News •
Minerals
The exploration of Pakistan’s mineral wealth is far from complete, but some two dozen different types of exploitable minerals have been located. Iron ore deposits are mostly of poor quality. The most extensive known reserves are situated in the Kalabagh region, in western Punjab. Other low-grade ore reserves have been found in Hazara, in Khyber Pakhtunkhwa. Small reserves of high-grade iron ore have been identified in Chitral and in the Chilghazi area (located in northwestern Balochistan), as well as in Khyber Pakhtunkhwa. Deposits of copper ore equaling or surpassing the reserves of iron ore have been found, but most sites remain unexploited. There are enormous reserves of easily exploited limestone that form the basis of a growing cement industry, a major component of the manufacturing sector. Other minerals that are exploited include chromite (mostly for export), barite, celestine (strontium sulfate), antimony, aragonite (calcium carbonate), gypsum, rock salt, and marble and granite.
Hydrocarbons and power
Pakistan has modest quantities of petroleum and some large natural gas fields. The first oil discovery was made in 1915. Pakistan intensified the search for oil and natural gas in the 1980s and was rewarded with the discovery of a number of new oil fields in the Potwar Plateau region and in Sindh. A number of fields have been developed, particularly near Badin, in Sindh. Despite the continued search for new and richer fields (including some offshore exploration and drilling), Pakistan has had to import increasing amounts of oil from abroad to satisfy growing consumption, making the country vulnerable to fluctuations in world oil markets. Most imports take the form of crude oil, which is refined into various products. Pakistan’s refinery capacity well exceeds its domestic crude production. The oil sector is regulated by the Ministry of Petroleum and Natural Resources, and international oil companies are authorized to operate in Pakistan in cooperation with domestic companies.
The largest natural gas deposits are at Sui (on the border between Balochistan and Punjab), discovered in 1953. A smaller field, at Mari, in northeast Sindh province, was found in 1957. A number of smaller natural gas fields subsequently have been discovered in various areas. A network of gas pipelines links the fields with the main consumption areas: Karachi, Lahore, Multan, Faisalabad, and Islamabad. Although proven reserves are large, they have not kept pace with domestic consumption.
Coal mining is one of the country’s oldest industries. The quality of the coal is poor, and the mines have been worked below capacity because of the difficulty of access; despite ample reserves, the country regularly imports coal.
Although energy production has grown faster than the economy as a whole, it has not kept pace with demand, and as a result there are shortages of fuel and electric power. The bulk of power requirements are provided by thermal plants (coal, oil, and natural gas), with most of the remainder provided by hydroelectric installations.
The generation, transmission, and distribution of power is the responsibility of the Pakistani Water and Power Development Authority (WAPDA), a public-sector corporation. WAPDA lost its monopoly over generation after Pakistan entered into an agreement in 1989 with a consortium of foreign firms to produce power from giant oil-fired plants located at Hub, near Karachi; the plants were completed in 1997.
Great progress, however, has been made in the development of the hydroelectric potential of Pakistan’s rivers. A giant hydroelectric plant is in operation at the Mangla Dam, on the Jhelum River in Azad Kashmir (the part of Kashmir under Pakistani administration). Another such source is the giant Tarbela Dam, on the Indus River.
Pakistan has three nuclear power plants, the Karachi Nuclear Power Plant (completed 1972), the Chashma Nuclear Power Plant-1 (2000), and the Chashma Nuclear Power Plant-2 (2011). The Chashma plants are at Kundian, Punjab. Nuclear power provides only a tiny proportion of the country’s total energy production.
Manufacturing
Mining and quarrying account for a small percentage of GDP and of total employment. Manufacturing, however, constitutes a healthy proportion. The beginning of the main industrialization effort dates to the cessation of trade between India and Pakistan in 1949, soon after the two countries gained independence. Initially it was based on the processing of raw agricultural materials for domestic consumption and for export. This led to the construction of cotton textile mills—a development that now accounts for a large part of the total employment in industry. Woolen textiles, sugar, paper, tobacco, and leather industries also provide many jobs for the industrial labor force.
The growing trade deficit in the mid-1950s compelled the government to cut down on imports, which encouraged the establishment of a number of import-substitution industries. At first these factories produced mainly consumer goods, but gradually they came to produce intermediate goods and a range of capital goods, including chemicals, fertilizers, and light engineering products. Nevertheless, Pakistan still has to import a large proportion of the capital equipment and raw materials required by industry. In the 1970s and early ’80s Pakistan set up an integrated iron and steel mill at Pipri, near Karachi, with the financial and technical assistance of the Soviet Union. A new port, Port Qāsim (officially Port Muḥammad Bin Qāsim), was built to bring iron ore and coal for the mill.
Initially Karachi was the center of Pakistan’s industrialization effort, but in the late 1960s and early ’70s Lahore and the cities around it began to industrialize rapidly. Karachi’s ethnic problems in the late 1980s and early ’90s accelerated this process, and Punjab increasingly became Karachi’s competitor in industrial output.
Major manufactured products include jute and cotton textiles, cement, vegetable ghee, cigarettes, and bicycles. Although the country still imports most of its motor vehicles, some Pakistani firms have entered into contracts with foreign companies to produce automobiles, motorcycles, and industrial tractors domestically.
Finance of Pakistan
Finance contributes a relatively small value to GDP, though its growth rate in the late 20th and early 21st centuries has been considerable. Pakistan has a variety of state banks, state-run banks (though more-recent trends have been toward privatizing these), scheduled (i.e., commercial) banks, private banks, and foreign banks. Noteworthy has been the spread of banks that operate within the principles of Islamic law. A number of such institutions were established beginning in the 1980s, and, more recently, several established Western-style banks have opened up divisions offering Islamic banking services.
Pakistan has a fairly well-developed system of financial services. The State Bank of Pakistan (1948) has overall control of the banking sector, acts as banker to the central and provincial governments, and administers official monetary and credit policies, including exchange controls. It has the sole right to issue currency (the Pakistani rupee) and has custody of the country’s gold and foreign-exchange reserves.
Pakistan has a number of commercial banks, called scheduled banks, which are subject to strict State Bank requirements as to paid-up capital and reserves. They account for the bulk of total deposits, collected through a network of branch offices. A few specialist financial institutions provide medium- and long-term credit for industrial, agricultural, and housing purposes and include the Pakistan Industrial Credit and Investment Corporation (1957; since 2001, PICIC Commercial Bank, Ltd.), the Industrial Development Bank of Pakistan (1961), the Agricultural Development Bank of Pakistan (1961), and the House Building Finance Corporation (1952). There are a number of private banks, many of which operate from Karachi. Habib Bank, Ltd., is one of the oldest. The Bank of Credit and Commerce International (BCCI) was founded in Pakistan in 1972; BCCI’s collapse in 1991 precipitated a major international banking scandal.
The Karachi Stock Exchange (Guarantee) Limited (1947), Lahore Stock Exchange (Guarantee) Limited (1970), and Islamabad Stock Exchange (Guarantee) Limited (1989) are the largest such institutions in the country; each deals in stocks and shares of registered companies. The Investment Corporation of Pakistan (1966) and the National Investment Trust (1962) were founded by the state to help channel domestic savings into the capital market; both have since been partly privatized. As part of the development of the “Islamic” economy, interest-free banking and financing practices have been instituted in many specialized banks.
Trade
Trade has grown into one of the major sectors of the Pakistani economy and employs a significant proportion of the workforce. Although there has been a trend toward increasing exports, the country has had a chronic annual trade deficit, with imports often outstripping exports. Over the years, important changes have taken place in the composition of foreign trade. In particular, while the proportion of total exports from primary commodities, including raw cotton, has fallen, the share of manufactures has greatly increased. But the bulk of the manufactured products coming into the export trade consists of cotton goods, so that Pakistan remains as dependent as ever on its leading cash crop. The other manufactures exported come mostly from industries based on agriculture, such as leather and leather goods and carpets; exports of rice and petroleum products are also important. The shift toward manufactured agricultural exports, which have a higher added-value content than primary commodities, has been encouraged by the government. The trade deficits and shortages of foreign exchange have made it necessary for the government to restrict imports and to provide financial incentives to promote export trade. Major imports consist of machinery, chemicals and chemical products, crude oil, refined petroleum, food and edible oils, and motor vehicles. Pakistan’s most important trading partners are China, the United States, the United Arab Emirates, Saudi Arabia, and Afghanistan.
Services
The government has traditionally been a major employer, and, just as in other former colonial countries with a well-developed civil service, government positions are coveted for the financial security that they offer. Combined with public administration, defense, construction, and public utilities, services account for roughly one-fourth of GDP and employ about one-fifth of the workforce. Tourism traditionally has contributed little to the economy, but the country has consistently attracted a number of tourists who engage in “adventure” tours, particularly in the high mountains of the north, where the Karakoram Highway provides access to some of the loftier peaks for hikers and climbers. Likewise, the ruins at Mohenjo-daro and Taxila—designated UNESCO World Heritage sites in 1980—attract a number of interested outsiders each year.
Remittances from workers abroad constitute a large (though extremely difficult to measure) source of revenue. At any given time there are several million Pakistanis working abroad, throughout the world; officially, the income that they send home (as well as money remitted by Pakistani immigrants abroad) amounts to hundreds of millions of dollars annually. Much income is likely transferred through unofficial channels—either by hand or through the services of the traditional system of money exchanges known as hawala—and the total amount of money remitted from abroad is likely much higher than official statements.
