PAKISTAN'S ECONOMY & WORLD MARKETS
PROF. DR. KHAWAJA AMJAD SAEED
Feb 21 - 27, 2011
Pakistan emerged on the political map of the world as a sovereign nation on August 14, 1947. The founder of Pakistan, Quaid-e-Azam Muhammad Ali Jinnah, had visualized Pakistan to be a vibrant and economically stable country with prosperity spread across the board. However, Pakistan had a chequered history in her economic development performance.
PAKISTAN'S GDP GROWTH
The decade of 1950's was the formative and initial years of Pakistan. However, it manifested a tremendous growth during 1960's due to significant participation of private sector in the economic development. In one year, she achieved a growth rate of 8.3 per cent, which made her number 2 in terms of performance in Asia after Japan which attained rank number 1 in GDP growth. However, 1970's was the beginning of nationalization of 32 industrial concerns, banks, marketing, and distribution companies in oil and insurance companies. Its economic growth declined. 1980's was partial denationalization. The 1990's was a politically disturbed position as political governments kept on changing periodically. Till the beginning of 2008, the government in power with military influence paved the way for restoration of democracy in the early part of 2008. Unfortunately, in the year 2008-09, GDP growth was 1.2 per cent mainly due to low performance in agriculture, high food prices of imports and high oil prices touching all time peak at US$147 per barrel. However, there was a GDP growth of 4.1 per cent during 2009-10. The forecasted figure of GDP growth during 2010-11 was targeted at 4.5 per cent. Due to misfortune of Pakistan, she was hit by heavy floods, which devastated the economy of the country on agriculture front and physical infrastructure was massively destroyed. Therefore, as against the above forecast, the realistic forecast of GDP growth of 2010-11 is estimated between 2 to 3 per cent.
Due to international assistance, participation by the Pakistanis (expatriates and residents of Pakistan) and the contribution of the government, rehabilitation work continue and with determination, the nation is going ahead.
Three constituents of Pakistan's GDP are agriculture (22 per cent), industry (26 per cent) and services sector (52 per cent). Agriculture constitutes four components namely Livestock (50 per cent), major and minor crops (46 per cent), Fishing (2 per cent) and Forestry (2 per cent). Pakistan manufacturing sector also consists of industries, minerals, electricity, and construction. Services sector constitutes physical, social, financial, and intellectual components.
Right now, the country is struggling to develop a sound strategy for her economic development in all the above components of GDP. However, this paper concentrates on learning from abroad. Therefore, the niches successfully used in sample countries of all the five continents of the world have been shared in this paper as part of experiential learning.
Several countries of the world are success stories due to strategies employed by them. We ought to learn from their approach and Pakistan has the capacity and capability to emerge as a strong economic power house. This piece shares some selected examples of success stories using one niche. In this respect, we have used the sampling technique by selecting some countries from five contents of the world:
1. Africa - South Africa 2. Americas - Chile 3. Asia - Bangladesh, China and Singapore 4. Europe - France, Germany, UK 5. Oceania - New Zealand
SOUTH AFRICA: MINERAL DEVELOPMENT AS ECONOMIC DRIVER
South Africa is known for the struggle which was lead by Nelsen Mandela and this ultimately resulted into freedom from the British. Moreover, their cricket team has been a flag carrier for their country. They have been blessed with tremendous reserves of gold and diamond. Their focus has been on using mineral development as an economic driver. Unfortunately, the contribution of minerals in GDP in Pakistan is around 3 per cent and its performance during 2009-10 was negative. It is high time that Pakistan government must focus attention through institutionalized approach to harness the hidden resources to our advantage and ensure significant contribution of minerals to GDP.
Allah has gifted all resources on shore, off share and hidden ones. We need focused attention in this sector to usher in an era of prosperity and consequential enrichment of lives of millions of our country.
CHILE: FISH AS ECONOMIC DRIVER
The geography of Chile is very interesting. Its west spreads long with Pacific Ocean. It used the niche of developing her coastal area for caching fish and exporting the same. UNITC, Geneva, Switzerland popularized this niche as a lesson to several countries of the world. Pakistan's South resembles with the west of Chile and one can learn from their approach to harness the coastal area to our advantage. Beside a boost to our exports, poverty reduction can also be achieved along with spread of prosperity to the down trodden of Balochistan and Sindh.
BANGLADESH: GARMENTS EXPORT AS A NICHE
The over-talked myth of jute serving as golden fiber to support the then West Pakistan at the cost of the then East Pakistan which later became Bangladesh was exploded as the international demand for jute was on the decline and Bangladesh found it difficult to earn foreign exchange which was earlier propagated on massive scale. Caught up with this problem, Bangladesh adopted one significant niche to economically develop the country. The first niche which successfully worked was a breakthrough in export of garments which now constitutes 64 per cent of her exports. Market niche was used as a focused approach. Pakistan needs to learn from this approach by focusing on export of "Fish" as her niche. We have huge potential to exploit the coastal belt of our country by concentrating on development of fishing on coastal belt. Institutionalized efforts are needed to be taken in this respect. Poverty stricken fishermen of Sindh and Balochistan can be helped through financial support and technical training and Pakistan can achieve great heights in exports. Now the contribution of fish in the total agriculture is only 2 per cent. Let us learn from the above "niche" approach and use "fish" as an economic driver to achieve the above goal.
CHINA: SYNERGY THROUGH RELATIONSHIP
China - Pakistan friendship has been historically well known. Recently Free Trade Agreement (FTA) was signed between the two countries. China is keen to help us. Today, China has emerged as a great economic power. Based on the World Development Report 2010, China is ranked as number three in the global exports (US$0.97 trillion). By now, her exports have crossed the barrier of US$1 trillion. Her foreign exchange reverses in the world are the lightest. She has achieved great economic height through a breakthrough approach of focusing on their internal strengths and capitalized these to her advantage. Her products are globally available at affordable prices. Benefitting from FDI flows of US$40-50 annually, she is now in reverse gear by providing financial assistance and FDI abroad on a rising curve. Her Western side needs considerable development as she needs access to hot waters, which only Pakistan can provide. The honorable President of Pakistan has made several visits to China with the objective of transfer of technology in agriculture and delegations have visited her for learning techniques of introducing innovations in industry and services sector. She has the capacity to deliver the goods in all sectors of our economy including mineral exploration and breakthrough in energy sector.
Time is ripe to give a serious focus to Pakistan-China in strengthening relationship on synergistic basis to usher in a new era of prosperity in our country. The earlier this is done the better.
SINGAPORE: EDUCATION AS AN ECONOMIC DRIVER
In 1964, Singapore was like a boat country. She was born as a sovereign independent nation out of Malaysia. Lee Kwan Yee, a leader with vision, became her Prime Minister and spelled out his vision of Singapore for the next 25 years. He compared his promise with performance and accomplished all the three promised goals: every Singaporean to have his/her own house, Singapore to be the cleanest city state to encourage tourism and Singapore to emerge as significant financial centre in the world. These were achieved through the establishment of two universities namely National University of Singapore, which ranks number one in Asia Pacific now and Nan Yang Technological University, which ranks number five in Asia Pacific now. Huge allocations were made to higher education, which has enabled Singapore to use quality education in management sciences, computer technology, social, physical, natural, and other sciences. Later, a third University of Management Sciences was established which was permitted to enroll persons of 40 and above years of age to ensure that new skills should continue to bejewel the nation for meeting the challenges of 21st century. How much are we investing in higher education? This is a question, which yearns for thinking on our part. Let us learn from Singapore to use quality higher education as an economic driver for all round gains to broaden the canvas of prosperity across the board. Today, Singapore has the lowest gini co-effluent (0.19 out of a scale of 1) representing the lowest poverty in the world. This index measures the level of inequality of income. The lower the index, the less is the inequality and the higher the index, the greater is the inequality of income.
FRANCE: TIGHTENING THE BELT
France is a nuclear power. Her culture is well spread out globally: Africa, Canada, and Europe. She is a great economic power and is a member of G-8. She is also struggling with economic problems and has, despite demonstrations, decided to tighten up the belt by rationalizing their expenditures pattern. The federal government annual recurring expenditure is 88 per cent excluding defense expenditure. A rough breakup of 88 per cent is 45 per cent for debt servicing and 33 per cent for running the affairs of the government. It is high time that we may set up a commission to suggest reduction of above expenditures by restricting annual federal government recurring expenditures to 20 per cent. The resultant saving can be canalized for strengthening social sector (education and health), and contributed to financing development activities under the annual federal ADP.
GERMANY: VOLUNTARY FINANCIAL SUPPORT ANNOUNCEMENT BY THE AFFLUENT
Germany rose from the ashes after the Second World War and has become an economic power in today's world. Based on World Development Report 2010, Germany has been ranked number one in the global exports, which amounted to US$16.3 trillion. Their products are well known due to top quality, precision, and high-tech contents. Despite small area, their productivity in all sectors of the economy is high. Due to financial difficulties, they are facing problems. To support the government to successfully grapple with the issues, the affluent business community of Germany has announced that, notwithstanding legal issues, they are, in voluntary spirit, willing to extend financial support to enable their government to confidently tackle the financial problems. This spirit is laudable and speaks volumes of their love for the country constituting patriotism. In Pakistan, only 2.4 million persons file income tax returns on annual basis. It is interesting to note that the parliament has laid down the maximum exemption up to Rs3 lac annual income. Millions enjoy the luxury of legal exemptions under the Second Schedule annexed to the Income Tax Ordinance 2001. Other category is non-filers of their income tax return. Rather than waiting for the withdrawal of legal exemptions, the affluent ones must demonstrate the voluntary spirit of depositing income tax in a separate bank account to be opened in the State Bank of Pakistan as financial support to reduce budget deficit and enable the government to accelerate the development activities in the country which will promote employment and reduce poverty.
UNITED KINGDOM: AUSTERITY
UK dominated the world for a long time. Even today she claims to be a big power drawing influence and/or strength from commonwealth countries numbering 60 plus. The discovery of oil in the North had given a big boost to her in 1980s. Now due to financial crisis globally, UK has also been hit hard. The current government is in great financial problem. She has decided to rationalize all types of government expenditure, including public sector enterprises, through the internationally known instrument namely austerity.
Pakistan can learn this lesson as budget deficit has grown and efforts to rationalize expenditure in all aspects must be undertaken quickly to harvest the dividend by learning from UK. The "Austerity Package" can be developed by our country as a positive challenge to tackle financial problems being faced at Federal, Provincial, District, Tehsil and Union levels. All stakeholders must rise to the occasion and be the beneficiary to flutter the flag of Pakistan high in the larger interest of strengthening sovereign economic front.
NEW ZEALAND: LIVESTOCK AS ECONOMIC DRIVER
New Zealand has sprung into prominence as she has the least corruption as announced by Transparency International in their Corruption Perception Index (CPI) 2010. This was 9.3 out a scale of 10. However, besides having many jewels in her crown, one interesting feature of New Zealand is that her population of sheep is twice the total population of the country. Accordingly, dairy farming products through processed shape are being enjoyed by several countries of the world in particular in Far Eastern Asian countries. Pakistan's share of livestock in the GDP of the country is 11 per cent. This needs to be doubled for achieving high contribution to agriculture as a sector and for development of the country in boosting exports of dairy products, development of agro-based industries in reduction of imports, and generation of self-employment to serve as an instrument of poverty reduction.
Change is the crying need of today. We all should be driven by it. Strategic new initiatives can enable us to follow niches of several countries as narrated above. We do not need to reinvent the wheel but implement the spirit of father of the nation and adopt various successful niches for which supportive environment has to be transformed into our success. The earlier we do so, the better it will be for us.
The writer is Professor Emeritus and Principal Hailey College of Banking & Finance, University of the Punjab, Allama Iqbal Campus, Lahore. Contact Email: email@example.comQ