Pakistan’s Economic Performance
Currently, no country without strong economic base can be confident of its survival. In fact, economic robustness ensures political vitality of a nation as per the adage that when money speaks no one criticizes the accent.
Eight years back, the government while embarking upon the journey to economic recovery and transformation, could not but agree with Machiavelli that results of wrong political decisions are like tuberculosis, difficult to detect but easy to cure in initial stages; when belated, easy to detect but difficult to cure.
Induction of good governance was considered very critical to ensure transparency, consistency and vigorous pursuit of the policies. A competent, efficient and responsive administration was put In place. For sustained economic growth, emphasis was laid on macro-economic development. It pursued well-conceived prudent monetary policies with a view to avoiding fiscal deficit, keeping inflation low and stabilizing exchange rate.
Revenue generation being crucial for national development, the government formed a Task Force in 2000 to review revenue structure. The recommended reforms included inter alia grant of greater autonomy for the Central ( now Federal) Board of Revenue while retaining it as a government department, to make it a viable organization.
As a sequel to tax reforms, two landmark schemes namely CARE (Customs Administration Reform) project on customs side and Universal Self- Assessment Scheme on Income tax side were launched. Through CARE, importers can file Goods Declaration (GD) without physical interaction with the Customs officials. Pakistan Customs Computerized System (PACCS) covers an automated solution for customs clearance a one-window operation. It has curtailed the clearing time from ten days to a few hours. These measures were intended to create tax-payer friendly environment, extend maximum facilities to the people, streamline and simplify tax laws, broaden tax base, remove discretion of the Tax Collectors, reduce contact with taxpayers and enhance financial resources.
From 1999 onwards, the government adopted a very liberal foreign investment policy where under foreign Investors can own upto 100% of most business barring radio-active substances, arms and ammunition, high explosives, currency and mint operations. Moreover, the government has introduced Alternate Dispute Resolution (ADR) mechanism to encourage foreign entrepreneurs to invest in Pakistan without any legal difficulty.
Investors have lately been showing confidence in the Pakistan economy. Foreign Direct Investment (FDI) neared $ 6 billion during the last fiscal year, $ 3.8 billion higher than the preceding one. Total foreign investment was expected to touch $ 6.5 billion (or 4.5% of GDP) by the end of the current fiscal year over 13 to 14 times higher than eight years ago.
To attract more investment, expanded role of Special Economic Zones (SEZs) is envisaged. Here already exist industrial parks such as “Marble City”, “Textile City”, Pak-China Economic Zones near Lahore and the Lasbela Industrial Estate in Balochistan. Another such measure covers establishment of a separate Ministry of Textile Industry.
High ratio Investments have been made in education, health, population welfare, protection of environment and access to credit. Huge investment in improved infrastructure in line with the World Trade Organization (WTO)standards has been undertaken Vital infrastructure like water storage ,power generation, roads, railways, ports, airports and telecommunication has been developed. A new port has been set up at Gwadar on Western Balochistan coast with the Chinese assistance.It has been linked with Karachi through 650 km Mekran Coastal Highway .Its further planned linkage with the Chinese province of Xingiang would provide Pakistan trade route to the Central Asian Republics.
Small and Medium Enterprise Development Authority (SMEDA) has initiated “Aik Hunar Aik Nagar” (one village one product) on the Thai model of one Tambon one product. Through Khushhal Pakistan Programme, small development schemes like electrification of villages, provision of natural gas, supply of potable water and construction of roads connecting farms with markets are undertaken on the recommendations of the public representatives.
Poverty alleviation programme accorded top priority is being strenuously implemented. Agricultural growth considered to make effective contribution towards poverty reduction and job generation, this sector is being focused on for accelerated progress. Services sector has also made considerable headway in telecom sector, banking, insurance and wholesale and retail trade.
Violations of copyrights, mushrooming spurious drugs, counterfeit publications, and unauthorized use of telecommunication facilities posed a constant threat not only to country’s international reputation but also to its economy. Legislation has been enacted to curb economic and cyber crimes. The government set up Intellectual Property Organization, namely IPO-Pakistan to protect, strengthen and integrate intellectual property rights and to promote awareness about the related issues in the public & private sectors, It has been vested with powers and functions to supervise and coordinate the working of all intellectual property offices including the Patent office, Trade Marks Registry and Copyright office.
Internet connections in the country have increased five fold from half million in 1999.In the obtaining business environment, It is imperative to have presence on the web to directly sell through the internet. Accordingly, on line presence (web portal of exporters) has been established to undertake Internet Marketing for web portal.
Pakistan has emerged as a conspicuous player in the global IT services as a consequence of concrete steps taken by the government. Pakistan enjoys status of a competitive location with regard to criteria like government support, education system, infrastructure, cost, political and economic milieu, and intellectual property security.
Foreign investment tends to be shy in the backdrop of political unrest, terrorism and militancy. In its war against terrorism, Pakistan has suffered a lot reflecting harmfully on its economic health. Besides, owing to upcoming elections and political uncertainty, some of the macro-economic indicators have been falling short of expectations during the last two fiscal years. Trade deficit, inflation, fiscal deficit (caused by increase in expenditure on internal security and revenue shortfall), privatization and revenue collection are the areas requiring particular attention for corrective steps. Food inflation has been caused due to inadequate administrative measures in combating profiteering, hoarding and smuggling as the administration seemed more to rely on market prices which unless vehemently pursued have the tendency to remain unresponsive. The projected target of reducing inflation from 8% to 6.5% is also likely to be negatively impacted.
The national exchequer is incurring losses of Rs.280 billion i.e. 2.8% of the GDP on account of subsidies given in POL products, electricity and wheat flour.
Pakistan’s consistent high growth in the last 8 years has created enormous demand for energy and power generation has not been able to keep pace with the mounting demand. The resultant energy gap has affected our industrial production and domestic needs.
Thus swelling current account deficit, trade deficit, increasing inflation(price hike of food especially flour, cooking oil and rice), shortage of electricity and gas and rise in utility bills, shooting international oil prices, decreasing volume of exports, due to prevailing uncertainty, may pose the succeeding government a tough challenge necessitating prompt remedial measures.
Notwithstanding the momentary glitch, the performance of the last eight years has been exceptional. The country has been set on the road to recovery to turn it to a progressive and prosperous one. The overall macro economic indicators from 1999 onwards have shown significant improvement with fiscal deficit, expenditures, and foreign debts having been curtailed; and earnings, foreign exchange reserves, exports and revenue collection having gone up, making the economy robust and vibrant. Over the past 8years, the economy has grown at an average rate of almost 7.0% per annum. Its size of $73 billion in 1998-99 has expanded to $160 billion. An unprecedented increase has been registered in merchandise exports, by almost 144% from $7.8 billion in 1998-1999 to $19.1 billion in 2006-2007.
Per capita income now is $1240 . Foreign Exchange reserves have soared to around US $ 15 billion.Trade deficit has come down substantially.