Boom-Box Mentality

Infact Pakistan has both the intellectual capital and the resources but the problem with us is of the consistency. The policies of one governement might not be that much good, but if they are stopped after two or three years then the whole process of progress need to be restarted.

I like the author`s basic analysis, but needs few modifications. India`s liberalisation though a nice case study is not totally relevant for Pakistan. Pakistan faces different challenges than what India had in 1991, hence it needs different policies. FDI does not come unless there is significant domestic investment. Also among the things faisaluno has mentioned, an important point is the narrow fiscal base. Its not good for country of 140 million people to have a narrow fiscal base, and Pakistan should take it up seriously.

Just to add a little tint of fun in the whole discussion...
A colleague of mine told us this a few days ago (probably he was making it up but anyways)..

An athiest came to Pakistan, and when he returned he was fully converte muslim and a true believer of GOD by heart.
the people in his country asked. How did this happen... and he was like..

``Every thing I saw in Pakistan was against Islam and the very principals of transparent society, I just couldn`t see that how the country is running and able to keep itself together``

You dont have to agree with it. but call it a coincidence or what ...but every time we are at the lowest end..something happens that just gives the higher end of the bargining table...

Well ... One can do all the analysis ..and look for all possible intelligent ideas that can help and you can do the all the hard work to make them work... but the bottomline is that all these intelligent ideas and collective hardwork cannot replace the sustained political stability and sustainibility. I dont wanna blame any kind of rulers in pakistan whether its Military, Political or establishment... but I do believe that ``we probably have to go deep down beforer we can start coming up``..... Establishment or military rulers can`t just provide the kind of certainity required in today`s world... The whole political system is built against the very idea that military sort o govt. works on...and you can also infer from the above statement that the kind of worst political govts. that we saw in 1990s (and due to which we gave up too early on the political process).. we proboably have to see that kind of govts. for a very long period of time till the system starts refining itself... if we want the long term political stability

Regarding the effects of remittances or geo-political situations... i do believe they have an effect..i wont go into the detail... however, We experienced such situations many times in Pakistan history when due to geo-political reason we had an edge... however, these effects would have been much more sustained, if there would have a fully functional political system in place (with developed mechanisms of transperency) ..

So sooner or later we have to decide how we want to go about it ... The sooner we decide...the better...

``unlike Pakistan, the Government in India moved to overhaul the overall system by liberalizing its closed-door economy to open up its markets``

Asim Raza, your above mentioned comments are true, but only to an extent. Bear in mind that Pakistan too is steadily liberalizing its markets, the recent spate of privatisations, de-monopolizing the telecoms/electricity sector, and anti-monopoly regulations are but a few examples.

Dear Writer i am surprised on your premise of disregarding remittance having any ``longterm`` and ``sustained`` affect on economic growth...

Now, let`s take a very simple approach...every country has two primary assets, one is natural resources and other is skilled labour..rest is secondry. A country can only grow by utilizing these two sources effectively and efficiently.

In Pakistan`s case, the lack of proper opppurtunities made us export our skilled labour to other markets but we cannot simply ignore them or remittances send by them.

Remember theese expacts is a great untapped source of skilled nationals. Although we are slow in industrilization but a skilled labour force is already ready and waiting to support and manage an industrilized pakistan...thanks to these expacts..

for those interested in pak i.t sector, here is an interesting article on the recent developments. also in the article is an anecdote about steve ballmer`s visit to lahore when he was a grad student at stanford:

http://www.technewsworld.com/story/42934.html

...Supportive Government Joins Fray
Stories like these are not uncommon in the Pakistani IT industry and are increasingly becoming a norm for an industry bent on shattering its long-persisting negative image in the Western world.

Even Pakistan`s government is joining the ranks in this regard. In addition to helping create a favorable policy environment and continually slashing telecom bandwidth prices, the government recently co-sponsored ``Expo Pakistan,`` one of the largest ``show and tell`` events to market Pakistan to its potential clients in a variety of industries, software being one of them.

...``We are ready,`` says Shahid Tarrar, the commercial councellor at the Pakistan Consulate in Los Angeles, ``to take American business leaders to Pakistan and help them see for themselves the `real` face of Pakistan and the opportunity it represents -- a face that is very different from the one often portrayed in U.S. media.``

Tarrar intends to execute upon his plan by taking up to 10 U.S. businessmen and investors to Pakistan shortly and, by doing so, hopes to nullify the ill-effects of the country`s misperceived negative image and level the playing field for Pakistan`s software industry.

...When it comes to Pakistan, the image belies the reality, and seeing is believing. From the shadows of a misplaced image has emerged an innovative strategy that seems to do the trick. This might just be the right kind of break the country`s software industry needs from its rather lackluster past. Pakistan is fast becoming a happening place for IT.

foreign aids...haha....this garbage is the result when urdu-medium-matric-section-types do analysis for a third rate website like chowk.

for folks interested in serious opinion, below are the views of rating agencies - the only instituitions whose views matter in the international financial markets. recent data/news flow from pak indicates that the concerns of the rating agencies are being addressed which means that pakistan`s credit ratings will maintain the upward momentum.

from moodys:

Opinion

Credit Strengths
Credit strengths for Pakistan include:

- Healthy external liquidity

- Robust growth and a high level of inward worker remittances

- Proven commitment to economic reform

- Alliance with the US that ensures economic and military support

Credit Challenges
Credit challenges for Pakistan include:

- Large public debt burden, especially in relation to government revenue

- Narrow fiscal revenue base

- Low GDP per capita and widespread poverty and illiteracy

- Tense, albeit improving relationship with India

- Fragile domestic political situation


...Rating Outlook
The outlook on Pakistan`s ratings is positive (changed from stable in January 2005). This reflects our assessment that the broadly favorable economic trajectory is likely to continue. We expect the public debt burden to continue to decline over the next two years as financial stability and fiscal discipline are maintained amid robust growth and adequate external liquidity. However, our cautiously optimistic outlook is subject to a number of significant downside risks. The political environment is likely to remain precarious while the economy will continue to be vulnerable to internal and external shocks.

What Could Change the Rating - UP
Greater stability in the domestic and regional political situation; an increase in the level of government revenue to GDP and an expansion of the export base; a further significant easing of the public debt burden amid sustained high growth.

What Could Change the Rating - DOWN
A substantial worsening of the domestic or regional political environment, or a breakdown in Pakistan`s alliance with the US; a significant decline in inward worker remittances or foreign financial support leading to a sustained deterioration in the balance of payments; an abandonment of the economic reform program, resulting in a return to financial volatility.

Recent Developments/Results
Both the agricultural and industrial sectors performed strongly during the first half of 2004/05. This was partly due to an abundant cotton crop, which is estimated to have reached record levels during the 2004/05 season (April to February). Moreover, the latest trade data suggest that Pakistan has benefited as expected from the expiry of the Multi-Fibre Arrangement at end-2004, with textile exports picking up during January to March 2005. However, inflationary pressures persist despite a series of modest increases in interest rates (which are expected to continue). Year-on-year CPI inflation rose to a seven year high of 10.2% in March 2005.

© Copyright 2005, Moody`s Investors Service, Inc. and/or its licensors including Moody`s Assurance Company, Inc. (together, ``MOODY`S``). All rights reserved.


from s&p:

Outlook

The stable outlook reflects the expectation that the reform process and fiscal consolidation will remain on track, and external liquidity will be maintained at current levels. However, any rating upgrade will depend on more rapid fiscal consolidation and economic improvements, and the speedier implementation of reforms, given the country`s structural weaknesses. A sustainable reduction in fiscal deficits will require widening the tax base, improving tax compliance and collection, and more efficient public expenditure. Although some progress has been made in recent years, further substantial progress will be politically challenging, even for this government.

The stable outlook also takes into account the high political and associated economic risks. Relations with India, although recently improving, could sour again. More permanent détente with India could bring about a sizable peace dividend and more economic benefits, lifting Pakistan`s growth prospects. If the existing economic achievements are built upon and economic reforms successfully deepened the ratings could be upgraded, particularly if the political framework remains stable and relations with India improve.

Mohammad Asim Raza

In your article you speak only of the World Bank, kindly be aware that there are other key stakeholders in Pakistani development, namely USAID, the IMF, Asian Development Bank and the Islamic Development Bank.

The Vice President of the Asian Development Bank, Mr Liquan Jin reaffirmed ADB’s support for further strengthening its partnership with Pakistan. The President of the Islamic Development Bank, Mr Ahmed Muhammad Ali clapped his hands on Pakistan`s exemplary Zakat and Baitul Maal system hailing it as a beacon of hope for Islamic countries.

Mohammad Asim Raza

Contrarian to many of your observations, the twinkle of Pakistan`s economy does shine on a midsummer`s night. We must however not glowingly bask in glory, for much is left to be desired. Pakistan is slowly crawling toward the Information Age. But at snail`s pace. Someone needs to rev up the ignition.

Nonetheless Pakistan in many respects is velocity-geared well on track to concretize its millennium development goals. The Pakistan Development Forum 2005 on “Sustaining Growth and Improving Quality of Life” bears testimony to my statement.

Pakistan is a nucleus for lucrative windfalls branching out of gas pipeline revenues from Central Asia, and its economic stability will serve the region as a multiple corridor for energy, trade and transportation. Admittedly the tourism sector needs a nose to the grindstone. Another imperative: to leverage our comparative advantages on the world stage. To this effect prospects of Pakistan’s Textile & Cotton Exports post-MFA (Multi-fiber Agreement) seem sanguine.

Feverishly rising inflation (CPI inflation rose to 9.1%) and current account + trade deficits demur as grave causes for concern.
To steer the economy toward calmer shores the GOP will need to rigorously pursue prudent macroeconomic policies to curb rising inflation, which can undermine exchange rate stability and shabbily distort incentive structure stalling growth.

Yet nefarious clouds do bear silver linings. A record cotton crop of 14.6 million bales, or 46% was harvested, and production of wheat is expected to eagerly climb to 10%. Sustained high demand continued to boost production in the large-scale manufacturing (LSM) sector, which expanded by 14.7% in the first seven months of FY2005. Growth in LSM sector was broad-based, with increases being particularly large in the case of cement, electronics, automobiles, fertilizers, and cotton cloth.

A 76% boost in cellular telephone connections to 8.8 million in February 2005 and 160,000 WLL connections given in the first 8 months of the FY show that telecommunication services are spreading their wings far afield. Cutting the ambilical chord of PTCL was a masterful stroke indeed. Prudently the SBP started to aggressively tighten the screws on monetary policy increasing the discount rate to 9%. Subsequently, interest rate on 3-month and 1-year TBs increased by 138 and 130 basis points to 6.39%.

In the services sector, the meteoric rise in the telecommunication sector is likely to accelerate further. Suited and booted bankers also expect fruitful outcomes through the prisms of reform and privatization. GDP growth expected to catapult to 7% and imports maintaining very high growth, CBR tax revenues should steadfastly succeed in raising a target of Rs 580 billion. There will be a shortfall in receipts from surcharge on petroleum products, as the Government erroneously failed to pass on the increase in international oil prices to domestic consumers until 12/2004.

Shaukat Aziz`s soundbites amplified to the tune of ``the government has adopted a future growth strategy, which rests on five pillars including water security, energy security, infrastructure development, human capital development and second generation reforms``. Let us hope these promises do not fizzle into hollowed meaningless slogans.

You applaud a high-tech information economy, but what Pakistan needs more urgently is realistic sustaining growth, rural development, creating job opportunities and equitable distribution of income. The current inelastic tax base is a disservice to all and sundry.

The macro stability must duly travel to improve the socio-economic conditions of the masses. Strengthening our local institutions, building a robust human infrastructure, transparency in policy-making, strengthening of tax administration, improving legal police and judicial system to surmount the trajectory to a beckoning 21st century.

Rule based fiscal policy with a debt limitation act is highly called for. Most pressingly, and this point cannot be over-stressed: Pakistan must plunge full-throttle toward universal primary education with 100 percent net primary enrolment ratio, fortifying disease control and power generation to avoid WAPDA-crisis like the plague, reducing infant mortality rates, basic farming inputs such as credit, seeds, fertilisers, improvement of irrigation, and even farm machinery made available to them.

Pakistan needs to fully immunise children, improving maternal mortality ratio and access to sanitation and safer water. Economic growth must address the gender dimension, because empowering women hits poverty at its root with many tangible benefits.”

Only then can Pakistan start scribbling an agenda for an ``information economy``.

Past follies of decades cannot be undone with whimsical rhetoric. Long term equity, rule of law, property rights and social justice must be from the grass-roots upwards.

An evolution from below.

Not an imperial imposition from above.

The collective genius of Pakistan if fully harnessed can reap a rewarding harvest.

So before leaping into the information age, Mr Asim Raza, we need to put our house in order.

The above points form the mainstay on the sketchboard for reform. Momentous strides for the winding road ahead.

Not only for Pakistan.

But for the bewildering array of emerging markets sprinkled around the globe.