Pakistan Economy: Reforms needed

January 14, 2016
Muhammad Luqman

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With a middle class population of around 30 million, the demand for high-end products is on an increase in Pakistan. An average import of one million smart phones every month and increased demand for home appliances, the country with a population of a 190 million, is undergoing a silent economic revolution. Therefore, everything is not doom and gloom in the country, as generally portrayed in the local and foreign media. The country has a strong industrial base; on the natural resources front, with bumper harvests of cotton, wheat, and sugarcane, the nation enjoys very respectable place in the region.

The order placed by Sri Lanka for the newly developed fighter jet planes JF-17 Thunder, has put Pakistan on the world map of high-tech arms exporting nations. If all of this is true, why does our economy continue to suffer?

Economists believe it is not the lack of resources that Pakistan is a case of sheer mismanagement. From the Korean War bonanza to the post 9/11 era, the military, and civilian leadership could not take benefit of the favorable international conditions. In the 1950s and 60s, the country focused more on import-substitution with establishing more and more factories to meet domestic demand. Little effort was made to add value to the natural resources. The economic managers of the country did not try to re-position even later.  Little efforts were made to increase revenue by promoting tax culture, which were mainly due to government’s dependence on aid from the West by entering into defense pacts and later knocking the doors of the international donors like World Bank, Asian Development Bank and International Monetary Fund (IMF) on one pretext or the other.

The natural resources, mostly found in the oil rich province of Baluchistan, could not be utilized. It was a classic example of resource curse phenomenon with intermittent insurgency waged by tribal leaders against the central government. This was the major reason that left Pakistan behind other countries of the region, especially China and India who are leading Asian nations in the field of economic growth. China is now challenging the world economies like the United States, Japan, and Germany.

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Despite much-claimed pro-poor efforts by successive governments, Pakistan has failed to meet the Millennium Development Goals (MDGs); especially those related to education, health and access to drinking water until the deadline of the year 2015, while achieving Strategic Development Goals (SDGs) does not seem be possible at all. All sorts of subsidies and food stamp schemes have failed to empower the poor segments of the society economically.

That is the reason because of which about 40 percent of the population is still below poverty line. About half of the people are illiterate and a big chunk has no access to other social and physical amenities. The per capita income of Pakistanis has risen to US $ 1513; but, this is the average or mean income that is meaningless for a big number of Pakistanis who despite toiling labor throughout the day, earn not more than 4 to 5 dollars a day. This has resulted in development disparities among federating units and intra-provincial and within district inequalities. Punjab is rated as the most developed province while, Baluchistan is dubbed as the most impoverished region. To ensure a trickle-down effect of all macro-economic development on the masses, reforms need to be put in place; otherwise, our dream of inclusive development will remain distant even in the years to come.