Transcript Slide 1

Towards Growth Strategy & Economic Reform
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Planning Commission
Characteristics of Growth in Pakistan
• 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
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Economic Growth 1972 - 2010
Volatility and decline in potential GDP growth
10
9
7
6
5
4
3
2
1
Boom – Bust Cycles
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
0
1972
GDP Growth (%)
8
3
Demographic Challenge
• A bulge in the working
age in coming 40
years
Projected Population by Age Groups
2050
85
85
85
84
83
83
80
77
71
67
63
2040
2030
2020
• Required growth:
– 8% per annum to
absorb growing labor
force
2010
2000
0
60
236
31
224
25
210
20
195
16
178
13
160
11
0-14
142
9
125
8
15-64
110
7
65≤
65>
95
6
81 5
120
180
240
300
360
Million
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Growth Alternatives (2011-15)
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6
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)
6.0
GDP Growth Rate (%)
5.5
5
5.0
4
4.0
3.4
3
3.6
3.8
3.9
3.0
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
2
1
0
2010-11
2011-12
2012-13
2013-14
2014-155
Growth Alternatives (2011-15)
9
8
GDP Growth Rate (%)
7
Stabilization + Reform: Market reforms
& productivity gains (Average 5.6%)
7.0
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)
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8.0
6.0
6.0
5.5
5
5.0
4
3
3.0
4.0
3.4
2
3.6
3.8
3.9
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
1
0
2010-11
2011-12
2012-13
2013-14
2014-156
Short Term: Getting back to potential
• Utilization of existing capacity
– Up to 30% in industry
– Up to 50% in fertilizer, auto sector, sugar, cement and steel
• Requires:
1. Removing major constraints
a.
Energy (Electricity and Gas)
b.
Availability and pricing of credit
2. Macroeconomic stability
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Longer term: Increasing Potential
Economic Growth
Physical Capital
Public Investment
Sector based &
Project based
Human Capital
Skills
Productivity
Education
Missing: Innovation,
Entrepreneurship, Markets 8
Pakistan Lacks Growth Software
Overall Infrastructure
Quality
Country
Score
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
Hardware
Country
Software
Global
Quality of
Innovation Education
System
Index (out
of 132
countries)
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
239
Developing a Growth Strategy
• Productivity through economic reforms
• Better management of public resources
• Better managed PSDP
• Restructuring and privatizing PSEs
• Consultative process in a federal structure (post 18th
Amendment)
o Taking feedback from provinces, chambers of commerce
and civil society organizations
o Building ownership through academia and media
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PSDP Resource Allocation Strategy
PSDP Weaknesses
o Decreasing PSDP Size
o High share of bricks &
mortar (60% of total in
2011)
Prioritizing PSDP
o Projects nearing
completion
o Social sector projects
o Key infrastructure
o Money Spread thin (large
projects: energy, water,
sectoral & regional spread)
transport
o Project governance
o Projects for removing
regional disparity
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Rationalization for Results
• Maintaining infrastructure development
through a better managed PSDP
1,905
projects with
Rs 3,057
Billion throwforward
1,421 projects
with
Rs 2,509 Billion
throw-forward
Project Approval Process
Improvement Measures
• 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
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Need to Restructure Public Sector Enterprises
Sr.
PSE
Financial Position
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PIA
Accumulated Losses Rs 76.6 billion
2
PASSCO
Loss of Rs 440.7 million in 2008-09
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TCP
Subsidized operation
4
USC
Subsidized operation
5
NHA
Government monopoly in highway contracts
6
PEPCO
Accumulated debt of Rs 425 billion
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Pak Steel
Accumulated loss of approx. Rs 36 billion
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Railways
Accumulated losses (2005 to 2010) Rs 86.7 billion
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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
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Pillars of New Growth Strategy
Increasing Productivity
Quality
Governance
Creative
Cities
Quality
of Life
Vibrant
Markets
Energetic
Youth &
Community
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Potential Governance Agenda
• 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)
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Markets & Entrepreneurship
• 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 &
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flats)
Cities as Hubs of Commerce
• 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
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Youth & Community
• 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
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Thank
You
Thank You
www.pc.gov.pk
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