Issues in Public Administration

MPA 509

Economic Issues and Challenges

Economic Development

• Economic development generally refers to the sustained, concerted actions of policy makers and communities that promote the standard of living and economic health of a specific area.

• Economic development can also be referred to as the quantitative and qualitative changes in the economy. ...

Economic Development• Such actions can involve multiple areas including

development of human capital, critical infrastructure, regional competitiveness,

• environmental sustainability, social inclusion, health, safety, literacy, and other initiatives.

• Economic development differs from economic growth. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP.

Economy of Pakistan

• Introduction

– Nature of the state and political system– Pakistan adopted typical Mercantilist approach– Political turmoil– Growth and Development debates• Illiterate, uneducated and unhealthy population

represent no progress

65 years of development

• Laying the Foundations:1947-1958 Features

– 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:1958-1968

AchievementsConsiderable economic growth and developmentSignificant leaps were made in industrial and agriculture productionModel Capitalist EconomyHigh growth rate in manufacturing sectorIncrease in exportsProgress in agriculture sector

Policy FailuresIncreased 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 Decade of Development:1958-1968

Economy of Pakistan It was characterized with certain paradoxes◦ On the one hand it had biggest growth rate in the history of

Pakistan

◦ And on the other hand it produced large increase in income inequalities, intra-regional difference and the concentration of economic power in the hands of few which distorted the fairer allocation of resources.

Economic indicators

Agriculture growth was about 41.5%

Manufacturing 9.1

Economy of Pakistan

One of the more negative features of Ayub industrial and trade policy was deliberate suppression of wages and ban on the labour activities which prevented country to acquire critical mass for industrial take-off. This was key factor in the down fall of Ayub regime and popularity of first PPP regime under ZAB.

The bad Luck Years:1971-1977

AchievementsFoundations 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

Critics of Bhutto dubbed his economic programme total failure.

One of the major cause was the loss of East Pakistan to which West Pakistan exported 50 percent of its goods and acquired large amount of foreign exchange from its raw material exports. Devaluation of rupee in 1972 brought significant dividends in terms of export growth.

However, OPEC 1973 oil increase played havoc with import bill and created imbalance of payment.

Also 1973 witnessed world wide recession of global oil crisis. Recurrent cotton crop failure and floods in 1973, 74 and 1976 affected Pakistan’s main exports.

Nationalised units were the most inefficient in the industrial sector because they were being run by bureaucracy.

Economy of Pakistan

• Sunny side of the Bhutto regime. – It laid down the foundation for future growth.

– Basic industries were established and a base for capital goods industry was established

– Middle East Boom was created due to his policies to export labour to Middle East. According to some figure around 2.2 million labour force was exported to Middle East and remittance they sent contributed significantly towards the growth.

The second Military Government 1977-1988

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

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)

The second Military Government 1977-1988

Economy of Pakistan

Zia adopted liberal economic policies. Economics and religion

State was more of rent seeking.

New class of entrepreneurs, especially from civil and military emerged.

Because of invasion of Soviet Union, Pakistan emerged as front line state. There was massive flow of aid to Pakistan which contributed in enhancing the domestic demand.

Economy of Pakistan◦ Large cuts were made in development expenditure

which fell from 9.3 in 1981 to less than 3 percent form 2000 onwards.

◦ In 19996-97 original development expenditure of Rs 105 billion was slashed to Rs 85 billion.

◦ Withdrawal of subsidies and increase in the rates of basic utilities such gas, electrify and petroleum products has been another feature of SAPs.

◦ The consequence of these policies has been the inflation, unemployment and de-industrialisation.

Economy of Pakistan– The impact of privatisation has also been negative as

far as employment of the people concerned.

– According to Zaidi, almost all the agreements with IMF have been signed by caretaker governments, even in 2001 $1.2 billion Poverty Reduction and Growth Facility agreement was signed by unelected military regime.

– Recent agreement with IMF under Extended Fund Facility (EFF), under which IMF has approved $7.6 billions. This loan is for three years.