Labour and taxation

The trade union movement dates to the late 19th century, but, because Pakistan’s industrial sector (inherited at independence) was so small, organized labour as a proportion of total employment is still in the minority. This has not prevented it from becoming an important political force. Before the 1971 civil war, there were considerably more than 1,000 registered unions, most of them organized within individual establishments. Countrywide unions based on a common craft or a particular industry were very few. Most of the unions were situated in the urban centres and were affiliated with one of three national labour confederations. After the civil war and the emergence of Bangladesh, the number of unions declined to a few hundred, affiliated with one umbrella organization, the Pakistan National Federation of Trade Unions.

Because of the country’s relatively high rates of unemployment, employers have remained in a strong position, and many of them have been able to bypass working agreements and laws. Only the unions in the larger industries (e.g., cotton textiles) have had the necessary coherence to fight back. Labour laws introduced in 1972 met some of the demands (job security, social welfare, pensions) of organized labour but also sought to control political activity by industrial workers. Labour union activity was severely constrained by the military government of 1977–88 but was subsequently revived during the first administration (1988–91) of Benazir Bhutto.

Taxation accounts for the main source of government revenue: the government levies sales taxes, income taxes, customs duties, and excise taxes. Sales and income taxes account for the largest proportion of all revenues, with nontax receipts constituting a large portion of the balance. Government expenditures exceed revenues by a large amount. Income tax rates have been comparatively high, but the tax base has been so small that individual and corporate income tax revenues have remained substantially lower than excise, sales, and other indirect taxes. The government has been able to maintain heavy expenditures on development and defense because of the inflow of foreign aid and worker remittances.

Transportation and telecommunications

Buses and trucks have displaced rail as the principal long-distance carrier. A program of deregulation of the road transport industry was undertaken in 1970 and encouraged the entry of a large number of independent operators into the sector. Trucks and tractor-drawn trailers have largely displaced the traditional bullock cart for local transport of produce to markets, but in many rural areas animal power is still crucial to economic survival. Air transport of cargo and passengers has become increasingly important.

All the main cities are connected by major highways, and Pakistan is connected to each of its neighbours, including China, by road. The great majority of roads are paved. The country’s main rail route runs more than 1,000 miles (1,600 km) north from Karachi to Peshawar, via Lahore and Rawalpindi. Another main line branches northwestward from Sukkur to Quetta.

Pakistan International Airlines (PIA), established in 1954, is the national carrier; until the mid-1990s it was the sole domestic carrier, but since then a number of small regional airlines and charter services have been established. (PIA also runs international flights to Europe, the Middle East, Africa, and East Asia, as well as to neighbouring Afghanistan.) The principal airports are located at Karachi, Lahore, Rawalpindi, Quetta, and Peshawar. Karachi, Port Qāsim, and Gwadar are the principal port cities. Since 2012 management and modernization of Gwadar’s port have been handled by a Chinese state-owned firm. A number of small harbours along the Makran Coast handle the small boats that ply between Pakistan and the Persian Gulf states. In the early 1990s the limitations of the transportation system emerged as a major constraint on the modernization of the economy, prompting the government to undertake large-scale investments in the highway sector. Private entrepreneurs were invited to participate on the basis of a “build-operate-transfer” (BOT) approach, which subsequently became popular in other developing countries. (In the BOT system, private entrepreneurs build and operate infrastructure facilities such as ports, highways, and power plants and then recover their costs by charging tariffs from the users. Once the investors have recovered their outlay, the facility created is transferred to the government.)

Pakistan’s telephone system has developed and expanded since the first years of independence. Since 1988 the government has stimulated investment in telecommunications and prompted the development of an efficient national system. Pakistan Telecommunications Company, Ltd.—originally founded in 1947 as the state-run Pakistan Posts and Telegraph Department and partly privatized in 1994—is the country’s largest carrier. Despite increasing capacity, standard telephone service is generally sparse, with only a fraction of households having a landline and rural areas generally still without any standard services. Mobile phone usage, however, has increased dramatically. Pakistani networks are connected with the outside world via satellite and by fibre-optic lines. At the beginning of the 21st century, personal computer ownership was almost nonexistent and Internet access was sparse. Since that time, however, Pakistan experienced significant growth: by the end of the decade, the proportion of households with a personal computer had grown to almost one-tenth. While Internet access through home computers remained very limited, Internet penetration in general reached about one-tenth of the population, partly due to the popularity of shared portals such as Internet cafés.