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
Question : What is the truest definition of Globalization ?
Answer : Princess Diana's death .
Question : How come ?
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 ""
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,
socio cultural and political
— Markus Gattol
• A process which strengthens the
links between people,
communities and economics of
• The greatest challenge faced by
globalization is the fight against
1. Globalization opens up markets and ensures
2. Removes inefficiencies, leading nations toward
greater economic growth.
3. Ensures specialization takes place in areas of
4. For labor abundant economies this means
increased employment as well as growth.
ORIGINS OF GLOBALIZATION
• The origins of globalization can be traced back till the 16th
• 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
• 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
• Population growth rate has decreased from 1.97 to 1.95
• According to Pakistan’s Millennium Development Goal Report
2013, the poverty rate decreased from 22.3 to 12.4 percent of
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
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
IMPACT OF WTO ON PAKISTAN
• Pakistan joined WTO in 1995 when the organization came
• 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.
• 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
• 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
• Is a United Nations International Financial
• Established in July 1945
• Provides loans to developing countries for
• Motto: Working for a World Free of Poverty
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
• 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
• Pakistan ranks 110
among 189 countries on
the ‘Ease of doing
• Rakings based on:
Start – up procedures
Time taken to register
a new business
Hence, private sector
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.
• 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.
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.
• Pakistan became member of International Monetary Fund
• First loan was borrowed in 1958, amounting to USD 25
• In a 20 year span, from 1958 -1979, Pakistan has been
granted a total amount of USD 460 million in IMF
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
• 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
• 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.
• STOP this culture and practice of “BORROW AND
• 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
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
Deregulation of institutions
Delinking of rupee from US dollar
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
1. Open trade and investment policies along with other
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
• Pakistan is the 10th biggest in the world according to the
labor force size
• 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
POSITIVE EFFECTS OF GLOBALIZATION
Increased Standard of Living
Access to New Markets
Investment and Capital Flows
Spread of Technical Know-How
Spread of Culture
Spread of Education
Legal and Ethical Effects
NEGATIVE EFFECTS/CRITICISM ON
. 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
Globalization And Its Discontents
• One of the most celebrated dissenters of
• Chief Economist of the World Bank till Jan
• Nobel Prize in Economics in 2001.
• Chairman of Clinton’s Council of Economic
• 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
What is the phenomenon of
• 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
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
The Promise of Global Institutions
• 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
The Promise of Global
• IMF was founded on the belief that there was a
need for collective action at the global level for
• 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
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
• 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
LPG – Liberalization, Privatization,
Globalization (Freedom to choose)
• LPG surely has the power to do a lot of good. But at what
• 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.
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
“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
~ Joseph Stiglitz, Globalization and its discontents
Nobel Laureate in Economics 2001, former Chief
Economist at the World Bank.