|We Pakistanis tend to rejoice when we hear news about Pakistan doing well in certain fields. Unfortunately commoners lack knowledge and ability to question the basic facts mentioned in reports those are so celebrated by the government.
It is given that Pakistan is a developing country. By definition a developing (a real process of being on the road to development) country must attain at least 7 to 7.5% GDP growth annually. Pakistan is lacklustering at 3 to 4.5% over the past 5years!
This performance leaves much to be desired.
Pakistan is an agrarian country or at least perceived to be one. Over the past decade in Pakistan which is the hub of agriculture no reforms have been implemented to stabilize let alone enhance agricultural production. Situation of farmers is real sad.
There is a huge agricultural and dairy market both domestically and internationally which is not being explored.
No land reforms have been done. No tax reforms on agriculture has been done. Cities are getting over crowded because of sad situation in rural areas. Farmers are leaving agriculture and moving to cities to find better economic opportunities. This exodus is causing cities to have problems of their own such as sanitation and social issues.
No export enhancement reforms have been done. Exports have dwindled down and trade deficit has sored to one of the highest levels in decades.
Stock market rise is not due to any current government’s extra ordinary steps. The increased confidence in stock market is due to betterment of army led peace and security situation especially in Karachi which is the hub of our economy. Most of the moves in stock markets are speculative. Some improvement in the stock market could be attributed to CPEC’s potential benefits
Government is totally counting on CPEC. It is a good project, but it will take at least six to eight years before its fruits can be fully enjoyed! However, we should keep in mind the benefits will come if we plan better. Simply having road links between Gawader and China will not do us any good. Government needs to establish job-creating industries. Find new export markets.
We do need to produce products cheaper than China in order to stay safe from the effects of this corridor, else Chinese products will take over the domestic market and further ruin our industry or what is left of it.
Debt already is very high. This could have very drastic results in near future. Government is borrowing like there is no tomorrow both domestically and internationally creating crowding out effect for the public. Public cannot borrow at good rates and invest in job creating industries.
Government is continuing to sell bonds at high discount rates. Money borrowed is being used in non-developmental projects. Additionally, putting future of Pakistan at stake.
Corruption is rampant with no let. No concrete action is being taken to eradicate this menace. Money looted in corruption is being sent off shore in record levels thus depriving the potential projects those need funds so desperately.
Increasing oil prices will have further very negative effect on our competitiveness and exports. This along with continuous borrowing by the government will have drastic effect on balance of payments and budget deficit.
Electricity and gas situation has not improved much.
Inflation which writer believes in Pakistan is supply-driven rather than demand-driven as in many other countries, is not being dealt with properly. Manufacturing as well as service industry has rendered exports expensive because of overall inflation.
Foreign investment is minimal. Government’s performance has been poor in making Pakistan a welcoming country. For a developing country investment to GDP ratio should be around 25% however in Pakistan it is hovering around 15%. In order to enhance its industrial base government needs to take rigorous steps to invite and encourage both domestic and foreign direct investment.
No concrete steps have been taken to market our young labor. There is no training programs in place for new potential industries. Graduates coming out of colleges with BA and BS degree are no good unless they are trained for specific industries and equipped with skills.
Government needs to focus on value added industries. For example, Pakistan is positioned highly in milk producing countries. There are so many potential value-added products those could be produced for both domestic and foreign markets.
Since there is high unemployment government needs to encourage entrepreneurship. It should direct banks with certain guarantees to loan new start-up ideas .
Cost of production factors must be kept low so that items manufactured in Pakistan can be competitive.
In short there is a lot to be done in order to have a pleasant economic surprise.
Dr. Shahzad Latif is Political Economist based in USA.
* In response to an article by Tyler Cowen in Bloomberg