Lahore: Amidst distinguished economists, academicians and policymakers from both the national and international platform, the Lahore School of Economics hosted its Eighth Annual Conference on Management of the Pakistan Economy at its Main Burki Campus.
The theme of this Conference was “Towards Accelerated Economic Growth: Its Need and Feasibility”, with the first day of the Conference being devoted to discussions on the challenges and constraints faced in accelerating economic growth in Pakistan.
Dr Shahid Amjad Chaudhry, Rector, Lahore School of Economics, inaugurated the Conference by welcoming all the speakers and guests.
The opening session of the Conference focused on A Heterodox Strategy for Stabilisation and Economic Growth. The first speaker, Dr Irfan ul Haque, Special Advisor, Financing for Development, South Centre, Geneva, remarked that a strategy for accelerated growth for Pakistan is both necessary and feasible as Pakistan’s macroeconomic conditions are broadly similar to some of its more rapidly growing neighbours. In light of this, Dr Irfan proposed a Heterodox Scenario, which showed that macroeconomic adjustments can be phased over the next few years and will be easier to make if the economy were to grow more rapidly. He, however, stressed that for accelerated growth to materialise, as a minimum, determined steps are needed to overcome the energy crisis, sharply raise the investment rate (particularly, private investment), and strengthen Pakistan’s competitiveness in the world market.
Carrying forward the discussion on Pakistan’s growth strategy, Dr S. Akbar Zaidi, Visiting Professor, School of International Public Affairs, Columbia University, presented a critical analysis of the Planning Commission’s Framework for Economic Growth launched a year ago(May 2011). According to him, the Framework avoids tackling core issues of taxation, distribution and equity, and privileges the market and free enterprise over the role of the state. It undermines and dismisses the significant role and contribution of government and the state in promoting growth in Pakistan. Therefore, Dr Zaidi termed this document of the Planning Commission as a “technicist script which has little value to the messy world of real politics”.
The second session of the day discussed the Economic Growth-Employment-Poverty Nexus. Dr Ashwani Seth, Professor, Institute of Social Studies, Erasmus University Rotterdam presented some agnostic reflections on the “new notion of inclusive growth”. Dr. Rashid Amjad, Vice Chancellor, Pakistan Institute of Development Economics (PIDE) presented an overview of the macroeconomic performance of Pakistan from 1980-2011 stating that Pakistan is currently experiencing stagflation: high inflation accompanied by high unemployment and poverty. He stated that even today there are in Pakistan between 20 to 30 million people living in absolute poverty (Rs.55 a day) and around 3.5 million unemployed, implying that poverty and employment issues need to be urgently addressed. Dr Amjad further commented that the overwhelming expected negative impact of low growth, high double digit inflation, poverty and crippling energy shortages on the labour market were to some extent cushioned by very large increase in remittances by the Pakistan diaspora, improved terms of trade for agriculture and possibly Benazir Income Support Program (BISP) and other support programmes. He believed that there is a strong need to analyze labour market and poverty issues taking into account the dynamics of and structural changes in the Pakistan economy with an ‘open’ mind rather than pre-conceived fixed position.
Dr Moazzam Mahmood, Director, Economic and Labour Market Analysis Department, International Labour Office, took the discussion further by elaborating upon global growth, employment, and macro policy options in 2012, especially for Pakistan. He believed that in light of the economic crisis faced, Pakistan should increase investment especially public investment. He stated that private savings in Pakistan are greater than private investments resulting in capital outflows from the economy. Therefore, there is a need to provide political security for this capital so that it is channelled towards propelling economic growth.
The next session of the day was devoted to discussions on International Competitiveness for Sustainable Growth. Sikander Rahim, Former Principal Economist, World Bank pointed out that there has been a fair amount of industrial development in Pakistan but it has given rise to disappointingly little increase of income. Mr. Rahim proposed that acquiring technology through collaboration and subcontracting is a plausible opportunity for Pakistan. This is because subcontracting manufactured components for foreign firms has the advantage that it is difficult to discriminate against the products in the way that textiles and ethanol have been discriminated against because they are parts of other products. In the long run its advantage is that stable subcontracting relations can expand production of more complex articles for which the Pakistani subcontractors get more value added and joint ventures with investment by the foreign partners.
Analysing factors that hinder export competitiveness of manufacturers in Pakistan Dr.Ejaz Ghani, Chief of Research and Dean, Faculty of Economics, Pakistan Institute of Development Economics, identified that at the macro level, GDP growth, level of industrialization, real effective exchange rate and physical infrastructure are the key drivers of export performance. He further stated that quality certification and adherence to health, labor, and environment standards is still a problem for exporters. A number of institutional rigidities, market imperfection, weaknesses in physical infrastructure, and lack of general business environment are features commonly perceived by firms as hurdles in export competitiveness.
Dr Azam Chaudhry,Dean, Faculty of Economics, Lahore School of Economics furthered the discussion by looking at local and international factors that affect firm entry and survival in Pakistan. His analysis showed that more export sector firms will enter in highly concentrated industries, firm entry and survival increases significantly as a result of a depreciation in the trade weighted real exchange rate, and potential new firms tend to be larger in districts with more medium sized firms. Dr. Chaudhry asserted that even though there is an obvious temptation for policy makers to promote industrial development in less developed regions, higher income areas suit new entrants and existing firms better.
The following speaker, Dr Matthew McCartney, Lecturer, Wolfson College, University of Oxford, stated that competitiveness has become a mantra and organizing framework for much of government policymaking in Pakistan and beyond. However, despite its intuitive appeal, Dr McCartney asserted that competitiveness is a dangerous, distorting and dead end obsession. Concluding the session, Dr Theresa Chaudhry, Associate Professor, Lahore School of Economics, presented an overview of the geography of misallocation in Punjab, stating that firms’ productivity levels are significantly different from average productivity levels.