The Iron and steel industry accounts for almost 8 per cent of the total industrial output in Pakistan. It also contributes around 6 percent to the country’s gross domestic product (GDP). However, it faces some major challenges that have led to this importance being reduced over the years. These challenges include energy shortage and high cost of production that have restricted growth in this sector; the government has taken measures to counter these problems so as to revive the industry in Pakistan.
Iron and steel have been an essential part of the Pakistani economy since its inception in 1947, with the first industrial plant established in 1954. The industry remains vital to Pakistan’s manufacturing capacity, employing thousands of people and providing affordable products to the country’s consumers; however, it has experienced recent difficulties due to low demand and lack of government support. Read more about how the iron and steel industry in Pakistan is changing, as well as its future potential.
A Brief History
Pakistan’s iron and steel industry are one of the oldest industries in South Asia. The first blast furnace was commissioned by the British colonial government at Faisalabad in 1905. The sector is also one of the most important sectors for employment, providing jobs to about 400,000 people. However, over time, it has had to face several challenges including high production costs as well as competition from other countries that have better infrastructure facilities such as easy access to coal mines that provide fuel for energy-intensive processes.
Challenges Faced by the Sector
The iron and steel industry is a crucial part of any economy, as it provides an essential input for manufacturing goods. The challenges faced by this sector are many, including a shortage of coal which leads to high reliance on imported fuel. Other challenges include inadequate power supplies, obsolete machinery, lack of skilled labour, and poor transport infrastructure. The Pakistani government has acknowledged these problems but has done little to alleviate them. Consequently, many companies have either closed down or relocated to other countries with more favourable conditions.
Ways to Improve Efficiency
- One issue with Pakistani steel production is poor efficiency. As a result, the country imports most of its steel. The following are some measures that can be taken to improve efficiency:
- Investing in new technologies;
- Improving worker productivity;
- Investing in better quality raw materials;
- Decreasing the cost of energy; -Increasing foreign investment;
- Encouraging competition by eliminating monopolies;
- Creating more green jobs for coal miners displaced by mechanization;
- Changing international trade regulations on pricing/import duties.
Key Opportunities for Growth
Iron and steel production is an integral part of any developing economy. This is especially true in Pakistan, where it represents a large percentage of GDP. However, this industry has faced declining productivity for years now. One possible reason for this is that much of the iron ore was being imported from other countries such as China, rather than mined domestically. The government recently made moves to change this by approving a number of mining projects throughout the country as well as expanding existing ones. This should go a long way towards increasing local production, which will lead to better prices for manufacturers who have been struggling with high import costs.
Key Challenges for Future Development
- Lack of skilled labour to fill vacant positions.
- An ageing workforce, with few new entrants, is not only a problem for firms but also poses a looming fiscal challenge to the Pakistani government.
- A lack of investment in research and development has led to inefficient production facilities.
- Inefficient logistics networks have hampered exports, which are constrained by tariffs on steel imposed by major importing countries such as China.
- Labour unrest over low wages at some plants has led to shutdowns.
- Growing competition from Bangladesh’s garment industry has deprived Pakistan of much-needed foreign direct investment (FDI).