INVESTMENTS ENTAIL OUT OF THE BOX SOLUTIONS
TARIQ AHMED SAEEDI
Aug 8 - 14, 2011
Pakistan continues to witness a drop in investment to gross domestic product (GDP) ratio. According to Pakistan Economic Survey 2010-11, total investment plummeted to 13.4 per cent of GDP last fiscal year from 22.5 per cent in 2006-07 while fixed investment decreased to 11.8 per cent of GDP.
Investment in an economy acts as an agent of driving economic activities and creation of job opportunities. It is important above all to bring Pakistan's economy in the list of industrialized economies. Pakistan has yet to yet obtain an international rank of industrialized economy. Industrialization is imperative for the country to fight the challenge of poverty and generate jobs or job opportunities for its mushrooming population of working age people.
Unlike Pakistan that attained an average GDP growth rate of 4.9 per cent, fixed investment ratio of 17 per cent, and savings ratio of 12 per cent during 1971-2009, many regional economies promoted physical and human capital formation, and achieved growth of five to nine per cent in the similar period, according to the new growth framework released by the planning commission earlier this year.
In this period, Pakistan managed to achieve lowest growth, saving, and investment rates as compared to China, India, Malaysia, Indonesia, and Thailand.
Foreign inflows that had beaten all previous records during the last decade made the economic growth dependent on them. Since the external flows are not redirected to productive investment avenues, growth rate happens to back to square one when exogenous injections are not administered to the economy, noted the framework.
The recommendation is therefore in favour of 'endogenous domestic growth'. However, it also advocated foreign investments channelizing into productive sectors instead of ending up in public sector funding.
There are a plenty of investment avenues available in the country that promises substantial return on investments provided the policy actions from the government end.
HIGH-END HUMAN CAPITAL
Human capital formation at professional level can enable the country to avail the economic opportunity emanating from rise in the population of working age group. A population bomb is ticking and working age group (15 to 64) is expanding rapidly-will reach 236 million by 2050ó, but that social problem can be converted into an economic opportunity, according to the population projection by the planning commission.
The demographic change can be leveraged if adequate growth rate is maintained and the same blessing may turn into a disaster of high unemployment if the case is reverse.
The PC document emphasised on the need of investments in the promotion of innovation, entrepreneurship, and markets that it said spur growth momentum.
Introducing education reforms in the public and private education systems is equally important to gain the demographic dividends.
Pakistan stands at 99th position in terms of quality of education out of 132 countries including neighbouring India that is on 37th.
The country's quality of education system is dangerously pathetic making youth oblivious to diversity of religion, cast, and creeds. Education is promoted as transitory phenomenon required to just racking up money. Independence, creativity, knowledge, and lifelong learning can overcome all our challenges.
New framework focuses on development of high-end human resources in contrast to old model of producing labour force of low-end technical skills.
Global competitiveness report 2010 ranked Pakistan on 101 out of 125 countries on the bases of infrastructure quality, technology and competition, and state of governance.
Urbanization in the country is the fastest in the region. Noteworthy is the fact that urban sprawls are emerging in major cities of the country in the name of urbanization, which again can be capitalized on for the benefits of the economy.
According to the planning commission, the major cities in Pakistan are suffering from flurry of urban clusters that of course erupt on the landmass without planning and with taking for granted utilities (water, power, and drainage) envisaged originally while keeping under consideration natural growth in population.
Urban centres take the shape of urban sprawls due to desultory shift of population from rural to urban areas.
Karachi is the financial, industrial, and human capital centre of Pakistan accounting for significant contributions towards the national economy. Because of the hustle and bustle of economic activities through thick and thin, a large number of people come to the city to earn bread and butter from every part of the country.
Public development funds are not allocated in proportion to the abnormal demographic changes primarily because of no updated census record. Last census was held more than a decade ago.
Notably, new framework order calls for 'creative development of the cities'. With all its minuses particularly in the perspective of Karachi whose large population drains on its infrastructure and encroaches many of its valuable spots-new developments can adapt to creative models like a cakewalk-, the framework has plus for it is indicating towards a model that is adopted viably in the west.
It may trigger a plethora of investments in the country's gateway to prosperity. Leisure tourism, transportation, power, and food and beverage are the potential investment avenues in Karachi.
Recreational and entertainment is a flourishing industry in good parts of the world. Tourists travel outside their homelands for outdoor funs and enjoying leisure activities. Civil administrations build parks, amusement spots, and panoramic beaches to cash in on the interest of tourists. Karachi that has human civilization history of before Christ when Alexander docked on the city's shoreline and ruled the settlements can also be an attraction for foreign tourists interested in the lore of heritage.
Food and beverage industry can be promoted for increasing exports from the country. Global retail food and beverage industry racks up annual revenue of five to six trillion dollar. Similarly, the city has enormous investment opportunities in ecommerce and modern energy generation technologies.
The government has to think out of the box while revisiting trade and investment policies that include hands-off foreign policy.