United Nations Development Programme launched by country director Marc-Andre Franche in Islamabad highlighted four major global trends. First, developing economies particularly India, China and Brazil have transformed themselves as emerging economies that accounts for their growing geopolitical influence; and, the South, as opposed to the North is driving global economic growth. The report forecasts that by 2020 China, India and Brazil's combined output in 1990 purchasing power parity dollars will surpass United States, Germany, the United Kingdom, France Italy and Canada's combined output.
In this context the current membership of international bodies including the United Nations Security Council and the citizenship of heads of multilaterals like the World Bank and the Asian Development Bank, etc, need a revisit. Secondly the dynamism of the emerging economies is fuelled by trade and foreign direct investment and technology partnerships within the South or, in other words, the South is no longer clamouring for technology transfer as a condition to achieve development with a doubling of its share of world merchandise trade - from 25 percent to 47 percent. Thirdly the middle class in the South is growing rapidly and there are demands for greater consumer items which would expand the fiscal space and enable the state to invest more on education. And finally a negative namely that income inequality remains an issue and cancels some of the progress achieved in curbing health and education inequality.
There is no doubt that Pakistan, firmly in the South, remains on the outside of these major developments other than in witnessing rising poverty levels in recent years. The reasons for this are varied including the failure to support economic policies that would have transformed the country from a developing to an emerging economy. Our politicians are at present in the election mode and their manifestoes focused on eliminating corruption as a major strategy to plug leakages which, so is the argument, would improve governance across several critical sectors particularly the energy sector as well as reduce the burgeoning budget deficits; however ignored is the need to implement reforms on an urgent basis if we are to transform ourselves into an emerging economy.
It is critical for Pakistan to note that the three emerging economies are no longer eligible for concessional credit from international donors - credit whose amount for each country is linked to performance. Pakistan has been subjected to decreasing amounts of concessional credit due to poor performance especially with respect to governance. And growth in trade of the emerging economies is not through getting a special status that is allowed only to the Heavily Indebted Poor Countries but through transforming their industrial sectors and thereby enabling them to effectively compete globally. In Pakistan the mantra of 'we want trade and not aid' remains with a focus on getting special exemptions from tariffs which are extended at a price which in recent years has implied remaining engaged in the war on terror with its consequent human as well as financial costs.
Pakistan needs to undertake massive reforms in the tax structure and ensure that taxes are not only equitable (with all paying the same tax on their incomes irrespective of the source of their income), fair (ending the issuance of statutory regulatory orders which have been and continue to be abused) and non-anomalous (with no special tax privileges extended to any entity whatever its credentials). There is also a need to encourage market based policies that would allow some of our industrial units to die while others that are more competitive would not only be able to effectively capture the domestic market but also compete internationally.
But before such policy changes are identified and implemented there is a need to implement power sector reforms, end untargeted subsidies, withdraw patronage towards all those state and private entities that do not clear their monthly bills, meticulously adhere to public procurement rules and regulations and last but not least begin civil service reforms that would take away the incentive to bow to political pressure or indeed to accept bribes. The scale of reforms required is massive and the sooner they start the quicker will the country be able to approach the label of an emerging economy.
Saturday, March 30, 2013
Pakistan: Human Development Report 2013
United Nations Development Programme launched by country director Marc-Andre Franche in Islamabad highlighted four major global trends. First, developing economies particularly India, China and Brazil have transformed themselves as emerging economies that accounts for their growing geopolitical influence; and, the South, as opposed to the North is driving global economic growth. The report forecasts that by 2020 China, India and Brazil's combined output in 1990 purchasing power parity dollars will surpass United States, Germany, the United Kingdom, France Italy and Canada's combined output.
In this context the current membership of international bodies including the United Nations Security Council and the citizenship of heads of multilaterals like the World Bank and the Asian Development Bank, etc, need a revisit. Secondly the dynamism of the emerging economies is fuelled by trade and foreign direct investment and technology partnerships within the South or, in other words, the South is no longer clamouring for technology transfer as a condition to achieve development with a doubling of its share of world merchandise trade - from 25 percent to 47 percent. Thirdly the middle class in the South is growing rapidly and there are demands for greater consumer items which would expand the fiscal space and enable the state to invest more on education. And finally a negative namely that income inequality remains an issue and cancels some of the progress achieved in curbing health and education inequality.
There is no doubt that Pakistan, firmly in the South, remains on the outside of these major developments other than in witnessing rising poverty levels in recent years. The reasons for this are varied including the failure to support economic policies that would have transformed the country from a developing to an emerging economy. Our politicians are at present in the election mode and their manifestoes focused on eliminating corruption as a major strategy to plug leakages which, so is the argument, would improve governance across several critical sectors particularly the energy sector as well as reduce the burgeoning budget deficits; however ignored is the need to implement reforms on an urgent basis if we are to transform ourselves into an emerging economy.
It is critical for Pakistan to note that the three emerging economies are no longer eligible for concessional credit from international donors - credit whose amount for each country is linked to performance. Pakistan has been subjected to decreasing amounts of concessional credit due to poor performance especially with respect to governance. And growth in trade of the emerging economies is not through getting a special status that is allowed only to the Heavily Indebted Poor Countries but through transforming their industrial sectors and thereby enabling them to effectively compete globally. In Pakistan the mantra of 'we want trade and not aid' remains with a focus on getting special exemptions from tariffs which are extended at a price which in recent years has implied remaining engaged in the war on terror with its consequent human as well as financial costs.
Pakistan needs to undertake massive reforms in the tax structure and ensure that taxes are not only equitable (with all paying the same tax on their incomes irrespective of the source of their income), fair (ending the issuance of statutory regulatory orders which have been and continue to be abused) and non-anomalous (with no special tax privileges extended to any entity whatever its credentials). There is also a need to encourage market based policies that would allow some of our industrial units to die while others that are more competitive would not only be able to effectively capture the domestic market but also compete internationally.
But before such policy changes are identified and implemented there is a need to implement power sector reforms, end untargeted subsidies, withdraw patronage towards all those state and private entities that do not clear their monthly bills, meticulously adhere to public procurement rules and regulations and last but not least begin civil service reforms that would take away the incentive to bow to political pressure or indeed to accept bribes. The scale of reforms required is massive and the sooner they start the quicker will the country be able to approach the label of an emerging economy.
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