May 21, 2006	Sunday	Rabi-us-Sani 22, 1427

KARACHI, May 20: The Social Policy and Development Centre’s (SPDC) annual report for 2005-06 entitled “Trade liberalisation: growth and poverty” suggests that if the process of further trade liberalisation is accompanied by other appropriate policies, including pro-poor fiscal policies, it can help alleviate poverty in Pakistan.

Since its inception five years ago, the SPDC, a CIDA-funded and a well-reputed private research and economic consultancy service, releases its annual reports regularly in the last week of December every year. It took more than five months this year for the release of the report at a gathering chaired by former finance and foreign minister Sartaj Aziz, who is vice-chairman of the SPDC. The guest of honour was Canadian High Commissioner David B. Collins, while Builquis Edhi, a noted social worker, was the special guest.

The report picks up one aspect of globalisation — the liberalisation of external trade regime — and examines its impact on growth and poverty in Pakistan. The report places the ongoing worldwide debate on the interactions between greater trade liberalisation, growth and poverty in the context of Pakistan.

In his presentation, SPDC acting managing director Dr Shaghil Ahmad said empirical results of the report indicated that there was an important channel through which trade liberalisation had a poverty reducing effect. “This is through its positive impact on investment and productivity and thereby growth,” he added.

Pakistan being a developing country of Asia has least access to the markets of developed countries and is faced with highest trade restrictions.

Highlighting the findings of the review, Mr Shaghil said that it was true that trade liberalisation had positive impact on investment and productivity and thereby growth, but at the same time the adjustment costs associated with trade liberalisation to a large extent had suppressed its benefits.

He said a substantial trade liberalisation had taken place in the country since the late 1980s and presently Pakistan had one of the lowest import tariffs among the Saarc countries except Sri Lanka.

Mr Shaghil pointed out that overall trade had increased but the export performance had not been impressive, as the export ratio to the GDP stood at 0.2pc, which was the lowest in the region.

He identified the negative impact of trade liberalisation that resulted in a reduction in collection of custom duties and thus overall tax revenues which impacted negatively on pro-poor development expenditures.

Sartaj Aziz while answering queries of the participants said that if the ratio of direct taxes was increased then only the upcoming budget could be considered a pro-poor budget.

Besides, he said, there should be safety allocations for those impacted by the trade liberalisation. He suggested that higher investment of more than 25pc to the GDP would be needed to maintain the growth rate of seven to eight per cent per annum.