1.

Structural Transformation
Definition

Structural transformation refers to the deep and long-term change in the structure of an
economy — from agriculture to industry, and then to services. It involves:
A shift in employment and output from farming to industry and services.
Better use of resources for higher productivity and income.

Initial Economic Structure (1947)

At the time of independence, Pakistan was mostly an agrarian country.
Over 50% of GDP and more than 70% of the labor force came from agriculture.
Industry and services were underdeveloped and small in size.

Post-Independence Planning and Failure

Pakistan tried to follow industrial development policies, especially during the 1950s–70s.
However, poor planning, political instability, and elite capture led to failure in real transformation.

Industrial policies helped a small elite but did not create inclusive growth.

Lack of Real Structural Change

Although agriculture’s share in GDP declined, industry and services didn’t grow fast enough to
absorb the people leaving farms.

As a result, a large part of the population remains underemployed, often in low-productivity

sectors.

Employment Challenges

Urban migration increased as people left rural areas to find better jobs.

But cities couldn’t offer enough employment, leading to:

Urban unemployment.
Growth of the informal economy (jobs without contracts or legal protection).

Poor quality of jobs, especially for youth and women.

Unplanned Urbanization

Migration to cities happened without planning.

This caused:
Overcrowded slums.
Poor housing, sanitation, and transport.
Social tensions and rising poverty in urban areas.

Growth of the Informal Sector

The formal sector (industries, services) did not grow enough to absorb labor.
As a result, most people are working in the informal economy, such as:

Street vendors.

Daily wage laborers.

Unregistered businesses.

These jobs are low-paid, insecure, and offer no social protection.

Key Observations by Akbar Zaidi

Pakistan has experienced a distorted transformation.

Unlike developed countries, where labor moved to high-productivity sectors, in Pakistan, the
labor force moved to low-productivity, informal services.
This means Pakistan's economic transformation has failed to produce broad-based growth and
good jobs.

Conclusion
Pakistan has gone through some change in economic structure, but not the type needed for real
development. The country needs:
Planned and inclusive policies to grow industry and formal services.
Investment in human capital (education, health).
Urban planning to support migration.
Support for SMEs (Small and Medium Enterprises) to generate jobs.

2. Green Revolution in Pakistan

Definition

The Green Revolution refers to a period during the 1960s and 1970s when new agricultural
technologies were introduced in Pakistan to increase food production. It focused on
high-yielding crops, chemical fertilizers, irrigation systems, and machinery.

Main Features of the Green Revolution

1. Time Period & Leadership:

Took place mainly during Ayub Khan’s regime (1958–1969).

Supported by international donors like the World Bank, USAID, and international research
institutions.

2. New Agricultural Technologies:

High-Yielding Variety (HYV) Seeds: Especially for wheat and rice.

Chemical Fertilizers: Boosted crop nutrition and output.

Pesticides and Insecticides: Protected crops from pests.

Mechanization: Tractors and harvesters increased land productivity.

Private Tubewells: Expanded irrigation, especially in Punjab.

3. Geographical Focus:

Punjab benefited the most because:

It had better irrigation and road systems.

Larger landowners who could afford technology.

Government policies favored canal-irrigated areas.

Achievements of the Green Revolution

1. Higher Agricultural Output:

Major boost in wheat and rice production.

Improved agricultural GDP growth.

2. Food Security:

For a period, Pakistan became self-sufficient in wheat.

Reduced food imports, saving foreign exchange.

3. Technology Adoption:

Sparked the modernization of agriculture, especially in Punjab.

4. Boost to Allied Industries:

Fertilizer, tractor, pesticide, and seed industries grew rapidly.

Created demand for rural credit, services, and infrastructure.

Problems and Criticisms of the Green Revolution

1. Increased Inequality:

Large landowners benefited the most.

Small farmers could not afford inputs and were often left behind.

Landless laborers saw no direct benefit.

2. Regional Imbalance:

Punjab developed faster than other provinces, especially Sindh, Balochistan, and NWFP (now
KP).

This increased provincial inequality.

3. Social Inequality:

Widened the gap between rich and poor.

Many poor farmers became sharecroppers or laborers for rich landowners.

4. Environmental Issues:

Over-irrigation caused waterlogging and salinity in many areas.

Excessive use of fertilizers and pesticides led to soil degradation and pollution.

Tubewells lowered the groundwater table, especially in Punjab.

5. Displacement of Traditional Farming:

Traditional crops and methods were replaced by input-intensive farming, which was
unsustainable for many small farmers.

6. Debt Trap:
Farmers took loans to buy modern inputs.
Crop failure or market issues caused indebtedness.

Conclusion

The Green Revolution succeeded in raising food production and modernizing agriculture, but:
Only a small segment of wealthy landowners benefited.
It failed to reduce poverty or rural inequality.
It caused environmental and regional problems that hurt long-term sustainability.

What Pakistan Needs Now:

Investment in rural education and infrastructure.

Support for small farmers and water management.
Sustainable agriculture with equal access to technology.

3. Industrialization-I: The Ayub Khan Era (1958–1969)

Introduction

Under President Ayub Khan, Pakistan adopted a state-led industrialization strategy focused on
Import Substitution Industrialization (ISI). The main goal was to reduce dependence on foreign
imports by producing goods domestically.

Key Features of the Industrialization Strategy

1. Import Substitution Industrialization (ISI):

Encouraged local production to replace foreign imports.

High tariffs and import bans protected domestic industries from competition.

2. Protectionist Policies:

Government used trade controls, subsidies, and licenses to support local industries.
Foreign exchange was allocated mainly to favored industrialists to import machinery.

3. State Support to Industrial Sector:

Provided cheap loans, tax holidays, and investment incentives.

Subsidized energy and utilities for industries.

4. Role of PIDC (Pakistan Industrial Development Corporation):

Established in 1950s, PIDC created industries in underdeveloped areas.

Focused on basic industries like cement, sugar, fertilizers, and textiles.

5. Emergence of Big Industrial Families:

Government policies helped a few families become extremely wealthy.

Famous groups: Adamjee, Dawood, Saigol, Crescent, and Habib.

By the late 1960s, only 22 families controlled 66% of industries and 80% of banking.

Achievements of Ayub’s Industrialization

1. Rapid Industrial Growth:

Industrial sector became the fastest-growing part of the economy.

Manufacturing output rose sharply, especially in textiles, cement, and food processing.

2. Urban Development:

Cities like Karachi, Lahore, and Faisalabad saw industrial expansion.

Created job opportunities in urban areas.

3. Private Sector Development:

A new industrial capitalist class emerged.

Increased foreign aid and investment from countries like the US helped support industrial
growth.

4. Infrastructural Improvements:

Growth in transport, energy, and banking sectors to support industry.

Criticisms and Limitations

1. Inequality and Wealth Concentration:

Industrial wealth was concentrated in the hands of a few elite families.

This led to resentment and class conflict, especially in East Pakistan.

2. Neglect of Agriculture and Rural Areas:

Majority of Pakistan’s population was still rural and dependent on agriculture.

Government prioritized industry, leaving agriculture underfunded and outdated.

3. No Focus on Exports:

Industrial policy was inward-looking.

Exports remained weak, and industries were not globally competitive.

4. Dependency on State Support:

Industries relied too much on subsidies and protection.

Failed to become self-sustaining or innovative.

5. Corruption and Crony Capitalism:

Industrial licenses and foreign exchange were often given to political allies.

Created a system of economic favoritism and corruption.

Conclusion

The industrialization under Ayub Khan brought rapid economic growth and urban development,
but:
It benefited only a small elite, increasing wealth inequality.
It ignored agriculture and failed to build a strong export base.
It planted the seeds of economic resentment and regional imbalance (especially in East
Pakistan).

Way Forward for Pakistan (as implied by Zaidi):

Balance between industry and agriculture.

Policies that support small and medium enterprises (SMEs).

Focus on export competitiveness and inclusive growth.

4. Industrialization-II: The Nationalization Era (1972–1977)

Introduction

After coming to power in 1971, Prime Minister Zulfikar Ali Bhutto launched a program of
nationalization. This meant transferring the ownership of major private industries, banks, and
other sectors to the government.

Goals of Nationalization

Reduce economic inequality by ending private monopolies.

Bring social justice and public ownership.

Give workers a voice and protect labor rights.

Ensure that key industries served the public interest, not just the profits of a few.
Main Features of Bhutto’s Nationalization Policy

1. Nationalization of Major Sectors:

1972: Nationalized basic industries like steel, cement, fertilizer, and chemicals.

1973–74: Nationalized banks, insurance companies, and educational institutions.

1976: Nationalized cotton ginning, rice husking, and flour mills.

2. Workers’ Participation in Industries (WPI):

Introduced to involve workers in the decision-making process.

Workers were given seats on company boards and a share in profits.

3. Creation of Public Corporations:

Industries were run by state corporations instead of private owners.

Examples: Pakistan Steel Mills, Pakistan Automobile Corporation.

Achievements of Nationalization

1. Social Goals:

Aimed to reduce the power of the elite industrial class.

Tried to make the economy more people-centered.

2. Labor Protection:

Introduced labor laws and benefits (minimum wage, job security).

Workers were better organized through trade unions.

3. Expansion of State Control:

Allowed the government to control important sectors like banking, education, and energy.

Failures and Criticisms

1. Inefficiency and Mismanagement:

Government officials lacked the skills to manage industries.

Many industries became unprofitable and corrupt.

2. Discouraged Private Investment:

Business owners lost trust in the government.

No new industries were set up, and economic growth slowed down.

3. Decline in Industrial Output:

Productivity dropped, and many factories operated below capacity.

Unemployment rose due to slow business activity.

4. Political Interference:

Industries were filled with political appointees, not professionals.

Focus shifted from production to political control.

5. Education and Health Impact:

Nationalization of schools and colleges led to lower educational standards.

Bureaucracy increased, damaging service delivery.

Conclusion
Bhutto’s nationalization was based on social and political ideas of equality and justice. However:
The lack of efficiency, corruption, and mismanagement in state control caused the industrial
sector to decline.
It damaged investor confidence and hurt the private sector’s growth.

Key Lesson: Without proper management and accountability, state ownership alone cannot
ensure economic success.

5. Industrialization-III: Privatization and Denationalization Era

(1980s–1990s)

Introduction

After the failure of Bhutto’s nationalization policies, the 1980s and 1990s marked a shift back to
private sector control. Governments under General Zia-ul-Haq and later civilian regimes (Nawaz
Sharif and Benazir Bhutto) promoted privatization, deregulation, and free-market reforms.

Goals of Privatization & Liberalization

Improve efficiency by transferring industries from the state to private hands.

Reduce financial burden on the government.

Encourage competition and productivity.

Attract foreign investment and modern technology.

Major Policies and Reforms

1. Privatization of State-Owned Enterprises (SOEs):

Banks, cement factories, airlines, utilities (like WAPDA), and telecom firms were sold to private
owners.

Managed by the Privatization Commission of Pakistan.

2. Liberalization of the Economy:

Reduced trade barriers and import duties.

Ended price controls and industrial licensing.

Opened markets to foreign investors.

3. Role of IMF and World Bank:

Pakistan accepted their Structural Adjustment Programs (SAPs).

These included cutting subsidies, reducing government spending, and boosting privatization.

Achievements of Privatization

1. Private Sector Growth:

Boosted the role of the private sector in banking, telecom, and manufacturing.

Helped develop capital markets and entrepreneurship.

2. Increased Foreign Direct Investment (FDI):

Sectors like telecommunication, cement, and banking attracted international investors.

PTCL, UBL, and other major firms were privatized.

3. Improved Efficiency (in some cases):

Some privatized firms performed better due to better management and profit incentives.

Criticisms and Negative Outcomes

1. Lack of Transparency:

Many public assets were sold at very low prices to political allies and wealthy businessmen.

Accusations of corruption and favoritism.

2. Job Losses:

To reduce costs, private owners downsized staff, leading to massive unemployment.

No plan for worker retraining or protection.

3. Increased Inequality:

Rich business groups gained more economic and political power.

Poor and middle-class citizens did not benefit equally.

4. Weak Regulation:

Government failed to build strong regulatory institutions.

Led to monopolies in private hands (e.g., cement cartel, private banks controlling rates).

5. Unbalanced Growth:

Focus remained on urban elite and big cities.

Small towns, rural areas, and informal sectors were ignored.

Conclusion

The privatization and liberalization of the 1980s–1990s helped reduce the state’s economic role
and encouraged private investment. However:

It failed to deliver social justice and inclusive growth.

Unemployment and inequality increased, especially for the working class.

Without proper regulation and transparency, privatization benefited a few powerful groups, not
the general public.

Key Lessons (As implied by Zaidi):

Privatization must be transparent, competitive, and accountable.

The state should still protect workers and regulate industries to avoid exploitation.

A balance between public and private sector is necessary for sustainable and fair industrial
growth.

6. IMF and Structural Adjustment Programs (SAPs)

What Are Structural Adjustment Programs (SAPs)?

SAPs are economic reform programs introduced by international financial institutions like the
International Monetary Fund (IMF) and World Bank. Pakistan adopted these programs from the
1980s to early 2000s during times of economic crisis and low foreign exchange reserves.

Objectives of SAPs:

To stabilize the economy and reduce budget deficits.

To shift from a state-led economy to a market-based system.

To increase exports and integrate with the global economy.

To make the economy more efficient by reducing government control.

Main Conditions of SAPs in Pakistan

1. Cutting Subsidies:

On food, electricity, fuel, and agriculture.

Meant to reduce government expenditure.

2. Privatization of State-Owned Enterprises (SOEs):

Banks, utilities, factories, and other public assets were sold to private investors.

3. Currency Devaluation:
The Pakistani rupee was devalued to make exports cheaper and more competitive.

4. High Interest Rates:

To reduce inflation and borrowing.

5. Trade Liberalization:

Lowering of import duties and tariffs to open the economy to global trade.

6. Tax Reforms:

Widening the tax base and increasing indirect taxes like GST (General Sales Tax).

Impact of SAPs on Pakistan

Positive Outcomes:

1. Encouraged Free-Market Economy:

More private sector participation and investment.

Export sector (textiles, rice, leather) grew during some periods.

2. Controlled Fiscal Deficits:

Helped reduce government overspending temporarily.

3. Modernization of Financial Sector:

Banking and capital markets became more developed and professional.

Negative Outcomes:

1. Rise in Poverty:
Removing subsidies increased food and fuel prices, hitting poor families the hardest.

2. Unemployment:

Privatization and spending cuts led to job losses, especially in public sector.

3. Higher Cost of Living:

Currency devaluation made imports more expensive.

Inflation affected middle and lower-income groups.

4. Weak Social Services:

Cuts in government health and education spending worsened public welfare.

5. Social Unrest:

Price hikes and job cuts triggered public protests and political dissatisfaction.

Criticisms of SAPs in Pakistan

1. Ignored Local Realities:

IMF policies were one-size-fits-all, not tailored to Pakistan’s unique problems.

Poor governance, corruption, and weak institutions made reforms ineffective.

2. Failed to Deliver Long-Term Growth:

While macroeconomic targets (inflation, deficit) improved, real development and employment
did not.

3. Over-dependence on IMF:

Pakistan kept returning to the IMF due to unsustainable policies and weak reforms.
Conclusion

Structural Adjustment Programs were designed to fix Pakistan’s economy, but:

They served IMF goals more than the needs of Pakistani people.

They caused increased poverty, unemployment, and inequality.

Public services weakened, and common people suffered the most.

Key Lesson: For real reform, economic policies must be fair, locally suitable, and
people-centered, not just dictated by international financial institutions.

IMF Bailouts
Pakistan has taken 23 loans (bailouts) from the International Monetary Fund (IMF) since 1958,
showing a long history of financial dependence. These loans were taken during economic
crises, but they also show the country’s difficulty in managing its economy without external help.

Pakistan owes $7.6 billion to the IMF and ranks 5th among countries with the most debt to the
IMF.

The first IMF loan was taken in 1958, and the largest was in 2008 during the Gillani government.

In 2023, Pakistan took $894 million in IMF funds, but also had to pay heavy interest and
charges.

The year 2013 was important due to large repayments and new loans, which influenced
Pakistan’s economy significantly.

The IMF has always asked Pakistan to make reforms (like managing inflation and stabilising
currency) in return for loans.

Many experts believe that while IMF loans help temporarily, they also cause poverty,
unemployment, and economic pressure in the long run.

Pakistan has often failed to fix its core economic problems, which is why it keeps returning to
the IMF.

Key Point for Exam:

Pakistan has taken 23 IMF bailouts in 75 years, reflecting deep economic troubles and
dependence on foreign loans. Though these loans provide short-term help, they raise concerns
about long-term poverty, debt, and failure to solve real economic issues.

Unpacking New IMF deal

The article explains how the new $7 billion IMF deal will seriously affect Pakistan's economy
and people. Although the IMF claims to help countries, the author believes that its demands are
too strict and harmful for Pakistan.

Key Points:

1. Strict Demands: Pakistan had to increase electricity and gas prices and speed up
privatization (selling state-owned companies) before even getting the loan. Now the IMF wants
even more.

2. Harm to Economy:

The IMF is asking to remove support for farmers (like subsidies and fixed crop prices), which will
hurt poor farmers even more.

Special Economic Zones (SEZs), especially under CPEC, may lose incentives. This will
discourage investment in Pakistan.

The government is being forced to sell even profit-making national companies, which could
reduce income for the country in the long run.

3. Exchange Rate Pressure:

The IMF wants the Pakistani rupee’s value to be decided by market forces. This could make the
rupee even weaker, increasing inflation.

4. Impact on Sovereignty:

The IMF also wants to limit the powers of Pakistan’s SIFC (Special Investment Facilitation
Council), which was created to bring foreign investment. This shows that the IMF is interfering in
Pakistan’s internal matters.

5. What Pakistan Should Do:

In the short term, Pakistan should reduce unproductive subsidies and ask the IMF to take some
responsibility for past economic damage.

In the long term, Pakistan should grow its own industries, strengthen CPEC, and complete
investment projects on time without foreign interference.

Simple Conclusion

> The new IMF deal will bring more harm than help to Pakistan. It may increase inflation, hurt
farmers, stop foreign investment, and weaken the rupee. Pakistan needs to protect its economy
and make strong policies to reduce dependence on the IMF.