Thirlwall Law: Why Hasn't Pakistan's GDP Grown Faster Than 5% Average Since 1960s?

[Pakistan Space Agency]

Stop owning American misadventures in the neighbourhood and expecting future generations to foot the $100+ billion bill, problem solved.

Concentrate on the electricity.

 

[CrazyZ]

To create a strong domestic market at home one need a strong population background with sufficient demand to cater domestic industry. Pakistan so far indeed very lack to nurture their own population, especially in universal education and universal healthcare system which in turn create a strong working population to create middle class market. Their human development index show us Pakistan not giving much attention to this one.

I agree with your points (human development is an issue) but Pakistan doesn't have a problem with consumption. Any Pakistani with some money wants to show off with fancy cell phones, nice car and big house....as opposed to savings.

Major problem is on the investment and macro financial policies side. Most Pakistani's invest in real estate, gold or in overseas businesses/real estate. These are not investments that expand the capability our local economy. Few understand and or invest in modern financial concepts like stocks that drive forward economic growth (again a human development issue) . Banks and businesses are generally risk averse. All of these combine to hamper investment as a percentage of GDP. Other Asian countries have done much better in this respect.

Pakistan has gone through so many BOP crisis that government officials now plan their personal finances around it. The Sharif's are the first to buy London real estate...before any planned PKR devaluation. Incompetent self interested and corrupt political elites are the primary drivers bad macro financial policies.

The East Asian model should be studied and replicated where possible. Reinvesting our recent gains into expanding our domestic production and R/D for more advanced domestic production is critical for us to get out of our historical BOP crisis cycle.

 

[Jungibaaz]

In addition to all that's been said above. While it's true that current account imbalance sets a speed limit for our growth rate and will perpetually suspend us in cycles of BoP related crises. The true underlying factors that are limiting good governance to prevent it, as well as not improving a whole host of other issues are the following:

• Political instability, and endemic institutional weakness.
• Lack of basic economic reforms.
• Vested interests promoting instability, lack of reforms, and dooming us to low productivity.
• Capital flight coupled with lack of foreign investment in key industrial sectors.
• A weak and untrustworthy sovereign stemming from the aforementioned.
• No lasting system founded on laws and constitutional framework. Subverting both is easy.

I need not give examples, but the first point is plain enough to see and understand. For the second, just take a look at land reforms, and the death of any progress in this with the Qazalbash Waqf (1989) case, or take tax and regulatory reforms that are now being looked at again. For the third, it's plain to see. Fourth can be seen in specific examples in textiles industry, and FDI figures. Examples of the fifth point range from supreme court rulings breaking contractual agreements and nullifying sovereign guarantees, to the usual instability leading to a long term state of policy-related schizophrenia. The last one feeds into the rest of the problems listed and allows poor governance to persist despite some honest attempts to improve the situation.

 

[Goenitz]

Just we need one thing. The state, and only the state owns the monopoly on violence. See this trend. Wherever in world, state can easily catch, put on trial and sentence, the region even within a country prosper. Be it SA, UAE or west. Or be it east Europe or us. See italy north to south. Karachi is not upto mark, just because of lawlessness.
We have large portion of rural area where there is no law. How do you think you can educate people there when their livelihoods depend on labour, plus locals MPAs eat all the funds. ? Unless we remove, all the obstacles in the way of police to establish its writ, we cannot prosper. No matter whatever you do. It will be futile. @Jungibaaz @Indos

 

[Indos]

Indonesia has had far more foreign investment and has some big tourist hubs. Pakistan can not rely on these. A trade surplus and good remittances are our best path to a healthy balance of payments.

Yup and this is why I am agree to suggestion that Pakistan need to scrap its FTA with China to achieve trade surplus by curbing the import side first. I can say that it is difficult to get benefit on that FTA, we are better to have FTA with European where their low cost manufacturing sectors have already been collapse.

Indonesia also has FTA with China (ASEAN-China FTA) and until Today we are still struggling to stop widening our trade balance with them despite our industry condition is relatively better than Pakistan. Chinese companies also prefer to invest in Vietnam since by residing in Vietnam they can both target Chinese and international market in the same time (due to the fear of US trade war).

Just we need one thing. The state, and only the state owns the monopoly on violence. See this trend. Wherever in world, state can easily catch, put on trial and sentence, the region even within a country prosper. Be it SA, UAE or west. Or be it east Europe or us. See italy north to south. Karachi is not upto mark, just because of lawlessness.
We have large portion of rural area where there is no law. How do you think you can educate people there when their livelihoods depend on labour, plus locals MPAs eat all the funds. ? Unless we remove, all the obstacles in the way of police to establish its writ, we cannot prosper. No matter whatever you do. It will be futile. @Jungibaaz @Indos

Good governance is of course the foundation of good growth. I think you need to make SWAT analysis so you can identify your strength and weakness and with that then you can exploit your strength and fix your weakness. Compare to previous period, Pakistan is much stable now. For almost 2 decades Pakistan are famous with suicide bombing and lawless Waziristan region.

To improve entrepreneurship, Pakistan IMO should have micro level funding where the borrower dont need to give some kind of fix asset guarantee. We have that in Indonesia and the name of the program in our language is KUR (Kredit Usaha Micro/ Micro business credit). Government has higher target every year for its disbursement and the lender is our state owned banks. So far the credit is quite healthy and the Non Performing Loan (NPL) is in the safe level.

 

[Nike]

Just we need one thing. The state, and only the state owns the monopoly on violence. See this trend. Wherever in world, state can easily catch, put on trial and sentence, the region even within a country prosper. Be it SA, UAE or west. Or be it east Europe or us. See italy north to south. Karachi is not upto mark, just because of lawlessness.
We have large portion of rural area where there is no law. How do you think you can educate people there when their livelihoods depend on labour, plus locals MPAs eat all the funds. ? Unless we remove, all the obstacles in the way of police to establish its writ, we cannot prosper. No matter whatever you do. It will be futile. @Jungibaaz @Indos

Why you don't start by reforming your police institution along with civil servant government corps? It is not like Indonesia or South Korean police institution and civil servant corps is free of corruption and scandal, but reformation (for Korean they started it earlier since the demise of Park Chung He and Indonesia since the demise of Soeharto) can bring a much better results compared to before. Red tapes and beurocracy must be cut and openness must be hold.

There is lot of thing to be done, and sooner is better.

 

[CrazyZ]

Yup and this is why I am agree to suggestion that Pakistan need to scrap its FTA with China to achieve trade surplus by curbing the import side first. I can say that it is difficult to get benefit on that FTA, we are better to have FTA with European where their low cost manufacturing sectors have already been collapse.

Indonesia also has FTA with China (ASEAN-China FTA) and until Today we are still struggling to stop widening our trade balance with them despite our industry condition is relatively better than Pakistan. Chinese companies also prefer to invest in Vietnam since by residing in Vietnam they can both target Chinese and international market in the same time (due to the fear of US trade war).

China is the world largest consumer market even in dollar terms. Scrapping FTA is not a good idea. In theory, our low end manufacturing should be cheaper than China's. We need to focus on competitiveness not protectionism.

 

[Goenitz]

Why you don't start by reforming your police institution along with civil servant government corps? It is not like Indonesia or South Korean police institution and civil servant corps is free of corruption and scandal, but reformation (for Korean they started it earlier since the demise of Park Chung He and Indonesia since the demise of Soeharto) can bring a much better results compared to before. Red tapes and beurocracy must be cut and openness must be hold.

There is lot of thing to be done, and sooner is better.

Reforms is what we need. Pak, BD and India police has many reforms dating back to 1900s. Politicians had control over police, land departments (due to agrarian society), and now on media. One rich tycoon has started his own channel (probably fed up buying journalists). So politicians are the last breed who wants to reform the police. The bulk of our voters is from rural areas, which is still in feudal age. Though our cities politicians are not clean but those rural MPs won't like to reform the police.
Our bureaucracy was good till 60s. It was heavily politiczed after 85 when politicians had power for posting/appointment. Sad affairs on our side.

 

[niaz]

I can’t say much about the pre-1958 Pakistan because I was too young to read or care about the state of the economy. My views are restricted to post 1958 when I had gained admission to the Institute of Chemical Technology of Punjab University and transferred to Lahore.

For the sake of simplicity, let us divide the period from 1958 to now into 6 periods for roughly 10 years each.

Economically, Pakistan had been doing very well under Ayub Khan. During his 10 years, the economy grew at an average of close to 6% per annum with two successful 5 years plans. However, the misadventure of the 1965 war by Aye Khan ended the good times.

Whether people admit it or not; the 1965 war started by us. The war ended without any result, one can call it a wasteful adventure because we made no progress on getting Kashmir. Instead, it put the brakes on the road to economic wellbeing.

The second period saw the disastrous 1971 war and the resultant 6 years of Bhutto regime, an era disastrous for Pakistan’s industry.

“Industrialists not just lost industrial units to Bhutto’s nationalization policy; they lost the urge to invest in Pakistan”. The economy of Pakistan further hunted badly by the oil price shock of 1970 and the growth rate fell from 6% of the golden sixties to 3.7% in 1970s. Moreover, the fourth five year plan was abandoned after the fall of Dhaka, East Pakistan and this incident left high cost consequences. Inflation on an average figured 16% from 1971 to 1977. The manufacturing sector remained slow with a growth rate of 3% and income inequalities rose as compared to previous periods. Large scale manufacturing sector which was in a classic condition in late 1950 and 1960s and the private sector was antagonized”

https://cscr.pk/pdf/rb/RB _Economy.pdf

The third decade suffered Zia’s Martial Law & the Afghan War.

The bigot Zia’s era; despite being the root cause of the spread of extremism & sectarianism in the civil society was; whatever the underlying cause may be; good for the economic growth. The economy again started growing at close to 6% per annum albeit due to the massive influx of US dollars.

Without blaming the individuals, it is very hard to deny that ‘Democratic’ government; even though an ideal form of gov’t for most countries; has, regrettably, been a major impediment in the path of economic progress in Pakistan. The CSCR article linked above refers to the 10 years between Zia & Musharraf as the ‘Lost decade’.

The fourth decade of Pakistan’s economy started with the Musharraf take-over and the 9/11. The combined effect of these events resulted in about 7% average annual growth in the economy with GDP doubling during the 2000 -2008 period.

http://www.riazhaq.com/2008/08/musharrafs-economic-legacy.html

Pakistan’s exports also more than doubled from about &8-billion in 199 to $18-billion in 2007-2008.

The performance of the Pakistan People’s Party’s 2008-2013 tenure was dismal. The average annual GDP fell to 2.9% which was close to 7% in Musharraf’s era. On the other hand, the breakaway Bangladesh experienced 6.8% annual GDP growth during the same period”

PML-N 2013- 2018 gov’t, despite the ‘Dharna’ of Imran Khan, fared better than the PPP gov’t under Zardari. The economy grew at close to 4.5%, albeit with a mounting balance of payment deficit.

We are in the 6th period now. Arguably, the economy was in the precarious condition when Imran Khan took over, however his 2 years performance show that Imran Khan and his ministers are even more inept at governance than even the Zardari’s PPP. I hope for the sake of Pakistan that the PTI gov’t can at least prove as good as PML-N on the economic front, but thus far apart from blaming the previous gov’ts, PTI has little to show for.

Conclusions.

The ground reality is that during the 62 years since 1958; 30 years of the Military rule proved far better on the economic front than the successively elected gov'ts. IMHO the main reason for this was the consistent economic & trade policies and better quality of the Ministers at the helm of the affairs. For example, Mohammed Shoab, Ghulam Ishaq Khan & Shaukat Aziz were far more capable than Dr. Mubasshar Hassan, Sartaj Aziz, and Ishaq Dar.

Another reason being the rise of extremism in Pakistan especially after 9/11. Who would want to invest in a country where life was not safe? One may call it Thirlwall Law or whatever.

 

[PakPrinciples]

PTI and Imran khan are trying to build the right environment to attract FDI.

I explained why local industries aren't growing and FDI is literally worthless in comparison to building your own brands.

FDI is not that great hence why so many countries have rules regarding it including restrictions on foreign ownership, obligatory screening and approval procedures, restrictions on foreign nationals managing operations or even working in affiliate companies, etc...?

The foreign manufacturers that setup shop in Pakistan aren't relocating for the purposes of generating exports to earn the country foreign exchange instead their main and many times only goal, as you've already seen with Suzuki, is to manufacture to meet domestic consumption requirements and though its better than importing ultimately you're still losing foreign exchange in the form of royalties, revenue sharing, etc...

In comparison to the OECD average not only is the Phillipines, which is doing significantly better than Pakistan, one of the most FDI restrictive nations on the planet but it's even more restrictive than China which along with nations such as Indonesia, South Korea and Canada are some of the most restrictive to FDI in the organization.

What Pakistan needs is government directed investment into Pakistanin brand development and manufacturing.

Compare China and South Korea, both saw an end to their civil wars only 3 years apart in the 50s but while South Korea built up its own brands like Samsung, Hyundai, LG, etc... without the mineral wealth the Chinese possessed the latter was content with becoming the world's sweatshop.

Now the South Korean GDP per capita is 300% higher than China's and the latter has learned what I'm trying to tell you the hard way only now developing its own brands like NIO (future competitor to Tesla), Huawei (competitor for Samsung and Apple), Baidou (competitor to Google), etc...

Not sure why Khan even said he wanted to "learn from China" unless he doesn't understand what China did to get where it is (ex. no minimum wage laws until 1993, total ban on trade unions that protect workers and negotiates better wages on their behalf, a total disregard for environmental protections, one child policy that f*cked up their demography, etc...).

Furthermore I don't see anyone being able to replicate the China model because that's not the direction business is moving with increasingly localized manufacturing as automation takes over to reduce shipping costs, impact of tariffs on lost revenues, prevent disruptions due to wars and disease, etc...

if the social welfare is into education and health of the citizens of Pakistan it is worth it.
without an educated healthy population there is no economic growth

Agreed, human development is critical to sustainable economic growth.

What I'm trying to say here is that this isn't sustainable and the country is in real danger.

The whole Pakistani economy, as Riaz Haq's post highlighted, is literally surviving on loans and remittances.

Government revenues finance those social welfare programs you guys are promoting but remember those revenues are derived from profits generated by government owned businesses and taxes whether they're property taxes, business and personal income taxes, sales taxes, etc...

Without industrial growth there is NO WAY you can continue to finance these social welfare programs let alone pay off Pakistan's debt obligations or appropriately budget the military to create the independent nation Pakistani's strive for it to be. Instead Pakistan will watch as it is increasingly unable to do anything regionally or globally completely subservient to foreign interests which, a lot of the time, is destabilizing because it can't stop taking loans while our people are forced to live abroad and work in foreign countries many times without due rights or in extreme danger (ex. Christchurch) making Pakistan highly sensitive to anything that would endanger remittances.

If you look at Pakistan's 2019-2020 budget they cite both the initial budgeted and later revised figures for the 2018-2019 financial year. What we see is that the government spent 26% more than they collected in revenues and almost 58% of what was spent went into servicing existing debt and paying off the principal of the loans (the bulk of it went into servicing debt).
Pakistan Budget in Brief 2019-2020

Pakistan now imports 200% more than it exports on dollar terms when just before the '97 re-election of Nawaz Sharif Pakistan was an export surplus nation with relatively balanced trade for almost its entire history.

How is this sustainable?

This isn't going to get any better the way things are going:

If the government wants to lift people out of poverty and help them then invest in industry so they can earn money and pay for their kids education and healthcare as well as afford decent housing and access to electricity and clean water. Eventually we'll be in a position where the government could afford universal healthcare and a myriad of other social welfare programs.

What would have been far better compared to healthcare and education spending would have been increased spending on low income housing which is something I've talked about in the past should have a massive impact on the country's economy considering our housing crisis is the worst in the region just shy of Afghanistan.

 

[CrazyZ]

I explained why local industries aren't growing and FDI is literally worthless in comparison to building your own brands.

FDI is not that great hence why so many countries have rules regarding it including restrictions on foreign ownership, obligatory screening and approval procedures, restrictions on foreign nationals managing operations or even working in affiliate companies, etc...?

The foreign manufacturers that setup shop in Pakistan aren't relocating for the purposes of generating exports to earn the country foreign exchange instead their main and many times only goal, as you've already seen with Suzuki, is to manufacture to meet domestic consumption requirements and though its better than importing ultimately you're still losing foreign exchange in the form of royalties, revenue sharing, etc...

In comparison to the OECD average not only is the Phillipines, which is doing significantly better than Pakistan, one of the most FDI restrictive nations on the planet but it's even more restrictive than China which along with nations such as Indonesia, South Korea and Canada are some of the most restrictive to FDI in the organization.

What Pakistan needs is government directed investment into Pakistanin brand development and manufacturing.

Compare China and South Korea, both saw an end to their civil wars only 3 years apart in the 50s but while South Korea built up its own brands like Samsung, Hyundai, LG, etc... without the mineral wealth the Chinese possessed the latter was content with becoming the world's sweatshop.

Now the South Korean GDP per capita is 300% higher than China's and the latter has learned what I'm trying to tell you the hard way only now developing its own brands like NIO (future competitor to Tesla), Huawei (competitor for Samsung and Apple), Baidou (competitor to Google), etc...

Not sure why Khan even said he wanted to "learn from China" unless he doesn't understand what China did to get where it is (ex. no minimum wage laws until 1993, total ban on trade unions that protect workers and negotiates better wages on their behalf, a total disregard for environmental protections, one child policy that f*cked up their demography, etc...).

Furthermore I don't see anyone being able to replicate the China model because that's not the direction business is moving with increasingly localized manufacturing as automation takes over to reduce shipping costs, impact of tariffs on lost revenues, prevent disruptions due to wars and disease, etc...





What I'm trying to say here is that this isn't sustainable and the country is in real danger.

The whole Pakistani economy, as Riaz Haq's post highlighted, is literally surviving on loans and remittances.

Government revenues finance those social welfare programs you guys are promoting but remember those revenues are derived from profits generated by government owned businesses and taxes whether they're property taxes, business and personal income taxes, sales taxes, etc...

Without industrial growth there is NO WAY you can continue to finance these social welfare programs let alone pay off Pakistan's debt obligations or appropriately budget the military to create the independent nation Pakistani's strive for it to be. Instead Pakistan will watch as it is increasingly unable to do anything regionally or globally completely subservient to foreign interests which, a lot of the time, is destabilizing because it can't stop taking loans while our people are forced to live abroad and work in foreign countries many times without due rights or in extreme danger (ex. Christchurch) making Pakistan highly sensitive to anything that would endanger remittances.

If you look at Pakistan's 2019-2020 budget they cite both the initial budgeted and later revised figures for the 2018-2019 financial year. What we see is that the government spent 26% more than they collected in revenues and almost 58% of what was spent went into servicing existing debt and paying off the principal of the loans (the bulk of it went into servicing debt).
Pakistan Budget in Brief 2019-2020

Pakistan now imports 200% more than it exports on dollar terms when just before the '97 re-election of Nawaz Sharif Pakistan was an export surplus nation with relatively balanced trade for almost its entire history.

How is this sustainable?

This isn't going to get any better the way things are going:

View attachment 670287

If the government wants to lift people out of poverty and help them then invest in industry so they can earn money and pay for their kids education and healthcare as well as afford decent housing and access to electricity and clean water. Eventually we'll be in a position where the government could afford universal healthcare and a myriad of other social welfare programs.

What would have been far better compared to healthcare and education spending would have been increased spending on low income housing which is something I've talked about in the past should have a massive impact on the country's economy considering our housing crisis is the worst in the region just shy of Afghanistan.

Your import export figures are old. Pakistan currently maintains a positive current account.

You can not develop industry without skilled workers. Technology will make human development much cheaper. An entire grade 1 to university level education can be put on a tablet, with video lecture, notes and books saved in its memory for a less then $100. These can be given to millions of students. Innovation is need to ensure affordability. You are right...GOP must watch spending......but after pandemic is resolved.

World economy is changing rapidly. Industry is important but so too are services. From employment perspective...services are probably more so. As I stated earlier, the keys to growth are investment/financial policy, technology, and populations growth with human development. Growth will make debt servicing easier.

I should also point out that Pakistan's public and private debt as a percentage of GDP is lower than many many countries (including India's). Other countries have strong internal financial sectors that can sustain this debt. Instead of strengthen our indigenous financial sector, past governments have chose to go abroad for funding. Modernizing and improving Pakistan's financial sector is critical to future growth and development. No way around it.

 

[FuturePAF]

I explained why local industries aren't growing and FDI is literally worthless in comparison to building your own brands.

FDI is not that great hence why so many countries have rules regarding it including restrictions on foreign ownership, obligatory screening and approval procedures, restrictions on foreign nationals managing operations or even working in affiliate companies, etc...?

The foreign manufacturers that setup shop in Pakistan aren't relocating for the purposes of generating exports to earn the country foreign exchange instead their main and many times only goal, as you've already seen with Suzuki, is to manufacture to meet domestic consumption requirements and though its better than importing ultimately you're still losing foreign exchange in the form of royalties, revenue sharing, etc...

In comparison to the OECD average not only is the Phillipines, which is doing significantly better than Pakistan, one of the most FDI restrictive nations on the planet but it's even more restrictive than China which along with nations such as Indonesia, South Korea and Canada are some of the most restrictive to FDI in the organization.

What Pakistan needs is government directed investment into Pakistanin brand development and manufacturing.

Compare China and South Korea, both saw an end to their civil wars only 3 years apart in the 50s but while South Korea built up its own brands like Samsung, Hyundai, LG, etc... without the mineral wealth the Chinese possessed the latter was content with becoming the world's sweatshop.

Now the South Korean GDP per capita is 300% higher than China's and the latter has learned what I'm trying to tell you the hard way only now developing its own brands like NIO (future competitor to Tesla), Huawei (competitor for Samsung and Apple), Baidou (competitor to Google), etc...

Not sure why Khan even said he wanted to "learn from China" unless he doesn't understand what China did to get where it is (ex. no minimum wage laws until 1993, total ban on trade unions that protect workers and negotiates better wages on their behalf, a total disregard for environmental protections, one child policy that f*cked up their demography, etc...).

Furthermore I don't see anyone being able to replicate the China model because that's not the direction business is moving with increasingly localized manufacturing as automation takes over to reduce shipping costs, impact of tariffs on lost revenues, prevent disruptions due to wars and disease, etc...





What I'm trying to say here is that this isn't sustainable and the country is in real danger.

The whole Pakistani economy, as Riaz Haq's post highlighted, is literally surviving on loans and remittances.

Government revenues finance those social welfare programs you guys are promoting but remember those revenues are derived from profits generated by government owned businesses and taxes whether they're property taxes, business and personal income taxes, sales taxes, etc...

Without industrial growth there is NO WAY you can continue to finance these social welfare programs let alone pay off Pakistan's debt obligations or appropriately budget the military to create the independent nation Pakistani's strive for it to be. Instead Pakistan will watch as it is increasingly unable to do anything regionally or globally completely subservient to foreign interests which, a lot of the time, is destabilizing because it can't stop taking loans while our people are forced to live abroad and work in foreign countries many times without due rights or in extreme danger (ex. Christchurch) making Pakistan highly sensitive to anything that would endanger remittances.

If you look at Pakistan's 2019-2020 budget they cite both the initial budgeted and later revised figures for the 2018-2019 financial year. What we see is that the government spent 26% more than they collected in revenues and almost 58% of what was spent went into servicing existing debt and paying off the principal of the loans (the bulk of it went into servicing debt).
Pakistan Budget in Brief 2019-2020

Pakistan now imports 200% more than it exports on dollar terms when just before the '97 re-election of Nawaz Sharif Pakistan was an export surplus nation with relatively balanced trade for almost its entire history.

How is this sustainable?

This isn't going to get any better the way things are going:

View attachment 670287

If the government wants to lift people out of poverty and help them then invest in industry so they can earn money and pay for their kids education and healthcare as well as afford decent housing and access to electricity and clean water. Eventually we'll be in a position where the government could afford universal healthcare and a myriad of other social welfare programs.

What would have been far better compared to healthcare and education spending would have been increased spending on low income housing which is something I've talked about in the past should have a massive impact on the country's economy considering our housing crisis is the worst in the region just shy of Afghanistan.

you raise many valid points; I’d have to take some time to look at the numbers to see how bad the actually trend is.

The most important point you raised, IMHO, is the need to build up brand Pakistan; going up the value added chain and exporting our own products by our own companies and thereby retaining the wealth in the country. I don’t disagree on this point. Which is why in an earlier thread (at the start of this pandemic) I recommended government incentivize private Pakistani (Local or overseas Pakistani) investors (or the government itself) purchasing insolvent or underpriced foreign companies that have key technologies (and patents) And connections we need to reform our export earning industries, as Tata did with Tesley Tea. This didn’t find many supporters, which is why FDI was the next best way to bring in reform, which might get local producers to follow the lead of the foreign investor and modernize.

 

[ziaulislam]

pretty simple. we have purposely destroyed our economy due to election year mismanagement i.e artfical low interests, note pritning creating fiscal disaster situation that puts us into IMF lockd down...the whole process waste 2-3 years of otherwise sustainable growth..

imagine PML N had not done this then ofocurse our growth would have been 4ish % instead of 5% but we wouldnt have wasted two years in stabilization

 

[PakPrinciples]

I'll preface this by saying that the PML-N, like the PPP were, like Musharraf, made some very poor choices when it came to the countries economy.

Your import export figures are old. Pakistan currently maintains a positive current account.

Well the current account is more than just imports and exports while Pakistan's balance of trade has admittedly improved as depicted below we still have a long way to go:

Pakistan's Balance of Trade:

There are some superb export oriented changes that IK and the PTI government have made as cited in the 2019-2020 Economic Survey including:

• Market based exchange rates
• Creation and later extension of PM IK's Export Package for another 3 years.
• Refunds to exporters and industrialists
• Tariff rationalization on inputs
• Export refinancing scheme.
• Imposition of up to 60% regulatory duties on 570 luxury and non-essential imported goods

Pakistan Economic Survey 2019-2020: Trade and Payments

However also affecting our Current Account are a host of things that have happened over the last few years including:

1. Pakistan's rupee having devalued by almost 60% since late 2017 largely due to the incompetence of the PPP and PML-N's terrible fiscal and economic policies. This has impacted Pakistani buying power and was necessary to clamp down on burgeoning trade deficits.
2. Pakistan has increasingly shut down informal money transfer schemes like Hawala networks across the country which has redirected more money via Pakistani financial institutions that is counted towards our Current Account.
3. We've seen large financial support from nations and financial institutions like Saudi Arabia (ex. $6 Billion USD pledged in 2018 during the Saudi Economic Conference), UAE, China, IMF, WB, etc... much like what happened before under the PPP and Zardari had an impact on the Current Account but didn't last long under the PML-N:
   • 
4. Pakistan's suspension of imports from India, which we had a trade deficit with, following their illegal revocation of Article 370. Though admittedly I'll need to look more into this.
5. Covid19
   • Global oil prices, which alongside natural gas imports constitute our largest commodity imports, have dropped by about 30% compared to pre-covid19 levels.
   • China shut down a lot of its manufacturing to control the spread of Covid19, which itself follows other major shut downs since 2017 related to pollution, reducing exports into countries like Pakistan through major disruptions in their supply chain.
   • Global economic slowdowns including inside Pakistan and the economic impact it had on our country not only resulted in people having less disposable income to purchase imported goods but a conscious effort by the public to "tighten their belt" during lean times.

My view is that we shouldn't sit around and squander time instead there needs to be a serious push towards industrialization but that's going to require every rupee we have because you can't keep devaluing the rupee nor can you depend on oil prices staying low forever let alone Chinese factories being shut down for good.

World economy is changing rapidly. Industry is important but so too are services.

There are primary, secondary and tertiary sector economies which effectively build upon and feed into one another.

The service sector jobs you're referring to is normally part of the tertiery sector and generally come from experience generated from actual application of technology, skills and techniques within the domestic primary and secondary sector of the economy.

What you're proposing is more like taking 1900 US where 40% of the population worked in the agricultural sector and just skipping 100 years forward overnight.
https://www.nber.org/chapters/c1567.pdf

I don't think that's possible nor would it be a responsible development strategy.

Our focus should initially be on the primary and secondary sector economies including the development of our own mining industry so we don't have foreigners attempting to exploit those resources the way Tethyan Copper attempted to in Reqo Diq.

Since almost 40% of Pakistan's citizens are employed in the agricultural sector compared to the global average in 2018 of about 28% to have the biggest impact on our peoples lives and alleviating poverty you'd want to focus on that sector first. The agricultural sector is of particular importance considering Pakistan's population is set to grow another 50% by 2050.

My view is that Pakistan has enough educated men and women necessary for the positions that will be available following a mass industrialization drive instead what we really need is money into our industries to help everyone else.

Furthermore, as you improve the economic standing of your own people they can then afford to pay for their own healthcare services and education for their children who aren't required to work to support the family and you'll see each successive generation better off than the last.

So, to provide an example, instead of focusing on educating each and every individual that works on farms to become PhD's in agricultural sciences a better approach would be for Pakistan to:

1. Form cooperatives headed by PhD's that would give famers active year round support and organize them across the country to produce goods most suited for their climate and soil conditions
   • Get farmers advanced agricultural equipment to share among themselves which they individually could never afford to totally industrialize the sector
   • A large cooperative can negotiate the purchase of their fertilizers and other necessary goods in bulk to could get better rates.
2. Switch over to center pivot irrigation to reduce agricultural water requirements and build more dams not just to produce electricity but also store water for dry seasons.
3. Expand and build new water sanitation facilities and sewage systems to get water not just to every home but also every farm
4. As farmers begin to produce more per acre, based on my previous readings we were producing about half what the US does for similar crops on a per acre basis, those extra profits can also be used to start paying into an insurance program that would assist farmers who suffer catastrophic crop failures so they aren't made destitute.

Another area of focus should be affordable housing considering Pakistan has the worst housing crisis in the region just short of Afghanistan:

That is a HUGE economic opportunity we have yet to exploit and is one reason why we also have the lowest house loan facility in Asia though our insane interest rates resulting from a massive trade deficit is the real culprit:

Eliminating our housing crisis will result in a dramatic increase in our GDP but also result in the expansion of a host of related industries which would be producing on much larger markets of scale making them far more competitive in the export market.

Furthermore, just imagine the growth in Pakistan's financial product/services sector.

However, once again, a lot of this isn't possible without the appropriate funding for the FBR and collection of the necessary tax revenues to drive our industrialization policy and we honestly can't afford to spend money elsewhere for this to succeed as quickly as we need it to occur.

I recommended government incentivize private Pakistani (Local or overseas Pakistani) investors (or the government itself) purchasing insolvent or underpriced foreign companies that have key technologies (and patents) And connections we need to reform our export earning industries

Interesting you mentioned this because I'm pretty sure I stated this like 10 years back on PDF as well.

There were a host of Japanese businesses that have amazing technology and expertise but whose brands have small market share or larger brands but who have suffered in light of a rapidly declining domestic population base and increased global competition.

I would say the same for some Chinese brands which could be available for purchase and move to Pakistan then rebrand them.

It's similar to my calls to cooperate with Ukraine years back particularly the aerospace sector to assist in the development of ICBM's but other technologies (i.e. forget Russia) but looks like Turkey beat us to it though I've also been hopeful of our increased cooperation with Turkey within defense related equipment development and even other segments of our industry.

 

[FuturePAF]

I'll preface this by saying that the PML-N, like the PPP were, like Musharraf, made some very poor choices when it came to the countries economy.



Well the current account is more than just imports and exports while Pakistan's balance of trade has admittedly improved as depicted below we still have a long way to go:

Pakistan's Balance of Trade:

There are some superb export oriented changes that IK and the PTI government have made as cited in the 2019-2020 Economic Survey including:

• Market based exchange rates
• Creation and later extension of PM IK's Export Package for another 3 years.
• Refunds to exporters and industrialists
• Tariff rationalization on inputs
• Export refinancing scheme.
• Imposition of up to 60% regulatory duties on 570 luxury and non-essential imported goods

Pakistan Economic Survey 2019-2020: Trade and Payments

However also affecting our Current Account are a host of things that have happened over the last few years including:

1. Pakistan's rupee having devalued by almost 60% since late 2017 largely due to the incompetence of the PPP and PML-N's terrible fiscal and economic policies. This has impacted Pakistani buying power and was necessary to clamp down on burgeoning trade deficits.
2. Pakistan has increasingly shut down informal money transfer schemes like Hawala networks across the country which has redirected more money via Pakistani financial institutions that is counted towards our Current Account.
3. We've seen large financial support from nations and financial institutions like Saudi Arabia (ex. $6 Billion USD pledged in 2018 during the Saudi Economic Conference), UAE, China, IMF, WB, etc... much like what happened before under the PPP and Zardari had an impact on the Current Account but didn't last long under the PML-N:
   • 
4. Pakistan's suspension of imports from India, which we had a trade deficit with, following their illegal revocation of Article 370. Though admittedly I'll need to look more into this.
5. Covid19
   • Global oil prices, which alongside natural gas imports constitute our largest commodity imports, have dropped by about 30% compared to pre-covid19 levels.
   • China shut down a lot of its manufacturing to control the spread of Covid19, which itself follows other major shut downs since 2017 related to pollution, reducing exports into countries like Pakistan through major disruptions in their supply chain.
   • Global economic slowdowns including inside Pakistan and the economic impact it had on our country not only resulted in people having less disposable income to purchase imported goods but a conscious effort by the public to "tighten their belt" during lean times.

My view is that we shouldn't sit around and squander time instead there needs to be a serious push towards industrialization but that's going to require every rupee we have because you can't keep devaluing the rupee nor can you depend on oil prices staying low forever let alone Chinese factories being shut down for good.



There are primary, secondary and tertiary sector economies which effectively build upon and feed into one another.

The service sector jobs you're referring to is normally part of the tertiery sector and generally come from experience generated from actual application of technology, skills and techniques within the domestic primary and secondary sector of the economy.

What you're proposing is more like taking 1900 US where 40% of the population worked in the agricultural sector and just skipping 100 years forward overnight.
https://www.nber.org/chapters/c1567.pdf

I don't think that's possible nor would it be a responsible development strategy.

Our focus should initially be on the primary and secondary sector economies including the development of our own mining industry so we don't have foreigners attempting to exploit those resources the way Tethyan Copper attempted to in Reqo Diq.

Since almost 40% of Pakistan's citizens are employed in the agricultural sector compared to the global average in 2018 of about 28% to have the biggest impact on our peoples lives and alleviating poverty you'd want to focus on that sector first. The agricultural sector is of particular importance considering Pakistan's population is set to grow another 50% by 2050.

My view is that Pakistan has enough educated men and women necessary for the positions that will be available following a mass industrialization drive instead what we really need is money into our industries to help everyone else.

Furthermore, as you improve the economic standing of your own people they can then afford to pay for their own healthcare services and education for their children who aren't required to work to support the family and you'll see each successive generation better off than the last.

So, to provide an example, instead of focusing on educating each and every individual that works on farms to become PhD's in agricultural sciences a better approach would be for Pakistan to:

1. Form cooperatives headed by PhD's that would give famers active year round support and organize them across the country to produce goods most suited for their climate and soil conditions
   • Get farmers advanced agricultural equipment to share among themselves which they individually could never afford to totally industrialize the sector
   • A large cooperative can negotiate the purchase of their fertilizers and other necessary goods in bulk to could get better rates.
2. Switch over to center pivot irrigation to reduce agricultural water requirements and build more dams not just to produce electricity but also store water for dry seasons.
3. Expand and build new water sanitation facilities and sewage systems to get water not just to every home but also every farm
4. As farmers begin to produce more per acre, based on my previous readings we were producing about half what the US does for similar crops on a per acre basis, those extra profits can also be used to start paying into an insurance program that would assist farmers who suffer catastrophic crop failures so they aren't made destitute.

Another area of focus should be affordable housing considering Pakistan has the worst housing crisis in the region just short of Afghanistan:

View attachment 671718

That is a HUGE economic opportunity we have yet to exploit and explains why we also have the lowest house loan facility in Asia:

View attachment 671719

Eliminating our housing crisis will result in a dramatic increase in our GDP but also result in the expansion of a host of related industries which would be producing on much larger markets of scale making them far more competitive in the export market.

Furthermore, just imagine the growth in Pakistan's financial product/services sector.

However, once again, a lot of this isn't possible without the appropriate funding for the FBR and collection of the necessary tax revenues to drive our industrialization policy and we honestly can't afford to spend money elsewhere for this to succeed as quickly as we need it to occur.



Interesting you mentioned this because I'm pretty sure I stated this like 10 years back on PDF as well.

There were a host of Japanese businesses that have amazing technology and expertise but whose brands have small market share or larger brands but who have suffered in light of a rapidly declining domestic population base and increased global competition.

I would say the same for some Chinese brands which could be available for purchase and move to Pakistan then rebrand them.

It's similar to my calls to cooperate with Ukraine years back particularly the aerospace sector to assist in the development of ICBM's but other technologies (i.e. forget Russia) but looks like Turkey beat us to it though I've also been hopeful of our increased cooperation with Turkey within defense related equipment development and even other segments of our industry.

rebranding would negate half the benefit. We need a company that already has name appeal in a foreign market, along with the technologies, so that a customer base is built into the acquisition.