Formal and informal sectors; promoting industry

Geography of Pakistan · Industrial development. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.

Test this topic free All Geography of Pakistan topics

The idea

The formal sector is work in registered businesses and government jobs. Workers have contracts, regular wages and fixed hours, and tax is paid. The informal sector is unregistered work: street sellers, roadside repairers, home workers and casual labourers. Income is irregular, no tax is paid, and there is no legal protection.

The informal sector gives work to people with little education or capital and supplies cheap goods and services. But the government collects less tax, and work is often unsafe and may use child labour.

The government promotes industry with industrial estates, export processing zones, tax concessions, loans and better infrastructure. Modern telecommunications have also brought service jobs such as call centres.

Rules to remember

Formal: registered, taxed, contracts, regular pay, pensions and sick leave, safety laws apply.
Informal: unregistered, untaxed, no contract, irregular and often low pay, no job security.
Industrial estate: an area with ready plots, roads, power, water and gas to attract factories (for example Hattar, Nooriabad).
Export processing zone (EPZ): firms making goods for export get tax and customs duty concessions; the aims are investment, jobs and foreign exchange.
Other help: tax holidays, cheap loans, lower duties on imported machinery, training, dry ports.
Call centres come to Pakistan for educated English speakers and lower wages; power cuts and weak internet links hold them back.
Serving customers in other time zones means evening and night shifts for staff in Pakistan.

Common mistake

Students think informal means illegal. Most informal work is honest work; it is simply not registered, so it is not taxed or protected by labour laws.

Worked example

A firm will make garments and sell all of them to shops inside Pakistan. Should it look for a plot in an export processing zone or in an ordinary industrial estate?

An EPZ gives its tax and duty concessions to firms that produce for export.
This firm sells only in the home market, so it does not fit the purpose of an EPZ.
An industrial estate offers a serviced plot with roads, power and water to any kind of factory.

Answer: An ordinary industrial estate, because the firm does not export its goods.

Ask about this

Type what you are stuck on. The helper finds the explanation, worked examples and the notes to read, free and instant.

Read the full notes

Geography Key-Terms List

Keep going

← Manufacturing and processing industries Tourism →Take a Geography of Pakistan test