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Pep ppt


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Presentation on Globalization and it's impact on Pakistan
course: Pakistan Economic Policy
Instructor: Mr,Zia Abbas
by: Shumaila Zaheer Siddiqui and Nauman Ahmed
Institute of business management (Iobm),Karachi

Published in: News & Politics
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Pep ppt

  1. 1. gg Globalization and it’s impact on Pakistan
  2. 2. Question : What is the truest definition of Globalization ? Answer : Princess Diana's death . Question : How come ? Answer : An English princess with an Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was drunk on Scottish whisky: followed closely by Italian PaparazzI's in Japanese motorcycles; treated by an American doctor, using Brazilian medicines. And moreover this is sent to you by a Indian, using American (Bill Gates') technology, and you're probably reading this on your computer, that use Taiwanese chips, and a Korean monitor, assembled by Bangladeshi workers in a Singapore plant, transported by Pakistan lorry-drivers, hijacked by Indonesians, unloaded by Sicilian longshoremen, and trucked to you by Mexican illegal's..... That, my friend, is "" Globalization ""
  3. 3. Globalization can be described as a process by which the people of the world are unified into a single society. This process is a combination of economic, ecological, technological, socio cultural and political forces. — Markus Gattol • A process which strengthens the links between people, communities and economics of the world. • The greatest challenge faced by globalization is the fight against poverty.
  4. 4. 1. Globalization opens up markets and ensures healthy competition. 2. Removes inefficiencies, leading nations toward greater economic growth. 3. Ensures specialization takes place in areas of comparative advantage. 4. For labor abundant economies this means increased employment as well as growth.
  5. 5. ORIGINS OF GLOBALIZATION • The origins of globalization can be traced back till the 16th century • West began to explore and discover the new land, bringing Englishmen to India in form of East India Company, where first multinational was born for us • After World War II and the first Great Depression, the leaders of Britain and the US fumbled with the idea of reconstructing the war-torn world monetary system
  6. 6. • Federal government allocated Rs. 59.28 billion for education • The liquid foreign reserves have declined to US$ 11.5 billion. • 3G/4G technology is expected to generate 900,000 new job opportunities in the next four years • The clearance of Rs. 480 billion stock of circular debt has added 1,700 MW of electricity • The public investment has recorded a growth at the rate of 17.12 percent • Population growth rate has decreased from 1.97 to 1.95 percent • According to Pakistan’s Millennium Development Goal Report 2013, the poverty rate decreased from 22.3 to 12.4 percent of population
  7. 7. World Trade Organization WTO is the international organization whose primary purpose is to open trade for the benefit of all. Goal of WTO The ultimate goal is to help producers of goods and services, exporters, and importers conduct their business Objectives The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably. Rules of WTO 1. Protection to Domestic Industry through Tariffs. 2. Binding of Tariffs 3. Most Favored-Nation (MFN) Treatment 4. National Treatment Rule
  8. 8. IMPACT OF WTO ON PAKISTAN • Pakistan joined WTO in 1995 when the organization came into being. • WTO negates anything which blocks the way of free movement of goods and services from one market to another on a basic assumption of improving the human lifestyle. • It provides special preferential treatment to developing countries like Pakistan by giving them more time and flexibility to adjust to the global trade liberalization system • Influential trade relations with other countries • Helps Pakistan develop an indigenous model of economic development based on local stakeholders.
  9. 9. • Settlement of trade disputes between countries • Helps mobilizing the poorest fraction of the country especially women by providing credit loans to them • To invest in local self-employment and business opportunities, and accessing market information using communication facilities • Tries to ensure full employment and a large and steady growing volume of real income and effect demand • Monitoring and reviewing Pakistan’s trade policies, as well as ensuring transparency of regional and bilateral trade agreements
  10. 10. World Bank • Is a United Nations International Financial Institution • Established in July 1945 • Provides loans to developing countries for capital programs • Motto: Working for a World Free of Poverty
  11. 11. WORLD BANK AND PAKISTAN • The World Bank, Pakistan is helping the Federal and Provincial Governments in implementing reform programs aimed at encouraging growth, investment, and employment generation. • Reforms are aimed at improving delivery of social services like education, health, clean drinking water, and sanitation. • Investing in Education • Responding to natural disasters • Protecting the poorest • Operating in conflict areas • Supporting rural livelihoods • Connecting the Poorest
  12. 12. World Development Indicators
  13. 13. • Pakistan ranks 110 among 189 countries on the ‘Ease of doing business’ index • Rakings based on:  Regulatory requirements  Start – up procedures  Time taken to register a new business  Hence, private sector investment remains low
  14. 14. HIGHLIGHTS OF PAKISTAN ECONOMIC SURVEY 2013-14 Growth and Investment • The outgoing year witnessed global recovery as the world economy started picking up in • the second half of last year and the global outlook indicates some signs of optimism. • In South Asia economic performance of Pakistan is improving quantitatively and qualitatively as growth is broad based and touched all sectors of the economy and is the highest achievement since 2008-09. • China and Pakistan have entered into a comprehensive plan of “economic corridor” between the two nations. It will serve as driver for connectivity between South Asia and East Asia.
  15. 15. • Major success of the outgoing fiscal year includes: picking up economic growth, inflation contained at single digit, improvement in tax collection, reduction in fiscal deficit, achieving of GSP plus status by EU, worker remittances touches new height, successful launching of Euro Bond, auction of long pending 3G and 4G licenses; foreign exchange reserves significantly rise, Rupee strengthened and stock market created new history. • The GDP growth accelerates to 4.14 percent in 2013-14 against the growth of 3.70 percent recorded in the same period last year. SOURCE: hlights_ES_201314.pdf
  16. 16. IMF AND PAKISTAN The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. SOURCE: • Pakistan became member of International Monetary Fund in 1950 • First loan was borrowed in 1958, amounting to USD 25 million • In a 20 year span, from 1958 -1979, Pakistan has been granted a total amount of USD 460 million in IMF packages.
  17. 17. IMF LOAN 2013 • IMF agreed to lend Pakistan an amount of USD 5.3 Billion (originally asked for USD 7.2 Billion) under the Extended Fund Facility (EFF) to boost Pakistan’s FX reserves and to help the economy • Urgency of the loan demonstrated the precarious situation of FX reserves especially when the State Bank of Pakistan had almost USD 6.25 Billion left in foreign reserves, an amount that couldn’t even cover six weeks of imports
  18. 18. • The Asian Development Bank has estimated that Pakistan will need an amount in the range of USD 6 Billion to USD 9 Billion to meet its obligations. • IMF’s EFF program comes with conditions, the government would have to reduce subsidies, particularly in the power sector which would result in higher bills. Therefore, development expenditure would have to be cut down.
  19. 19. RECOMMENDATIONS • STOP this culture and practice of “BORROW AND WASTE”! • Instead borrow when needed only and invest the borrowed money so that the return can be paid back as debt. • Expand the tax base by bringing in agriculture, services and evaders into the tax net • Promote private investments • Promote an environment that is conducive to attract donor funding in sectors such as education, health, social development and research and technology
  20. 20. LIBERALIZATION POLICY OF PAKISTAN • Pakistan adopted the liberalization policy in late 1980’s due to the problem of deficit in current account  Denationalization of industry  Liberalization of trade i.e. Expansion of exports and removal of import barriers,  Deregulation of institutions  Delinking of rupee from US dollar  Privatization  Foreign exchange regime  Opening up capital markets for foreign investors  Exchange rate regimes • Trade liberalization policy under the Structural Adjustment Programme (SAP) did not give fruitful results
  21. 21. RECOMMENDATIONS 1. Open trade and investment policies along with other sound policies 2. Empower poor people 3. Strong governance 4. Improve human capital 5. Workable social protection measures 6. Common global goals 7. Clear policy perspective 8. Institutional mechanism 9. Improve competitiveness strategy
  22. 22. EMPLOYMENT OPPORTUNITIES • Pakistan is the 10th biggest in the world according to the labor force size
  23. 23. RECOMMENDATIONS • Encourage foreign investment • Free trade, and trade barriers removed • Quality and quantity of the exports promoted • Population kept at the optimum level • Increase health expenditure
  24. 24. POSITIVE EFFECTS OF GLOBALIZATION Increased Standard of Living Access to New Markets Increased Competition Investment and Capital Flows Spread of Technical Know-How Spread of Culture Spread of Education Legal and Ethical Effects
  25. 25. NEGATIVE EFFECTS/CRITICISM ON GLOBALIZATION . Weaker countries loose their culture. Counties become more dependent on each other. That is why economic crisis move from one country to other countries very fast. become poorer.  More powerful countries dictate their "rules of game" for others.  Growth of international crime.  Countries are not able to control financial flows and migration. Companies from developed countries move their business to developing countries with less salaries. It causes growth of unemployment in developed countries.
  26. 26. Globalization And Its Discontents Joseph Stiglitz
  27. 27. • One of the most celebrated dissenters of globalization. • Chief Economist of the World Bank till Jan 2000. • Nobel Prize in Economics in 2001. • Chairman of Clinton’s Council of Economic Advisors. • Currently teaching at the Columbia University. • Stiglitz says: The average European cow gets a subsidy of £1.20 a day, more than what is earned by half the people in the developing world. For much of that world, globalization seems like a pact with the devil.
  29. 29. What is the phenomenon of Globalization? • Closer integration of countries & peoples of the world that has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flow of goods, services, knowledge and people across borders • Creation of new institutions working across borders • Three main institutions govern globalization: IMF, World Bank and WTO
  30. 30. The Promise of Global Institutions Globalization has helped: • Countries grow faster by opening up to international trade • Reduce the sense of isolation • Millions by bringing them foreign aid benefits Then, why has globalization become so controversial?
  31. 31. The Promise of Global Institutions (Cont.) • Growing divide between haves and have-nots has left increasing numbers in the Third World in dire poverty • Neither has globalization succeeded in ensuring stability • Western countries have pushed poorer countries to eliminate trade barriers • Environment has been destroyed
  32. 32. The Promise of Global Institutions (Cont.) • IMF was founded on the belief that there was a need for collective action at the global level for economic stability • IMF is a public institution established with money provided by taxpayers around the world • Major developed countries run the show, with only the USA having effective veto
  33. 33. BUT IMF FAILED! • The IMF has failed in its mission of promoting global instability; has also been unsuccessful in guiding transition of countries from communism to a market economy • Jobs have been systematically destroyed before countries’ industrial & agricultural sectors were able to grow strong and create new jobs • Maintaining tight monetary policies has led to interest rates that would make job creation impossible • Those who lost jobs were forced into poverty
  34. 34. LPG – Liberalization, Privatization, Globalization (Freedom to choose) • LPG surely has the power to do a lot of good. But at what cost? • Pursuing LPG at an alarming rate defeats the very purpose of developing the countries. • Many LPG policies become being an end in themselves instead of being the means to an end.
  35. 35. Freedom to choose? • U.S – the prosecutor, the judge and the jury. • Studies on various countries prove that steps laid out by IMF also did not guarantee progress. (Failures – Bolivia, Argentina, East Asia. Success - Chile) • Premature liberalization results in increased instability. The costs of such instability is, disproportionately, borne by the poor
  36. 36. “If globalization continues to be conducted in the way it has been in the past, globalization will not only succeed in not promoting development but will continue to create poverty and instability. Without reforms, the backlash that has already started will mount and discontent with globalization would grow.” ~ Joseph Stiglitz, Globalization and its discontents Nobel Laureate in Economics 2001, former Chief Economist at the World Bank.
  37. 37. THANK YOU 