There are many things wrong with official thinking about the state of the Pakistani economy. Some useful material was produced at the Planning Commission. What the Planning Commission called the Framework for Economic Growth, or FEG, has some innovative material. It is right to focus on what it labels the “soft side” of the development equation. The Commission has claimed that for Pakistan to increase the rate of economic growth, it needs to invest in the softer aspects of development and not continue to commit large sums of public money on brick and mortar development schemes that have, in the past, dominated the Public Sector Development Plan.
The “soft side” advocated by the Planning Commission includes institution building, human resource development, increasing the capacity of the private sector to innovate, reducing the regulatory burden carried by private enterprise and changing and modernising urban regulation so that cities become the most dynamic part of the economy. The Commission is also concerned about the declining efficiency and effectiveness of the various civil services. It has called for a fundamental restructuring and reform of the civil administration. All these are worthwhile goals and they needed to be included in an approach aimed at the long term. However, they don’t constitute a strategy that could pull Pakistan out of the deep economic hole it has dug for itself.
The FEG is an approach that will deliver rewards over the long term. It will do very little to solve Pakistan’s current economic problems. Following are some of the many problems crying out for policymaking attention, listed in no particular order: Pakistan’s longest lasting recession with no end in sight; continuing violence, some of it directed at the state; increasing isolation from the world; continued dependence on external capital flows for financing low levels of public-sector investments; the loss of confidence on the part of the investment community, both inside and outside the country, in Pakistan’s economic future; low rates of domestic savings and low tax-to-GDP ratio; very little public-sector investment in improving the quality of the large human resource; declining share in international trade; poor relations between the federal government and provincial administrations; and increasing incidence of public sector corruption.
Pakistan is now regarded as a fragile state by development institutions such as the World Bank. In one of its recent World Development Reports, the Bank also picked up some of the soft factors in the growth function. These, it suggested, are essential ingredients of long-term sustainable development. But it emphasised — correctly I believe — that it will take a generation or two, before fragile economies such as Pakistan can begin to use these factors effectively in the development equation. In the meantime, they need to pull their economies out of the low growth traps into which they have fallen. To get to the long term, they need to focus on the short term.
What should be the development agenda for the policymakers at this delicate moment in the country’s economic history? There are at least five areas that need the policymakers’ urgent attention: revival of growth; increasing domestic resource mobilisation; reconnecting the country with the world; reducing income disparities; and investing in the development of the large human resource. Each of these areas requires a series of government actions. There are no indications that any of these are planned. What needs to be done in one area will impact on the remaining four. In other words, a comprehensive approach that dealt with the short-term is the need of this precarious hour. Long-term thinking could wait while the short term was being fixed.
Published in The Express Tribune, August 13th, 2012.
COMMENTS (9)
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A lot need to be changed in Pakistan.
We must make make Pakistani multicultural and appreciative of it. Equality for all citizen Make life of common Pakistani simple and easy by making daily consumption item and education energy petrol and housing cheapest in the region.Investment is running away from Pakistan.if you can't make Pakistan better than quit as early as you can.
Only Imran Khan can make a difference. Only by returning the country to its Islamic roots can we fix holes in the macro and the micro, support the structural and the underlying spiritual, and fine tune both the supply and the demand-side of the nation's economy.
Thorough overhauling of the system is required.Kick-out all incompetent and parasites. 6000MW additional required atleast two Big dams immediately needed. Hydel is the most cheap source for a country like pakistan All institutions to be made independent; what statebank is doing when government is daily printing 2billion Rs? pakistan has to return 10b$ per year to IMF/WB. Who cares?
@Dr Meekal Ahmed:
agree with the good doctor. perhaps pervez musharraf's economic policy team should have been allowed to stay on even after he left. after all, the PPP came in with a decent enough mandate that their 'roti, kapra, makan' sloganeering should have resonoated with parliament serving after a supposed 'dictator'. why was the supposed 'dictator' thrown out along with his reasonable econonomic reforms? a case of throwing the baby out with the bath water.
Mr Burki your knowledge and understanding of Economics is appreciated and the remedies suggested by you may even work in any normal country. To develop at a rapid clip a country needs good Policies, good Human Resources as well as large doses of Capital. External Capital whether in the form of FDI or FII investments will only come if the following conditions are met :- 1] The State has the capacity to enforce and implement the Law. 2] The State should have physical control over all its territory. 3] The State has the ability to safeguard the life and Property of Investors. 4] Economics and welfare of the people and not ideology, religious or otherwise is the guiding principle. 5] Barriers to easy Entry and Exit are reduced. 6] Education system is revamped such that students develop the skills that will make them competitive and efficient.
A healthy society that is tolerant of different schools of thought and does not impose itself on individuals private space would definitely play the role of catalyst in the process. I do not believe that the country lacks in enterprise. It is crony Capitalism that always suffocates the spirit of free enterprise.
well, sir if the FEG is only going to deliver in the "long-run" and I agree with that assessment, then we are all truly dead.
We cannot wait that long. We need to get the macro fundamentals right or at least moving in the right direction.
Just make a little progress on something -- anything!
It distresses me as I am sure it does you that not a single reform measure has been implemented by this government in the last four years. This must be the longest drought in Pakistan when it comes to reforms. Nothing on the macro side and nothing on the structural side. Just beg, borrow and steal and hang on for dear life.
The problem is simply that our so-called political, military and industrial elite are not in the least interested in addressing any of the issues highlighted by Mr Burki. Low growth? Who cares! Poverty alleviation? Why bother. Income inequality? Why would they want to change that? Until the people of Pakistan define themselves solely as Pakistani, and start demanding more than slogans and handouts from their leaders, none of this will change.
pity
Burki Sahib, We are a dependent economy and corrupt polity. It requires complete paradigm shift to bring things in line. Alas! we don't have the guts to do it. Apologize for little harsh words on an earlier article. It was, perhaps, not my day.