Towards a Growth and Development Strategy.ppt

Towards a Growth and Development Strategy

1. Towards a Growth and Development Strategy
1
Planning Commission

2. •Preoccupation with stabilization and crisis
•Growth policy by default
–Aggregation of projects
–Sectoral focus
•Result: sporadic growth
•Lack of structural reform: declining potential
growth rate
2
Characteristics of Growth in Pakistan

3. Economic Growth 1972 - 2010
3
Boom – Bust Cycles
Volatility and decline in potential GDP growth

4. Demographic Challenge
•A bulge in the working
age in coming 40
years
•Required growth:
– 8% per annum to
absorb growing labor
force
4
Projected Population by Age Groups
Million
65>

5. Growth Alternatives (2011-15)
5
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)

6. Short Term: Getting back to potential
•Utilization of existing capacity
•Requires:
1.Removing major constraints
a.Energy (Electricity and Gas)
b.Availability and pricing of credit
2.Macroeconomic stability
6

7. Growth Alternatives (2011-15)
7
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)
Stabilization + Reform: Market reforms
& productivity gains (Average 5.6%)

8. Longer term: Increasing Potential
8
Sector based &
Project based
Missing: Innovation,
Entrepreneurship, Markets

9. 9
Overall Infrastructure
Quality
CountryScore
Indonesia 2.5
India 3.3
China 3.4
Pakistan 3.4
Thailand 5.0
Korea 5.1
Taiwan 5.4
Malaysia 5.7
Hongkong 6.4
Source: Global Competitiveness Report
Country
Global
Innovation
Index (out
of 132
countries)
Quality of
Education
System
Spending
on R&D
Pakistan 79 99 80
India 30 37 36
Indonesia 39 44 28
Thailand 57 67 47
Malaysia 24 23 19
China 26 52 23
Hardware
Software
Pakistan Lacks Growth Software

10. Developing a Growth Strategy
10
•Productivity through economic reforms
•Better management of public resources
•Better managed PSDP
•Restructuring and privatizing PSEs
•Consultative process in a federal structure (post 18
th

Amendment)
oTaking feedback from provinces, chambers of commerce
and civil society organizations
oBuilding ownership through academia and media

11. PSDP Weaknesses
oDecreasing PSDP Size
oHigh share of bricks &
mortar (60% of total in
2011)
oMoney Spread thin (large
sectoral & regional spread)
oProject governance
Prioritizing PSDP
oProjects nearing
completion
oSocial sector projects
oKey infrastructure projects:
energy, water, transport
oProjects for removing
regional disparity
11
PSDP Resource Allocation Strategy

12. Rationalization for Results
1,905
projects with
Rs 3,057
Billion throw-
forward
1,421 projects
with
Rs 2,509 Billion
throw-forward
•Maintaining infrastructure development
through a better managed PSDP

13. •Ongoing:
–Modernization of feasibility reports
–Project approval (PC-I) stating benchmark parameters for
monitoring and evaluation
•Proposed:
–Harmonize rules of donor agencies with GoP policies
–Constitute joint donor – GoP appraisal teams
13
Project Approval Process
Improvement Measures

14. Need to Restructure Public Sector Enterprises
Sr.PSE Financial Position
1PIA Accumulated Losses Rs 76.6 billion
2PASSCO Loss of Rs 440.7 million in 2008-09
3TCP Subsidized operation
4USC Subsidized operation
5NHA Government monopoly in highway contracts
6PEPCO Accumulated debt of Rs 425 billion
7Pak SteelAccumulated loss of approx. Rs 36 billion
8RailwaysAccumulated losses (2005 to 2010) Rs 86.7 billion
14

15. Ongoing PSE Reform Efforts
•Reform of Power sector under implementation
•Reform Strategy for Railways formulated
•Reforms of Gas Sector under formulation
•TCP and PASSCO to be examined for closing down
15

16. 16
Pillars of New Growth Strategy
Increasing Productivity

17. Potential Governance Agenda
17
•Civil service reform –structure and incentives to attract
talent
–Monetized salaries, merit based promotions, and easy entry
& exit
•Devolution of powers, responsibilities and resources to
lower tiers of government for better service delivery
•Performance based governance
•Business process reengineering with technology
(outdated regulations & multiplicity of processing
layers)

18. Markets & Entrepreneurship
18
•Modernize laws and regulations for better markets
–Agriculture market committees
–Entry of new investment into the engineering sector
–Bankruptcy law (legislation drafted)
•Deregulating markets e.g. wheat, sugar & commodities exchange
(under implementation)
•Encouraging innovation through incubation centers, cluster
strengthening (e.g. Sialkot, Gujranwala, Wazirabad)
•Improving environment for domestic commerce
–Taxation regime, rent laws
–Legal structures for common property ownership (shops &
flats)

19. Cities as Hubs of Commerce
19
•Reform zoning and building regulations
–Two zoning laws
–Restrictive limits on heights
•Various needs unmet (office space, commerce,
flats, warehouses, schools etc.)
•Property rights and land markets (issues of
titles, taxation structures etc.)
•Freeing government land for commercial
purposes

20. Youth & Community
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•Youth bulge - policy priority
•Making social capital available for youth
–Community & social infrastructure (libraries,
community centers etc.)
•Difficult to productively employ growing
young labor force
–Develop framework for youth self employment

21. Conclusion
•Reform, reform reform!
•Focus on productivity
•Merit and competition
21

22. 22
Pillars of New Growth Strategy
Increasing Productivity

23. Thank You
www.pc.gov.pk
23
Thank You