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Infographics of Growth Strategy of Pakistan

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					                                               Growth Strategy of Pakistan, 2011
                                                                                                        Growth strategy aims to make growth more inclusive and
   Decades long struggle with macroeconomic
   stabilization arising from unsustainable
                                                                                                                speed up the movement out of poverty
   fiscal policies                                                                 Exports, Imports and Current Account
                                                                                               1980s-2000s                                                      In 2010 - 110 million people in working age group
   Pressure of demography                                                                                                                                       By 2050 - 236 million people in working age group
                                                                              20
                                                                              15
   Heightened expectations of the population for a                            10
   better life from a democratic government                                    5                                                                                                   Targeting Growth
                                                                               0

   Battering from external events, including                                             Exports             Imports            Current Account
                                                                                        (%) of GDP          (%) of GDP            Deficit/GDP
   earthquakes, floods and a continuing
   longstanding low intensity conflict
                                                                                      Sectoral Shares in GDP (%)
                                                                              60
   Legacy of economic distortions
                                                                              50                                                    Agriculture                                                      Deep and sustained reforms in
                                                                                                                                                            Revival of the economy to its
                                                                              40                                                                                                                       areas such as public sector
                                                                                                                                                          short-term potential annual GDP
   Low and declining productivity                                                                                                   Industry                                                        management, competitive markets
                                                                              30                                                                           growth rate of about 5-6% and
                                                                                                                                                                                                    development, urban management
                                                                              20                                                                           long term growth rate of 7-8%
                                                                                                                                    Service                                                         and connecting people and places
                                                                              10
   Large loss-making public sector that impedes
                                                                              0
   market development
                                                                                          1970                 2010

                                                                                                                                                                                       Key determinants of growth are
                                               Thrust of the Growth Strategy
 The growth strategy seeks to increase return on investment through measures to improve investment climate,
                                                                                                                                                                                         economic governance and
              to reduce cost of doing business and to dissolve impediments to entrepreneurship                                                                                                 human capital


Constraints to Economic Growth of Pakistan                                                                                                           GDP Growth (%)                                      Key Points




                                                                                                                                                                                                                                       Prepared and Presented by Madiha Younus
                                                                                                                                                  1971-2009 (Annual Avg.)                   • Focus is on fresh approach of
                                                                                                                                                                               China          “Software” of growth
                     Inadequate Market Development                                                                                                                                          • Politicized PSDP projects selection,
Inadequate market                                                                                                                                         4.9                  India          requiring rationalization of PSDP
   development                                                                                                                                                         9.1                  • Gross under utilization of existing
                       Lack of competition
                                               Lack of Efficient Public Sector Management                                                                                      Malaysia
                                                                                                                                                                                              infrastructure
                                                                                                                                                  5.9
                       Tax tariff and policy                                                                                                                                   Indonesia
                                                                                                                                                                                            • Simultaneous engineering of
                            distortions
                                                                                                                                                                         5.3                  stabilization and growth can be done
                          Entry barriers         Provide core governance       Facilitate markets and
 Lack of efficient                               goods such as security of        investment with
                                                                                                          Promote deepening of
                                                                                                                                                    6.0                        Thailand     • Energy crisis in Pakistan, a
  public sector           Government                                                                       physical, human and
                                                life, property, transaction     informed policy and
  management              involvement
                                                        and contract           competent regulation
                                                                                                           social infrastructures                                6.4                          management issue rather than a
                         Poor regulation                                                                                                                                       Pakistan       capacity issue
                                          Productivity and Innovation
               Never before in history has innovation offered promise of so much to so many in so short a time ~ Bill Gates

    Labour Productivity by Sector, 2007                    To increase public sector productivity, role of state needs to be transformed from
3                                                                  owner-operator to facilitator-regulator across economic activities
2                                                                      Industry-University linkages should be emphasized as they play
                                                                                   a decisive role in fostering innovation
1

0
    Agri.   Manuf.     Const.   Wholesale Finance &
                                                                                                       Reforms for Productivity
                                & Others Others

                                                                                                                 Competitive markets
     Agriculture                                        Industry
                                                                                                                 Productive human resource
       Cotton production can be increased by
                                                       Consistent subsidies have adversely
             62.5% by developing seed
                                                         affected the risk taking culture                        Healthy population
        industry, controlling weeds and pests
         (CLCV and Mealy Bug) and adopting                      in private sector
      improved crop management techniques                                                                       Meaningful education

       Environmental degradation is costing                                                                 Connecting markets and people
       Pakistan in terms of low GDP growth

                                                                                                                 Knowledge creation




                                                                                                                                                Prepared and Presented by Madiha Younus
     40% of irrigated land has been affected by                                                                 and commercialization
          either salinity or water-logging
                                                            Less than impressive                            Diffusion and absorption
     20% of current milk production is lost due         contribution of productivity in
          to poor infrastructure facilities                GDP growth of Pakistan                               Development of cluster

                                                  Productivity and innovation impart sustainability to growth
                                               Quality Governance
 If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand ~ Milton Friedman

                                                               Issues
Large government footprints                                                 Weak public finance
  (50% of GDP) crowds out             Excess regulation hurts         •Inefficiencies in resource mobilization
                                                                                                                 Weak institutions and
     private investment                  business milieu                                                             civil service
                                                                              •Unnecessary subsidies
       •PSEs bleeding


                                              Reforming Governance
                                                                   Improve public sector management
           Changing role of government
                                                                                HRD
                                                                           (Right skill-mix)
           Exit from Markets                                                Merit based
                                                                           remuneration
                        Restructure                                        and promotion
                         Privatize
                        Close down
                                                                                                                      Restructuring




                                                                                                                                         Prepared and Presented by Madiha Younus
                                                                            Tax reforms
                Deregulation
                                                                        Remove untargeted                              Autonomy
                          CCP                                               subsidies
                          SECP                                                                                       Accountability
                          SBP                                           Efficient PSDP/RBM



                           Quality governance to improve delivery of public service and sustainability to growth
                                   Deepening and Maintaining Openness
                                   You have to be very rich or very poor to live without a trade ~ Albert Camus

                              No success story in growth accelerations worldwide has featured exclusive inward-looking growth
                                                              Openness allows reaching new markets
                          Openness in trade is a critical ingredient for self sustained growth that creates jobs and raises productivity
                                    Tariff system has become distorted and non-transparent and is exposed to corruption
                             Good logistics is critical for trade and competitiveness due to its wide ranging impact on economy

Trade Share of Pakistan in Selected Countries (%)                     Composition in Goods (%)                                    Total Openness (%)
                                                                                            Textile                 35
  10
                                                                                            Leather Prod.           30
   5
                                                                                            Misc Manuf.
    0                                                                                                               25
                                                                                            Vegetable Prod.
           India                                                                                                    20
                         USA                                                                Others
                                            China                                                                            1995      2000         2005          2009



        Need for Addressing                                                                                                             Information Gaps and
                                                            General                            Specific Sectoral
        Coordination Failures                                                                                                               Transparency
                                                        Recommendations                       Recommendations
                                                                                                                                          Recommendations
                                                                                                                                          Substantial improvement in
                                                        Re-establish unilateral trade
                                                                                           Issuance and implementation of a             computerized version of detailed
                Extremely high                             liberalization program                                                           customs tariff schedule
                                                                                             general trade policy statement
Implementation     protection
                                    Active use of       Abolish distortive regulatory                                                  Thorough inventory and review of
 issues related   slows down
                                     non-tariff                duties (SROs)                                                                  tariff distortions




                                                                                                                                                                              Prepared and Presented by Madiha Younus
     to poor     development
                                    barriers is an
   governance   of efficient and                          Maintain a neutral real            Immediate abolition of ad-hoc                 Publication of MOC regular
                                   area featuring
       and        competitive                               exchange rate policy            system of quasi-import licensing                       statements
                                    coordination
 management industries and                             Accelerate re-establishment of                                                     Publication and easy access
                                     failures in
structures need    promotes                                normal trade relations                                                              to information on
                                    government
  to overcome    rent-seeking                                    with India                                                                  anti-dumping decisions
                   behaviour                           Accelerate maximum potential          Thorough review of economic               Frame of all policies and regulatory
                                                         possible under signed free        justification for sectors/industries            stance based on intentions
                                                             trade agreements                                                            defined in the growth strategy



                   Openness allows to reach new markets, raise productivity and accelerate innovation and competitiveness for sustained growth
                                Vibrant and Competitive Markets
   Open markets offer the only realistic hope of pulling billions of people in developing countries out of abject poverty,
                          while sustaining prosperity in the industrialized world ~ Kofi Annan


            Key Issues in Markets                                                Pakistan ranks 85th out of 183 countries
                                                                                        in ease of doing business
 Outmoded urban management and zoning                            • Urban areas have excess demand for retail, office and mixed use
 for domestic commerce                                             space
 Inadequate transport and storage facilities                     • About 30% to 40% of agricultural produce is wasted due to
 for agricultural markets                                          inefficient farm to market channels and inadequate storage facilities
                                                                 • Agriculture Produce Markets Act of 1939 is outdated and requires
 Legal issues and regulatory environment                           fresh legislation
                                                                 • Pakistani businessmen claim delayed justice, weak property rights,
                  Key Reforms                                      corruption and time and cost of enforcing contract as key
                                                                   constraints to investment
          • Promoting trade openness and competition
          • Land reforms                                                         Most Problematic Factors for Doing Business, 2010
 Macro    • Taxation reforms                                                20
 Level
Reforms   • Labour reforms                                                  15

                                                                            10
          • Agricultural and rural markets                                   5

 Meso     • Reforms for manufacturing sector                                 0




                                                                                                                                                                 Prepared and Presented by Madiha Younus
 Level    • Trading processes                                                      Corruption     Govt.         Policy      Inflation    Inefficient   Crime &
                                                                                                Instability   Instability                  Govt.        Theft
Reforms                                                                                                                                 Bureaucracy



          • Initial setup of business
 Firm     • Enforcing contracts
 Level
Reforms

                                  Competitive markets ensure higher productivity and efficiency of economy
                                                           Creative Cities
                                                       Focusing on cities as engine of growth
                                             Area Density in 1 sqkm                                Population by 2030
               Cost of investment per
                27 sqkm in Pakistan                                                                      (000)
                                            Dubai            Pakistan                              •   Karachi      27,993
                                           (Vertical        (Horizontal                            •   Lahore       14,626
Cost of investment                        Expansion)        Expansion)                             •   Faisalabad   6,192
per sqkm in Dubai                       200,000 people      6,000 people                           •   Rawalpindi   4,149
                                                                                                   •   Multan        3,025


         Urban Governance Issues
Laws and Regulations for Cities
• Restrictive zoning and building regulations
• Lack of mixed use and high rise development                                                   • Amend zoning laws and                                         • Modernize land and
                                                                                                  building regulations                                            registration system

                                                                Reforms for Commercialisation
• Ambiguous urban land policies




                                                                                                                                 Reforms for Land and Housing
                                                                                                • Auction/privatize state-                                      • Establish housing and
Excess Demand                                                                                     owned land                                                      information system
                                                                                                • Build linear                                                  • Revise laws favoring
• Demand for commerce, office space, warehouses                                                   commercialization along                                         tenants
  and housing                                                                                     inner city roads                                              • Establish regulatory
• Missing space for community infrastructure                                                    • Improve capacity of urban                                       bodies for real estate
                                                                                                  planners for low cost                                           markets
Land Markets                                                                                      energy construction and




                                                                                                                                                                                               Prepared and Presented by Madiha Younus
                                                                                                                                                                • Increase access to housing
                                                                                                  for facilitation of research                                    finance - revitalize HBFC
• Idle-state-owned land
• Complex land registration system
                                                                                                • Revise city planning for                                      • Curtail growth of katchi
                                                                                                  deregulation to unlock                                          abadi by producing low
Property Rights                                                                                   productivity and                                                income housing
                                                                                                  innovation                                                    • Repeal Land Acquisition
• Lack of titles and tax related issues                                                         • Establish more community                                        Act 1894
• Biased rent laws                                                                                space
                                  Cities generate ideas, innovation, technology and choices to accelerate growth
                                  Connecting to Compete
Measured in time of transport and communication, the whole round globe is now smaller than a small European country was a 100 years ago ~ John Boyd

                                                                                                          Connectivity Scorecard Rankings
                                Connectivity                                                           Resource and Efficiency Driven Economies

                                                                                                     Malaysia    Turkey        Iran        India   Pakistan

  State of Physical             Human Resources                                             2009        1           2          12           20       24
                                                               Social Connectivity
    Connectivity                  Connectivity
                                                                                            2010        1           7          14           21       25
  Inefficiencies in               Human capital                  Social divide among
  transport sector is             comprises low to               people belonging to
  annually costing                medium skilled labor           different economic
  Pakistan 5% of GDP                                             classes is consistently                    • Encourage public private partnership in
                                                                 widening                                     infrastructure development
                                  Bureaucracy                                                               • Improve public transport network
  30% agricultural                (generalists) and
                                                                                                            • Create a sophisticated market for
  output wasted due to            stringent rules and            Weak collaboration
                                                                                                              railways
  inefficient farm to             regulations make it            of diaspora by local        Reforms
  market channel, lack            hard for                       enterprises and                            • Be a regional hub of aviation
  of cool storage and             professionals to               institutions                  for          • Improve trade facilities through
  obsolete trucking fleet         participate in the                                       Connectivity       adoption of ICT
                                  economic affairs of                                                       • Incentivize ICT services
                                  the country                                                               • Open domestic trade market




                                                                                                                                                          Prepared and Presented by Madiha Younus
                        Impact of Poor Connectivity

                 • Disintegrated markets
                 • Lethargic cities
                 • Youth with unemployable skills

                                     Better connectivity reduces cost of doing business and thus boosts growth
                                                       Energetic Youth and Community
                      Much education today is monumentally ineffective. All too often we are giving young people cut flowers
                                when we should be teaching them to grow their own plants ~ John W. Gardner




       Education with                               Current State of Youth                  The Real Challenge                   Opening Windows of
        Opportunity                             • Youth bulge in coming years             • Introduce youth development             Opportunity
 Poor quality of basic and university           • Largest proportion (32%) of               programs in provinces               • National youth service reforms
              education                           uneducated youth
                                                                                                                                • Youth education and skill
• Parallel education systems                    • Less than 6% of youth has                                                       development
                                                  vocational and technical education
• High school drop-outs                                                                                                         • Youth and women
                                                • Highest illiteracy rate (30%) of                                                entrepreneurship
• Failure to engage large youth
  population
                                                  Pakistani youth in the region
                                                                                                                                • Youth volunteer services
• Corruption, stringent laws and                • Curriculum does not prepare youth
                                                                                                                                • More youth space
  financing major impediments to                  for job market
  self employment
      71% - have no school career counseling                                                                              Reform policy and regulation to involve
                                                                                                     Success               young people in community activities
 83% - term school career counseling important                                                          of
                                                                                                     Orangi
                                                           18th Amendment                            (Quality
 79% - unsatisfied with either schooling system                                                   education PPP)
                  or curriculum                                                                                          Introduce courses related to economic
                                                       • Abolition of Concurrent                                      choices and decision making for all disciplines

 47% - do not have sports or recreation facilities       Legislative List
                                                                                                   Youth is a
                                                       • Amendment in Federal                    Solution, Not a
      90% - want extracurricular activities              Legislative List                           Problem!              Create space and opportunities for youth
                                                       • Article 25 A - education                                                and women entrepreneurs
                                                                                                 (Youth service)




                                                                                                                                                                        Prepared and Presented by Madiha Younus
   28% - feel syllabus/curriculum irrelevant to          compulsory for children
                  market demand                        • Curriculum, syllabus, planning
                                                         and policy fall under the
                                                         jurisdiction of provinces                                         Promote career counseling services at
   12% - not keen to learn occupational skills                                                 National Internship             community and school levels
                                                       • Ministries and their functions             Program
 100% - hold poor accountability the reason for          devolved to provinces
                                                                                                 (Also for metric
                  corruption
                                                                                                 pass students)
                                                                                                                             Engage youth in economic, social
   95% - believe education can resolve problem of                                                                                and community services
                     extremism

                           Energized youth and community allows reaping the benefits of demographic transition and accelerating growth
                                                 Implementation: RBM
      You were born to win, but to be a winner, you must plan to win, prepare to win and expect to win ~ Zig Ziglar
                                                                                        • Implementation of change must alleviate constraints to productivity
 Emphasis on performance and results                                                      and facilitate growth
      that affect people's lives                                                        • RBM requires systematic implementation of key processes led by
                                       The current system does not make growth and
                                           employment a core objective of policy          the overall growth strategy
                                                                                        • Output based budgets must emphasize on outputs, outcomes and
                                                                                          key performance indicators

                                                     Control of Planning System under             Five Critical Changes to Strengthen Linkage
                                                       Post 18th Amendment Milieu
    New Vision for Economic                                                                           between Planning Commission and
            Growth                                 • Consulting and setting medium                         Government Performance
                                                     term and annual development
• Periodic identifying emerging                      objectives
                                                                                                                Strengthen MTDF and MTEF
  constraints to economic growth                   • Identifying key economic reforms
• Consensus building through extensive             • Specifying government and                            Support unified results based budget
                                                     ministry-level reporting                                      preparation process
  consultations                                      requirements
• Building a system for measuring                                                                        Decentralize responsibility for projects
                                                   • Strengthening capacity of                                       to line ministries
  productivity and public service                    ministries
  delivery                                                                                                   Redefine role and processes of
                                                   • Developing capacity of planning                              Planning Commission
• Developing and monitoring                          system
  quantifiable plans regularly                                                                           Establish results based monitoring and
                                                                                                                    evaluation system




                                                                                                                                                            Prepared and Presented by Madiha Younus
                        • Provides change agenda for a                                                                     • Fiscal allocations
                          greater degree of implementation                                                                 • Ministerial/departmental
   Results                                                                                         Introducing               policies and plans
                          assurance
   Based                • Helps government to focus on
                                                                                                     RBM in                • Budgeting
 Management               achievement of results and                                               Government              • Accounting
                          utilization of resources                                                                         • Monitoring


                  RBM enhances quality of planning, implementation and outcome of development efforts and improves quality of life of people

				
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