Page 81 - CMA Journal (May-June 2025)

SECTOR BRIEF

S B

Large-Scale Manufacturing (LSM) Sector in Pakistan

By ICMA Research and Publications Department

The manufacturing sector in Pakistan is broadly year-on-year increase in the Quantum Index of
categorized into Large-Scale Manufacturing (LSM) and Large-Scale Manufacturing (QIM). However, the sector
Small-Scale Manufacturing (SSM). LSM comprises continues to face structural volatility. In 2023, LSM
industrial units registered under the Factories Act, output contracted by 10.92%, following uneven
1934, or those employing 10 or more workers, and growth in previous years. This persistent fluctuation
includes both production and service-related activities. highlights underlying challenges such as energy
SSM refers to smaller, often informal units operating shortages, high input costs, weak demand, and policy
outside this formal framework, typically with limited unpredictability, all of which constrain the sector’s
scale, capital, and regulatory oversight. long-term stability and competitiveness.
In March 2025, Pakistan’s manufacturing sector
showed modest improvement, as reflected by a 1.79%
A Historical Overview of Pakistan’s Industrial Evolution

Period Phase Title Key Higghlights
e
n
1947–1950 Post-Independence Setup Inherited only 34 of 921 iindustrial unitss; no formal inndustrial policy;; small-scale
n
manufacturing centered in KKarachi and Lahhore; Industrial FFinance Corporaation created
s
(1948); industry contributed 6.9% to GDP.
a
w
1951–1960 Planned Growth & Import First Five-Year Plan adoptedd; state-led deveelopment; textilles and sugar ddrove 80% of
o
Substitution industrial growth; 16% of private credit to mmanufacturing; SME support th
e
and incentives.
u
1961–1970 Industrial Expansion Phase Industrial output rose 7–8%% annually; ledd by textiles, suugar, cement, and fertilizer;
p
r
Punjab contributed nearly 500% of national mmanufacturing.
1972 Nationalization Drive Bhutto government nationaalized 31 major EERO; sectors inccluded steel,
o
chemicals, engineering, and utilities; strongg shift to state-leed control.
n
1978–1988 Start of Liberalization Nationalization reversed unnder Zia; privatte sector re-entered fertilizerss and autos;
o
a
public investment continuedd in heavy indusstries; Pakistan SSteel Mills launcched in 1981
with Soviet assistance.
r
o
1985–1988 Private Sector Revival Industrial policy promoted private investtment in textilees, cement, andd consumer
u
goods; manufacturing grew 4–5% annually;; early privatizattion improved cc
1989–1999 Privatization & Aggressive reforms under Beenazir and Nawwaz; cement fullyy privatized by 1992; partial
e
&
Deregulation privatization of Pakistan Steeel; banking, teleecom, sugar, andd auto sectors liberalized for
local and foreign investors.
e
h
2014–2017 Recovery with Regional LSM growth at 4–5%; drivenn by rising textille exports and ccement demandd; LSM made
Gaps up 70% of total manufacturing; KP and Baloochistan’s share remained under 10%.
e
2018–2020 CPEC Gains, Growth Strain CPEC pushed SEZ developpment; industrrial momentumm slowed due to political
G
t
uncertainty, trade frictions, aand COVID-19; LLSM contracted..
2021–2022 Post-COVID Rebound & LSM rebounded sharply on nnd global demand; led by textiiles, pharma,
d
Cost Surge and cement; aand energy costts eroded comppetitiveness.
2023–2025 Cost-Driven Contraction LSM output dropped 10.92%% in 2023 due to weak demannd, export slummp, and high
C
;
energy costs; March 2025 QIM rose 1.79%, bbut growth remaained volatile annd uneven.
ICMA’s Chartered Management Accountant, May-June 2025 79