Pakistan, which had almost no large industrial units at the time of partition in 1947, now has a fairly broad industrial base, and manufacturing accounts for about 17 percent of GDP. Cotton textile production is the single most important industry, accounting for about 19 percent of large-scale industrial employment. Cotton yarn, cotton cloth, made-up textiles, ready-made garments, and knitwear collectively accounted for nearly 60 percent of Pakistan's exports in 1999-2000. Other important industries are cement, vegetable oil, fertilizer, sugar, steel, machinery, tobacco, paper and paperboard, chemicals, and food processing. The government is attempting to diversify the country's industrial base and to increase the emphasis on export industries. Small-scale and cottage industries are numerically significant but account for a relatively small proportion of the GDP at about 6 percent. Small-scale industry includes facilities, which employ fewer than 50 workers, and cottage industries (industrial units in which the owner works and is aided by family members but employs no hired labor). In 1999, industrial production grew by 3.8 percent.
Privatization of many state-owned enterprises is a key element of Pakistan's reform program. In 1991, the government identified a group of 118 state-owned industrial units for privatization. Of these, 97 units have been sold off. Industrial units—including factories producing cement, chemicals, automobiles, food products, etc.—have mainly attracted domestic private investors. The government plans to spend 90 percent of privatization proceeds for debt repayment and 10 percent for poverty alleviation. The government has laid out a time frame for privatization of various organizations in the financial, oil and gas, power, industrial, and telecommunication sectors, and the privatization process is to be completed by 30 June 2002. In most cases, the government aims to find "strategic investors" to buy up a certain stake of these firms and gain management control. The privatization process is a very complex undertaking, since new regulations of private sector entities in these sectors are still being established.