Pakistan has achieved many economic landmarks during the outgoing year. On closer scrutiny these achievements look more like economic miracles rather than landmarks.

With the investment rate still averaging in the range of 15-16 per cent of GDP it is nothing short of a miracle to have achieved an export growth of over 20 per cent and that too when most of the growth in the manufacturing sector (7.7 per cent) has been contributed by non-export sectors.

Indeed, the major export sector, textile and apparel showed a paltry growth rate of 5.2 per cent with relatively higher value addition item like cotton cloth growing at the rate of 1.5 per cent and the low value addition product, yarn at 8.1 per cent. And leather goods, the other most important export item actually showed negative growth rate. On the other hand, non-export sectors like automobile group( 49.8 per cent), food, beverages and tobacco (8.5 per cent), paper and board( 15.7 per cent), metal products, machinery and equipment (18.4 per cent) and tyres and tubes( 16.2 per cent), and chemical and pharmaceutical(20.5 per cent) grew at much higher rates.

Still, as the Economic Survey (2002-03) recounted, exports from Pakistan grew by 20.8 per cent during July-April 2002-03 as against a decline of 1.8 per cent in the same period last year. Primary and manufactured exports grew by 26.0 per cent and 18.5 per cent respectively. Most importantly, exports of textile items not only increased in value terms but these have expanded in quantity terms as well. In particular , exports of cotton cloth, knitwear, bedwear and towels grew in quantity terms in the range of 6.7 per cent ( cotton cloth) and 42 per cent (knitwear) with bed wear and towels growing by 26 per cent and 20 per cent respectively. But then, if there was no significant increase in the domestic production of textile items as shown by the Survey while discussing the manufacturing sector’s performance where did we get all those items to export?

That is perhaps why one feels that it is nothing short of a miracle that Pakistan’s export growth out-performed global export growth by a wide margin and as the Survey claimed Pakistan’s share in global exports appears to have increased from 0.153 per cent last year to 0.168 in 2002-03. A strong growth in exports amid subdued global economic activity, sluggish world trade, and uncertain geopolitical environment is certainly one of the most important achievements of Pakistan’s economy in the outgoing year.

It is possible that despite the seemingly low growth rates in the export sector production, export itself could grow at a very high rate because in absolute terms the output of export items could be enough to reflect a high percentage of growth in exports having a very depressed base-line. However, independent economists who do not believe in miracles question the claim of the Survey on exports. They insist that exports simply cannot grow at the fantastic rate of over 20 per cent in the face of depressed production of export goods in the country during the year under discussion. In their opinion a large part of the proceeds shown as export earnings was made up of those resources which the Pakistani traders had accumulated overseas over the last several years by under-invoicing and over-invoicing their exports and imports. These traders have now started bringing these resources back home fearing confiscation by host countries on the suspicion of being linked to some illegal activity.

Going by the world economic outlook for the year, there was no way, Pakistan could have found buyers, even if it had produced exportable goods in good quantities, in the countries which were suffering from a series of adverse developments. These developments, as the Survey itself pointed out, included several major corporate scandals and bankruptcies in the United States resulting in the bursting of the equity market bubble, rising uncertainties in the run up to war in Iraq causing oil prices to rise sharply and a recent outbreak of Severe Acute Respiratory Syndrome (SARS) virus badly affecting business environment in Asia and likely hurt growth in the region. The Survey further said that economic growth remained somewhat weaker in the major growth poles of the world economy. Growth in the US remained weak and has continued to be disappointing in the Euro area as a result of subdued domestic demand( if the domestic demand in these major markets were subdued how was it that they imported so much from Pakistan during the year?).Deflation in Japan continues and evidence suggests that deflationary expectations are becoming more widespread and persistent. Weaker outlook in advanced countries and higher oil prices have adversely affected the pace of economic recovery in developing countries( except in Pakistan?).

The Survey attributes the so-called ‘sharp’ increase in industrial production despite stagnant investment rates in the last several years to what it calls the utilization of the widespread excess capacity that already existed in manufacturing sector. So, it argues that until and unless the excess capacity is utilized to a larger extent, investment rate may not accelerate in the short run. Higher industrial growth can be sustained with rising capacity utilization rates in the short term, the Survey asserts. But then if you are utilizing excess capacity, then why has this not been reflected on the employment scene. You do need extra hands to man the increased production activity. But during the year, unemployment rate went up to nearly 8 per cent from nearly 6 per cent in 1998. In urban areas the unemployment rate is nearly 10 per cent whereas in the rural areas it is nearly 7 per cent.

According to the Survey, Pakistan’s macroeconomic indicators have further strengthened in a very difficult global environment during the year 2002-03. It is rare, the Survey says, that the country has witnessed so many of its macro indicators registering significant improvement in a single year. But as long as the rate of investment and the rate of unemployment continue to remain disappointing, all the so-called successes with regard to other indicators would remain puzling and meaningless.

In fact the very sustainability of the ‘gains’ made during the year appear doubtful as most of the substantive ones are based on exogenous factors having a very short fuse. Take for instance the $10 billion of foreign exchange reserves which include $4 billion of remittances. If the international situation normalizes, these resources would likely disappear in no time. It is the same for the so-called concessional assistance from bilateral and multilateral sources. Their sustainability depends on the national interest of the US which is out looking for weapons of mass destruction. And perhaps by the end of this calender year, those who are bringing back their unearned dollars would also have completed the exercise.

So, in order to be able to make the most of the advantages that we are enjoying today before they disappear, the country should start paying attention to its real economy. The government appears mindful of this, but going by what it has been saying all these three years it seems it wants the private sector to do the needful while it keeps on shedding its own obligations and responsibilities on the pressures of multilateral donors in the name of the so-called reforms and globalization.

The fact of the matter is, our private sector will never take any risk. It will always demand concessions, incentives and protection which too the government cannot afford because of the close monitoring of the donors.

So, finally, the government will have to take up the slack itself and start investing in social and physical infrastructure so that we have enough of trained and skilled manpower of quality and enough infrastructure facilities like water, power, gas, roads, bridges and ports, etc, to attract foreign investment.

Here too the pressures of the donors would not let it go the hold on public sector spending. But then, our current official economic managers have been promising all these last two years that very soon they would liberate the country from the clutches of the IMF. Time has now come for them to keep their promise.