ASSESSING PAKISTAN’S DEVELOPMENT Presented by Salman Azam Joiya Reg# PhD Economics

Introduction A snapshot comparison of 1947 with 2014 does not certainly confirm the assertion that Pakistan is very much better off in the second decade of the 21 st century than it was in Importantly, it matters also when one is comparing the past with a particular present. For example, many in Pakistan during the false boom period felt that Pakistan's economy had turned around, permanently, and that it was destined for a trajectory similar to India’s or even China’s, laughable though it now sounds. In many cases, one would argue that many countries are far better off over the last fifty or sixty years, countries such as Malaysia, South Korea, China, India and even Bangladesh, all have evolved stable and prosperous economies, with most countries in the world having evolved as different forms of democracies.

Cont’d Can one make similar statements about Pakistan which has had a roller-coaster economy, interspersed with extensive and oppressive military dictatorships and praetorian democracy? Even after the first democratic handover between two elected governments in 2013, one is hesitant to predict certainty in Pakistan’s democratic prospects at a time when the public discourse still revolves around the question of whether Pakistan is a failed state or a failing one. The only suitable manner in which a country can be evaluated is to examine its own particular history, and to look at how certain features have evolved through certain processes and the direction in which these developments have taken place.

Structural change Pakistan today is less than half of the country it was in The contribution made by East Pakistan to Pakistan’s society and economy was huge. Pakistan is basically an agricultural country is no longer true. The services sector has replaced agriculture as the dominant sector of the economy, contributing almost half of GDP. Process and extent of Urbanization In 1951 only 17% of West Pakistan lived in areas designated as Urban; today estimate suggest that above 40* live in cities and towns. Emergence and consolidation of middle class The nature of exports from Pakistan has also changed dramatically. Feudalism in Pakistan died a very long time ago.

Cont’d Population (millions) Contribution to GDP by sector(%) 1949/502002/32012/13 Agriculture Manufacturing Others Labor force by sector (%) 1950/ /13 Agriculture Manufacturing Others

1950/ /13 GNP per capita(US$) PPP real GDP per capita(US$) Composition of Exports(%) 1951/22002/32012/13 Primary commodities Semi-manufactures1416 Manufactures7569 Primary schools(Numbers) , Literacy (%) Female Literacy(%) Life Expectancy(years) Infant mortality rate

Decades and Epochs The first eleven years, between 1947 and 1958, are the years when the country and economy were trying to settle down, but to no avail. In the decade of development under Ayub Khan, this period was followed by what many still call the golden era of economic development. Post-1971 Pakistan was a new country in every respect compared to the one that had existed between 1947 and The third brief, albeit highly significant era in Pakistan’s history was the five-and-a-half year period of Zulfiqar Ali Bhutto.

Laying the Foundations: – Predominantly agrarian, undeveloped and newly independent nation – Little industry, few services and no infrastructure – Adverse international conditions and precarious domestic situation – Attempts of bureaucracy to keep Pakistan on its feet – Lack of capital – Trade surplus

The Decade of Development: Achievements – Considerable economic growth and development – Significant leaps were made in industrial and agriculture production – Model Capitalist Economy – High growth rate in manufacturing sector – Increase in exports – Progress in agriculture sector

Cont’d Policy Failures – Increased disparities in incomes – Concentration of economic prosperity – Social sectors were neglected – Little or no increase in real wages – Trade was highly controlled and closed – Distortion of local markets b/c of overvaluation of exchange rate

The Bad Luck Years: Achievements – Foundations for future growth and development – Basic industries were setup – Base for a capital goods industry – Middle East boom – Illiberal economic policies – Foreign exchange earnings doubled because of devaluation

Cont’d Failures – Events beyond control affected economic program of this era – Downward trend in growth – Nationalization – Cotton crops failure and floods affected Pakistan’s exports – Crisis in balance of payments – Devaluation of Pakistani rupee

The Second Military Government: Achievements – Liberal economic policies – Higher industrial growth – Second economic revolution because of remittances from the Middle East and aid from abroad – Emergence of middle class

Cont’d Policy Failures – Martial rule inflicted deep rooted damage to Pakistani society – Drugs and arms culture in Pakistan – Confusion of policies – Underutilization of resources (foreign aid and remittances)

Neo liberalism, Structural Adjustment and Praetorian Politics: Achievements – Return of democracy – Era of structural adjustment – Economic liberalization and stabilization – Privatization – Reduction in tariff rates to increase exports

Cont’d Policy Failures – Macro economic crisis – High taxation – Low spending in social sectors – Trade reforms resulted in deindustrialization – Continuous devaluation in the Pakistani rupee – Increased in the administrated prices of utilities – High inflation rate – Unemployment – Privatization without proper policy – Loss of sovereignty for the Pakistani state and its people

Life style Liberalism, dictatorship, War and Subjugation Achievements – Foreign direct Investment – Economic boom – Real estate expansion to top floor – Better rule than other military regimes

Cont’d Policy Failures – Liberalism – Caught in war against terrorism – Economy boomed under false cocktail of aid from US, IMF and other global support. – Political elite allowed IMF to run economic policy

Another Demographic Transition? 2007 onwards Achievements – First free and fail elections since 1970 – First democratically elected civilian government in four decades – Rise of free media – Democracy became an audible slogan – Reduction in tariff rates to increase exports

Cont’d Policy Failures – Emergency imposed along with Lal Masjid attack and fall of Musharraf – Assassination of Ms Bhutto – Weak demographic transition – Failure of demographic system to impose its footprints – International pressure because of Osama Bin Laden Assassination – Democrats didn’t know how to consolidate democracy and economy

The Balance Sheet So far we have discussed the idea of complementarities and have seen how such externalities may precipitate a coordination failure. The case of several sectors simultaneously functioning at a suboptimal level requires a policy that assists the economy to move from a suboptimal outcome to one that is more efficient. All of this analysis is based on the presumption that, somehow, history pins down the equilibrium, and makes it difficult for firms, individuals, or sectors to free themselves in a coordinated way from the low-level equilibrium trap.

Conclusion Comparisons with other countries to ‘deduce what could have been done’ or how to go about development, often ignore elements of specificity and conceptuality on the one hand and the chance and randomness on the other. Yet there are generalities as well. All nations belong to, and are part of, the global economy, and increasingly so. They cannot avoid the influences- both negative and positive- of this integration. Their destinies are often closely linked with those of others, and by being part of the world order, they have the ability to learn much more from each other and a greater place.