News: GDP growth from 2000-06 stands at 5.6 percent
Newspaper: Business Recorder
Date of Publication: Saturday, March 31 , 2007
Web site: http://www.brecorder.com/index.php?id=545088&currPageNo
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ISLAMABAD (March 31 2007): Pakistan's average GDP growth from 2000-2006 stands at 5.6 percent but to achieve constant economic growth and to bring stability in the growth pattern, governance would be a prime factor. This observation was made during a presentation in a seminar on "Growth Diagnostic in Pakistan" at PIDE on Friday.

The authors Idrees Khwaja, Dr Abdul Qayyum and Asma Hyder noted Pakistan experienced the highest growth of 6.77 percent in 60's. It was 6.45 percent in the 80's and the growth rate of 5.6 percent during 2000-2006 showed some decline. However the average growth from 2003 to 2005-06 is 6.8 percent.

However, to sustain this economic growth and to stabilise its growth pattern, governance is one of the prime factors. According to international competitiveness report, Pakistan is placed at 77th position among 102 countries, each in respect of judicial independence, irregular payments in tax collection and corruption.

In the presentation, M. Idrees Khwaja focused on various factors responsible for growth, and said that the cost of finance, savings, infrastructure, low human capital, macroeconomic environment are at their acceptable levels, while governance, institutions (financial, legal, and labour market) and innovations are below acceptable limits.

The paper written by Dr Abdul Qayyum, M Idrees Khawaja and Asma Hyder noted that the institutional scenario is not very encouraging, as Pakistan is placed at 78th position. Only 15 percent of the Pakistani firms sponsored training of their employees. Besides there exists lot of disparity in the educational systems observing O/A level, Public/Private English medium schools, Urdu medium schools and Madressas, which create social differences and hamper human capital growth.

Similarly, the Innovation criteria is another negative factor, where Pakistan is declared as 94th among 102 nations. Lack of innovation is due to rent seeking behaviour of the industries like seeking subsidies, tariff protection and erstwhile bank loan defaults. Lack of research worsens the situation.

Regarding infrastructure, an important factor of development and economic growth, the authors referred to the Global Competitiveness Report 2006-07. Here Pakistan is rated parallel to India and China with a score of 3.4. However, it is well behind Malaysia, Thailand, Korea, Taiwan and Hong Kong, which are quite ahead with scores of 5.7, 5, 5.1, 5.4, and 6.4 respectively.

It was noted during discussion that post 9/11 era produced high growth due to rapid rise in remittances by the Pakistanis abroad and US financial support (recorded and unrecorded) on account of terrorism and other related challenges.

The participants agreed this was a temporary arrangement, and in a volatile environment, future economic growth is unpredictable. To make it sustainable, a lot has to be done in governance, innovations, and institutionalisation of departments.

In response to a question by this scribe Dr Abdul Qayyum expressed the view that if governance had been good in Pakistan, Pakistan would have benefited much like China and India as the global trends had favoured robust economic growth in Asia. He added that the continuous focus and interest of the developed countries might as well benefit Pakistan, and sustain its growth. Though gross savings were 23.6 percent of GNI the net savings at 15.4 percent, is not a favourable indicator.

The authors referred to a recent study of World Bank, which sees great potential for growth in five major sectors of Pakistan's economy like fisheries, mining, readymade garments, light engineering and dairy. But these face several serious constraints due to high freight, electricity outages, delay in rebate collections, government's involvement in cotton seeds, bribes at the harbour and customs, ill-defined fishing policy, non-transparent leases of marble mines, and poor property rights and short-term leases.