New Economic Growth and Reform Strategy

Economic Growth & Reform Strategy

Dr. Vaqar AhmedPlanning Commission of Pakistan

1

2

• Growth Experience of Pakistan

• What is the Current Growth Strategy?

• Why Move Towards a New Growth Strategy?

• What is the Proposed Growth Strategy?

• Themes in Growth Strategy

• Development Planning – Post 18th Amendment

Outline

3

Consensus-building

Governance plan

Security plan

Socio-economic plan

Outward orientation plan

Development Approach

4

Identity Language Social fabric Common treats/goals

Consensus-building

5

Accountability

Civil Service ReformsRegulation

Governance Plan

6

Security for assets and

profits

Internal and external threats

Security Plan

7

Revival of Growth Productivity Reforms Poverty

Intervention

Socio-economic Plan

8

Export Competitiveness

Transit to China and India

Logistics to India

Link CIS to Asia

Outward Orientation PlanPakistan as a Global Player

9

-20-15-10

-505

1015

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

Bangladesh

-10

-5

0

5

10

15

20

25

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

India

02468

1012

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

Pakistan

-4

-2

0

2

4

6

8

10

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

Sri Lanka

Growth Experiences Across South Asia

10

Investment & Savings Performance (1979 – 2010)

Country GDP Growth %

Fixed Investment to

GDP (%)

Domestic Savings to GDP (%)

ICOR

China 9.1 32.2 37.9 3.5

India 5.3 23.9 22.0 4.5

Malaysia 6.4 27.4 35.0 4.3

Indonesia 6.0 25.9 29.2 4.3

Thailand 5.9 29.5 28.8 5.0

Pakistan 4.9 16.6 11.9 3.4

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Growth & External Resource Inflow

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

-15

-10

-5

0

5

10

15

GDP Growth Current Account Balance to GDP

Due to low domestic savings, continued reliance on foreign savings – adding to growth volatility

12

Structural Transformation 1970 - 2010

0

2

4

6

8

10

1970s 1980s 1990s 2000-10

Sectoral Growth Rates (%)

Agriculture Manufacturing Services

0

10

20

30

40

50

60

1970 2010

Sectoral Shares in GDP (%)

Agriculture Industry Service Sector

Agriculture growth rate declining. Decade average slightly above population growth rate. Issues for food security, unemployment and poverty.

13

Exports, Imports and Current Account 1980s – 2000s

0

5

10

15

20

Exports % of GDP

Imports % of GDP

Current Account

Deficit / GDP

1980s

1990s

2000s

Food Group, 17

Textile Manufactures, 53

Petroleum Group, 5

Other Manufactures, 19

Other Items, 6

PercentageShares in Total Exports (2010)

Since 1990s openness decreased in terms of both exports and imports. Export to GDP ratio low. Highly concentrated, lacking diversification and prone to ToT shocks.

14

Infrastructure – Hardware of Economic Growth

Global Competitiveness Index (out of 139 countries)

Quality of Electricity

Supply

ICT Usage Quality of Roads

Quality of Railroad

Quality of Port

Infrastructure

Quality of Air

Transport

Malaysia 26 40 50 21 20 19 29

Thailand 38 42 79 36 57 43 28

China 27 52 78 53 27 67 79Indonesia 44 97 103 84 56 96 69

Vietnam 59 98 70 117 59 97 88

Philippines 85 101 106 114 97 131 112

India 51 110 118 90 23 83 71

Pakistan 123 128 109 72 55 73 81

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Management & Organization – Software of Growth

Property Rights

Corruption Education &

Training

Goods Market

Efficiency

Labour Market

Efficiency

Financial Market

Technological Readiness

Malaysia 37 44 49 27 35 7 40

Thailand 87 71 59 41 24 51 68

China 43 47 60 43 38 57 78

Indonesia 74 65 66 49 84 62 91

Vietnam 88 61 93 60 30 65 65

Philippines 102 135 73 97 111 75 95

India 61 80 85 71 92 17 86

Pakistan 99 108 123 91 131 73 109

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Losses of 22 State owned enterprises now over Rs. 300 billion annually

Untargeted subsidies still in place

Due to low growth, tax revenue and domestic savings expected to be low.

Pressures on the Economy

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• Growth policy by default• Public Sector Investment• Sector Picking and Regulated Markets

• Result• Sporadic growth usually created by external resources• Preoccupation with crises and stabilization

• Lack of structural reform

What is the Current Growth Strategy?

No Long Term Thinking on Growth Strategy

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Why Move Towards a New Growth Strategy?

• Expected long run labor force growth 3.6 % annually• Absorbing incremental labor requires GDP growth in excess of 8 %

annually

2001 2002 2003 2004 2005 2006 2007 2008 20090

1

2

3

4

5

6

-2

0

2

4

6

8

10

12

14

Une

mpl

oyed

Lab

our F

orce

(mil-

lions

)

Real

Per

Cap

ita In

com

e G

row

th

(%)

Falling Per Capita

Incomes

Rising Unemployment

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New Economic Growth Strategy

Economic Discipline

Responsible Fiscal & Monetary Policies

Restructuring of PSEs

Rationalization of PSDP

Productivity

Governance & Institutions

Market Reforms

Urban Management

Youth & Community

New Economic Growth Strategy

20

Potential Governance Agenda

21

Civil Service Reform

Structure and Incentives to Attract Talent

Monetized Salaries, Merit based Promotion, and Easy Entry & Exit

Markets & Entrepreneurship

22

Modernize Laws & Regulations for Markets

Agriculture Market Committees

Investment in New Sectors

Bankruptcy Law (legislation drafted)

Cities as Hubs of Commerce

23

Modernize Laws & Regulations for Cities

Reform Zoning & Building Regulations

Reforms for Connectivity

Revisiting ‘PPP’

Adding ‘PPP Option analysis’ in

PC-1

Reviewing ‘procurement law & processes’

Bringing land acquisition laws in-line with

international norms

Aviation

Increasing profitability through 6th freedom rights

Reducing CAA’s role to regulating

Auctioning of routes against preferred allocation to PIA

Youth & Community Engagement

25

Youth Engagement

Empowerment through Voice and Citizenship

Service Learning

Planning with Line Ministries and Provinces

26

Strategic Level Planning

Review of Key Socio-Economic Challenges

Developing Vision & Mission

Helping Provinces and Line Ministries Formulate Execution Plan

27

New Role of Government

Policy

Regulation

Production & Management

Financing of Assets

Ownership of Assets

Markets Government

Thank Youwww.pc.gov.pk

[email protected]

Thank You