Pakistan Economy Challenges and Prospects

1. Pakistan Economy
Challenges and Prospects

2. WE ARE CONSUMING MORE AND SAVING
LESS
• We Consume 85 Rupees and Save only 15 Rupees.
• Too little Money is available to Invest for Economic
Growth
• If we want to grow at 6% Needs 24-25% Investment
Rate
• If we want to rely on domestic resources.
• Saving rate should be 25%.
• India saving rate was same, achieving 34-35%.
• China was achieving 50%.
• We need to double our savings if we want to depend
on domestic resources.
2
Challenges

3. WE IMPORT MORE AND EXPORT LESS
• Till 2007-2008, 80% of our imports were financed from
Export earnings.
• Reduced to 50%-60% in 2010 Gap of 40%
Approximately.
• Trade deficit is increasing/Reliance on Foreign Resources
• Ups and Downs in the availability of funds
• We need to reduce Trade Deficit By expanding more
exports and reducing import
3
Challenges

4. GOVT. SPENDS MORE THAN IT EARNS AS
REVENUES
FISCAL DEFICIT IS THE DIFFERENCE BETWEEN GOVT
SPENDING AND GOVT. REVENUES
FISCAL DEFICIT IS AROUND 7% OF GDP
AVERAGE TAX PAID IS ONLY 9 PAISAS OUT OF ONE RUPEE.
HOW TO FINANCE IT?
EXTERNAL SOURCES/BEGGING OR SBP
Chances of inflation which is harmful for Middle classes with fixed income.
1999- DEBT/GDP RATIO WAS 100 %.
CURRENTLY AROUND 60%.
4 Challenges

5. GOVT. SPENDS MORE THAN IT
EARNS AS REVENUES
•Fiscal responsibility law says that it should not increase
than 60% of GDP
•How 9 paisas out of every single rupee is enough for
Defence, Education, Health etc
Defence expenditures are only 20% of Govt. Expenditures, and just 4% of GDP.
•7-8% of GDP is debt servicing which is 40% of Govt
Expenditures.
•More revenue needed, Tax base should be increased.
•Continuous large fiscal deficits are putting countries
into debt trap.
5
Challenges

6. OUR SHARE IN THE WORLD TRADE IS
SHRINKING
1990 PAKISTAN’S SHARE WAS 0.2%. NOW ITS AROUND
0.12%.
Now world trade is growing more faster than world growth.
INDIA DOUBLED ITS SHARE FROM 0.7% TO 1.4%
APPROXIMATELY.
Pakistan is going in the opposite direction
PAKISTAN IS STUCK WITH ONLY FEW EXPORT
COMMODITIES.
PAKISTAN HAS ONLY LIMITED MARKETS TOO FOR ITS
PRODUCTS
WE NEED TO IMPROVE QUALITY, GO OUT AND MARKET
OUR PRODUCTS, INVEST IN RESEARCH AND DEVELOPMENT,
CANT MOVE AHEAD.
6 Challenges

7. WE BAD LAG IN SOCIAL
INDICATORS
BAD INDICATION OF
literacy rate
Infant mortality rate
Access to water and health facilities
Primary enrolment ratios
NOT COMPARABLE WITH OTHER DEVELOPING COUNTRIES WITH
SAME PER CAPITA INCOME
If we have 100% literacy rate. PCI might be $2000 & poverty will be reduced to
15-20%.
WE HAVE TO ACHIEVE 80-85% LITERACY RATE TILL 2015
7 Challenges

8. WE FACE ENERGY AND WATER
SHORTAGES
BIG CHALLENGE IS ENERGY AND WATER SHORTAGE
REASONS
KESC LOSSES
RECOVERY OF BILLING
45% people are paying for 55% who are stealing electricity
NO ADDITIONAL DAMS CONSTRUCTED
WATER COURSE LOSSES OF 20-25%
UNEQUAL DISTRIBUTION OF WATER BETWEEN LAND LORDS AND
SMALL POOR FARMERS
GOVT IS PROVIDING 200 MILLION SUBSIDY EVERY YEAR.
INDUSTRY IS SUFFERING IN EXECUTING EXPORT ORDERS
8 Challenges

9. WE FACE ENERGY AND WATER
SHORTAGES
PRODUCTIVITY OF POOR FARMER IS ONE TON PER ACRE WHILE
OF LAND LORD IS THREE TON.
CLIMATE CHANGES, GLOBAL WARMING AND MELTING OF
GLACIERS WILL POSE SERIOUS PROBLEMS FOR PAKISTAN IN
FUTURE,
9
Challenges

10. COST OF DOING BUSINESS IS HIGH
PAKISTAN IS AT THE BOTTOM HALF OF THE COUNTRIES WHERE COST OF
DOING BUSINESS IS VERY HIGH
BUREAUCRACY IS THE REASON WHICH TAKES NO RIGHT DECISION AT RIGHT
TIME
They are just sitting and enjoying their seats
Do not work without pressure or incentive
SMALL AND MEDIUM BUSINESSES ARE SUFFERING
AVAILABILITY OF LAND, WATER, ELECTRICITY, GAS IS ONE IMPORTANT ISSUE
LACK OF COORDINATION AMONG VARIOUS GOVERNMENT AGENCIES IS
ANOTHER REASON
OUTDATED LAWS ARE APPLICABLE. DELAY IN COURT SYSTEMS, TAX
EVASION, LACK OF PROPERTY RIGHTS, INFORMAL SECTOR ETC ARE POSING
SERIOUS PROBLEMS FOR THE NEW BUSINESS PROJECTS AND MADE MANY
FIRMS UNPROFITABLE.
10
Challenges

11. CRISIS OF GOVERNANCE AND
IMPLEMENTATION WEAKNESSES
LOOK AT THE POLICY DOCUMENTS OF THE GOVERNMENT
REGARDING HEALTH, EDUCATION, INDUSTRY, EDUCATION ETC
TODAY AND FORTY YEARS BEFORE AND SEE THE IMPLANTATION
RECORD.
WE DESIGNED A LOT OF FIVE YEAR PLANS, MANY MEDIUM TERM
FRAMEWORKS BUT IMPLEMENTATION IS QUESTIONABLE?
CULTURE OF MERIT IN RECRUITMENTS, PROMOTION,
EVALUATION, PERFORMANCE, COMPENSATION IS MANDATORY
ORDERS ARE GIVEN BUT THEY ARE BURIED IN FILES
ISSUE OF POOR GOVERNANCE AND IMPLEMENTATION CAN BE
VISIBLE IN ALL THE SECTORS OF THE ECONOMY.
11 Challenges

12. POLITICAL STABILITY, LAW &
ORDER/SECURITY
TO BE SUCCESSFUL COUNTRY WE MUST HAVE POLITICAL
STABILITY, GOOD LAW AND ORDER AND SECURITY
SITUATION BUT WE DO NOT HAVE THIS
IN PAST PAKISTAN WAS CONSIDERED AS THE MOST
ATTRACTIVE COUNTRY FOR THE INVESTMENT
FROM THE LAST FIVE YEARS OR SO WE HAVE MISSED THE
BOAT
ALL THESE THINGS HAVE BEEN ENDED
We need to start our journey from where we have started it
12 Challenges

13. PROSPECTS/
SOLUTIONS TO
IMPROVE ECONOMY
13 Prospects

14. CHANGE IN NATIONAL PSYCHE AND
MINDSET
WE ARE TOO MUCH NEGATIVE ORIENTED AND PESSIMISTIC
SINCERITY AND HONESTY IS NEEDED IN EVERY ONE’S WORK
NO MESSIAH WILL COME THAT FIX OUR PROBLEMS
MEDIA IS CREATING NEGATIVE THINKING AND NATIONAL PSYCHE
THROUGH AMAZING SPEECHES
CHANGE THE MIND SET RATHER THAN BLAMING THE
GOVERNMENT FOR EVERY MATTER
EXPECTATION FROM YOUNG'S TO BE MORE RESPONSIVE AND
RESPONSIBLE
WE HAVE TO STAY IN THIS WORLD AND SURVIVE
14 Prospects

15. BUILDING UP OF HUMAN CAPITAL
NO SUBSTITUTE OF HUMAN CAPITAL
WORLD ECONOMY IS GOING TO BE KNOWLEDGE BASED
ECONOMY
WE MUST HAVE TO ACQUIRE KNOWLEDGE AND APPLY IT
PRIVATE SECTOR, GOVT, NGO’S LOCAL COMMUNITY ALL HAVE TO
MAKE EFFORT TO ENSURE THAT EVERY CHILD GOES TO SCHOOL
TECHNICAL SKILL AND KNOW HOW FOR EVERY HIGH SCHOOL
GRADUATE
NEW THINKING THAT HUMAN CAPITAL IS AS IMPORTANT AS
MACHINERY
PAKISTAN IS BEHIND THE WORLD IN INSTITUTIONS,
INFRASTRUCTURE, AND IN HUMAN CAPITAL
WE HAVE NO CHOICE BUT TO ACCELERATE THE PACE TO CATCH UP
WITH OTHERS
15 Prospects

16. USE OF TECHNOLOGY
TECHNOLOGY IS SPREADING LIKE WILD FIRE
THINK ABOUT THE PROGRESS OF MOBILE PHONES IN VILLAGES
AND CITIES
NEAR 100 MILLION PAKISTANIS HAVE MOBILE PHONES
YOU CAN USE THIS TECHNOLOGY AND UP TO SOME EXTENT NOW
WE ARE DOING IT NOW TO PROVIDE THEM BANKING SERVICES,
WEATHER UPDATES, INFORMATION REGARDING HEALTH SERVICES
ETC. IT IS A POWERFUL TOOL
USE OF TECHNOLOGY FOR THE SOCIAL AND ECONOMIC WELL
BEING OF PAKISTANIS ESPECIALLY INFORMATION /
COMMUNICATION IS NEEDED, HOWEVER, WE ARE MISSING IT
A MORE COMPREHENSIVE APPROACH IS NEEDED SO THAT
TECHNOLOGY CAN BE USED FOR POVERTY REDUCTION
16 Prospects

17. YOUNG LABOUR FORCE
PAKISTAN IS ONLY ONE OF THE FEW COUNTRIES WHICH HAS A YOUNG LABOR
FORCE
THIS CAN BE USED FOR OUR OWN AS WELL AS FOR WORLD ECONOMY
JAPAN, USA, EUROPE AND AFTER 2050 CHINA WILL HAVE INCREASED RATIO
OF OLD TO YOUNG PEOPLE WHILE IN PAKISTAN AND INDIA RATIO OF
YOUNGER PEOPLE TO OLD IS GOING TO INCREASE
THESE YOUNG PEOPLE ARE TOOLS. PROVIDE THEM SKILL, EDUCATION,
TECHNOLOGY AND MAKE THEM A PART OF THE OWN AND WORLD’S LABOR
FORCE
THIS CAN BOOST UP THE PAKISTAN ECONOMY
Worker’s Remittances increased
CREATION OF JOB OPPORTUNITIES IS ALSO NEEDED FOR EDUCATED AND
SKILLED LABOR
17 Prospects

18. GOVERNANCE. DEVOLUTION AND
DECENTRALIZATION
POPULATION IS INCREASING SO WE CANNOT GOVERN THEM BY
SITTING IN ISLAMABAD, KARACHI. PESHAWAR, AND QUETTA
Needs of the areas and communities could not be assessed by sitting in capitals
DEVOLVE, DECENTRALIZE, DELEGATE AUTHORITY AT DISTRICT, TEHSIL,
UNION COUNCIL (LOCAL LEVEL) SO THAT RIGHT DECISIONS CAN BE
TAKEN
Devolving powers at the gross roots that people can themselves decide what they
need
THEIR MUST BE ACCOUNTABILITY OF THE PROVINCIAL AND LOCAL
GOVERNMENTS BUT THEIR MUST NOT BE INTERFERENCE FROM THE
FEDRAL GOVERNMENT.
THIS WAY SHOULD ENSURED OPTIMAL
ALLOCATION OF RESOURCES
18 Prospects