Your SlideShare is downloading. ×
Issues in pakistan’s economy
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Issues in pakistan’s economy

1,542

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
1,542
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
80
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. ISSUES IN PAKISTAN’S ECONOMY PRESENTATION BY: THAWBAN ANWAR BAIG B09-016
  • 2. TABLE OF THE CONTENT• 8.5) THE PRIVATIZATION PROCESS – PRIVATIZATION IN PAKISTAN – GOVERNMENT POLICIES – CRITICISM• 8.6) THE DEBATE OVER EFFICIENCY IN THE INDUSTRIAL STRUCTURE – PAKISTAN’S IMPORT SUBSTITUTING INDUSTRIALIZATION POLICY – STUDY OF little et al – COUNTER ARGUMENTS ON STUDY OF little et al – CONCLUSIONS
  • 3. (8.5) THEPRIVATIZATION PROCESS
  • 4. WHAT IS PRIVATIZATIONPRIVATIZATION, ALSO SPELLED PRIVATISATION, MAY HAVESEVERAL MEANINGS. PRIMARILY, IT IS THE PROCESS OFTRANSFERRING OWNERSHIP OF A BUSINESS, ENTERPRISE,AGENCY, PUBLIC SERVICE OR PUBLIC PROPERTY FROM THEPUBLIC SECTOR (A GOVERNMENT) TO THE PRIVATE SECTOR,EITHER TO A BUSINESS THAT OPERATE FOR A PROFIT OR TOA NON-PROFIT ORGANIZATION. IT MAY ALSO MEANGOVERNMENT OUTSOURCING OF SERVICES OR FUNCTIONSTO PRIVATE FIRMS, E.G. REVENUE COLLECTION, LAWENFORCEMENT, AND PRISON MANAGEMENT.
  • 5. PRIVATIZATION IN PAKISTAN• THE STRUCTURAL ADJUSTMENT PROGRAMME OF 1988• PRIVATIZATION PROGRAMME BEGUN IN 1990• PRIVATIZATION PROGRAMME STARTED BY NAWAZ SHARIF GOVERNMENT IN 1990
  • 6. PRIVATIZATION IN PAKISTAN• THE DISINVESTMENT AND DEREGULATION COMMITTEE – TO MAKE RECOMMENDATIONS ON HOW THE PRIVATIZATION PROCESS SHOULD TAKE PLACE – POLICY MAKING FOR THE PRIVATIZATION OF INDUSTRIES
  • 7. BENAZIR’S FIRST GOVERNMENT• PRIVATIZATION IN BENAZIR’S REGIME: – LIP SERVICE – PROMISED TO PRIVATIZE STATE-OWNED SECTOR – IN REALITY NO PRIVATIZATION TOOK PLACE IN MANUFACTURING SECTOR
  • 8. BENAZIR’S FIRST GOVERNMENT• REASON GOVERNMENT GAVE IN RESPONSE TO ITS FAILURE:“IT WANTED TO CONDUCT AN EXERCISE THAT WASTRANSPARENT , WELL CONCEIVED AND BROADBASED”• CRITICISM: – GOVERNMENT LACKED COMMITMENT – LACK OF POLITICAL WILL
  • 9. DISINVESTMENT AND DEREGULATION COMMITTEE• ESTABLISHED FOLLOWING PRINCIPLES: – GOVERNMENT SHOULD COMPLETELY RETIRE FROM PRODUCTION OF INDUSTRIAL GOODS – IDENTIFIED 109 INDUSTRIAL UNITS FOR PRIVATIZATION – IDENTIFIED 4 OF THE 5 NATIONALIZED COMMERCIAL BANKS FOR PRIVATIZATION• THE COMMITTEE WAS DISSOLVED IN 1991 AND WAS REPLACED BY A PRIVATIZATION COMMISSION
  • 10. THE PRIVATIZATION COMMISSION OF PAKISTAN• THE MANDATE OF COMMISSION WAS: – VALUATION OF THE ENTERPRISES THAT WERE TO BE PRIVATIZED – THE VALUATION WAS BASED ON THE ASSESSMENT OF INDEPENDENT CONSULTANTS – IMPLEMENTATION OF BIDDING PROCESS – SUPERVISE THE TRANSFER OF UNITS FROM PUBLIC TO PRIVATE SECTOR
  • 11. THE PRIVATIZATION COMMISSION OF PAKISTAN• IN ITS EARLY PHASE THE PRIVATIZATION PROCESS WAS UNSUCCESSFUL BECAUSE: – DUE TO FEW NUMBER OF BIDDERS – THE PRIVATIZATION WAS NOT THE MAIN FOCUS OF GOVERNMENT’S ECONOMIC POLICY
  • 12. THE PRIVATIZATION COMMISSION OF PAKISTAN• DUE TO UNSUCCESSFUL EFFORTS BY PRIVATIZATION COMMISSION, GOVERNMENT DECIDED TO REVISE ITS PRIVATIZATION POLICIES BY: – IMPROVING THE LEGAL AND ADMINISTRATIVE PROCEDURES – DECIDED TO ADVERTISE THE 105 OF 109 INDUSTRIAL UNITS FOR IMMEDIATE SALE• ATTEMPTS WERE MADE TO MAKE THE WHOLE PROCESS “TRANSPARENT”• ONE OF THE MAIN REASONS FOR PRIVATIZATION AT THAT TIME WAS TO RAISE THE REVENUE
  • 13. PRIVATIZATION IN PAKISTAN• BY NOVEMBER 1992 – 67 OF 109 INDUSTRIAL UNITS HAD BEEN ISSUED LETTERS OF INTEREST TO SALE – OUT OF THESE 67 INDUSTRIAL UNITS, THE MANAGEMENT OF 49 UNITS HAD BEEN TRANSFERRED TO PRIVATE SECTOR – RS. 6 BILLION OUT OF TOTAL 13 BILLION FOR THESE 67 PRIVATIZED UNITS HAD BEEN RECEIVED BY THE GOVERNMENT
  • 14. PRIVATIZATION IN PAKISTAN• WHY THIS PRIVATIZATION PROCESS WAS SLOW AND DIDN’T DEVELOPED AS IT WAS PLANNED: – MOST OF THE UNITS THAT WERE OFFERED FOR PRIVATIZATION WERE ALREADY BANKRUPT – HENCE THE INTEREST OF PRIVATE SECTOR TOWARDS BUYING THESE UNITS WAS VERY LOW
  • 15. PRIVATIZATION IN PAKISTAN• GOVERNMENT’S UTMOST PRIORITY WAS TO PRIVATIZE THE FOLLOWING THREE INDUSTRIAL SECTORS: 1. ENERGY SECTOR. 2. TELECOMMUNICATION SECTOR. 3. FOUR NATIONALIZED COMMERCIAL BANKS.
  • 16. PRIVATIZATION IN PAKISTAN• BY LATE 1995 THE TELEPHONE AND TELEGRAPH SECTOR HAD BEEN PARTIALLY PRIVATIZED• TWO BANKS HAD BEEN PRIVATIZED: – ALLIED BANK WAS SOLD TO ITS EMPLOYEES – MCB TO A PRIVATE BUSINESS HOUSE• PRIVATIZATION OF BANKS IN MUSHARRAF’S ERA: – HBL – UBL – TWO INDUSTRIAL BANKS  NATIONAL DEVELOPMENT FINANCE CORPORATION  INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN
  • 17. THE INSTITUTE OF DEVELOPING ECONOMIES IN JAPAN’S REPORT• PRIVATIZATION IN PAKISTAN WAS NOT SUCCESSFUL BECAUSE: – BID EVALUATION PROCEDURES WERE INCORRECT – PROCESS SUFFERED FROM FAVOURITISM – THE INFORMATION WAS NOT OPEN TO ALL PRIVATE PARTIES – TRANSFER OF UNITS TO INEXPERIENCED PARTIES AND THEY HAD NO PREVIOUS RECORD OF RUNNING AN INDUSTRIAL UNIT AT ALL
  • 18. (8.6) THE DEBATE OVER THE EFFICIENCY IN THEINDUSTRIAL STRUCTURE
  • 19. INDUSTRIAL STRUCTURE OF PAKISTAN• THE INDUSTRIAL BOOM OF 1960’S, THE COLLECTIVE VIEW OF ANALYSTS AND ECONOMISTS WAS: – HIGH GROWTH WAS ACHIEVED AT VERY CONSIDERABLE COST – BUT THE ENTIRE INDUSTRIAL STRUCTURE OF PAKISTAN WAS SEVERELY INEFFICIENT• THE INEFFICIENCY WAS DUE TO STATE’S INTERVENTION IN DISTORTING PRICES IN DOMESTIC MARKETS• THUS AFFECTED THE MANUFACTURING SECTOR OF PAKISTAN ADVERSELY
  • 20. PAKISTAN’S EARLY INDUSTRIAL AND ECONOMIC GROWTH• PAKISTAN’S IMPORT SUBSTITUTING INDUSTRIALIZATION POLICY: – MOST OF THE YOUNG DEVELOPING COUNTRIES FOLLOWED THE SAME POLICY – PROTECTED DOMESTIC INDUSTRY – CREATING TRADE BARRIERS SUCH AS TARIFF, MULTIPLE EXCHANGE RATES AND IMPORT LICENSING
  • 21. DEBATE OVER THE INEFFIECIENT NATURE OF PAKISTAN’S INDUSTRIAL STRUCTURE• THE STUDY BY IAN LITTLE, SCITOVSKY AND MAURICE: – AMONGST THE DEVELOPING COUNTRIES STUDIED, PAKISTAN HAD THE HIGHEST EFFECTIVE RATES OF PROTECTION IN MANUFACTURING SECTOR – AFTER THE PRECISE CALCULATIONS, THE AUTHORS REVEALED THAT MANUFACTURING SECTOR’S CONTRIBUTION TO VALUE-ADDED ACTUALLY GREW AT NEGATIVE RATE AND NOT AT 16% AS BELIEVED – THE CONCLUSIONS OF THE STUDY WAS THAT MANUFACTURING SECTOR HAD BEEN GIVEN TOO MUCH EMPHASIS WHILE AGRICULTURAL AND MANUFACTURED EXPORTS HAD SUFFERED
  • 22. DEBATE OVER THE INEFFIECIENT NATURE OF PAKISTAN’S INDUSTRIAL STRUCTURE• THE POLICY TOOLS RESPONSIBLE FOR THE INEFFICIENCY WERE MAINLY: – MULTIPLE EXCHANGE RATES – IMPORT LICENSING – TARIFF STRUCTURE• EXPORTERS IMPORTED THEIR INPUTS AT BELOW PAR EXCHANGE RATE AND THEN EXPORTED THEIR GOODS AT A HIGHER RATE• EXPORT TAX WAS A DISINCENTIVE FOR THE EXPORTERS OF LEATHER AND COTTON• IN 1964 ABOUT 64% OF ACTUAL VALUE ADDED WAS DUE TO DISTORTIONS IN THE INDUSTRIAL STRUCTURE• DUE TO THIS PROTECTION THE MANUFACTURING COST OF VALUE ADDED WAS INCREASED BY 300% ON AVERAGE
  • 23. DEBATE OVER THE INEFFIECIENT NATURE OF PAKISTAN’S INDUSTRIAL STRUCTURE• THE DISTORTIONS WERE CREATED DUE TO FOLLOWING GOVERNMENT’S PROTECTION POLICY: – EXCESSIVE EMPHASIS ON THE MANUFACTURING SECTOR – RESULTED IN POOR EXPORT PERFORMANCE – NEGLECTED THE AGRICULTURAL SECTOR – A DISTORTED SECTORAL DISTRIBUTION IN THE INDUSTRY
  • 24. DEBATE OVER THE INEFFIECIENT NATURE OF PAKISTAN’S INDUSTRIAL STRUCTURE• CRITICISM ON THE STUDY OF LITTLE et al: – AKBAR NOMAN HAS ARGUED THAT THE CLAIMS BY LITTLE et al ARE HIGHLY MISLEADING – THE STUDY SUFFERED FROM PROBLEMS IN DATA AND THEIR INTERPRETATION – WORLD PRICES FIGURES WERE USED THAT WERE OVERSTATED – THE INEFFICIENCIES OF PAKISTAN’S INDUSTRIALIZATION IN 50s AND 60s HAVE BEEN MUCH EXAGGERATED
  • 25. DEBATE OVER THE INEFFIECIENT NATURE OF PAKISTAN’S INDUSTRIAL STRUCTURE• CONCLUSIONS: – INDUSTRIAL POLICY WAS PROTECTIONIST AND DISTORTIONARY – GIVING RISE TO DEEP ROOTED INEFFICIENCES – LATER CAUSED THE INDUSTRIAL CRISIS IN 1970s – THREE SUCCESSFUL SUBSECTORS EMERGED AND ARE ACCORDING TO INTERNATIONAL STANDARDS 1. CHEMICALS 2. ENGINEERING 3. TEXTILE
  • 26. DEBATE OVER THE INEFFIECIENT NATUREOF PAKISTAN’S INDUSTRIAL STRUCTURE – THE INEFFICIENCY IDENTIFIED BY little et al ACTUALLY EXISTED – THERE IS A CONSENSUS AMONGST PAKISTANI ECONOMISTS THAT PAKISTAN’S INDUSTRY HAS BEEN INEFFICIENT, DUE TO HIGH PROTECTION AND WARPED INCENTIVES

×