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Monday, 1 August 2011
What is foreign economic trade and
discuss the main sources of foreign
loan? and discuss the international
financial institutions which provide
loan
Foreign Economic Aid :-
Foreign economic aid is the flow of
resources and technical assistance from a
developed countries to less developing
countries. The loan is provided to meet
the gap between domestic savings and

investment. Various international
institutions like ZMF, IBRD, IDA, IFC
are also providing loans.
Foreign loan is provided by one
government to other government or
through international institutions.
Following are the main international
institutions :

1. The Colombo Plan :-
It provides technical assistance to the
South East Asian countries. The
development assistance is provided by
U.S.A, U.K. Canada, Japan etc.

2. IBRD :-
It is also called World Bank. It is
providing long term loans to more than
124 countries. It provides the loan for
electricity water supply and rail roads
etc.

3. United Nations Agencies (UNA) :-
It provides long term loans, grants and
specialist services to the less developed
countries. It provides assistance through
its various specialized agencies.

4. The Agency for International
Development :-
It is the aid subsidiary agency a World
Bank to provide infrastructure facilities.
It provides the loan for long term. The
loan is repaid in the local currency.

5. The International Finance
Corporation :-
The IFC is also subsidiary agency of
World Bank. It provides the loan to
private enterprises in various countries.

6. Aid From Socialist Countries :-

The socialist countries are also helping
the non-socialist countries. It provides
the loan for various projects.

7. Islamic Development Bank (IDBI) :-
It was set up in 1975. It has 40 Muslim
countries. It is helping the Muslim
countries according the principles of
Shariah. It is playing very effective role
in improving the economic condition of
Muslim Countries.

8. The Organization of Petroleum
Exporting Countries :-
It is providing loans to various countries
of various projects. It has also provided
loan most of underdeveloped countries
for the development projects.
Posted by fysul mirza at 05:47 , 0
comments
Labels: Economics 2, Foreign Aid

Discuss the main powers and functions
of the central bank or the state
bank

The powers and functions of the central
bank differ from country to country
however following are the important
functions of the central bank.

1. MONOPOLY OF NOTE ISSUE :-
At the present time, the central bank has
the monopoly of note issue through out
the world. No other bank can issue the
notes.State bank issues the paper
currency. There are two principles of
note issue :

1. Currency Principle.
2. Proportional Reserve System.

2. BANKER'S TO THE
GOVERNMENT :-
As the government bank it performs the
following services :

1. Accounts Holder :-
It keep government accounts. It receives
deposits and makes payment on behalf of
the government.

2. Lender to the Government :-
The central bank grants loans to the
government. It also makes investment in
government bills and securities.

3. Public Debt Management :-
The central bank manages public debt
and also handles financial business.

4. Financial Advisor :-
The central bank acts as an advisor to the
government in the matters of monetary.

5. Banker's Bank :-
The central bank acts as a banker to the
commercial banks, in the following ways
:

6. Maintenance of Cash Reserve :-
The commercial banks keep a fixed
portion of their total deposits as a reserve
with the central bank.

7. Lender of Last Resort :-
At the time of banking crises, the
commercial banks can get loan and re-
discount of their bills of exchange.

8. Remittance Facility :-

The central bank also provides
remittance facilities to the commercial
banks.

9. Clearing House :-
The central bank manages and supervises
the clearing house to facilitate the
clearing of cheques between banks.

10. Foreign Exchange Policy :-
In the field of foreign exchange policy
there are three important functions.

11. Custodian of Exchange Reserves :-
The central bank is also a custodian of
foreign exchange and gold reserves.

12. Exchange Control :-
The central bank manages foreign
exchange transactions and enforces
exchange control regulations. The

allocation of foreign exchange
expenditure is made by the government
through the central bank.

13. Exchange Rate Stability :-
The central bank is responsible for
maintaining of stable foreign exchange
rate.

14. Controls Credit :-
It is also the responsibility of the central
bank to regulate the volume of credit and
its direction according to the economic
conditions of the country.

15. Price Stability :-
It is also the basic function of the central
bank that it should frame the monetary
policy in such a manner that prices inside
the country should be stable.

16. Falling Prices Case :-
In case of falling prices the central bank
adopts the inflationary policy and
increases the supply of money and credit.

17. Case of Rising Prices :-
In case of rising prices central bank
adopts the deflationary policy and
decreases the total quantity of money and
credit. So inflation can be checked.

18. Growth and Control of Banks :-
It is the duty of the central bank to
promote the growth of the banking
system on sound footing. The central
bank also controls the commercial banks.

19. Export Finance Scheme :-
Under the state bank export finance
scheme the commercial banks are
providing finance to the exporters at the

concessional rate. This scheme has
encouraged the exports.
comments
Labels: Banking and Finance, Central
Bank, Economics 2
Discuss the prerequisites of effective
planning or discuss the conditions
which are necessary to the success
of planning

Today planning is considered essential
for economic development. But in
various countries these have not been
implemented successfully because these

countries are unable to create conditions
which are necessary to the success of
planning.

CONDITIONS :-
Following are preconditions for the
effective planning :

1. Statistical Data :-
For a successful economic planning there
is need of accurate statistical data about
economy. In most of developing
countries available statistical data is
incorrect so the planning is ineffective.

2. Cooperation of the People :-
A plan which lacks public cooperation
can not succeed. People are not ready to
provide various information's about the
income and expenditure. So it becomes
the cause of failure.

3. Lack of Competent
Administration :-
For the successful planning competent
and in-corrupt administration is essential.
While in under developed countries like
India, Pakistan planning machinery is
weak ineffective and corrupt. So it is the
major cause of failure of plans.

4. Political Stability :-
Effective planning requires political
stability in the country. But some
countries are facing political unrest in
these days. It is the major obstacle in the
way of effective planning.

5. Objectives of the Plan :-
There should be no contradictions in the
objectives of the plan. The people should
be clear about the objectives of the plan

otherwise planning is fruitless.

6. Dependence on Foreign Aid :-
It is essential that aid should be provided
to the poor countries in time for the
development plans. Most of
underdeveloped countries are also
relying on foreign aid. But many times in
the past it has been curtailed or stopped.
It becomes the cause of failure.

7. Over Population :-
For effective planning optimum size of
population is essential. While India and
Pakistan are facing the over population
problem and it is the main obstacle in the
way of effective planning and
development.

8. Natural Climates :-
The planning of agriculture sector can be

successful in nature is kind. In
subcontinent agriculture is the back bone
of the economy. If weather is
unfavorable it reduces the agriculture
production and exports of the country.
While the import of food increases. So
uncertain situation of agriculture is an
obstacle in the way of effective planning.

SOURCES OF THE COUNTRY :-
In subcontinent per capita income rate of
savings and investment is low. Due to
the limited sources the rate of
development is very slow. All these
factors are not favorable for effective
planning.
comments
Labels: Economics 2, Planning and
Economic Development
Sunday, 31 July 2011

Define planning and discuss the role
and importance of planning in the
less developed or developing
countries

The meaning of
economic planning differ from country
to country and person to person. Keeping
in view the various definitions we can
say that aim of all the plans is to utilize
the available resources more effectively
achieving the well defined objectives
during given period of time.

Importance or Objectives or
Advantages of Planning

1. In crease in National Income :-
The objective of planning is to utilize the
resources of the country in such a
manner that it should increase the size of
national income. In the developing
countries planning is very useful for
increasing the production of the country.

2. Superior Decisions :-
The decision of planning authority are
more superior as compared to the
individuals. Planning authority keeps in
view the interest of the whole nation. It
prepares the plan keeping in view the
economic condition of the country.

3. Achievement of Full Employment :-
In the less developed countries and in the

advanced countries the objectives of
planning is to achieve the full
employment.The main objectives of the
planning to create jobs for the people of
the country.

4. Equal Distribution Of Wealth :-
In the capitalistic countries the gap
between rich and poor is increasing. It
creates social evils. Through planning we
can reduce the inequalities in income.

5. Elimination or Regional Disparity :-
Through planning the regional economic
disparities can be removed. In the plan
special fund can be allocated for the
development of backward areas. It is the
one of main objective of planning that
there will be reduction in the regional
disparity.

6. Improvement in The Balance Of
Payment :-
The balance of payment of developing
countries remains deficit. It adversely
affects the rate of economic growth.
Through planning government can
reduce the imports and can increase the
exports.

7. Balanced Economy :-
If one sector of the economy is
developed the country will not achieve
maximum rate of development. Through
planning resources of the country can be
allocated in such a manner that it
provides balance to the economy.

8. Control of Economic Crises :-
Due to economic crises, economy faces
many problems. Through planning
depression can be controlled and

production can be increased.

9. Solution of Over Population :-
When the size of population is greater
than the size of natural resources it can
be adjusted through effective planning.

10. Self Sufficiency In Food :-
Each country wants to become self
sufficient in food. So this objective is
also achieved through planning. In the
each development the target was
proposed for the agriculture sector.

11. Industrial Development :-
Today without industrialization no any
country can improve its economic
condition. For the establishment of new
industries, planning is very effective.

12. Increase In welfare Program :-

The provision of social services is main
aim of the planning. For example some
developing countries plan various
facilities like housing, schooling,
transport and water provided to the
people.

13. Increase In Capital Formation :-
Without increasing the rate of capital
formation, we can not increase the rate of
development. In the less developed
countries rate of saving is very low and
due to this rate of investment is low.
Through effective planning we can
increase the rate of savings in the
country.

14. Elimination of Poverty :-
Through planning we can increase the
rate of economic development in the
country. National income and per capita

income will rise and poverty will
remove.
comments
What is meant by market imperfection
it is an impediment in the
achievement of optimum allocation
of resources

Imperfection of
Market :-
In a free enterprise economy demand and
supply forces determine the prices of

various goods and services.The reward
of four factors of production is also
determined according the demand and
supply. The allocation of resources is
optimum and if improves the production
of various sectors. If any authority
interferes in the working of free
enterprise economy it reduces the rate of
development.
In the under developed countries the
working of market is imperfect which
causes low production.

Causes of Market Imperfection or
Defects in the Market System

1. Immobility of Factors of Production
:-
In the less developed countries factors of
production are not ready to move from
one place to another and from one sector

to another for higher return.

2. Rigid Price System :-
In the less developed countries rate of
profit, rate of investment, rate of
employment is very low due to the rigid
price system. If the prices are allowed to
fluctuate according to the demand and
supply it will increase the rate of profit
and rate of investment in the country of
competition among the buyers and
sellers.

3. Rigid Social Structure :-
In the less developed countries social
structure is also creating obstacles in the
way of market perfection. Producer and
consumer both are suffering a loss
because of competition among the
buyers and sellers.

4. Role of Middleman :-
In the developing countries middleman is
enjoying maximum profit. Producers are
unable to achieve the reasonable prices
of their production. It makes the market
imperfect.

5 Ignorance About Market
Condition :-
In the developing countries buyers ans
sellers don't know the market condition.
So the same price can not prevail in the
market.

6. Lack of Specialization :-
There is a lack of specialization in the
production process. The developing
countries are unable to produce the
commodities on large scale. Cost of
production is also high and due to this
demand is low. It makes the market

imperfect.

7. Attitude of the People :-
In the less developed countries people
generally purchase the commodities from
the nearest shop instead of checking the
price on various shops. Sometimes
consumer likes to purchase the goods
from their friends even they charge high
prices it makes the market imperfect.

8. Monopolies :-
Producers generally create monopolies to
earn maximum profit. These monopolies
are the main obstacles in the way of
perfect market.

9. Hoarding :-
Sometimes businessman creates shortage
of goods in the market by hoarding the
production. Due to this our market is

imperfect.

10. Unequal Distribution of Wealth :-
In most of developing countries
distribution of wealth is not equal. So it
is also the main cause of market
imperfection.

Measures

1. Increases Mobility :-
The mobility of the factors of production
should be improved to make the market
perfect.

2. Improvement in Transport
System :-
To improve the market system of the
country government should improve the
transport and communication system in

the country.

3. Monopolies Should be
Discouraged :-
Government should adopt such measures
that monopolies should be discouraged.

4. Market Information :-
Government should provide all the
information's about the market
conditions. In this regard newspapers,
radio and T.V can play its role more
effectively.

5. Utilization of Resources :-
There should be a maximum utilization
of productive resources. It will improve
the market condition.

Summing up we can say that market
mechanism can play very effective role

but in the present age the interference of
the government is essential upto some
extant for the economic development of
any country.
comments
Friday, 29 July 2011
Write a note on the following 1.
Pakistan Railway 2. Air transport
in Pakistan (PIA) 3. Road
transport in Pakistan 4.
Communication system in Pakistan
PAKISTAN RAILWAYS :-
Pakistan railway is an important source
of transport in the country. In the world
war second railway was used a very
important source of transportation. But
its condition was miserable at the time of

independence.

Pakistan has paid special attention for the
development of railway. In every plan a
sufficient amount was allocated for its
development. The development of
railway can be judged by the following
facts :

1. Project Completed :-
1. Karachi circular railway constructed.
2. Kot-Adu, D.G.Khan, Kasmore link
completed.
3. Marshalling yar and pipri completed.
4. Mehran Bridge Kotri completed.

2. Project Near Completion :-
1.Work on phase of Margala to
Islamabad is in hand.
2. Construction of Karachi Terminal
Station is near completion.

3. Oil yard at Mahmood Kot is also
completed.
4. Improvement in telecommunication is
under process.

3. Fast Trains :-
Fast trains and rail cars are introduced
between various cities of Pakistan. There
are many comfortable trains, Shalimar
Express is very fast train between Lahore
and Karachi.

4. Electric Train :-
Pakistan railway has also introduced
electric trains between Lahore and
Karachi and Khanewal. Further it will be
extended from Lahore to Karachi.

5. Workshops :-
A number of workshops have been set up
on various stations. The workshops on

Mughalpura Lahore is making wagons
and carriages.

6. Factories :-
Various factories has been set up in the
country for the production of wagon and
carriages. These are set up in Islamabad,
Shukhur, Jehlum, Kohat, Kotri,
Khanewal.

7. Export :-
Now Pakistan is also exporting the
wagons and carriages to other countries
like Bangladesh.

Problems of Pakistan Railways :-
The Pakistan railway out put is very low
because private trucks and NLC have
adversely affected its earnings. Railway
has also to operate the uneconomical
routs. The passengers misuse the trains.

Management has shown inefficiency and
railway is suffering a loss.

AIR TRANSPORTATION IN
PAKISTAN (PIA) :-
In 1949 there were only three small air
companies in 1955, Pakistan
International Air Line was set up.

Objectives of PIA :-
It was set up to provide safe and efficient
transport services on domestic and
international routs according to the
international standard.

PIA Performance :-
PIA has made rapid progress is
increasing the domestic and international
flights. All the important cities of
Pakistan are now provided air transport

services. On the international route, PIA
has extended its services to all the
important countries of the world. In the
world PIA is considered an efficient
airlines. PIA earned profit Rs. 11813
million during 1993. During the period
of 6th five year plan PIA added :
1. One 747.
2. Six Boeing's.
3. Two Twin others.
4. Three Air Buses and two Fokker to its
Flee.
5. PIA fleet is comprised 48 aircraft of
different types.

Problems of PIA :-
In the last few years there are complaints
that ticket are being black marketed.
Reservation problem is also fell by the
people. To improve the efficiency of PIA
last government had banned the union

and provided engineering facilities. But
now again government has decided to
restore the union in PIA Govt. has also
approved 13 private parties to operate
new domestic lines. Now there are four
private carriers operating on various
routes on 24.9.2000.

ROAD AND TRANSPORT IN
PAKISTAN :-
Road transport is an important means of
conveyance in Pakistan. Buses, Trucks,
Cars, Rickshaws and Motor Cycles are
included in the road transport. About
82% passengers in the country use the
road transport. At the time of partition
roads were inadequate to meet the needs
of the country.The government of
Pakistan paid special attention on the
improvement and construction of new

roads. During the 6th five year plan
almost Rs. 19 billion were allocated for
the development of road in the country.
In the 8th five year plan sufficient
amount was allocated.

Advantages of Road and
Transportation :-
1.It has increased the revenue through
taxes.
2. Road transport is cheaper than rail and
air.
3. It has great importance for agriculture
and industrial sector.
4. The return of road transport
investment is quick.
5. It facilities the trade.
6. It is an important source with the
urban areas.
7. Villages are connected with the urban
areas.

Operation :-
In Pakistan mainly road transport is in
the hands of private sector. To improve
the urban transport government had set
up the transport corporation. In 1977
Punjab and Karachi transport corporation
was set up.

COMMUNICATION SYSTEM IN
PAKISTAN :-
If in any country communication system
is well developed and cheap it expands
the market of various goods and saves
the time. In the development of Pakistan
it is playing very effective role.
In Pakistan following are the important
means of communication :

1. Postal Services :-

In Pakistan our postal system s well
organized. The officers of this
department are selected through Federal
Public Commission by the competitive
Examination (CSS). These postal
training centers have been set up to train
the postal stuff. Post offices are also
collecting the small savings of the
people. Now letters are lifted by air from
the important cities.

Urgent Mail Services :- Post office
department has introduced urgent mail
services. Within 24 hours letter can b
received in the important cities. It is
great advantage for the people.

2. Telecommunication :-
In 1947, there were only seven telegraph
offices and 12346 telephones in the
country. In 2000 it has been increased

3035000 and now it linked all over the
world through satellite communication
system.

3. Radio :-
There were only two radio stations in
1947, one at Lahore and other at
Peshawar. The government of Pakistan
improved this sector and set up various
radio stations in Multan, Quetta, Karachi,
Rawalpindi and Bahawalpur. In 1972, it
was converted into corporation. Radio is
an important source of political
awareness.

4. Television :-
A private limited company introduced
television in November, 1964 in
Pakistan. In 1967, this company was
converted into public limited company.
In Pakistan T.V is operated on

commercial lines. PTV covers 82%
population of the country. The license
fee is also charged. Noe government has
introduced the other channels for
students education, PTV has also
introduced the morning programmes.

5. The Pakistan Motorway :-
This project was initiated by the former
Govt. Nawaz Sharif, At present there is
one National Highway No. 5 in Pakistan.
It is also called Karachi, Lahore,
Rawalpindi, Peshawar Highway. It
carries about 56% traffic of the country.
Due to Central Asian Republics there is
great trade potential for Pakistan.

1st Section :- The first section is the six
lane Islamabad, Lahore, motorway which
is 335km in length.

2nd Section :- It is from Islamabad to
Peshawar which is 154 km in length.

3rd Section :- It is from Sheikupura to
Multan. Its length is 317 km.

Completed Section :- Gwader Road
Motorway is 895 km Karachi-Hub-Kakar
is 341 km. These have been completed in
1998.and Lahore to Islamabad and
Islamabad to Peshawar Motorway is also
completed and Pindi Bhatian to
Faisalabad motorway too completed..

Objectives :-
1. To promote international trade.
2. To promote the infrastructure to the
industries.
3. To reduce the traffic pressure on the
present roads.
4. To provide fast and cheap

transportation.
5. To create the new jobs.
6. To remove the regional disparity.
7. To boost up the industrial zones.
8. To improve GDP.

It was a controversial project. Some
people say that it is very costly and it has
no immediate necessity. They consider a
luxury. The construction contract of first
section of 6 lane was given to South
Korean Company. Its cost was 30.5
billion. The contract for second section
was given to Turkish Company.
The PPP Govt. was not satisfied from
this project and if brought some changes
in it. The delay was also taken place. The
change in the contract also lowered the
prestige of the country.
In-spite of various problems it is a fact

that Motorway role can not be ignored in
the development of the country.
comments
Labels: Economics 2, Transport and
Communication
Discuss the role of transport and
communication sectors to the
economic development and discuss
the importance of transport and
communication
Importance of Transport and
Communication :-
Rail, road, air and ships are including the
transport sources. While postal,
telephone, telegraph, internet, radio and
T.V are included in the communication
sources. These sources play very
effective role in the economic
development of any country. The

importance of these sectors can be
judged by the following facts :

1. Mobility of Factors of Production :-
If the means of transport and
communication are improved, quick and
cheap they will increase the mobility of
factors of production. The reward of all
the factors will become equal.

2. Stable Prices :-
The developed system of transport and
communication helps in stabilizing
prices of the commodities through our
the country.

3. Supply of Raw Material :-
Due to the quick and cheap transport
system, raw material can be easily
supplied to factories on lower cost. Even
from out side the country it can reach in

time.

4. Supply of Manufactured Goods :-
From the factories goods can be easily
transported to the markets if transport is
efficient.

5. Use of Natural Resources :-
To use the idle resources of the country
transport sector plays very important
role. The production of the country can
be increased with the development of
transport and communication. Minerals
like coal, gas and oil can be explored
easily.

6. Extension of Market :-
If the means of transport and
communication are cheap and fast then
commodities can be easily carried over
to long distance and the size of the

market will expand. Today domestic and
international market has been expanded
due to the modern transport system.

7. Specialization :-
If the transport and communication
system is developed the different areas
will adopt the process of specialization.
Due to specialization the cost of
production reduces.

8. Stimulates Trade :-
The cheap and quick means of transport
simulates the trade inside and outside the
country.

9. Agricultural Development :-
Due to developed transport system
fertilizer and seeds can be provided in
time to the framers. It will increase the
production of agriculture sector.

10. Industrial Development :-
The machine and raw material can be
imported from other countries for the
industrial sector. If our means of
transport and communication are fast and
then experts services can also be hired.

11. Importance for Emergence :-
In case of food shortage we can import
the food from other countries. Transport
and communication importance can not
be ignored in case of floods and storms
also.

12. Increase in Employment :-
This sector is providing the employment
to a large number of people. With the
development of this sector we can reduce
the rate of unemployment.

13. Increase in the Income of the
State :-
The development system of transport and
communication increases the income of
the state.

14. Spread of Education :-
If the developed transport system is
available in the country then students can
visit from different areas to receive
education. Radio , T,V also plays its role
in increasing the education in the
country.

15. Improves the Sense of Brotherhood
:-
Improved transport and communication
system has developed the sense of unity
and brotherhood. Today every person
can move from one place to another
easily.

16. Increase in Social Welfare :-
Due to the developed system of transport
and communication we can provide the
basic needs of life to the poor nations.

17. Sound Defence :-
A well developed transport and
communication system enables the
government to defend the country on
sound footing.

18. Political Awareness :-
Radio, T.V, internet and cheap transport
facilities create the political awareness.
They are in a better position to know
their economic and social problems.
They can also cooperative to solve these
problems.
comments

Labels: Economics 2, Transport and
Communication
Thursday, 28 July 2011
Write a note on delinking of rupees
from dollars

In 1971, Pakistani
rupee was linked with the US Dollar. In
1982 it was from delinked from US
Dollar. Now the value of our currency
will be determined according the demand
and supply of foreign exchange market.
If the domestic economic condition is
stable balance of payment is favorable
then value of currency increases,

otherwise it falls. The exchange rate is
fixed daily by the State Bank of Pakistan.

Causes of Delinking :-
1. Eighty nine countries out of 142 has
adopted the managed floating exchange
rate. Pakistan also followed them.
2. It will increase the export of
traditional and non traditional exports.
3. It will ensure the positive and
independent exchange rate policy.
4. It will discourage the out flow of
capital.
5. It will encourage the Pakistanis
working abroad to send their income in
Pakistan.
6. It will reduce the prices of exports arid
with attract the foreign buyers.

CRITICISM :-
1.Devaluation :-

The delinking of rupee has devalued the
currency.

2. No Increase in Exports :-
The delinking could not increase the
exports of the country.

3. Deficit Increased :-
The balance of payment deficit is
increasing day by day because as the
value of our currency is falling deficit is
increasing.

4. Increase in Debt :-
The total volume of debt has been
increased.

5. Import Volume Increased :-
By delinking the value of imported
goods is increasing.

The delinking of dollar was a good step
but we can not reap the benefit due to the
contraction in the world trade.
comments
Labels: Economics 2, Foreign trade
How would we correct the unfavorable
balance of payment of Pakistan?

MEASURES TO
CORRECT THE BALANCE OF
PAYMENT

1. Proper Utilization of Resources :-
The less developed countries like
Pakistan should utilize their natural

resources properly. It will increase the
production and exports of the country.

2. Increase in Labour Intensive
Industries :-
Pakistan should prefer the Labour
Intensive industries. Because labour is
cheap as compared to the machinery. It
can reduce the import of machines and
can reduce the cost of production. The
demand of cheap goods can increase.

3. Increase in Small Scale Industries :-
We should increase the small scale
industries like Korea, Taiwan and Hong
Kong. We can increase our production
and exports with small capital. We can
increase the exports of sports and
carpets. Pakistan can not afford to import
the heavy machinery.

4. Change in Export Pattern :-
Since Independence we are exporting
raw material and few primary goods.
Now if we want to correct our balance of
payment we shall have to increase the
ex[ports of manufactured goods.

5. Decrease in the Imports :-
The consumption goods may not be
imported and people should use the local
manufactured goods. People shall have
to motivated to use Pakistani goods.

6. Denationalization :-
All the sick and nationalized
industrialized industries should be
handed over to the private sector to
improve the production of the country.
The private sector has the capacity to
revived the sick units.

7. Improvement in Quality :-
We should improve the quality of the
product to capture the world market by
attracting the quality of the product.

8. reduce the Cost :-
For increasing exports it is necessary that
we should reduce the cost of production.
Because in the competition lower prices
attract the other countries.

9. Joint Projects :-
We can increase the industries with the
help of foreign investors. It will be useful
for increasing the exports.

10. Reduction in Invisible Imports
Services :-
We should reduce the expenditure on
diplomats shipping to insurance to make
our balance of payment favorable.

Foreign fours and members of
delegations should be curtailed.

11. Reduction in Export Duties :-
The government should reduce the
export duties and should provide
incentives to the exporters. It will
increases the exports. Credit and License
facility should be provided to exporters.

12. Revision in Import and Export
Policy :-
The government should frame such type
of import and export policy that if should
encourage the exports and discourage the
imports.

13. Devaluation Policy :-
Sometimes devaluation policy is also
adopted to correct the balance of
Payment. The delinking of dollar policy

was also adopted to correct the balance
of payment in Pakistan.
comments
Distinguish or Difference between
balance of trade and balance of
payment and what are the causes of
unfavorable balance of payment of
poor countries
Balance of Trade :-
Balance of trade is the difference
between the various exports and imports
of visible goods of a country during a
given period of time. If the value of
visible items exports exceeds then the
value of visible goods imports then
balance of trade is said to be favorable.

Balance of Payment :-

Balance of Payment is a record of
economic transaction between residents
of the one country and the rest of the
world during the period of one year.
Under balance of payment we include
visible as well as invisible goods.

Favorable Balance of Payment :-
If the total value of imported goods and
services exceeds than the total value of
exported goods and services during a
year the balance of payment is said to be
unfavorable. In case of opposite situation
it will be unfavorable.

CAUSES OF UNFAVORABLE
BALANCE OF PAYMENT IN POOR
or LESS DEVELOPED
COUNTRIES :-
Most of developing countries balance of
payment condition is not satisfactory.

Accept few years they facing deficit in
their balance of payment. The deficit is
met by the loans. The deficit is
increasing day by day.

1. Import of Machinery :-
Developing countries are importing
machines and technology to improve the
industrial; sector. It has made the balance
of payment unfavorable because the
value of capital goods is increasing day
by day and we want to industrialize our
economy.

2. Export of Raw Material :-
Exports of developing countries depend
upon raw material and semi
manufactured goods. The prices of raw
material are very low in the world
market. So poor countries balance of
payment remains unfavorable. For

instance the product of cotton reduced in
Pakistan in 1995 due to virus so it also
affected adversely in balance of payment
because Pakistan imported cotton instead
of exporting.

3. Dependence on Agriculture :-
Many countries like India, Pakistan,
Bangladesh and other developing
countries mainly rely on exports of
primary goods like rice and cotton. If
climate is unfavorable then production of
agriculture sector decreases which
affects the balance of payment badly.

4. Payment for Foreign Services :-
Every year most of underdeveloped
countries pays a lot of foreign exchange
for various services like transport,
Insurance and Experts. It makes their
balance of payment unfavorable.

5. Increase in the Sick Industrial Units
:-
In some developing countries due to
nationalization a number of units are
suffering a loss. These units are not
producing goods according to their full
capacity. The low production has
reduced the exports and increased the
deficit of the budget.

6. Unfavorable Terms of Trade :-
Poor countries are paying higher prices
of imports as compared to the prices at
which it gets from exports.

7. Poor Performance of Public
Sector :-
The performance of public sector
industries is also not satisfactory in
developing countries. it waste lot of

foreign exchange of the country.

8. Political Unrest :-
many less developed countries are facing
political unrest which is the main cause
of low production. Ultimately balance of
payment remains unfavorable. In this
situation investor fears to do the
investment.

9. Advanced Countries Policies :-
The import policy of advanced countries
is not favorable for the poor countries.
They impose restrictions on the imports
and create problems for the poor
countries. They have also created unions
against developing countries.

10. Import of Oil and Fertilizer :-
Developing countries are spending a lot
of foreign exchange every year on the

import of oil and fertilizer. It has
increased the deficit in the balance of
payment.

11. Import of Wheat :-
Poor countries are facing the food
shortage problem and spending a huge
amount of foreign exchange on its
import.

12. Import of Consumption Goods :-
The people of less developed countries
prefer to consume the imported goods.
Even people are not ready to wear their
on country cloth. This attitude has
increased the imports. Cosmetics and
basic consumption goods are even
imported.
comments

Discuss the major exports of Pakistan
and discuss their importance

Major Exports of
Pakistan :-
Following are the important exports of
Pakistan :

1. Cotton :-
It is the most important cash crop of
Pakistan. Now due to its importance our
farmer in increasing its cultivation. In
1993-94, 8.0 million bales were exported
to other countries. Pakistan earned 3.083
billion dollars foreign exchange in 1993-
94. govt. has also allowed the exporters

to purchase cotton directly from the
Ginners. China, Hong Kong, Japan are
the buyers of raw cotton. Pakistan faced
the cotton crises in 1995 due to low
product.

2. Rice :-
Pakistan is earning a lot of foreign
exchange by exporting rice to Middle
East countries. Pakistan has monopoly in
the trade of Basmati Rice. In 1993-94
Pakistan earned 8214 million dollars.
Pakistan shall have to pay special
attention to the quality and cost of rice.
India and China are our competitors in
the world trade of rice.

3. Cotton Clothe :-
It has an important position in the
exports of Pakistan. Pakistan exports
billion dollar's cotton cloth to various

countries like U.K and Japan. we can
increase the Textile exports by using the
latest technology.

4. Cotton Yarn :-
During the last five years Pakistan has
doubled the production of cotton yarn.
no doubt the spinning capacity of the
cotton mills is very low. Pakistan has
earned million dollars every year by
exporting cotton yarn. The main buyers
are Japan, Hong Kong and Germany.

5. Carpets :-
Pakistan exports the hand made and
machine made carpets. Pakistan has a
tough competition with China and India.
Pakistan earned million dollars every
year by exporting it is West Germany,
Switzerland, U.S.A, France, U.K and
Italy.

6. Leather :-
In the field of exports Pakistan leather
industry is playing very important role.
Our leather industry has improved the
quality of product according the world
market standard Italy, Japan, Spain are
the main buyers.

7. Vegetable and Fruits :-
The export performance of vegetable and
fruits is very poor. Because processing
and grading facilities are not available in
Pakistan. Vegetables and fruits are
exported to the middle east and gulf
countries. Onion, chillies, pees and
potatoes can be also exported to various
countries.

8. Sports and Surgical Goods :-
Various other items like sports surgical

goods and jewellery is also ex[ported to
other countries. During 1995-96 Pakistan
earnest million dollars by exporting these
goods.

9. Fish and Fish Product :-
The export of fish and fish product
export is increasing day by day. Pakistan
earns million dollars foreign exchange
by exporting it every years.
comments
Wednesday, 27 July 2011
Discuss the export performance of
Pakistan or discuss the trend of
foreign trade in Pakistan

Export
Performance :-
After partition the foreign trade of
Pakistan was also affected like other
sectors of the economy. But after the
establishment of some industries exports
were increased. We can study the export
performance under three different
periods :

1. Performance From 1948 to 1971 :-
Before the partition internal and external
trade was controlled by the English
Rulers so foreign trade was affected very
badly after 1947. In 1948 the
government of Pakistan increased the
import of consumer goods t remove the

shortage in the country. It expanded the
volume of exports. About 60% of the
total exports of Pakistan were purchased
by the India in the early years.

2. Demand of Devaluations Refused :-
In 1949 Pakistan refused to devalue the
currency and India refused to purchase
the Jute and Cotton of Pakistan. So
Pakistan decided to develop the trade
relations with other countries like U.K,
France, Germany and Italy.

3. Effects of Korean War :-
The exports of Pakistan's raw material
increased due to Korean war. India
government also decided to import the
Jute of Pakistan. But the prices of
Pakistan's exports increased. The exports
value decreased due to fall in the prices
of raw material in the world market.

4. Devaluation of Currency :-
The government of Pakistan reduced the
value of Pakistani currency upto 30% in
1955 to encourage the exports. There
was a continuously fall in exports except
one year after devaluation.

5. Martial Law 1958 :-
In 1958 Martial Law was imposed and
government introduced export Bonus
Scheme. It increased our exports but due
to heavy imports our balance of trade
remained unfavorable.

6. Second Five Year Plan Period
(1960-65) :-
In the second five year plan due to liberal
import policy our balance of trade
remained unfavorable.

7. Third Five Year Plan Period (1965-
70) :-
In this period also export performance
remained very poor due to many reasons
like political disturbance and increase in
imports. Later on the war of 1965 created
more problems for exports.

8. Separation of East Pakistan :-
After the separation of East Pakistan
export policy was revised by the
government.
Following measures were taken to
increase the exports of the country.
1. Export Bonus Scheme was abolished.
2. Currency was devalued upto 131%.
3. Multiple exchange rate system was
finished.
4. Trade agreements were made with
Muslim Countries.
The above measures increased the

exports in 1971-72 to Rs. 10161.2
million. There was a marginal increase in
the value of exports upto 1976-77.

Following were the main causes of low
exports :
1. Nationalization of industries.
2. Frequent changes in fiscal and
monetary policies.
3. Floods.

During the 1977-81 there was an
increase in the exports. However in
1981-82 the increase in as fallen upto
17%. It has the following reasons :
1. The consumption of goods increased
at home and exports reduced.
2. The demand of our exports reduced in
the world market.
3. Fall in the terms of trade.
4. Unfavorable Global conditions.

5. Afghan Refugees Problem.

Relinking of Dollar in 1982 :-
The government of Pakistan adopted
various measures like relinking of dollar
to improve the exports. In the year 1987-
88, Pakistan earned 4.4 billion dollar
from exports. Cotton and cotton product
is the major source of foreign exchange.
The present government is also stressing
more on the export of manufactured
goods and value added goods. The total
value of export during 1993-94 was 6.75
billion dollars. The trade deficit during
1995-96 was 3.75 billion dollars. During
the year 1998-99 the trade deficit was
1.65 billion dollar and 1.60 in 2000-
2001.
After studying the exports performance
we can say that now the share of
manufactured goods is increasing in the

exports and it is good sign for Pakistani
economy.
comments
Tuesday, 26 July 2011
Discuss the various measures to solve
the problems of cottage and small
scale industries or Discuss the role
of state in solving the problems of
small

Any government can take advantages by
their cottage and small scale industries if
they take some important steps for this
industry. We discuss the important
measures to solve the problems of
cottage and small scale industries under
these headings :

1. Credit Facilities :-
The government should provide the
credit to small and cottage industries at
lower rate of interest. Further
commercial banks are also providing
loan to develops the industries.

2. Industrial Estates :-
The government has set up the number
of industrial estates in the different cities.
These areas have been provided various
facilities like, roads, banking, and
transport facilities to encourage the small
scale industries.

3. Testing Laboratories :-
The government has established the
testing laboratories to maintain the
prescribed standard of cottage industries
product.

4. Supply of Designs :-
The government also provides the new
models and designed to producers to
improve the qualify of cottage industry.

5. Publicity :-
The government has set up the display
centers and show room,s inside and
outside the country to increase the sale of
cottage industry product.

6. Facility of Raw Material :-
The government imports the raw
material for the cottage industries from
abroad and provides them at lower price
to encourage them.

7. Purchase of Cottage Industry
Product :-
The government also purchases finished
products from them and sells it at show

room. Govt display centers in side and
out side the country are creating the
demand.

8. Protection Against Foreign
Competitions :-
The government has also provided
protection to home industry by imposing
heavy duties on the imports. Still there is
a need of further protection. Smuggling
should be also controlled.

9. Establishment of Training
Institutions :-
The government has set up various
institutions like industrial, vocational,
commercial and polytechnic institutions
to provide the qualified workers to the
cottage and small scale industries.

10. Carpet Centers :-

For the training of weavers the small
corporation have set up carpet training
development centers. These are working
very usefully.

11. Handicraft Centers :-
Handicrafts development centers have
been set up to promote the handicrafts.

12. Advisory Services :-
The small scale industries advisory
services has been set up in each province
to provide guidance to the new comers in
small scale industry.
comments
Labels: Cottage and Small Scale
Industry, Economics 2
Saturday, 23 July 2011

What are the problems of cottage or
small scale industries and suggest
measures to improve these
industries

No doubt small
scale industry has great importance in
economy but unfortunately this sector
was neglect in the past.
Following are the main problems of
cottage or small industries :

1. Lack of Finance :-
The cottage and small scale industry is
facing the problem of capital shortage.
The financial institutions are not ready to

provide the credit on low rate of interest.
It is an obstacle in the ways of small
scale industry development.

2. Competition :-
There is a stiff competition between the
large scale industry and small scale
industry and usually small scale industry
suffers a loss.

3. Import Policy :-
The import [policy of the government is
also not favorable for the small scale
industry. It discourages the small scale
industry.

4. Smuggling :-
Smuggling of large scale consumer
goods from Russia, Iran and Singapore
has also discouraged the small scale
industry.

5. Problem of Raw Material :-
The owner of the small scale industry
can not get enough raw material what he
wants. Poor quality of raw material is
provided on higher prices to the small
industry.

6. Old Methods of Production :-
Small industries use old machines and
old methods of production. Due to this
the quality of small scale industries
product is very poor. So they are helpless
to sell the product at low rate.

7. Lack of Marketing Facility :-
The marketing facilities are inadequate
in the country. The small and cottage
industries are selling their product at the
low prices in the hands of middleman.
Even they can not advertise their product

on T.V because they have not sufficient
capital for this purpose.

8. Lack of Qualified Staff :-
The cottage industries can not employ
the qualified engineers and economists.
It reduces the quality of product.

9. Shortage of Electricity :-
There are a large number of villages
where electricity is no available. The non
availability of electricity is an obstacle in
the way of small scale industries.

10. Breakdown of Electricity :-
The regular break down of electricity has
also affected the production of small
scale industry adversely. Prices of
electricity are also rising day by day.
Higher prices has increased the cost of
production.

11. Lack of Standardization :-
The mixing of good and bad product
creates problems of marketing inside and
outside the country. The product is not
standardized.

12. High Cost of Production :-
The mostly cost of cottage industry is
very high. Because the process of
production is very slow and raw material
is also bought at higher prices. Rates of
electricity charges are also increasing.

13. Entrepreneur is Uneducated :-
Mostly cottage industries are owned
managed and controlled by literate
people. They follow the old methods and
production remains very low.

14. Lack of Roads and Transport

Facilities :-
There is a lack of roads, transport, water
supply, electricity and telephone
facilities for the small scale industry.
When infrastructure will not be available
how those can flourish.

15. Lack of Storage Facilities :-
The small scale industry in particularly
in villages is lacking storage facilities. A
huge product is wasted due to the
problem.
comments
What is cottage and small scale
industry? discuss its importance in
the economic development or What
are the main advantages of cottage
and small scal

Cottage Industry :-
It means the industry is run in the home
usually with the help of family members.
Simple implements are used and workers
are not paid wages.

Small Scale Industry :-
In the small scale industry the male
members of the family along with hired
labour work together. In small industries,
electric power and improved machines
are mostly used in subcontinental the
firm employing less than 10 person are
classified as small. In subcontinental
Carpet industry , poultry farming, bee
keeping, tailoring and furniture making
is included in the cottage and small
industry.

Importance :-
There is a shortage of capital and

technical skill in subcontinental. It is not
possible to establish the heavy industries.
While it is very easy to increase the
number of small scale industries. The
examples of Japan, Hong Kong and
Taiwan are before us.
Following are the main advantages of
small scale industry in subcontinental :

1. Increase in Industrial Product :-
There is a shortage of manufactured
goods in our area. We spend a lot of
foreign exchange on the import of these
goods every year. So we should increase
the small scale and cottage industry to
remove the shortage of these goods.

The rate of unemployment is increasing
day by day. To control unemployment it
is necessary that we should increase the

small scale industries because these are
labour intensive. Our farmer can also
easily work in small scale scale industry.
It is not possible to provide Govt. jobs to
all the unemployed people. It may also
increase the self employment.

3. Increase in Foreign Exchange
Earnings :-
the various kinds of goods like carpets
and sports sold in the international
market. We earn a lot of foreign
exchange by exporting these goods.

4. Use of Industrial waste :-
The waste of large scale industries like
cotton and steel can be used by the small
scale industry. In this way we can save a
lot of capital.

5. Provides Employment to Women :-

Our women is engaged in the cottage and
small scale industry and increasing the
production. Because in our society
women can not work with other men in
the factories. We should increase the
number of cottage industries to make the
female sector a real asset of the nation.

6. Increase in The Income :-
Increase in the production of goods on
small scale increase the income of the
people. The rise in income improves the
standard of living. In rural areas there is
great need of small scale industry.

7. Cheaper Production :-
The small scale industry is labour
intensive while labour is cheap in
subcontinental, so the production of
small scale industry is cheaper. Due to
low prices people purchase more goods

and market expands.

8. Proper Distribution of Wealth :-
The small scale industry increases the
income of the people and reduces the gap
between rich and poor. We can reduce
the poverty by expanding the small scale
industry.

9. establishment With Small Capital :-
We can establish these industries with
small capital. In subcontinental most of
the people are poor, so they can start the
production with small capital.

10. Development of Backward Areas :-
We can develop backward areas by
establishing the small scale industry in
these areas. It will remove poverty from
backward areas.

11. Reduction of Population
Pressure :-
The development of small scale industry
reduces the pressure of population on
land and increases the income of the
people.

12. Reduction in Migration :-
The unemployed labour force is
migrating to the other countries. If we
expand the small scale industry, it can
serve the nation instead of serving the
other countries.
comments
Friday, 22 July 2011
Why the government adopted the
policy of privatization deregulation

or what are the advantages or
objectives of privatization policy

The government of Pakistan has decided
to adopt the policy of privatization which
has produced some encouraging results.

Meaning of Privatization :-
Privatization is described as a process for
the transfer of state owned enterprises
(Soes) to the private sector.

Objectives of Privatization :-
1. To improve efficiency.
2. To generate revenue.
3. To broad base ownership.

4. To develop capital markets.

The Govt. of Pakistan set up a
privatization commission on Jan. 12,
1991 to implement the privatization
policy. In the industrial sector 118
industries are to be privatized out of this
67 have been privatized. The buyer
include 8 ex-owners, 9 employers group
and 5 foreign firms. The 2nd phase of
privatization had been started in July
1994. ABL and MCB has been
transferred to private sector, NBP 10%
shares offered for sale.
Following are the main causes of
privatization :

1. Increase in Efficiency :-
The profit seeking behavior of new
private sector managers will reduce the
cost of production. When cost of

production will be low it will attract the
customers. The aggregate demand of
various goods will increase and market
will expand, experience shows that
private entrepreneur is more efficient as
compared to the Govt. Officer because
his personal interest is involved.

2. Decrease in Govt. Burden :-
Now government has handed over the
various industrial units to private sector
and the loss which was beard by the
Government, now such loss will be
saved.

3. Increase in Production :-
Now private managers will manage the
sick units with full devotion and personal
efforts. So there will be an increase in
production. Policy of privatization will
promote competition, among the various

producers. They will compete in quality,
price and quantity, so consumer will
enjoy the maximum benefits.

4. Increase in Saving and
Investment :-
Secondary capital markets will expand
due to privatization and in this way rate
of saving and investment will rise.

Example :- Allied Bank of Pakistan after
one year of privatization has increased
the industrial financing up to 406%.
There is 59% increase in the inflow of
capital from other countries.

5. Sense of Ownership :-
After privatization the sense of
ownership and confidence among the
people has been developed. For example
Allied Bank shares are purchased mostly

by the employees. Now they are partners
of the bank, so they have shown the
positive attitude and profit amount has
risen.

6. Economic Freedom :-
One of the objectives of adopting this
policy is to provide greater freedom to
the economy to respond to market prices
and to allow the the economy to grow
according to its full potential.

7. No Political Influence :-
After privatization of financial
institutions loans will not be issued on
political basis, a private manager will
issue the loan keeping in view the
interest of the institution. The borrower
will also realize that there is no chance of
right off so he will not misuse the credit.

8. Quick Decisions :-
When the personal interest of the
managers will be involved in the profit
of the institution they will not waste the
time and quick decisions will be made.

For Example :- In case of recovery
some times quick and bold steps are not
taken by the executives of banks which
becomes the cause of loss.

9. Better Services :-
After privatization customers will find
better services from the various
institutions. Because the private sector
provides better incentives to those
employees who perform their duties
honestly and efficiently.

10. Increase in Foreign Investment :-
Privatization process has inspired

confidence and trust among the foreign
investors. The Japanese, Koreans and a
couple of others are keenly interested in
Pakistan for investment. So foreign
investment will rise if consistency
remains in our economic policies.

11. Increase in Economic Development
:-
Privatization was only remedy to bring
improvement in the state of affairs facing
the country. Govt. officers were running
the public sectors industries without
much success. Because they had no
interest in the promotion and
development of these units. They were
also not answerable to any body. So the
public sector was almost received with
huge losses to the government budget.
On the other hand private sector
managers are answerable to the

investors. They will be removed if they
failed to run the units efficiently. When
industries will run efficiently their rate of
production, employment and profit will
rise which will lead to over all
development.

12. Increase in Revenue :-
Aggregate revenue of the Govt. will also
increase from the industries through
taxes.
No doubt there are various advantages of
privatization but it must not lead to
monopolies and concentration of wealth
and no room should be left to suspect for
unfair ideals.
comments
Labels: Economics 2, Industrial
Development

Discuss the main sources of industrial
financing in Pakistan

1. Industrial
Development Bank Of Pakistan :-
it was set up in 1961. Its paid up capital
was Rs. 1,570,000. It is an important
source which supplies the funds for
industrial development. It provide
medium term and long term credit
facilities. The loans are granted for the
establishment of new Industrial Units
and for the replacement needs of the old
units. The major objective of this bank is
to spread the benefit of industrialization
in all the classes of the people. It issues
the loans on behalf of the government

and provides finance in the form of
equity. It also encourages the
establishment of industries in the less
developed areas of the country. It pays
due regard to the export oriented
industries and those industries which are
based on domestic raw materials. It is
acting as a monitoring agency of World
Bank and Asian development for small
scale industrial units.

2. Pakistan Industrial Credit and
Investment Corporation (PICIC) :-
The Pakistan Industrial Credit and
Investment Corporation was established
in 1957 with the help of government of
Pakistan and World Bank. The private
domestic investors hold 65% shares and
the remaining 35% has been taken by
foreign investors from Japan, U.K, West
Germany and France. A board consists

upon the 20 members. Five members are
foreign share holders. The Pakistan
Industrial Credit assistance to the new
industries. Before advancing loan it
examines the profitability ant its
importance to the economy. The
objective of the PICIC is to support the
private industrial sector in the form of
local and foreign currencies. It also
provides technical skill to the
industrialists. Corporation also arranges
loans direct from abroad.

3. National Development Finance
Corporation (NDFC) :-
Its main objective is to promote the
industrial expansion and economic
growth in the country. It provides
technical and financial assistance to the
new and old projects. Railway, Airlines,
Shipping, Ports, Steel Mills and textile is

financed by the NDFC.
Any one firm or individual can purchase
the NDFC certificates. It provides large
term and small term loans. NDFC offers
higher rate schemes in the country with
maximum safety and security, NDFC,s
financial resources comprise of capital
and reserve deposits in local and foreign
currencies. World Bank, Asian
Development Bank and Islamic
Development Bank also provide finance
to this institution. The Board of Directors
comprises of six Directors including
Chairman all are appointed by the
Federal Government.

4. Investment Corporation of Pakistan
:-
It was set up in 1966. Its major objective
was to develop the capital market in the
country. It has to provide the capital

market in the country. It has to provide
the sound base for investment in
Pakistan. The authorized capital of the
ICP is 200 million rupees. It has opened
the branches in important cities to
increases the share holders in the
country. This corporation has also started
the scheme of profit and loss sharing in
1980. The ICP Mutual Funds are
operated on interest free return. It
mobilizes the savings of public inside
and outside the country. The fund
amounting to Rs. 230 million has been
fully subscribed. On Board of Director
Supervises it which has eleven members
including chairman. These are appointed
by the Federal Government.

5. National Investment Trust (NIT) :-
The NIT was set up in 1963. It is a joint
stock company with paid up capital of

1.2 million. The NIT was converted into
interest free organization in 1979. It was
established to mobilize the savings to
meet the growing needs in the country. It
announces the rate of profit on the unite
after every quarter. Now its branches are
available in the big cities of the country.
The National Bank of Pakistan acts as
trustee of NIT. It also undertakes sale
and purchase of units along with other
commercial banks. Zakat is charged on
the NIT units.

6. Equity Participation Fund (EPF) :-
It was established in 1970. Its major
objective was to improve the growth of
small and medium size of industry in the
private sector. It had given to the priority
to the less developed areas of the East
and West Pakistan. After the Dhaka fall
it was recognized. The authorized capital

of the fund is Rs. 200 million, which is
contributed by the Federal and Provincial
and Govt. State Bank and Institutional
investors to provide equity support to the
less developed areas to improve their
economic conditions.

7. Banker's Equity Limited :-
It has started functioning in 1980. Its
objects is to improve the private sector
investment and capital market. It also
works on the basis of interest free loans
upto 1984. Its approved financial aid for
3 to 5 projects.

8. Insurance Companies :-
In Pakistan there are three insurance
companies which are playing very
effective role for the capital market.
State Life Insurance Corporation was set
up in 1972 and its position is the

strongest than the others while Pakistan
Insurance Corporation and National
Insurance Corporation Services also
cannot be ignored in this regard.

9. Combines Companies :-
Pak Saudia Company, Pak Kuwait and
Pak Japan Companies are also playing
important role to improve the industrial
and agricultural sector in the country.
These are providing finance to the
different sectors and improving the
Capital market in the country.

10. Small Business Finance
Corporation :-
It was set up in 1972. Its main aim to
provide financial aid to the small
business to increase the rate of
production and employment in the
country. Those people who have some

technical know how but they are
financially poor. They can get finance
from this corporation. Its head office is
of Islamabad. Cottage and small scale
industry is financed by this corporation.
The corporation has also Islamized its
operation in 1980 eliminating the
interest. It was recognized in 2001.

11. Stock Exchange :-
It is a market foe existing securities
which are issued by the public
authorities. Stock exchange provides a
place to the buyers and sellers of the
shares and securities. Stock exchange
indicates about the Govt. or bad health of
the economy. If the share prices are
rising it means country is running on the
path of development and prosperity. If
the share prices are falling it is a sign of
downfall of the economy. At present

there are two stock exchanges in
Pakistan. The Karachi Stock Exchange
was registered in 1949 and Lahore Stock
Exchange in 1971.
comments
Development
Thursday, 21 July 2011
Pakistan Industrial Development
Corporation (PIDC), National
Fertilizer Corporation of Pakistan
(NFC), Steel Mill

PAKISTAN
INDUSTRIAL DEVELOPMENT
CORPORATION (PIDC) :-
It was set up in 1950. In 1952 it started
its work. It had completed 60 projects in
1973.

Capital Structure :-
It was set up with authorized capital of
Rs. 10 million.

Performance :-
During the period of 1952 to 1974 it
expanded the industrial base. It
developed the heavy industries like

fertilizers, ship building, jute mill,
cement factories etc. PIDC was regarded
a symbol of inspiration to the private
sector.

Problems :-
The nationalization of 1972 affected
performance of PIDC very badly. Now it
is also facing the financial problems. It
has to depend on the Annual
Development Plan Funds. It can not set
up project valuing Rs. 50 lacs or above
without government approval.

Suggestions :-
The government should increase the
funds of Pakistan Industrial
Development Corporation (PIDC). The
Pakistan Industrial Development
Corporation (PIDC) should be
encouraged to established agro base

industries. It should also be encouraged
to take smaller projects. The losses
suffered by Pakistan Industrial
Development Corporation (PIDC) units
in backward areas.

NATIONAL FERTILIZER
CORPORATION OF PAKISTAN
(NFC) :-
It was set up in 1973 at Multan. In June
30, 1980. Its authorized capital was Rs.
1000,00 million and paid up capital was
Rs. 700.23 million. This project is
completed at a cost of Rs. 2243 million.
Some modification is also made in the
plant and now it is operating around 90%
capacity.

PAKISTAN STEEL MILL :-

The steel mill project was started with
the help of Russia on December 30,
1973. It has a great importance in our
history. Because without steel industry
we can not bring industrial revolution in
the country.

Capital :-
The cost of steel mill project is Rs. 25.5
billion. Its productive capacity is 1.1
million tons.

1. Importance for Industrial
Development :-
The annual production capacity of steel
mill is 1.1 million tons which can he
expanded to over 2 million tons.

2. Development of Engineering
Industry :-
The production of steel mill will improve

the engineering industry of Pakistan.

It provided the job to twenty thousand
persons for the construction work.
Further 15,000 persons will be required
to operate the plant at fully capacity.

4. Self Reliance :-
The steel mill has provided the sound
base for industrialization and reliance to
industrial sector.

5. Foreign Exchange Savings :-
Our imports will be reduced due to steel
mill product and it will save a lot of
foreign exchange. It has saved 3.5 billion
foreign exchange during 1999-2000.

6. Supply of Electricity :-
It is also supplying surplus electricity to

the Karachi Electricity Supply
Corporation.

7. Important for Construction :-
The Pakistan steel mill has also provided
the iron for the construction work. The
production of electrical and mechanical
instruments have been increased.

8. Importance for Agriculture :-
The production of tractors, thrashers and
tube wells is now easy due to the steel
mill production. It will increase the
production of agriculture sector.

The government of Pakistan has
protected the steel mill from foreign
competitions through import duties. But
still it is suffering loss due to many
reasons.

comments
Development
Discuss the advantages and
disadvantages of nationalization or
Why industries were nationalized
in 1972 in Pakistan and discuss its
effect on the leve

In the period of Mr. Zulfiqar Ali Bhutto
government nationalized basic industries
in 1972. Life insurance company was
also nationalized in the late 1972.
Vegetable ghee units were nationalized
in 1973. Commercial banks and shipping
were take it over in 1974. While flour
mills, rice bushing and cotton ginning
factories were nationalized in 1976.

MAIN CAUSES or ADVANTAGES OF
NATIONALIZATION :-
Following were the main causes of
nationalization :

1. Equal Distribution of Wealth :-
The government nationalized the
industries and banks to provide equal
distribution of wealth. Because few
families had full control over the major
portion of national wealth. So
government decided to provide equal
chances of earning to the people by
nationalizing the units.

2. End of Monopoly :-
There was complete hold of few
capitalists over the supply of the market.
They were charging higher prices from
the consumers. To remove the
monopolies government nationalized the

industries, so that goods should be
provided to the public at lower price.

3. Check on Smuggling and
Hoarding :-
The government nationalized the various
banks on this ground that capitalists were
misusing the savings of the whole nation.
They used the credit for hoarding and
smuggling.

4. Fair Distribution of Credit :-
The banks were nationalized to provide
the fair distribution of credit. All the
classes of the public will enjoy the credit
facilities. Small farmer and small
businessman was ignored by the banks
before nationalization.

5. Economic Stability :-
It was also argued that all the business

institutions will adopt uniform policy
after nationalization. It will provide
economic stability.

6. Effective Planning :-
It was also argued that after
nationalization government will prepare
the plans more effectively and the rate of
out put will rise.

7. Increase in Production :-
It was also argued that after
nationalization the labour will work
more honestly and efficiently to increase
the production of these units.

8. Increase in Social Welfare :-
Before nationalization all the profit of
industries and banks was in few hands.
But after nationalization it will be used
for the best interest of the whole nation.

9. Price Stability :-
It was also climes that state bank can
minimize the fluctuation in the economic
activity with the help of nationalized
commercial bank.

DISADVANTAGES OF
NATIONALIZATION

1. Increase in Corruption :-
The nationalized industrial units were
handed over to the government officials
and it increased the corruption in this
sector. Efficiency of the units reduced
after nationalization.

2. Fall in Production :-
After the nationalization production of
various units decreased and rate of profit

removed. The managers of those units
did not pay proper attention.

3. Sick Industries :-
In the short period these industries
suffered a loss and were declared sick
industries.

4. Carelessness of Labour :-
After nationalization workers became
careless about their duties and this
attitude of labour affected the production
adversely.

5. Public Sector Over Weighted :-
Public sector has become overweight and
it is health risk for the economy. More
over public sector is flourishing at the
expenses of private sector.

6. Private Sector Discouraged :-

The nationalization policy discouraged
the private sector, and due to this rate of
investment decreased. Even the target of
private investment in the 8th five year
plan could not achieved due to the fear of
nationalization.

Keeping in view above defects
government of Pakistan denationalized
the various industries. Now in the
present budget of government has
provided various incentive to promote
the private industrial sector. Present
government is trying is best to encourage
the private industrial sector.
comments
Development
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