October 21, 2001	Sunday	Shaba'an 3, 1422

KARACHI, Oct 20: Does international economic recession spurred by Sept 11 episode signal that “globalization is dead”?

This is the conclusion of a paper presented by Dr Javed Ansari, Dean, Institute of Business Management, at a seminar on financial restructuring held at the College of Business Management, Korangi on Saturday.

Governor of State Bank Dr. Ishrat Husain inaugurated the seminar.

“In the post globalization era,” he added “countries will have to learn to survive on their own resources”. In the face of the contracting global market, he did not visualize foreign trade driven economic growth.

Stating that the root of the present international crisis is deep, the noted economist stressed that Pakistan should devise a domestic demand, not an export-oriented macro-economic strategy.

He called for a major increase in public investment and in the role of the government an investor and consumer within the economy.

In the post-globalization era, fiscal policy would be much more important in sustaining and expanding domestic demand and President Bush’s intervention to boost investment has already given “us a taste of market failure”. And he says: “The days of small government are over.”

Credit must be targeted to key sectors, firms and groups with high saving, investment and output growth potential. Merely easing market-based monetary policy is clearly not enough for stimulating saving or investment growth in Pakistan.

Dr. Javed Ansari cautioned that “a write-off of debt is unlikely and even if it materializes, is unlikely to reduce debt payment obligations by much more than 40 per cent. There are no prospects for a major inflow of foreign private capital if “we become a frontline state in the war against Afghanistan”.

Addressing the IBM students in his personal capacity, secretary-general of the Overseas Chamber of Commerce and Industry Zahid Zaheer spoke on the negative impact of the financial liberalization.

He said the World Bank stabilization programme had not worked and the malaises afflicting the financial system continue despite restructuring. He, however, pointed out a few areas of positive developments.

While welcoming diversity of views offered by the two speakers and observing that no one can claim monopoly of wisdom, State Bank Governor Dr. Ishrat Husain cautioned “the interpretation that has been provided that liberalization has not worked in Pakistan, is not based on solid evidence.”

It is stated that the IMF and the World Bank induced restructuring and reforms have not yielded positive results over the past decade and admit that it was for the first time last year that stabilization programme was fully implemented. “If we are not implementing the programme, we cannot talk about its failure”, he added.

Dr. Ishrat said that Pakistan got a lot of money from abroad in the 80s, but “we had a highly irresponsible economy”. “We had a fiscal deficit of 8-9 per cent, which resulted in the debt stock that we have inherited today”. Similarly, in the 90s there was very poor management of the economy. The economy was not being managed on the principles of liberalization and privatization. There was no resolve to take tough decisions.

Dr Ishrat argued that the literature of developing countries is replete with examples where the countries have taken measures in order to liberalize, privatize and de-regulate, have developed their economies and have a competitive advantage. “In Pakistan we did not have competition. Unless we adhere to those principles of liberalization, and there is level-playing field, with no privileges and patronage, we would not be able to turn our economy around”, the SBP governor added.

The fact that there a recession in the Western economies during the last one year or six months, which is a transitory and a temporary phenomenon, should not absolve “us from taking sensible economic decisions, which is to restructure our financial sector and to liberalize it”, he said. The system of taking decisions by bureaucrats has been a failure and should not be brought back.