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The Economic Advisory Group (EAG), an independent group comprising individuals from academia, policy, and the private sector, presents a vision for economic transformation that focuses on understanding key factors which have prevented this from happening in the case of Pakistan.
It draws from the experience of other emerging economies and leading economic research on how countries have successfully transformed their economies by letting their productive structures adapt and evolve over time.
The recommended policy actions laid out in EAG’s recent publication, New Vision for Economic Transformation, are a significant departure from the traditional focus on achieving growth by reinforcing existing structures of the economy. While such traditional approaches did deliver many episodes of growth spurts, these always proved to be short-lived, often leading to the build-up of large imbalances and, ultimately, crises.
A key requirement for transformation is that economic resources must be allowed to move from less productive to more productive activities. In a market economy, this critically depends on whether the incentive structure is allowed to evolve such that returns from investing in more productive activities are indeed higher than those from less productive activities.
In 2019, Pakistan’s export basket continued to be dominated by similar low value-added manufactured goods and primary products, as in 2000. Going even further back in time presents a similar picture.
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The Economic Advisory Group (EAG), an independent group comprising individuals from academia, policy, and the private sector, presents a vision for economic transformation that focuses on understanding key factors which have prevented this from happening in the case of Pakistan.
It draws from the experience of other emerging economies and leading economic research on how countries have successfully transformed their economies by letting their productive structures adapt and evolve over time.
The recommended policy actions laid out in EAG’s recent publication, New Vision for Economic Transformation, are a significant departure from the traditional focus on achieving growth by reinforcing existing structures of the economy. While such traditional approaches did deliver many episodes of growth spurts, these always proved to be short-lived, often leading to the build-up of large imbalances and, ultimately, crises.
A key requirement for transformation is that economic resources must be allowed to move from less productive to more productive activities. In a market economy, this critically depends on whether the incentive structure is allowed to evolve such that returns from investing in more productive activities are indeed higher than those from less productive activities.
Countries become what they make
Data shows that the structure of Pakistan’s economy has remained ossified over the past several decades. The data includes exports of goods and is taken from the Observatory of Economic Complexity. The lack of economic transformation which the country has experienced since 2000 stands out.In 2019, Pakistan’s export basket continued to be dominated by similar low value-added manufactured goods and primary products, as in 2000. Going even further back in time presents a similar picture.
Read full story...
