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2.2.6 Foreign Direct Investment .................................................................................................. 91 2.2.7 Sector‐wise Decomposition of FDI ...................................................................................... 93 2.3 Constraints to Investment & Manufacturing Growth in Pakistan .............................................. 95 2.3.1 Macroeconomic Instability & its Impact on Investment & manufacturing ........................ 96 2.3.2 Infrastructural Constraints on Industrial Growth ............................................................. 109 2.3.3 Factor Markets Constraints on Investment & Manufacturing .......................................... 124 2.3.4 Standards, Regulation & Governance Constraints ............................................................ 146 Competitiveness & Industry Stagnation ........................................................................................... 160 2.3.5 Other Horizontal Issues & Interventions .......................................................................... 167 3 Competitiveness of Key Industrial Sectors of Pakistan ........................................................... 173 3.1 Primary Industrial Sector .......................................................................................................... 174 3.1.1 Chemical Industry ............................................................................................................. 174 3.1.2 Steel Industry .................................................................................................................... 182 3.1.3 Fertilizer Industry .............................................................................................................. 185 3.2 Value Added Knowledge Based Industrial Sectors ................................................................... 190 3.2.1 Auto & Farm Machinery Industry ..................................................................................... 190 3.2.2 Electronics Industry ........................................................................................................... 193 3.2.3 Pharmaceutical Industry ................................................................................................... 200 3.3 Value Added Skill & Engineering Based Sectors ....................................................................... 208 3.3.1 The SME Sector ................................................................................................................. 208 3.3.2 Fan Sector ......................................................................................................................... 210 3.3.3 Cutlery, Utensils & Hunting Equipment Sector ................................................................. 218 3.3.4 Horticulture Processing Sector ......................................................................................... 227 3.3.5 Surgical Instruments Sector .............................................................................................. 231 3.3.6 Sports Goods Sector .......................................................................................................... 237 3.3.7 Ceramics Sector ................................................................................................................. 242 3.3.8 Furniture Sector ................................................................................................................ 246 3.3.9 Leather Sector ................................................................................................................... 254 3.3.10 Gems & Jewellery Sector .................................................................................................. 260 3.3.11 Marble & Granite Sector ................................................................................................... 264 3.3.12 Light Engineering Sector ................................................................................................... 271 iv
3.3.13 Fisheries Sector ................................................................................................................. 283 4 Spatial Concentration of Economic Activity .............................................................................. 285 4.1 Introduction .............................................................................................................................. 285 4.1 Introduction .............................................................................................................................. 285 4.2 New Economic Geography and Development .......................................................................... 287 4.3 Mapping Measures of Regional and Spatial Inequality ............................................................ 290 4.3.1 Regional Spatial Distribution of Population and Density .................................................. 290 4.3.2 Measuring Regional Poverty and Income Inequality ........................................................ 296 4.3.3 Evidence on Spatial Disparities in Human Capital Infrastructure ..................................... 310 4.3.4 Market Access and Spatial Inequality in Road Infrastructure ........................................... 322 4.3.5 Agglomeration of Manufacturing Industries in Pakistan .................................................. 327 4.3.6 Localization versus Urbanization Externalities ................................................................. 337 5 Poverty Impacts of Public Investments and Causes of Industry Agglomerations .............. 342 5.1 Introduction .............................................................................................................................. 342 5.2 Are Regional Infrastructure Disparities Influencing Incidence of Poverty? .............................. 343 5.2.1 Background ....................................................................................................................... 343 5.2.2 The causes of poverty in Pakistan ..................................................................................... 343 5.2.3 Methodology and data ...................................................................................................... 345 5.2.4 The basic regressions ........................................................................................................ 347 5.2.5 The effect of spatial inequality in social infrastructure on rural poverty ......................... 358 5.2.6 Spatial inequality in road infrastructure and rural poverty .............................................. 360 5.3 Nexus between Infrastructure, Income Inequality and Poverty ............................................... 364 5.3.1 Does high inequality cause high poverty in Pakistan? ...................................................... 365 5.3.2 Method of Analysis ........................................................................................................... 367 5.3.3 Social infrastructure and poverty: How inequality affects poverty? ................................ 368 5.3.4 Road infrastructure and poverty: Does inequality matter? .............................................. 370 5.4 What Factors Cause Agglomeration of Manufacturing Industries? .......................................... 372 5.4.1 Background ....................................................................................................................... 372 5.4.2 Explaining agglomeration .................................................................................................. 373 5.5 Nature of Scale Economies and Patterns of Industry Agglomeration ...................................... 378 5.5.1 Background ....................................................................................................................... 378 v
Page 1 and 2: INDUSTRIAL POLICY, ITS SPATIAL ASPE
Page 3: Table of Contents List of Tables ..
Page 7 and 8: List of Tables Chapter 2 Table 2‐
Page 9 and 10: List of Figures Chapter 2 Figure 2
Page 11 and 12: Figure 4‐12: Spatial inequality i
Page 13 and 14: Acronyms and Abbreviations ADR Alte
Page 15 and 16: Acknowledgements This study has bee
Page 17 and 18: percent average GDP growth rate, th
Page 19 and 20: Development Fund and a Skill based
Page 21 and 22: knowledge based industries such as
Page 23 and 24: Therefore, we recommend specific ty
Page 25 and 26: manufacturing industries is widespr
Page 27 and 28: • Expansion of the tax base by in
Page 29 and 30: • In special economic zones, scie
Page 31 and 32: which could cross from Iranian to P
Page 33 and 34: • Provide infrastructure of the p
Page 35 and 36: transaction cost of smuggling and r
Page 37 and 38: Accordingly, the government should
Page 39 and 40: information flows between the train
Page 41 and 42: etc., that operate outside the form
Page 43 and 44: In view of the credit problems face
Page 45 and 46: • Establishment of testing and ce
Page 47 and 48: the interim period the Ministry sho
Page 49 and 50: growth of downstream industries esp
Page 51 and 52: • Strictly enforce the Tariff-bas
Page 53 and 54: • New courses in systems design m
Page 55 and 56:
• Allow long-term subcontracting
Page 57 and 58:
in KP. The total production of the
Page 59 and 60:
• Keep on supporting PHDEC to imp
Page 61 and 62:
Sports Goods Sports Goods industry
Page 63 and 64:
• Ensure that the ceramics centre
Page 65 and 66:
• Allow free import at 0-5% for 3
Page 67 and 68:
• Operationlaise the planned marb
Page 69 and 70:
• Support provision of market inf
Page 71 and 72:
In order to improve the competitive
Page 73 and 74:
• Advocate the use of pre-fabrica
Page 75 and 76:
diversification which has been a ma
Page 77 and 78:
gives a brief synopsis of the compe
Page 79 and 80:
The 1980s brought a major shift in
Page 81 and 82:
the costs of entry for a pioneer fi
Page 83 and 84:
macro level investigation of indust
Page 85 and 86:
on its own. The Government of Pakis
Page 87 and 88:
Source: IMF, 2008 However, in the p
Page 89 and 90:
2.1.2 Structural Rigidity & Inadequ
Page 91 and 92:
share in formal non-agriculture emp
Page 93 and 94:
Breaking down the analysis of manuf
Page 95 and 96:
Moreover, during the 1990s, total f
Page 97 and 98:
Figure 2‐13: Output per Worker Gr
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of world exports increased on avera
Page 101 and 102:
More so, the product concentration
Page 103 and 104:
The underlying reason for South Asi
Page 105 and 106:
Source: Felipe and Lim, 2008 2.1.5
Page 107 and 108:
order to bring about technological
Page 109 and 110:
sector. The role of the government
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eforms in particular trade liberali
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07. In the last two years, the priv
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from 12% to 24% of total investment
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2005-07 controlling for the size of
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skewed away from the manufacturing
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sustained growth and wide spread em
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interest rate remained stable in th
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45.00 40.00 35.00 30.00 25.00 20.00
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Source: Felipe and Lim (2008). Rece
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increased as a premium for being a
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The government faces an immediate n
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services, TRIPs (Trade Related Inte
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most of the burden, for e.g., those
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that it comes second only to Bangla
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Box 2‐2: Energy in Comparison wit
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Hydel or Hydropower While the gener
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announced at least two months in ad
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network. Road linkages connecting m
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Ministry of Industries and Producti
Page 149 and 150:
According to the World Bank (2004),
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Absence or weakness of skills in th
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and Nazli (1998)]. In Balochistan,
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Source: PIHS (2001-02 and 2005-2006
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Pakistan do not consider inadequate
Page 159 and 160:
curricula, poor quality of instruct
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also to enhance information flows b
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shortage of qualified textile profe
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Figure 2‐36: growth in lending by
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the average value of the collateral
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The procedural requirements such as
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2.3.3.6 Policy Recommendations: The
Page 173 and 174:
approving the certification bodies,
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Balochistan Sindh Punjab NWFP Small
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of manufacturing the tyre. Such ina
Page 179 and 180:
Cost (% of Claim) Source: World Ban
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Due to the tax rates and complicate
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are: import duties, import surcharg
Page 185 and 186:
Competitiveness & Industry Stagnati
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egional competitors like India and
Page 189 and 190:
the overall TFP growth rate to 0.9
Page 191 and 192:
aiding hidden sugar stocks. This il
Page 193 and 194:
Second, a science park captures the
Page 195 and 196:
This should be done while preservin
Page 197 and 198:
• Pilot projects that help demons
Page 199 and 200:
ecome too costly for more developed
Page 201 and 202:
inputs/raw material by the domestic
Page 203 and 204:
Table 3‐1: Demand for Petrochemic
Page 205 and 206:
products is reasonable (import of e
Page 207 and 208:
3.1.2 Steel Industry Steel is a cri
Page 209 and 210:
scrap and serviceable engineering g
Page 211 and 212:
sector. Investments in improved fer
Page 213 and 214:
Figure 3‐5: Comparison of Pakista
Page 215 and 216:
3.2 Value Added Knowledge Based Ind
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About 75% of the firms supply to th
Page 219 and 220:
Electronics is one of the largest m
Page 221 and 222:
3.2.2.1.2 Lack of Technological Kno
Page 223 and 224:
3.2.2.1.4 Trade through Illegal Cha
Page 225 and 226:
Page 227 and 228:
new patent laws under the TRIPs whi
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Figure 3‐8: Broad Comparison of P
Page 231 and 232:
• Income Tax: The advanced income
Page 233 and 234:
3.3 Value Added Skill & Engineering
Page 235 and 236:
• Adequate human resource with gr
Page 237 and 238:
etween 5-10 years. Sales are also f
Page 239 and 240:
3.3.2.1.1 Low levels of productivit
Page 241 and 242:
etc are fetching much higher export
Page 243 and 244:
• Strongly advocate with State Ba
Page 245 and 246:
The above composition suggests that
Page 247 and 248:
Out of this 70% of the cost is for
Page 249 and 250:
• Similarly, grinding is done usi
Page 251 and 252:
The industry seems to be doing reas
Page 253 and 254:
Another major area that has restric
Page 255 and 256:
for such industry already exists in
Page 257 and 258:
Chinese products fetch (US$0.35 - i
Page 259 and 260:
more than the producer. The mean re
Page 261 and 262:
Page 263 and 264:
US$0.26 billion in 2009 from a high
Page 265 and 266:
Figure 3‐21: Typical Value of Han
Page 267 and 268:
3.3.6.3 Policy Recommendations: Sin
Page 269 and 270:
Source: UN Commodity Trade Statisti
Page 271 and 272:
• Ensure that the Ceramics Indust
Page 273 and 274:
level of quality control, inefficie
Page 275 and 276:
Figure 3‐25: Key Challenges in Pa
Page 277 and 278:
Another issue faced by the furnitur
Page 279 and 280:
3.3.8.4 Policy Recommendations: It
Page 281 and 282:
675 tanneries in the formal sector,
Page 283 and 284:
• Limited availability of modern
Page 285 and 286:
3.3.10 Gems & Jewellery Sector Paki
Page 287 and 288:
Raw Mat erial Waste is 7% Filing &
Page 289 and 290:
3.3.10.2 Policy Recommendations: Ca
Page 291 and 292:
3.3.11.1 Value Chain Analysis Value
Page 293 and 294:
capable of processing stone in acco
Page 295 and 296:
Figure 3‐29: Traditional Quarryin
Page 297 and 298:
of the NEEDS. Below we have summari
Page 299 and 300:
3.3.12.1.9 Levy of Federal Excise D
Page 301 and 302:
production assets and technology. T
Page 303 and 304:
Source: ‘Pakistan: Growth and exp
Page 305 and 306:
• Explore possibility of increasi
Page 307 and 308:
3.3.12.12 Electrical Fittings The e
Page 309 and 310:
scale commercial fishing vessels. I
Page 311 and 312:
overtime, we freeze the district bo
Page 313 and 314:
The phenomenon of localized versus
Page 315 and 316:
4.3 Mapping Measures of Regional an
Page 317 and 318:
Source: GoP (2001) Khan (2003) disc
Page 319 and 320:
Log of population 2005-06 13 14 15
Page 321 and 322:
Log of population growth from 1981-
Page 323 and 324:
Ghaus-Pasha and Jamal; 1996-97 Jafr
Page 325 and 326:
FBS 2550 calories -- -- 26.6 29.3 2
Page 327 and 328:
eginning; it has remained constant
Page 329 and 330:
Figure 4‐5: Poverty headcount in
Page 331 and 332:
a ratio equal to twice the area bet
Page 333 and 334:
egistered slightly increasing magni
Page 335 and 336:
4.3.3 Evidence on Spatial Dispariti
Page 337 and 338:
system in each district. Since thes
Page 339 and 340:
Intermediate college size -0.047 0.
Page 341 and 342:
Table 4‐10: Most and least develo
Page 343 and 344:
eporting of data. However, district
Page 345 and 346:
Figure 4‐10: Industry clusters an
Page 347 and 348:
4.3.4 Market Access and Spatial Ine
Page 349 and 350:
Figure 4‐12: Spatial inequality i
Page 351 and 352:
indicates that Peshawar, Abbottabad
Page 353 and 354:
Moreover, we also present evidence
Page 355 and 356:
Table 4‐11: Change in concentrati
Page 357 and 358:
Next, we discuss the geographic con
Page 359 and 360:
313 Beverage industry 32 36 16 -0.0
Page 361 and 362:
Table 4‐13: Geographic concentrat
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district, it is termed as urbanizat
Page 365 and 366:
Table 4‐15: Localisation versus u
Page 367 and 368:
5 Poverty Impacts of Public Investm
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landholding and the incidence of po
Page 371 and 372:
ijt household and individual level
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individual characteristics. Column
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Financial assets owned by household
Page 377 and 378:
Mardan =1 if individual belongs to
Page 379 and 380:
Survey year 1992-93× Punjab 0.073
Page 381 and 382:
Table 5‐4: Effects of household a
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is roughly similar, except that mal
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Pseudo R 2 0.131 0.131 Notes: All r
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Survey year 1996-97 0.139 0.346 0 1
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status dummies and province-year fi
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unchanged until 1996-97. This is re
Page 393 and 394:
the whole country, f ( yi ) is the
Page 395 and 396:
Province× year fixed effects inclu
Page 397 and 398:
Individual level controls included
Page 399 and 400:
We take corresponding data from Pak
Page 401 and 402:
second five year period, industry a
Page 403 and 404:
oads density variable is positive a
Page 405 and 406:
complete set of sub-industry (3-dig
Page 407 and 408:
The two time dummies reflect produc
Page 409 and 410:
0.125) in road density of a distric
Page 411 and 412:
Fourthly, the literature tells us t
Page 413 and 414:
References Ahmad, H., M. Mahmud, N.
Page 415 and 416:
Competitiveness Support Fund (2010)
Page 417 and 418:
Gelman, A., J.B. Carlin, H.S. Stern
Page 419 and 420:
Henderson, J. V., Todd Lee, Yung J.
Page 421 and 422:
Levine, Ross and Renelt, David (199
Page 423 and 424:
Shabbir, T., A.H. Khan (1991). Minc
Page 425:
World Development Report (2000). En
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