To arrest the growing poverty and to achieve more level playing field in the highly competitive world trade after the end of the current year, Pakistan needs to accelerate its economic growth rate to a level matching other developing nations in the region.
However like other developing countries in South East Asia, Pakistan having basically an agrarian economy is continuously faced with natural disasters and is engulfed in economic and political compulsions, largely affecting economy's growth.
The failure of crops due to frequent drought conditions and sometimes owing to heavy floods and the need for frequent enhancement in defence-related expenditures due to the unresolved political conflicts, and above all the external shocks like loss of export markets and vast fluctuations in import and export prices, totally disrupt all development programmes. Thus the country is exposed to heavy fiscal and trade deficits.
Apart from internal and external shocks impeding sustainable growth both in industrial and agriculture sector, lack of infrastructure, specially the availability of utilities at high cost and inequitable and unjust tax and tariff structure and more importantly poor law and order situation and such adverse environments further compounded by political uncertainty and lack of transparency in business practices, are preventing investment in new projects, both from internal and external sources.
In order to survive effectively in the world trade arena after compulsions of the WTO regime are put in place, things will have to be moved on war-footings in order to attract investments in all sectors of economy, both from indigenous and external sources.
No doubt, serious efforts are on for transition towards market economy. In this regard, structural programmes undertaken give signals that the country is struggling to develop its private sector and market institutions and also efforts are visible to rationalize government activities/roles regarding development of public sector projects forming integral part of the infrastructure.
At this juncture, the government's development strategies for industrial, agriculture and service sector must be aimed at increasing Pakistan's share in world trade and gaining increasing integration in global trading system.
In this regard, China's strategy for opening up its economy need to be examined and replicated with necessary modifications. China enhanced its exposure to outside world in early eighties by acquiring the membership of Taiwan into the World Bank and the IMF and also its reacquiring the contracting party status in the General Agreement on Tariffs and Trade (GATT) had resulted in enhancing trade to GDP ratio from 10 to 40 per cent by end of the 80's.
China continued with open door policy and this strategy culminated into its seeking membership of the World Trade Organization (WTO). This move to join the WTO was for gaining external impetus to overcome domestic obstacles to further reforms and protection of its trade interest to sustain its economic growth pattern, which it has achieved.
The immediate result was its gaining permanent status of Most Favoured Nation from USA. No doubt, China has an advantageous position regarding having a large skilled and unskilled cheap labour force and needed infrastructure for all sectors of economy.
This has enabled China to enjoy economies of scale of production of labour intensive industries to the fullest extent specially relating to textile and clothing, which are exportable items and distinguished for lowest corporate cost world wide. Thus China would continue to command a perennial export market for these items.
In the recent past, availability of cheap labour and necessary infrastructure has enabled China to attract direct foreign investment especially from Asia's new industrial economies.
China's getting most favoured nation status and its membership with the WTO would in turn benefit the investing countries. Recent fiscal reforms undertaken by China has further liberated trade through widespread tariff reduction and tax expansion.
Regarding the availability of natural and human resources, Pakistan is placed in similar position, especially its peculiarity for having agrarian economy and a large skilled and unskilled labour force usable both in agriculture and industrial sector.
Recent initiatives on the part of government to develop infrastructure to boost up industrial and SME sector in particular (as is reflected from allocations of Rs.202 billion for current year's public sector development expenditures), promises major spending on construction of dams, canals and roads to ensure regular supply of water and electricity and easy accessibility of agriculture products to urban markets.
A very liberal package announced for farmers should go a long way in boosting up agriculture sector. Easy and cheap availability of credit not only from Zarai Taraqiati Bank, but also from all commercial banks, with various incentives attached with the schemes particularly relating to regular repayment of loans would prompt farmers to make effective use of borrowed money.
Further, the cut and abolition of import duty and tariffs on import of material used in manufacturing of fertilizers and pesticides and also on tractors and tools used in agriculture must substantially reduce cost of agriculture inputs and improve the quality of exportable agriculture and agri-based industrial products, specially of raw cotton and cotton made-ups of all categories. This will enable exporters to compete effectively in global market.
Similarly, the availability of required infrastructure for industrial sector, particularly utilities at lower cost and substantial cut in import duty and very liberal bank credit available both for ongoing and new projects both in large scale and SME sectors and the recent initiatives on the part of government to curb acts of terrorism to improve law and order situation, must speed up industrialization both through indigenous and foreign investment.
Social sector development, which is a bridge linking economic development to peoples prosperity, need to be focussed in all development plans. Investment in human capital by providing quality education in all disciplines and better health environment are needed to have highly skilled and energetic labour force and expertise in latest technology, so as to produce quality goods and services and survive effectively in highly competitive export market.
Similarly, marketing of goods and services within the country would also depend on competitive position with imported goods and services, as tariffs and import duties will no longer be available to discourage influx of imported goods.
It is only the quality and cost of indigenous items, which will give them competitive edge to survive in the market. Diversification of export items is yet another factor giving impetus to China's external trade.
China until late eighties was known for massive manufacturing of low quality goods specially textiles, footwear, toys and other light manufacturing products. Markets of South East Asian developing countries were flooded with these goods, but with the start of nineties, a radical change is witnessed in export items.
Its share in total world's export has risen in almost all categories of goods. Significant rise is noted in export of electronic items, office machinery, telecommunication products, industrial machinery, etc. Of late share of hi-tech items like automated data processing equipment and electronic items has increased to 25 per cent of China's total exports.
Pakistan urgently needs to embark on programme of diversification of export items and their markets in order to enhance or at least retain its share in global market under the WTO regime.
Pakistan can gain from diverting her exports of items to China, which are complementary to Chinese products like cotton yarn, grey cloth, fashion/designer clothes, software, chemical products, etc.
India's exports of software and information technology (IT) related services, which are complementary to China's IT industry have increased by almost 300 per cent over the last six years.
The accession of China to the WTO, which has immensely widened its spectrum of exports would benefit the low income developing countries of South East Asia region who have capability to produce exportable items complementary to Chinese export items specially relating to textiles and IT products. Of late China is coming up for export of furniture items also.
The quality of Pakistani furniture especially of wood carving work and made of marble has already enabled the country to gain wide market in Middle East, as such China can also be taken as potential export market for furniture export, as it would add to the variety of furniture exportable from China.
The speedy growth of Chinese economy is attributed to radical change in its centuries long traditions of having closed door policy. Pakistan is also engulfed in adversities of traditional feudal system, which has directly or indirectly created imbalances and inequalities in all sectors of the economy.
It is especially the absentee landlordism, which is one of the main causes of stagnancy in the growth of agriculture sector. As such there is urgent need of introducing land reforms with special focus on eliminating absentee landlords and ensuring farming by genuine farmers, which is essential to give boost to agriculture industry.
Further, for speedy growth in agriculture, there should be direct link between agriculture research institutes and agriculture universities in the country to enable faculty and students to update their knowledge with the help of research findings. Research programme must focus on improving quality and yield of important crops like cotton, rice, wheat, sugar cane, fruits and vegetables, etc.
China after introducing economic reforms in 1978, apart from opening its door focussed on formation of rural enterprises and private business, and provided incentives to family farms and small private businesses, hence the SME sector employing major portion of labour force made tremendous progress.
Education of work force was also given top priority. As such speedy growth of Chinese economy, apart from its being an outcome of growth in the country's capital assets, such as new factories, manufacturing of machinery and communication system, can also be attributed to investment in human capital.
Accordingly, Pakistan also needs to have due focus on development of farming and non-farming businesses in rural sector. However it should be through private enterprises by making available necessary infrastructure.
At the same time, as a part of human development programme, priority should be given to provide opportunities for skill development in various lines of businesses to labour force in general and particularly for those residing in rural areas.
