According to the document economic growth is necessity for more jobs, better living standards, and poverty reduction. Increase in economic gap with other countries could affect Pakistan's regional position. The document discussed in detail how high growth economies transformed their nations through favourable policies. In 1960, South Korea had a GDP per capita three times of Pakistan. Today, its per capita income is twenty-two times more.
"Business as usual is no longer an option. Each year an additional two million people enter the job market. By 2030, Pakistan's population will touch 260 million more than half of which will be in cities. This means we need to educate sixty million more children in addition to those currently out of school. By 2030, also about half of our population will be in urban centers that are already stressed and cannot provide even minimal services to businesses and residents. Urban centres are important drivers of growth. To promote economic activity, they must have reliable power, gas, and water supply, mass transit systems, as well as high class Wi-Fi. Air and sea/dry ports must be of world standards," Document said.
According to the document Pakistan does not generate enough savings for it to invest in future growth. There is major infrastructure deficit and low private investment. Spending on workers' skills, education, and other human needs is paltry. Over twenty-two million children are out of school. The macro-economy does not support growth. These factors have locked the economy in a low/moderate growth trap.
Pakistan's small manufacturing sector produces low value added goods and contributes just 14% to GDP. Governance often burdens businesses. The political economy favours the influential. Resource allocation is inefficient. Forty-four percent of labour works on farms. Other headwinds include fragile sec.
The policy document offers a plan for reforms. Steps are needed to increase domestic savings. High growth economies consistently invest over 25% of GDP, including 7% on infrastructure. They spend another 8% on health and education. Pakistan too must aim for investment of at least 25% from the present 15% of GDP. It must increase the share in GDP of export oriented manufactures and become part of the global value chain. Public investment must focus on high priority projects in the areas of power supply, transmission /distribution, and water storage and efficiency. It must also strengthen agriculture research and extension services. Investment in skills and education must increase.
The Policy Document calls for preparing a favourable industrial policy which will increase value added exports. Government must aid with tax incentives, low cost credit, R&D support, dedicated infrastructure, and training of workers. SEZs, being set up under CPEC, should connect with domestic and international markets. It also calls for preparing an export oriented trade policy which will focus on transit trade and border facilitation. This will stabilise the external account. The tariff structure must support export led growth. We need to attract Foreign Direct Investment (FDI) in export sectors.
The Policy document recommended that government should start new Free Trade Agreement (FTA) negotiations and resume discussion with Iran. Most importantly, we must avoid treating import duty as public revenue and reform tariffs to support export. It also recommended that to increase public revenue, authorities must reduce tax evasion. At the same time, they may lighten burden on the manufacturing sector by enhancing collection from those paying less than their due.
According to the document government may review power policy to improve energy mix and the generous incentives to investors. It must also reduce line and billing losses. Our businesses must have reliable power supply at competitive rates. Acquisition of land for productive purposes must be made easy for businesses and development organisations.
The document suggested that government must cooperate with industry for skills development.
It should set aside the needed financial and organisational resource. Present set up needs a complete overhaul. The country needs a committed and competent leadership to steward development. The government must devise growth policies and build consensus. Public and private players must cooperate to boost economic activity. All incentives must be dispensed without patronage. Government must have a dedicated team of policy makers and experts to help decision making. Policies for the vulnerable and excluded groups are also necessary.
Copyright Business Recorder, 2017