News:Pakistan’s public debt has decreased from 53.5% to 52%
Name of the Newspaper: Pakistan Observer
Date of publication: Friday, November 2, 2007
Website:http://www.pakobserver.net/news/topstories07.asp

Islamabad—Pakistan has successfully managed to decrease public debt from 53.5% to 52% of GDP and contained inflation from 9.10% to 7.20%, says Global Competitiveness Report of 2007-2008
The World Economic Forum has released its Global Competitiveness Report 2007-2008 today, identifying that Pakistan has improved its competitiveness by 7 ranks as compared to last year. Considering methodology used for 2006-2007 for 122 countries Pakistan would have secured the 84th position.
The World Economic Forum has adopted a new methodology for evaluating the Global Competitiveness Index for 2007-2008, which includes breaking out the single pillar on market efficiency into its three subcomponents (goods, labor, and financial markets). The World Economic Forum also included six new countries to measure the Global Competitiveness Index. Therefore straight comparisons to rankings in prior years of the Global Competitiveness Index cannot be made directly.
The United States tops the overall ranking in The Global Competitiveness Report of 2007-2008. Switzerland is in second position followed by Denmark, Sweden, Germany, Finland and Singapore. Pakistan has maintained its position by 92, whereas other major players lost there rankings by significant numbers. India lost 5 ranks on the GCI, whereas, Slovenia and Brazil lost 6 ranks, Egypt lost 14, United Arab Emirates and Indonesia lost 5 and 4 ranks respectively. Pakistan remained more or less stable with respect to the constant sample and not considering the countries which entered the rankings for the first time this year, above Pakistan.
It seems that the Global Competitiveness Report of the World Economic Forum (WEF) recognizes the leadership of the current government’s strategy based on deregulation, privatisation and liberalization, where Pakistan realized important progress in a number of different dimensions captured in the indexes.
Significant improvement were made in Institutions, including property right (+0.40), in institutional framework (+0.27 for diversion of public fund variable, +0.35 in the efficiency of the legal framework among other), in the level of security (+0.31). Also private institutions sub-pillar is assessed as more efficient and transparent than last year (+0.24).
The pillar on Infrastructure shows improvement with respect to last year (+0.6 overall), with a notable increase in the number of telephone lines (+0.48) in line with the government’s effort to improve connectivity and infrastructure.
On the Macroeconomic stability, level of public debt has decreased (from 53.5% to 52% of GDP) and so has inflation (from 9.10% to 7.20%).
Health and primary education pillar shows a negative delta of 0.31 with respect to last year, due to the fact that data on expenditure for education, used by the World Economic Forum is from 2004-2005, which is used by the World Development Indicators (WDI). Nevertheless many variables are stable and the net primary enrollment rate has actually improved. It is also important to note that the hard data included in the GCI were the most recent available at the time of the index computation. However the majority of the data used by WEF for this pillar is from 2005. The WEF used the figures of 2005-2006, which has calculated the expenditure in education at 1.60% of GDP. This means that the increase in public expenditure in education (2.42% of the GDP) implemented by the Government of Pakistan in 2007 is not reflected in this year’s index, but will be eflected next year. The country has improved in important dimension, such as the extent and effect of taxation (0.32), the total tax rate, the effectiveness of anti-monopoly policies (+0.02) and the business impact of rules on FDI (+0.31). Pakistan has shown an overall positive delta of 0.15, with improvements in some variables on the pillar of Labor market efficiency. The pillar on Financial market sophistication shows a slight overall improvement (+0.03), with a positive delta (0.14) for the efficiency sub-pillar and some notable improvement in the soundness of bank (+0.18) among others.
The Technological readiness pillar registers an overall positive delta of 0.23, with significant improvements in the ICT penetration levels (internet users, personal computers and mobile telephone subscribers have all increased substantially) as well as in selected important variables, such as the availability of latest technologies (+0.68), the firm level technology absorption (+0.13), laws relating to ICT (+0.14) and FDI and technology transfer (+0.14). On the Innovation pillar, Pakistan shows improvement, such as the university/ industry research collaboration (+0.23) and intellectual property protection (+0.64).
Pakistan has shown significant improvements in improving the rankings on Property Rights (95 to 92), Intellectual Property Protection (79 to 62). Pakistan especially showed significant improvements on the Corporate Governance indicators; where it showed improvements in the Ethical Behavior of Firms (82 to 52), Strength of Auditing and Reporting Standards (68 to 60), Protection of Minority Shareholders Interests (57 to 39) and the Willingness to Delegate Authority (97 to 78).
The economic reform strategy of Prime Minister Shaukat Aziz is registering gains, according to the new methodology used by the World Economic Forum for the GCR of 2007-2008, Pakistan scored relatively well for Prevalence of Foreign Ownership (72 to 64), Business Impact of the Rules on FDI (66 to 24), Cooperation in Labor-Employer Relations (77 to 70), Pay and Productivity (65 to 43) and Effectiveness of Anti Monopoly Policy (79 to 66).
On Technological Readiness Index; Pakistan’s ability to show Firm Level Technology Absorption (85 to 60), FDI and Technology Transfer (75 to 61), Use of Personal Computers (113 to 87) and Number of Internet Users (107 to 87). The GCR also indicates that Pakistan has done sufficient work in improving the domestic value chain, which is reflected in improving the local supplier quality from (61 to 48). Although, Pakistan did well in the Financial Market Sophistication, Pakistan performed well in Financing through Local Equity Market (60 to 57), Ease of Access to Loans (42 to 41) and Soundness of Banks (84 to 66), the indicator on Venture Capital Availability declined (61 to 89).
Pakistan’s overall competitive performance is hindered by its position in some of the key pillars, mostly related to human capital: higher education and training, health and primary education, and labor markets. On education and training, the country has low primary, secondary, and tertiary enrollment rates, (ranked 120th, 120th, and 116th, respectively), a poor assessment for the quality of the educational system, and the availability of staff training. Health indicators are also worrisome, placing the country 106th overall, this is however also due to the fact that the World Economic Forum used the data available prior to 2005-2006. Finally, the country receives poor marks for labour market efficiency (ranked 113th), with low female participation in the labour force, high firing costs, little reliance on professional management within companies, and wages that are not flexibly determined.
Pakistan ranked as follows on the overall pillars: Institutions (81), Infrastructure (72), Macroeconomic stability (101), Health and primary education (115), Higher education and training (116), Goods market efficiency (82), Labour market efficiency (113), Financial market sophistication (65), Technological readiness (89), Market size (28), Business sophistication (79) and Innovation (69). However Pakistan maintained its overall position by 92 among the 131 countries.
Pakistan’s identified competitive advantages by the GCR have been identified as the business impact of rules on FDI, protection of minority shareholder’s interest, interest rate spread, extend and effect of taxation, time required to start a business, non-wage labour costs, hiring and firing practices, pay and productivity, ease of access to loans, strength of investor protection, domestic market size and local supplier quality. In addition to these, the GCR also identified quality of railroad infrastructure, available seat kilometers, HIV prevalence and government procurement of advanced tech products as the indicators where Pakistan has competitive advantage.
Pakistan improved its key indicators due to the formal relationship established with the World Economic Forum in 2006, when the Competitiveness Support Fund became its country partner institution. The Competitiveness Support Fund, a joint initiative of United States Agency for International Development (USAID) and the Ministry of Finance, Government of Pakistan, took immediate actions to improve the indicators. Based on the direction of the Prime Minister, CSF held meetings with the line-ministries and high level private sector representatives. The meetings were held with the objectives to discuss immediate actions to be taken to improve the areas identified by the State of Pakistan’s Competitiveness Report, and the Global Competitiveness Report 2006-2007 of the World Economic Forum. —Online