Pakistan 's economy in general and the manufacturing sector in particular has been beset by low levels of investment. This has been a major impediment in creating a virtuous circle of growth, employment creation and poverty reduction in the country. However, in certain sectors of the economy, such as textiles, and in certain regions – such as the eastern province of the Punjab – investment levels appear to be higher than the aggregate pattern for the country.
Low levels of investment in Pakistan have either been explained in the market-state framework (i.e. of too much or too little of liberalization and structural adjustment) or in the investment climate framework. Asad Sayeed argues that these approaches have only limited explanatory power. In particular, they cannot explain major levels and patterns.
There is now a growing body of literature internationally which looks into local level institutional factors rather than the macro environment to understand differential levels of investment and growth within countries. Levels of violence, expropriation of rents from capitalists by state and non-state groups as well as creation of local level networks that protect property rights are some of the variables explored to understand such intra-country differentials.
This project seeks to explain intra-country differentials in investment in Pakistan in a macro milieu of violence and political instability. It will seek to trace the process and nature of network formation amongst private industrial investors in different industrial locations of Pakistan .
Field research is being conducted in the garments and spinning sub- sectors of the textile industry. This choice is dictated by a number of criteria. First, the textile industry is the largest industrial sector in Pakistan and the most significant contributor to value-added exports. Second, the garments and spinning sectors provide an interesting contrast of one being largely labour intensive with relatively smaller capital outlays and the other more capital intensive requiring larger capital outlays respectively.
This research is being conducted in the cities of Karachi and Lahore. Karachi has remained the major hub of industrial activity in the country historically. Karachi has also witnessed ethnic violence and political instability at a relatively greater scale than the rest of the country's industrial centres. Lahore is located in the eastern province of the Punjab and have over time become major industrial centres, especially for the textile industry. While there is an ethnic mix amongst industrial entrepreneurs in Karachi , entrepreneurship in the Punjab is exclusively Punjabi.
The field research methodology is primarily qualitative; detailed interviews with firm/industrial group owners/CEOs and senior managers who deal with investment decisions. In addition, other relevant groups such as industrial estate association personnel, the local chamber of commerce/industry association office bearers and personnel from relevant government departments have also been interviewed.
Beyond the Investment Climate Towards Understanding the Investment Conundrum in Pakistan: by
Asad Sayeed and Rashid Memon. This paper presents the results of the first phase of this project.
Asad Sayeed: Political Economist, Director, Collective for Social Science Research (CSSR), Karachi, Pakistan.