Explaining Pakistan’s Premature Deindustrialization
Keywords:
Deindustrialization, industrial policy, economic growth, Pakistan.Abstract
Recognizing that Pakistan faces premature deindustrialization, this paper seeks to explain the phenomenon. The country experienced wild swings in industrialization during the 1950s and 1960s. The period 2001–10 was characterized by fairly strong growth, followed by contractions in other periods. Pakistan’s manufacturing sector is dominated by clothing and textiles exports. Periods of manufacturing growth were associated with pro-manufacturing and import substitution policies, while slumps were characterized by deregulation and a relatively high exchange rate. The evidence shows that the relative stagnation of manufacturing (regardless of the policies implemented) can be explained by the lack of a dynamic industrial policy targeting technological catch-up and leapfrogging. Moreover, where rents were distributed in the form of incentives, there was no emphasis on monitoring and appraisal.
References
Abbasi, Z. F. (2009). Analysis of the political economy of industrial policy in Pakistan. Islamabad: Impact Consulting.
Abramovitz, M. (1956). Resource and output trends in the United States since 1870. American Economic Review, 46(2), 5–23.
Amjad, R., Din, M., & Qayyum, A. (2011). Pakistan: Breaking out of stagflation into sustained growth [Special edition]. Lahore Journal of Economics, 16, 13–30.
Amsden, A. H. (1989). Asia’s next giant: South Korea and late industrialization. New York: Oxford University Press.
Amsden, A. H. (1991). Diffusion of development: The late-industrializing model and greater East Asia. American Economic Review, 81(2), 282–286.
Burki, S. J. (2008). Industrial policy: Domestic challenges, global imperatives and Pakistan’s choices [Special edition]. Lahore Journal of Economics, 13, 23–34.
Chang, H.-J. (2003). Kicking away the ladder: Development strategy in historical perspective. London: Anthem Press.
Devarajan, S., & Nabi, I. (2006). Economic growth in South Asia: Promising, un-equalizing, sustainable? Economic and Political Weekly, 41(33), 3573–3580.
Fransman, M. (1985). Conceptualizing technical change in the Third World in the 1980s: An interpretive survey. Journal of Development Studies, 21(4), 572–652.
Gerschenkron, A. (1962). Economic backwardness in historical perspective. Cambridge, MA: Belknap Press.
Hamid, N., & Khan, M. (2015). Pakistan: A case of premature deindustrialization? [Special edition]. Lahore Journal of Economics, 20, 107–141.
Hamid, N., Nabi, I., & Zafar, R. (2014). The textiles and garments sector: Moving up the value chain [Special edition]. Lahore Journal of Economics, 19, 283–306.
Haque, I. (2014). Toward a competitive Pakistan: The role of industrial policy [Special edition]. Lahore Journal of Economics, 19, 61–90.
Haque, I. (2015). Theory at odds with best practice: The travails of industrial policy [Special edition]. Lahore Journal of Economics, 20, 87–106.
Hasan, P. (1998). Pakistan’s economy at the crossroads: Past policies and present imperatives. Karachi: Oxford University Press.
Hasan, P., Kemal, A. R., & Naseem, S. M. (1997). Learning from the past: A fifty-year perspective on Pakistan’s development [with comments]. Pakistan Development Review, 36(4), 355–402.
Johnson, C. (1982). MITI and the Japanese miracle: The growth of industrial policy, 1925–1975. Stanford, CA: Stanford University Press.
Kaldor, N. (1967). Strategic factors in economic development. Ithaca, NY: Cornell University Press.
Kemal, A. R. (2004). Exploring Pakistan’s regional economic cooperation potential. Pakistan Development Review, 43(4), 313–334.
Khan, M. H. (2000). Rent-seeking as process. In M. H. Khan & K. S. Jomo (Eds.), Rents, rent-seeking and economic development: Theory and evidence in Asia. Cambridge: Cambridge University Press.
Khan, M. A., Qayyum, A., Sheikh, S. A., & Siddique, O. (2005). Financial development and economic growth: The case of Pakistan. Pakistan Development Review, 44(4), 819–837.
Kollmeyer, C. (2009). Explaining deindustrialization: How affluence, productivity growth and globalization diminish manufacturing employment. American Journal of Sociology, 114(6), 1644–1674.
Lall, S. (2000). The technological structure and performance of developing country manufactured exports, 1985–98. Oxford Development Studies, 28(3), 337–369.
Lall, S., Weiss, J., & Zhang, J. (2005). The ‘sophistication’ of exports: A new measure of product characteristics (QEH Working Paper No. 123). Oxford: Oxford University.
Looney, R. (2008). The Musharraf paradox: The failure of an economic success story. Open Area Studies Journal, 1, 1–15.
Nadvi, K., & Sayeed, A. (2004). Industrial capital and pro-poor change. Unpublished report prepared for DFID.
Noman, O. (1988). Pakistan: A political and economic history since 1947. London: Kegan Paul International.
Rasiah, R. (1995). Foreign capital and industrialization in Malaysia. Basingstoke: Macmillan.
Rasiah, R. (2009). Garment manufacturing in Cambodia and Laos. Journal of the Asia Pacific Economy, 14(2), 150–161.
Rasiah, R. (2011). Is Malaysia facing negative deindustrialization? Pacific Affairs, 84(4), 714–735.
Rasiah, R. (2012). Beyond the Multi-Fiber Agreement: How are workers in East Asia faring? Institutions and Economies, 4(3), 1–20.
Rasiah, R., & Nazeer, N. (2015). The state of manufacturing in Pakistan [Special edition]. Lahore Journal of Economics, 20, 205–224.
Rasiah, R., & Nazeer, N. (in press). Comparing industrialization in Pakistan and the East Asian economies [Special edition]. Lahore Journal of Economics, 21.
Reinert, E. S. (2007). How rich countries got rich... and why poor countries stay poor. London: Constable.
Rodrik, D. (2007). One economics, many recipes: Globalization, institutions and economic growth. Princeton, NJ: Princeton University Press.
Rowthorn, B., & Wells, J. R. (1987). Deindustrialization and foreign trade. Cambridge: Cambridge University Press.
Sarmad, K. (1992). External shocks and domestic adjustment in Pakistan 1970–1990. Pakistan Development Review, 31(4), 857–869.
Sayeed, A. (1995). Political alignments, the state and industrial policy in Pakistan: A comparison of performance in the 1960s and 1980s. Unpublished PhD thesis, University of Cambridge, UK.
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London: Methuen.
Wade, R. (1990). Governing the market: Economic theory and the role of government in East Asian industrialization. Princeton, NJ: Princeton University Press.
Wizarat, S. (2002). The rise and fall of industrial productivity in Pakistan. Karachi: Oxford University Press.
Young, A. A. (1928). Increasing returns and economic progress. The Economic Journal, 38(152), 527–542.
Zaidi, S. A. (2005). Issues in Pakistan’s economy (2nd ed.). Karachi: Oxford University Press.
