PAKISTAN'S INTEGRATION INTO GLOBAL ECONOMY

 

One can hope for a better status of Pakistan in global economy in the near future


By AKRAM KHATOON

Dec 15 - 21, 2003

Despite structural reforms undertaken in all spheres of the country's economy under vigorous monitoring of funding agencies, Pakistan continues to remain on a slow growth path. As a result it is being sidelined from the process of globalization and stand deprived of benefits of closer economic integration with rest of the world. Reason being, country is still faced with serious economic and social challenges like retaining high population growth rate entailing rapidly increasing labor force, slow human development process and gender inequalities countered by slow economic growth rate thus restricted accessibility to global market.

Slow down in economic growth rate since last mid nineties with little check on population growth rate, which continues to persist at 2.6 %, has worsened unemployment situation.

No doubt fiscal and monetary reforms undertaken resulted in strengthening country's economy to some extent but below mark trade performance specially in the area of value-added exports has impeded the global financial integration. The reason for the fact that economic impact of these structural reforms has not been fully realized can be that these reforms have not penetrated deep down to address the structural rigidities and distortions both in social and economic life of the country.

Further, factors like unavoidable external influences, weak political set up devoid of tolerance and discipline causing poor law and order situation and recurring conflicts among ruling and opposition parties is preventing entry of foreign investments. Internal investors are also reluctant to come forward for absence of congenial investment climate.

Besides, until recent past it has been the political culture that each new incoming government never cared to continue with the programs and policies of its predecessors, thus over all growth process was badly hampered. It is for the first time in the history of Pakistan that present elected government is earnestly continuing with the policies of previous military led regime. They shall however have to go a long way to install a transparent judiciary system and creating an environment where human rights are fully protected and everyone is provided opportunity to develop his / her capabilities.

The human development report released by UNDP lately does not show any significant improvement in any indicator regarding human development status in Pakistan and instead its performance at this count has been down graded by ranking it as 146th among the countries under focus. The poverty stricken population continues to persist at 35% despite this issue getting priority in all development plans of present and preceding governments since mid nineties. Due to gender disparity in women's access to education, health and economic well being opportunities poverty has engulfed in its folds almost 70% of female population. The recent move to allow women 1/3rd representation in local government and allocation of 20 to 25% seats in provincial and National Assemblies would go a long way in lessening gender disparity in all walks of life. Women legislatures have already started voicing for repeal of unjust laws barring women development and impacting their social and economic freedom.

In order to eradicate poverty and attain sustainable economic growth rate an improved strategy is need to be undertaken towards education, health and social protection through safety nets. The reforms already introduced and yet to be undertaken must cover all aspects of socio economic life of the country, because neglect of even one area in the process of growth and development can thwart the over all development process.

It is unfortunate that health sector is not receiving due attention. Only 1.7% of the GDP is available annually for development of health facilities. Government's extensive intervention is needed for providing basic public health services, ensuring food supply of good nutrition value, and also safe drinking water to poor population specially in poverty infected rural areas, on continuous basis.

Government is need to develop effective management and regulating strategies both for public and private health care services provided. It is also necessary that mechanism developed for monitoring and management must meet peoples' need even in remotest part of the country. This requires induction of adequate number of doctors and health personnel and compulsory posting of doctors and paramedic staff in rural and far-flung areas on rotation basis. In this regard newly set up National Commission on Human Development which is meant to support government as well as NGOs initiatives in providing basic health services and promoting primary education must come forward in a big way to supplement efforts initiated for social sector development.

Education sector also needs concerted efforts for enhancing enrollment rate and plugging heavy drop-outs which render all efforts futile for making primary education compulsory for all.

Students teacher ratio need to increase and quality of education to be improved by inducting quality teachers on contract basis and linking remuneration with their performance.

Fastly changing information technology and its impact on economic environment and economic growth pattern all over the world necessitate total change in education curriculum and initiating research and development to be the part of higher education particularly in the field of science and technology. This is necessary to develop expertise of students to the level attained by economically developed countries.

Recent initiative on the part of government to invite foreign faculty to teach at universities and professional colleges is a step to raise standard of education. However to attract scientists and research scholars from within the country, who are at par in competency with their foreign counterparts, suitable incentives should be offered.

In order to arrest growing poverty and to improve over all growth rate of the economy, social safety nets need to be injected in the system. In fact reforms undertaken in various sectors of the economy should have resulted in creating more jobs rather than rendering a large number of labor force jobless. Effective strategy is needed to eliminate social risk like deployment of child labor and exploitation through bonded labor practices. Free deployment of child labor in carpet weaving, sport goods manufacturing and others has ultimately impacted export market of relevant goods. In this regard government intervention is essential to comply with Time bound program of International Labor Organisation (ILO) requiring total elimination of child labor from industries which are health hazardous. Besides that efforts should be accelerated for creating employment and self-employment opportunities for deprived segments of population and to lessen their vulnerability rather than to provide traditional safety nets like distribution of Zakat from Baitulmal and giving food vouchers etc to poor.

No doubt country's external economy has gained strength due to sincere efforts of economic managers and mostly being a windfall, resultant of dramatic happenings in international politics dominated by super powers. However government efforts to bring in sustainable economic reforms, have not so far brought any significant improvement in GDP growth rate and instead eroded internal economy, thus causing steep rise in number of unemployed and lowering per capita income. This has made sustainability of even external economy's growth rate doubtful.

Due to lackluster job growth in private sector of the country, sizable allocations (Rs.65 billion) have been made for public sector development expenditures. These are mainly for construction of dams and roads, aimed at creating employment opportunities, but purely public sector initiatives in this regard, instead of bringing positive results will prove burden on country's resources and general public, as government in order to generate revenues resort to new taxes and deficit financing. As such there is need to prompt private sector to invest in such projects and also in labor intensive industries and to phase out public sector spending gradually. Public sector role should be only of provider of infrastructure. Besides sincere efforts are needed to ensure congenial political environment and total harmony in law and order situation to attract both internal and foreign investments and to revive stagnant economy. The GDP growth rate need to be enhanced to atleast 8% in order to match population growth rate in order to improve employment situation in the country.

The unemployment problem stand compounded further in recent years, as due to rising cost of living there is influx of female job seekers in labor market. The number of women employed in formal sector has got doubled of what was twenty years back, though still their percentage (9%) in formal sector is quite low. The unemployment situation relating to white collar jobs has further worsened with structural reforms and privatization program carried out relating to public sector enterprises. The process of down sizing/right sizing carried out in financial sector alone has scrapped around 34,000 employees.

After realizing the fact that public ownership of strategic industries, utility services (being offered at subsidized rates) and financial institutions is counter productive to economic development, government resorted to privatization of these entities. Some of these have already been disinvested. However due to stagnant economy and rising unemployment, privatization of major public sector entities is not being favored by the employees as well as general public, in view of apprehensions of lay off of surplus staff by new management in order to improve operational efficiency of the entities. Government has however seen a way out, as such National Bank of Pakistan, Oil and Gas Development Authority and Sui Southern & Northern Gas companies are being disinvested gradually through offer of their shares to general public through stock exchange. It is hoped that resistance from employees would fade away in course of time.

Further there is urgent need for removing fiscal imbalances. No doubt, due to concerted efforts of present and immediate past Military led regime to expand tax net and reducing subsidies fiscal deficit has reduced considerably, but still its present level threatens failure of all out efforts made to reduce internal and external debts drastically.

The volume of export trade need to be accelerated keeping in view potential challenges of WTO regime as it is the only way to reduce and finally to wipe of balance of payment deficit. In this regard it is imperative to improve overall investment climate as suggested earlier, in order to bring in foreign investments by ensuring comparative cost advantage to foreign entrepreneur for setting up large scale industries and investments in strategic projects. The assurance of congenial investment climate on the other hand would prompt indigenous capital also to flow towards small and medium size industrial sector, mostly producing value-added and designer goods, competing strongly in international market. This will automatically enable the government to do away with high tariffs and other non-tariff barriers, which is a prerequisite for operating under WTO regime.

Further in order to achieve phenomenal economic growth and to get integrated into global market, concerted efforts are needed on the part of establishment for infusing good governance and transparency in all aspects of economic life of the country. It is a matter of satisfaction now that sincere efforts of economic managers in this regard have started earning appreciation from IMF and other foreign financing entities and one can hope for a better status of Pakistan in global economy in the near future.