Islamic Republic of Pakistan
Islami Jamhooria Pakistan
LOCATION AND SIZE.
Pakistan is a country located in South Asia that covers an area of 796,095 square kilometers (310,410 square miles), almost twice the size of California. In the south, it borders the Arabian Sea, with a coastline of 1,046 kilometers (650 miles) and stretches north to the great Hindukush and Karakoram mountain ranges, with peaks as high as the Nanga Parbat (8,126 meters, 26,660 feet) and the K2 (8,611 meters, 28,251 feet). Pakistan is edged between India, with whom it shares a 2,192-kilometer (1,362-mile) borderline to the east, and Afghanistan and Iran, with whom it has 2,430 kilometers (1,510 miles) and 909 kilometers (565 miles), respectively, of common border. It also shares a 523-kilometer (325-mile) border with China in the north.
The country's temperatures are amongst the most extreme on earth, ranging from 50 degrees Celsius (122 degrees Fahrenheit) or more at the height of summer in the deserts of Sindh to-50 degrees Celsius (-58 degrees Fahrenheit) and below in the depths of winter on the northern mountain ranges. Until 1947, Pakistan was part of British India, which was then divided into the largely Hindu India and the Muslim state of Pakistan. Until 1971, this state consisted of a large territory to the west of the newly established Republic of India and a smaller territory in the northeastern part of historic British India, separated from each other by 1,600 kilometers (995 miles). East Pakistan succeeded in that year to become independent Bangladesh.
The government of Pakistan estimated that Pakistan's population was 137.5 million in June 2000, excluding about 1.5 million refugees from Afghanistan. Pakistan's Afghani refugee population increased significantly in the fall of 2001 after a U.S. bombing campaign against Afghanistan's ruling Taliban regime caused thousands to flee to Pakistan. A large majority of Pakistanis are very young, owing to the high rate of population growth in recent decades. About 41 percent of the population is under the age of 14 years, and 55 percent is between the ages of 15 and 64 years. Population growth is still quite high at around 2.2 percent in 2000. Pakistan has a very high infant mortality rate, with 88 deaths per 1,000 live births, but, on average, every woman in the country gives birth to more than 4 children. According to government figures, only about a third of the population lives in towns (33 percent in 2000), while two-thirds (67 percent) are rural. The population density was 175 people per square kilometer in 1999, according to World Bank figures, which makes Pakistan a heavily populated country despite its size. The largest towns are Karachi with 9.3 million inhabitants, Lahore (5.1 million), and Faisalabad (2 million).
Pakistan has 4 major provinces: the Punjab, Sindh, Baluchistan, and the North-West Frontier Province (NWFP), as well as some federally administered tribal areas. In 1998, 55.6 percent of the population lived in Punjab, 23.0 percent in Sindh, 13.4 percent in the NWFP, 5 percent in Baluchistan, 2.4 percent in the Federally Administered Tribal Areas (FATA), and 0.6 percent in the northern areas and the federal capital of Islamabad.
Urdu is the national language of the state, and English is the official language, most widely used among the elite and in government ministries, since only 10 percent of the population speak Urdu as their native tongue. Punjabi is spoken by 48 percent of the population, while Sindhi is used by 12 percent; Siraiki, a Punjabi variant, is spoken by 10 percent, and Pashtu by 8 percent of the population. Only 40 percent of Pakistanis are able to read and write, compared to an average of 49 percent in South Asia and 53 percent in low-income countries worldwide. The literacy rate for women is even lower than for men, showing gender disparities in education.
Islam is the state religion of Pakistan, which was designed to be the homeland for Muslims living in British India. At the time of the census in 1998, 96.7 percent of Pakistanis were Muslims. The remaining 3.3 percent consist of non-Muslim minorities, such as Christians (1.6 percent of total population), Hindus (1.5 percent), and others. The majority of Muslims are adherents to the Sunni branch of Islam, but a minority, variously estimated at 15 to 25 percent, are Shia Muslims. An offshoot Shia sect, the Ismailis, led by Prince Karim Aga Khan, are prominent in some northern areas. Shia-Sunni tensions have increased in recent years and there have been occasional clashes.
INFRASTRUCTURE, POWER, AND COMMUNICATIONS
Pakistan's infrastructure is poor and suffers from decades of neglect. Roads and railways are insufficient and in poor condition. Both the telephone system and the provision of electricity are hampered by corrupt and inefficient governmental service providers, which increasingly face competition from private entrepreneurs.
Pakistan has a total of 247,811 kilometers (153,990 miles) of roads, of which 141,252
|Country||Telephones a||Telephones, Mobile/Cellular a||Radio Stations a||Radios a||TV Stations a||Televisions a||Internet Service Providers c||Internet Users c|
|Pakistan||2.861 M (1999)||158,000 (1998)||AM 27; FM 1; shortwave 21||13.5 M||22||3.1 M||30||1.2 M|
|United States||194 M||69.209 M (1998)||AM 4,762; FM 5,542; shortwave 18||575 M||1,500||219 M||7,800||148 M|
|India||27.7 M (October 2000)||2.93 M (2000)||AM 153; FM 91; shortwave 68||116 M||562||63 M||43||4.5 M|
|Afghanistan||29,000 (1996)||N/A||AM 7; FM 1; shortwave 1 (1999)||167,000 (1999)||10||100,000 (1999)||1||N/A|
|a Data is for 1997 unless otherwise noted.|
|b Data is for 1998 unless otherwise noted.|
|c Data is for 2000 unless otherwise noted.|
|SOURCE: CIA World Factbook 2001 [Online].|
kilometers (87,774 miles) are paved. There are only 339 kilometers (211 miles) of expressway. Almost 90 percent of Pakistan's freight and passenger traffic travels by road. The major north-south and east-west link is Lahore and Rawalpindi to Peshawar and carries over half of Pakistan's goods and passenger traffic. The World Bank reports that Pakistan's road network is notable for its poor condition. Over two-thirds of paved arterial roads are not wide enough for 2 lanes. At both federal and provincial levels, Pakistan provides insufficient funding for road maintenance. According to the World Bank, these poorly maintained roads can result in 30 to 40 percent higher transportation costs.
Trains, the classic means of public transportation in British India, diminished in importance during the last decade of the 20th century. There are 8,163 kilometers (5,072 miles) of railway tracks. Pakistan Railways, an autonomous agency under the Ministry of Railways, operates the railroad system. Over the past 15 years, there has been a marked shift in freight traffic from rail to highways, a trend that the government hopes to stabilize and reverse. Railways carry about 15 percent of freight traffic and road vehicles 85 percent. The rail system comprises 781 stations. Rolling stock includes about 550 locomotives, 4,250 passenger coaches, and 32,000 freight cars. Pakistan Railways plans to improve railroad's share of long-haul freight traffic, upgrade track to permit trains to operate at higher speeds, and rehabilitate infrastructure to make better use of capacity.
Pakistan's major ports are Karachi and Port Muhammad bin Qasim, where Pakistan's merchant fleet of 20 ships is based; the country also has 2 proposed sites for future facilities at Gwadar and Pasni, both on Baluchistan's Makran Coast. Karachi is the main port, handling the majority of all dry and liquid cargo. During 1999 and 2000, Karachi Port handled 18 million tons of cargo, an increase of 2.4 percent from the preceding year. Port Qasim during the same period handled 9.5 million tons of cargo, showing an impressive increase of 19 percent over the corresponding period. To facilitate this expansion, the Pakistani government has allowed 2 shipping companies to construct and operate specialized integrated container terminals at Port Qasim and on Karachi's West and East Wharves.
The government-owned national air carrier, Pakistan International Airlines (PIA), has a fleet of 48 planes and serves 35 domestic and 37 international destinations. Karachi's Quaid-i-Azam International Airport, whose Jinnah Terminal opened in August 1992, is the principal international gateway to Pakistan, although Islamabad, Lahore, Peshawar, Faisalabad, and Quetta also have a number of international flights. In line with plans to continue modernizing and upgrading its civil aviation facilities, a new international airport is being constructed at Lahore. New airports and improvements in runways are also planned for Islamabad and other cities. The government recently opened the domestic aviation market to private sector competition. As of July 2000, 3 private airlines—Aero Asia, Shaheen Air, and Bhoja Air—are operating on local and international routes, while a fourth private sector airline, Safe Air, is operating on domestic routes only.
The combined generating capacity of the 2 public energy producers and distributors—the Water and Power Development Authority (WAPDA) and the Karachi Electricity Supply Corporation (KESC)—reached 11,701 megawatts (MW) in 1999-2000. Private producers contributed an extra 4,674 MW, bringing the total installed capacity to 16,375 MW. Pakistan's energy supply comes from a combination of oil (42.8 percent), natural gas (38.6 percent), water (12.8 percent), coal (5.2 percent), liquid petroleum gas (0.4 percent), and nuclear production (0.2 percent). Pakistan has faced chronic energy shortages, and domestic energy demand has outstripped supply. The development of the energy sector remains a high priority. From July 1998 to June 1999, the largest electricity consumption was by the industrial and transport sectors (34.4 percent each), followed by domestic (22.1 percent), commercial (3.2 percent), agriculture (3.0 percent), and other government sectors (2.9 percent). Pakistan's commercial energy demand is estimated to double over the next 10 years and, despite recent gas discoveries, the energy shortfall is expected to increase.
Even after recent rationalization of power tariffs , industrial and commercial tariffs are quite high in Pakistan. Nevertheless, the state-run WAPDA remains close to bankruptcy due to numerous unpaid bills. Unpaid bills (many in dispute) mounted from R15 billion at the end of June 1998 to R28 billion by the end of February 1999. KESC, which is supposed to be privatized, owes WAPDA R8 billion. The government reacted by using armed forces personnel to collect overdue electricity bills from private consumers and to check for theft of electricity. The successful drive against illegal connections led to a fall in sales demand as illegal connections were removed by WAPDA as well as by the consumers themselves. Although bill collection from private consumers is greatly improved, collection from government agencies is still a serious problem.
Pakistan has a mediocre but improving domestic telephone system. Service is adequate for government and business use, in part because major businesses have established their own private systems. Since 1988, the government has promoted investment in the national telecommunications system on a priority basis, significantly increasing network capacity. However, despite improvements in urban systems, telecommunication services are still not readily available to the majority of the rural population. There were 2.861 million fixed lines in 1999 and another 400,000 applications are being processed, yet Pakistan's Telecommunication Corporation (PTC) is meeting less than half of this demand each year. One reason is that much of the demand is from customers in rural areas where two-thirds of the population lives and where the payback takes much longer and is less lucrative.
In December 1990, the Pakistan Telephone and Telegraph (PTT) Department, which was directly controlled by the Ministry of Communications, was converted into the Pakistan Telecommunications Corporation (PTC), which still is the only provider of basic telephone services. PTC today employs 60,000 civil servants and is the country's most lucrative state-owned franchise. PTC earned net profits of about R18 billion on sales of R60 billion in the first half of 2001. Nevertheless, the government is eager to privatize PTC by first selling 26 percent ownership to a "strategic investor," and then selling further parts after the firm is on a solid footing. This new urgency to sell parts of PTC stems from a desire to lay a telecom infrastructure that supports a wider ambition. Pakistan, with an eye on India's IT success, wants to develop a software sector, but IT companies will invest only if they have access to affordable bandwidth capacity. Since private-sector inflows are necessary to achieve this goal, the sector is being deregulated in rapid fashion.
At present there are 3 cellular mobile phone operators. Cellular phones are a small market, with a penetration of only 0.24 percent, but it is growing quickly as deregulation lowers tariffs and as the cost of handsets falls. In 1998, there was only 1 operator, which had 158,000 subscribers. The current 350,000 cellular phone subscribers is forecast to swell to 1 million by 2003. There were 49 radio stations in 1998, broadcasting to about 13.5 million radios. In 1997, the country had 22 television broadcast stations, and Pakistanis owned 3.1 million televisions. In 1999, there were 26 different Internet service providers (ISPs); by 2000, this number had increased above 30 ISPs. Internet bandwidth usage grew heavily as access expanded from 29 cities in August 2000 to 350 population centers in a 4-month crash program. The number of Internet accounts is about 150,000, sharpening a market struggle between several Internet service providers.
Pakistan's IT policy focuses on education, and the budget reflects the emphasis: the allocation to science and technology went from R120 million in 2000 to R5 billion in 2001. The aim is to equip and upgrade universities; train teachers and public servants; improve economic rewards for PhDs; draw women into the IT net by training them for, say, medical transcription services; and teach the computer language Java on a mass scale, especially to the large number of jobless young people. At the same time, 15-year tax breaks are being offered to create the right business environment for foreign investment.
Unless there are major new discoveries, crude oil production—which satisfies under 18 percent of the country's requirements, compared with 35 percent in 1991-92—will ultimately run out. Recoverable reserves were estimated at 225 million barrels. Crude oil and related product imports cost R100.4 billion (US$1.7 billion) during the first 9 months of 1999-2000, accounting for 25.9 percent of all imports.
There have been promising gas discoveries in recent years. Natural gas production averaged 2.22 billion cubic feet per day in 1999-2000, about 10 percent above the previous year, while known recoverable reserves were estimated at over 19.5 trillion cubic feet at the end of March 2000. The government faced the prospect of buying this gas at international oil prices, since it had earlier promised to do so. However, it can hardly afford the price, which caused problems with the gas exploration companies.
There is an extensive range of non-fuel minerals. Deposits of limestone, marble, china clay, dolomite, gypsum, silica, ochre, sulfur, barytes, bauxite, iron ore, and emeralds are being exploited, but all on a very low scale. International exploration and development companies would, if they could, flock to Baluchistan, which is believed to possess massive reserves, particularly of natural gas. The problem is that the province's tribal chiefs, over whom the central government exerts little control, have been demanding too high a price for permission to drill. Most of the foreign companies initially awarded concessions were not able to make use of them when faced with obstruction from Baluchi tribesmen. An exception is the country's biggest development project in the remote Chagai district of Baluchistan, where the Metallurgical Construction Corporation of China is mining blister copper. It is also hoping to exploit some of the area's gold and silver reserves.
Before 1947 there was little manufacturing in the area that makes up present-day Pakistan. Its primary role was as a supplier of raw materials, including cotton, to industrial hubs across British India, such as Bombay. In general, manufacturing still works with relatively basic technologies, generates few value-added products, and has a narrow production base, i.e., it does not diversify into many different product groups. Textiles are Pakistan's primary industry, and in 1999 accounted for 8.5 percent of the gross domestic product, 31 percent of total investment, 38 percent of industrial employment, and almost 60 percent of total exports. Pakistan is Asia's eighth-biggest textiles exporter, with export revenues of US$5.7 billion in the first half of 2000. Export growth has been declining since a recent peak of 6.1 percent in 1996. The trend is reversing, encouraged by large cotton crops in the past 2 years which have lifted output to about 11 million bales (each bale weighing 170 kilograms), the bulk of which is consumed at home, and large-scale capital investment to modernize plants. However, progress is still expected to fall short of targets, notably to be among Asia's top 5 exporters with sales of US$14 billion by 2005.
As a rule, large textile firms concentrate on spinning and weaving, leaving garment manufacturing to highly fragmented small to medium-scale producers. The industry, particularly its spinning and weaving sectors, has been under pressure since the mid-1990s, owing to increased competition in the international market, financial mismanagement within the industry, and rising global demand for value-added textiles, as well as the increase in production capacity in other developing countries. Pakistan's textile sector must move to higher value-added production to meet challenges and opportunities beyond 2005, when quotas are removed and tariff barriers lowered, as mandated by the World Trade Organization (WTO). This will expose Pakistan's mills to intense competition from China, Asia's largest textile exporter.
Food processing is a large industry, generating an estimated 27 percent of value-added production and making up 16 percent of the total employment in the manufacturing sector. Major sub-sectors of Pakistan's food industry are cooking oils and hydrogenated vegetable oils, sugar, flour, tea, dairy products, beverages, and canned foods. The fish, meat, and fruit and vegetable sectors remain underdeveloped, partly for lack of adequate infrastructure, including storage and transportation facilities. A small quantity of processed foods is imported to feed a few supermarkets catering to the country's elite. The vast agricultural resources and the country's geographic location make Pakistan an ideal country for investment in the food sector. Several foreign firms have entered the market and established their own presence as manufacturers, or established joint ventures with local partners. The fastest growing sectors are beverages—including carbonated soft drinks and juice and juice-flavored drinks—poultry, and edible oils.
Pakistan Steel, with an annual capacity of 1.1 million tons, is Pakistan's only integrated steel plant. It is located near Port Bin Qasim, 25 kilometers (15.5 miles) east of Karachi. The steel mill was constructed with technical assistance from the former Soviet Union, and currently employs about 20,000 workers. Iron ore, manganese, and cocking coal for the plant are all imported.
Leather is one of the major foreign exchange earners for Pakistan. The leather and leather products industry is labor-intensive (directly employing more than 200,000 workers), and there are over 500 tanneries in Pakistan. The recent growth of the industry is due in large part to its successful progression from the export of raw hides and skins and semi-processed leather towards high value-added finished leathers and leather products (including leather jackets, gloves, footwear, and sporting goods). The tanning sector is concentrated in Punjab, where manufacturing units process primarily buffalo and cow hides; tanneries in Sindh process primarily goat and sheep skins. The local market for leather is limited, and about 80 percent of production is exported. More sophisticated machinery and productivity increases can be expected to further boost exports. Pollution, especially through tannic acid and dyes, is a serious problem for this industry.
In 2000, services contributed about 49 percent to GDP. Wholesale and retail trade alone accounted for 14.9 percent of GDP, while transport, storage, and communications contributed 10.1 percent, public administration and defense 6.3 percent, ownership of dwellings another 6 percent, and finance and insurance 2.5 percent. Other services contributed 9.3 percent to GDP.
A ruling by the Pakistani supreme court in December 1999 obliged the government under General Pervez Musharraf to finalize arrangements for an Islamic banking system by the end of the 2001 financial year. The issue of converting to an Islamic banking system, under which fixed interest is abolished in favor of a regime where profits and losses are shared between depositors and borrowers, has never been as central in the country's history as it is now. Some of the existing instruments, such as leasing, are considered compatible with Islam and could be offered on a wider variety of products to respond to demand. Bankers assert that once the issue of Islamic banking is resolved Pakistan will launch the privatization of 1 or 2 of its 3 large public sector banks: Habib Bank, United Bank, and National Bank.
Financial reforms introduced in 1990 have liberalized Pakistan's banking sector, which had long been dominated by state-owned banks, and private banks are gradually playing a more significant role. In December 1990, the government announced plans to privatize state-owned banks and to allow the establishment of private domestic banks. As of 2001 the government had privatized 2 formerly nationalized banks: Allied Bank Limited (ABL) and Muslim Commercial Bank. There are 44 banks operating in the country, of which 25 are domestic, while 19 are foreign banks. The 25 Pakistani commercial banks have over 8,000 branches nationwide. Commercial banks are engaged predominantly in corporate lending. Consumer banking in Pakistan is largely undeveloped. There is no tradition of lending to small individual consumers, and purchases of automobiles, housing, and consumer goods are generally made on a cash basis. High interest rates combine with high start-up costs to discourage initiatives in the consumer sector.
In 1996, the banking system was on the verge of collapse due to the breakdown of governance and loss of financial discipline. Over the years there had been widespread political interference in both lending and loan recovery by banks, and borrowers had come to expect not to repay loans they took, especially from the state-owned banks. As a result, the stock of non-performing loans (NPLs) grew by almost 600 percent between the end of June 1989 and the end of June 1998, when the total amount of NPLs stood at R146 billion. Since December 1997 a reform program has been implemented, with support from the World Bank. Corporate governance has been improved through changes in management of the state-owned banks and protection given to the new management from political interference. The legal and judicial processes for recovery of loans have been strengthened. Operating losses have been reduced through staff separations and closures of non-viable bank branches. Much remains to be done to further strengthen banking regulation and supervision, and develop a well-functioning legal and judicial system. At the same time, privatization needs to be accelerated while ensuring that banks are sold to sponsors that bring in internationally recognized good corporate governance.
Commercial activities such as wholesale and retail trade have the largest share of business in the service sector at around 30 percent.
In 2000, General Pervez Musharraf, the military ruler, ordered his troops to accompany teams of tax inspectors to visit neighborhoods to collect information on the expenditures of individual Pakistanis. The move sparked resistance from traders in parts of the country, eventually forcing the government to make some concessions. Many of the tax board's employees are poorly paid and have wide-ranging powers, a combination that breeds corruption. Businessmen complain of being harassed by tax officials and subjected to complicated bureaucratic procedures as penalties for not paying bribes. Concessions made to traders included the abolition of a newly introduced general sales tax at retail level. This measure did not meet International Monetary Fund (IMF) conditionality, and the organization subsequently stalled the payment of a sizeable adjustment loan.
The number of foreign tourist arrivals in the South Asia region was 5 million in 1998; Pakistan's share of tourist arrivals in this region was 7.6 percent. More than half of foreign tourists in 1999 traveled to Pakistan to visit friends and relatives, followed by business travelers (18.3 percent), holidays and recreational travelers (13.4 percent), and religious tourists (2.5 percent). Most of the total tourists from overseas visited main cities like Karachi, Rawalpindi/Islamabad, and Lahore. Of the 420,000 tourists visiting in 1999, the largest share of around 125,000 came from the United Kingdom, mostly native Pakistanis working and living in Great Britain.
Pakistan has no territories or colonies.
Government of Pakistan, Ministry of Finance. <http://www.finance.gov.pk> . Accessed August 2001.
Harrison, Selig S. India and Pakistan: The First Fifty Years. Cambridge: Woodrow Wilson Center Press, 1999.
Naipaul, V. S. Among the Believers. Harmondsworth: Penguin,1982.
Noman, Omar. Pakistan: Political and Economic History Since 1947. London: Kegan Paul, 1990.
U.S. Department of State. FY 2001 Country Commercial Guide: Pakistan. <http://www.state.gov/www/about_state/business/com_guides/2001/sa/pakistan_ccg2001.pdf> . Accessed August 2001.
Zaidi, S. Akbar. Issues in Pakistan's Economy. Oxford: Oxford University Press, 1999.
—Markus R. Bouillon
Pakistani rupee (R). 1 Pakistani rupee equals 100 paisa. Currency notes of 1, 2, 5, 10, 50, 100, 500, and 1,000 rupees are in use.
Cotton, fabrics and yarn, rice, other agricultural products.
Machinery, petroleum, petroleum products, chemicals, transportation equipment, edible oils, grains, pulses, flour.
GROSS DOMESTIC PRODUCT:
US$282 billion (purchasing power parity, 1999 est.).
BALANCE OF TRADE:
Exports: US$8.4 billion (f.o.b., 1999). Imports: US$9.8 billion (f.o.b., 1999).