34th AGM – Press Release

Growth strategy of government focusses upon building strengths in economic fundamentals and an investment strategy for efficient resource allocation – Mr. Makhdum Khusro Bakhtyar

 

Day 1, 12th December, 2018

Islamabad – Three-day 34th Annual General Meeting and Conference of Pakistan Society of Development Economists (PSDE) commenced today (Wednesday), December 12, 2018 at the Marriot, Islamabad. This year the theme of the conference is “Pakistan’s Economy: The Way Forward”. The Conference was inaugurated by Mr. Makhdum Khusro Bakhtyar, Federal Minister for Planning, Development & Reform, and Patron PSDE.

The conference is being hosted by the Pakistan Institute of Development Economics (PIDE), with the support of the Ministry of Planning, Development and Reform. Other sponsors of the conference include FES, IFPRI, HEC, The Asia Foundation and Pakistan Poverty Alleviation Fund.

Addressing to the inaugural session, the Chief Guest Makhdum Khusro Bakhtyar said that the consumption in Pakistan is 93% of GDP, highest among the emerging economies, whereas in Bangladesh, consumption is about 74%. The saving rate in Pakistan is less than half of other countries of the region. He said that the growth strategy should focus quality and inclusiveness of economic growth, human capital and sustainable agriculture. SME sector has been identified as one of the key sector of economic growth. He said that CPEC is an opportunity for Pakistan and China for growth and prosperity. The two countries are in effective collaboration which is beneficial for both countries. The agriculture framework under CPEC focuses on joint ventures, value addition, cold chain management for fruits and vegetables, marketing and branding will help the country to overcome socioeconomic weaknesses.

            He said that we need to increase saving, and to balance between direct and indirect taxes. He said that in the period of previous government, the international price of petrol went down making it easy to handle current account balance. He said that the service sector contributes to 56 percent of domestic GDP but its share in exports is very small. He said that our imports from China have reached USD 18 billion and the country needs to adapt import substitution policies and the government is devising policy packages for this purposes.

Earlier, in his Presidential Address, Dr. Asad Zaman, the President PSDE and member Economic Advisory Council said that there are many wrong theories widely accepted by economists and cost of these wrong theories is incalculable. He cited that economic theory says that the ultimate goal of human being is to maximize utility. This theory is ridiculous and has been proven false especially by game theoretic approach. Dr. Asad said that the problem of scarcity, which is considered central in economics, comes into consideration only if we consider the wants, and in terms of necessity, there is no scarcity. He said that a society based on the care of others and cooperation is the potential solution to many problems.

In his Secretary’s report, Dr. Fazal Hussain, the incumbent Secretary PSDE, welcomed all the guests and participants. He informed the gathering that the Conference of PSDE has been a regular annual event since inception of PSDE in 1982 and the conferences of PSDE have been attended by top economists from across the globe including Nobel Laureates. He stressed importance of the event in highlighting the main issues facing Pakistan’s economy and as a platform of knowledge sharing. He expressed hope that the deliberations at this year’s Conference would yield insight into the way forward for Pakistan’s economy.

The second event of the conference was Mahboob ul Haq Memorial Lecture, with the theme ‘Bringing Human Capital Back to Pakistan’. The distinguished speaker Dr Adil Najam from Boston University is the lead author of Intergovernmental Panel on Climate Change (IPCC) report, the report that won 2007 Noble Peace Prize. In his address Dr Najam highlighted three crucial issues faced by young people i.e. quality education, meaningful employment and meaningful engagement, or the three E’s. He said that the youth now comprise of a major chunk of Pakistan’s population, and by 2045, the future of Pakistan will be decided by the demographic bracket that is now under 30. Contrary to other countries, in Pakistan the youth dividend has not translated into increased employment and human development. Policy makers have to focus on the three E’s to give an impetus to development. He argued that human development is a function of three factors namely health, wealth and knowledge.  Therefore, to boost the level of human development, these three vital components should be prioritized. Pakistan now lies far behind neighboring countries in human development. He cited that HDI for Bangladesh and Iran has shown an increasing trend, and in these countries, there is a boom in service sector’s export and women education. He suggested that that serious work is required for women education and for this, there is need to provide transportation and sanitation facilities to girls. Similarly, investment in domain of health facilities, urban community development and youth with special focus on women’s education can prove to be beneficial in increasing the level of human development in Pakistan.

Dr. Mehtab Karim, Vice Chancellor of Malir University, was discussant for the session, and said that Pakistan has been left behind other countries in HDI mainly due to high population growth.  In Pakistan on an average each woman has about 3.5 children as compared to two children in other countries in the Subcontinent.  Thus, it has been also left behind with regard to the literacy rate and life expectancy. He mentioned that due to high birth rate about 30% of Pakistan’s population consists of youth in ages 15 to 29.  He cited that small percentage of young people in Pakistan seek postsecondary education compared to other Muslim countries like Iran, Turkey, Egypt and Bangladesh and many are inclined to seek employment abroad. Dr. Ghulam Muhamad Arif, former Joint Director of PIDE, the second discussant, also agreed with Dr Mehtab arguing that Pakistan has the highest population growth rate in the region. This has implications for demographic characteristics as well as human development in Pakistan.

The third event of the conference was a panel discussion on the theme ‘The Management of Economy’. Addressing to the session, Dr. Dr Eatzaz Ahmad of Quaid-e-Azam University said that GDP growth of Pakistan has been fluctuating. He cited that in 1960’s the growth rate of Pakistan was viewed as an ideal for development but now it is nowhere. He sees the lack of institutional support and inadvertent policies as the main reasons for aggravated economic growth of country. The second speaker of the session was Mr. Shahid Hussain Assad who discussed ‘Revenue Management, Issues and Challenges’. He mentioned that current issues faced by Pakistan economy in tax collections are narrow tax base and low tax to GDP ratio. Large informal economy proves to be a reason in loss of taxable income. Similarly, due to political lobbying tax exemptions and concessions are given. He suggested to broaden the tax base, simplification of tax procedures and harmonization of federal and provincial taxation.

The third speaker of the session was Mr. Riaz Riazuldin, former Acting Governor of State Bank of Pakistan. His discussed Exchange Rate Management in Pakistan and said that Exchange rate management regimes kept changing in Pakistan and poor exchange rate management is one of the reason behind poor export performance. He suggested that there is serious need to boost remittances in order to stabilize exchange rate.  The last speaker of the session was Dr Ashfaq Hasan Khan, the Member Economic Advisory Council. He argued that exchange is very weak determinant of exports and on the other hands, exchange rate has very adverse impact on the external debt. He said that any potential benefit of exchange rate is wiped out due to increase in external debt, and in addition the devaluation raises the costs of inputs for local production which hurts the economy badly. He emphasized the need to control public debt and boost private investments. Dr. Asad Zaman, Vice Chancellor PIDE concluded the session by arguing that the exchange rate can be managed only at the cost of foreign reserves which is rather bad for the economy.

Fourth event of the conference was a panel discussion “Governance, Housing, Poverty and Employment” generated debate on pulsing issues of poverty, lack of employment opportunities, insufficient housing facilities, and dearth of institutional capacity in Pakistan. The Guest of Honor, Mr. Muzzafar ud Din, Agha of AKRSP highlighted the role of institutional support in expanding country’s output. Dr. Talat Anwar, Professor of Public Policy at PIDE said discussed how Pakistan may learn from China’s experiences, by evaluating through their experience on poverty reduction strategies. He said that Low rent houses for poor, targeted health reforms, education emergency and emergency provision are the main lesson from China for Pakistan. Dr. Nuzhat Ahmad, Former Director AERC, Karachi said that there is inverse relationship between household size and income. The third speaker, Mr. Abdul Wajid Rana, Program Leader, IFPRI, Pakistan, emphasized the civil service reforms in Pakistan. He said that civil service reforms are necessary for fiscal stability and for collaboration between politicians and civil servants.

He said that current reforms should be focused on the emerging challenges and work towards increase collaboration. He discussed that the ineffectiveness of state institutions are undermining Pakistan’s Economic, Social and political development. He said that emerging challenges of civil service reforms should be centralization to decentralization, hierarchical to collaborative federation, top down to participative governance, globalization and SDGs, Technical Advancement, Accountability, Vibrant Judiciary and active Legislative Committees.