Economy Assignment 1

8/6/2019 Economy Assignment 1

http://slidepdf.com/reader/full/economy-assignment-1 1/18

SUBMITTED BY: AHRAZ ALI

ID: 5414

SUBMITTED TO: MR. KHURRAM ARSLAN WASTI



ECONOMY

An economy consists of the economic system of a country or other area, the labor, capital and land

resources, and the economic agents that socially participate in the production, exchange, distribution, and

consumption of goods and services of that area.

(http://en.wikipedia.org/wiki/Economy)

GLOBAL ECONOMY

It refers to the expansion of economies beyond national borders, in particular, the expansion of production

by transnational corporations to many countries around the world. The global economy includes the

globalization of production, markets, finance, communications, and the labor force.

(colours.mahost.org/faq/definitions.html)

OR

The international network of individuals, businesses, governments and multilateral organizations which

collectively make production and consumption decisions.

(globaledge.msu.edu/resourcedesk/glossary.asp)

DEVELOPING ECONOMY

Developing country is a term generally used to describe a nation with a low level of material well being

(en.wikipedia.org/wiki/Developing economy)

OR

A country with a low per capita income, and undeveloped secondary and tertiary sectors.

(kristianseconomics.blogspot.com/2009/11/a2-glossary.html)

Following are 10 major facets of Developing Economy:

y Economically backward ± The developing countries are economically poor and areunable to feed their population or meet their daily requirements of food, shelter and goodhealth.

y Low per capita income ± The per capita income is very low. The purchasing power of

the people is very low. They are unable to buy good clothes and have better standard of living for themselves.

y Lower levels of national income ± The national income levels are also low. Theearnings earned from various sectors are not very high.

y Technologically backward ± The technical know-how is not very advanced as comparedto developed countries. Of course, countries such as India are making much advance inthis sphere of activity also, yet it has a long way to go.



y High rate of population growth ± Developing countries have a high population onaccount of which their economic growth is slower. They have to feed more people whencompared to developed countries, which have lower levels of population.

y Poverty ± There are large number of poor people living in these developing countries onaccount of the huge population. Some of them live in abject poverty.

y

Lower levels of investment ± Industrial growth is at slower pace and level of investmentis not very high in developing countries.y Dependent on f oreign aid ± The developing countries receive international aid from

developed countries to improve their economic conditions. They succumb to thedomination of the developed countries.

y Inf lation ± Inflation rate is high in these countries. Since economic growth is slow andthe general production output is also not very high, goods and service are available at ahigher cost.

The developing countries or economies have too much to achieve in the sphere of industrial andagriculture sphere. They have to make tremendous efforts to feed their millions of people.

(http://www.paggu.com/business/world-economy/10-facets-of-developing-economy)

DEVELOPED ECONOMY

While there is no one, set definition of a developed economy it typically refers to a country with a

relatively high level of economic growth and security. Some of the most common criteria for evaluating a

country's degree of development are per capita income or gross domestic product (GDP), level of

industrialization, general standard of living and the amount of widespread infrastructure. Increasingly

other non-economic factors are included in evaluating an economy or country's degree of development,

such as the Human Development Index (HDI) which reflects relative degrees of education, literacy and

health.

DEVELOPING COUNTRIES

Kofi Annan former Secretary General of the United Nations, defined a developed country asfollows. "A developed country is one that allows all its citizens to enjoy a free and healthy life ina safe environment´

But according to the United Nations Statistics Division: ³There is no established convention for the designation of "developed" and "developing" countries or areas in the United Nationssystem.´

There many countries that are under development out of them we will consider Srilanka andBangladesh.



"Sri Lanka has emerged from a decades-long civil war, and is enjoying an economic revival. It iscurrently the second-fastest growing Asian economy after China, a fact not lost upon the IMF, whichrecently upgraded Sri Lanka to middle income emerging market status.

Like Brazil, Sri Lanka enjoys an adult literacy rate of just over 90&#37. Sri Lanka¶s gross enrolmentratio, which gives an indication of school attendance, is also comparable to that of China.

What is particularly noteworthy of Sri Lanka¶s growth is the narrowness of its gender gap. In theGlobal Gender Gap Report 2010 published by the World Economic Forum, which measures gender-

based disparities on economic, political, education and health-based criteria, Sri Lanka ranked withinthe top 20, the only South Asian country to do so.

Closing the gender gap is not just an issue of gender equity; it is also one of harnessing the currenthuman resource potential, and uplifting the potential of the next generation.

The most important determinant of a country¶s competitiveness is its human talent ± the skills,education and productivity of its workforce. In any country, women account for half of the current

talent base and have a key role in nurturing the next generation."

Sri Lank a's economy is estimated to have grown by 8.5 percent during the second quarter

of 2010 from a year earlier, which is the highest quarterly growth rate recorded since 2002,the government's statistics off ice said.

Agriculture

The statistics office said tea production grew 5.1 percent, rubber 3.9 percent helped by strong prices,while coconut output fell 7.9 percent. Paddy had grown 10.2 percent with the highest ever recorded paddy area during the 'Maha' cultivation season since 1952.

Livestock production had grown 3.2 percent with milk production increasing 9.1 percent to 58.1million litres in the second quarter, helped by the end of war in the eastern province.

Higher costs had reduced chicken production by 5.2 percent and eggs by 0.9 percent.The fishing industry was up 18.3 percent in the second quarter with inland fishing up by 15.7 percentand marine fishing up by 18.6 percent.

Marine fishing was helped by the end of the war, with fish output in the Northern province up by134.1 percent and Eastern province up 45.8 percent. In other areas production had fallen due tomigration of fisherman to the North, the statistics office said.



Industry

Within industry, manufacturing had grown by 8.9 percent. Textile, apparel and leather had growth

7.9 percent, and chemicals, petroleum and plastics by 15.9 percent.

Electricity, gas and water had grown 7.5 percent and electricity generation was up 8.2 percent withhydro power up 37.7 percent and thermal power down 7.1 percent. Higher hydro power output

indicates higher value addition.

Construction had grown 9.3 percent, driven mainly by large scale state projects, the statistics office

said. Cement production had increased 23.5 percent against an 8.7 percent fall a year earlier.

A building material import index showed an increase of 32.1 percent during the quarter against a fall

of 29.3 percent a year earlier. But last year also construction was estimated as having grown by a

positive 5.4 percent.

Services

The 8.8 percent growth in the services sector was driven by wholesale and retail trade, hotels and

communication, the statistics office said.

Export trade had growth 5.0 percent, import trade 13.2 percent against a 22.2 percent drop a year

earlier. Domestic trade was estimated to have grown 7.5 percent.

Hotels and restaurants were estimated to have grown 25.5 percent against a fall on 0.4 percent a year

earlier, when the country was at the height of a war.

Transport and communications had growth 12.9 percent against 5.7 percent last year, with passenger

and goods transport up 13.0 percent. New registrations of motor vehicles were up 78.6 percent

against a decline of 36.2 percent last year.

Port and aviation sector had grown 15.9 percent, posts and telecoms were up 12.1 percent. Banking,

insurance and real estate had grown 8.5 percent up from 5.4 percent. Interest income at banks had

dropped 9.9 percent with falling interest rates.

(http://www.defence.pk/forums/world-affairs/72975-sri-lanka-economy-grows-8-5-percent-2010-a.html )



Bangladesh is primarily an agrarian economy. Agriculture is the single largest producing sector of

economy since it comprises about 30% of the country's GDP and employing around 60% of the total labor

force. The performance of this sector has an overwhelming impact on major macroeconomic objectives

like employment generation, poverty alleviation, human resources development and food security.

Agricultural holdings in Bangladesh are generally small. Through Cooperatives the use of modern

machinery is gradually gaining popularity. Rice, Jute, Sugarcane, Potato, Pulses, Wheat, Tea and Tobacco

are the principal crops. The crop sub-sector dominates the agriculture sector contributing about 72% of

total production. Fisheries, livestock and forestry sub-sectors are 10.33%, 10.11% and 7.33%

respectively.

Meeting the nation's food requirements remains the key-objective of the government and in recent years

there has been substantial increase in grain production. However, due to calamities like flood, loss of food

and cash crops is a recurring phenomenon which disrupts the continuing progress of the entire economy.

(http://www.deshforum.com/showthread.php?tid=1728 )

(http://www.indexmundi.com/bangladesh/gdp_ real_growth_ rate.html)



Introduction

It is indeed great honor and pleasure for me to be spending this morning with you. I am quitecognizant of the fact that this is one of the finest institution Pakistan has and I always keepsaying that if we had institutions like C & SC replicated in our civilian life, the country would bemuch better off, therefore, I commend you and I am sure that all of you would be rising stars of Pakistan Armed Forces and would make a contribution which is badly required for the uplift of the country. Gentlemen! I am going to talk about a subject which practically affects every singlesector of life, which is economy. It underpins every walk of life and there is great deal of interaction between health of economy and the defense forces.

Sectors of Pakistan

There are four sectors of Pakistan¶s Economy:

1- Monetary Sector 2- External Sector 3- Real Sector 4- Other Sector

Monetary Sector Contributes as:

� Discount rate: Discount rate is a rate at which Central Bank discounted the treasury billsof Commercial Banks on certain conditions. Discount rate policy try to control thequantity of money and credit

� NDA &NFA (Net domestic assets and Net foreign assets): Domestic reserves of acountry are called net domestic assets. Foreign reserves of a country are called netforeign reserves.

� Private sector credit: The cumulative private sector credit grew by 4.6 percent during Jul-Feb

FY09 compared with strong growth of 11.7 percent in the corresponding period last year. � Risk and challenges´ The persistence of the global recession and credit market

imperfections is likely to impact firm¶s capacity and propensity to invest globally.� µ

Government budgetary borrowings are increasing.

Conclusion:As new policy statement of SBP tell us the recent situation of discount rate, NDA, NFA, private sector credit and risk and challenges which Pakistan will face in future.

SBP take some measures to control recent position of economy and most important measure of SBPis decrease in discount rate for supporting the real economy activities.

http://www.finance.gov.pk/survey/chapter_10/05_Monetary.pdf



EXTERNAL SECTOR

Following are the major aspects of external sector

y

Exchange rate: The price of domestic currency in terms of foreign currency is calledexchange rate

y Current situation: Sharp deterioration in july-oct FY 09, Improvements in some sector & its reasons, 83.9% Growth in overall external sector, Revival of financial inflows,Increase in foreign reserves, Increase in value of rupee.

y Financial account: Financial account is concerned with classifying measuring &recording the transaction of business mainly it includes investment & its sub parts.

y Investment: Investment means increase in existing stock of capital.

y R emittances: A remittance is a transfer of money by a foreign worker to his home

country.

y Debts & liabilities: External debt & liabilities recovered in 1st quarter & actually fell in

absolute relative term. It implies that EDL grew both in absolute & relative term. EDL

stood at 31% of the projected GDP. Highest increase in absolute term was recorded in

debt stock owed to the IMF as a result of inflow of 3.1$ bn.

y Foreign R eserves: Foreign exchange reserves are only the foreign currency deposits

held by CB & Monetary authorities. These are the assets of the CB held in different

currencies mostly in dollar, euro & yen.

These indicators strongly influence the economy of a country.

REAL SECTOR

There are three major sub sectors in real sector:

1- Agriculture2- Industry3- Services

July 24, 2010. Real sector , the devastating floods in Pakistan ... The Sensitive Price Index of 53items in July 2010 recorded a growth of 13.9% over July...

Source: Economic survey (2009-10) & SBP second quarterly report for FY10

OTHER SECTOR

Other source of income is Foreign Remittances and aid.



An Overview:

Let me give you a brief overview in simple terms as to what the structure of this economy is? In1947, Pakistan had 30 million people with per capita income of 100$. Agriculture accounted for almost 50% of economic output with hardly any Manufacturing, as all industries were located inIndia. Therefore, it was unable to feed 30 million people and was dependent on PL-480 imports fromthe USA. From thereon, Pakistan has come a long way. Today with 170 million people, our per capita income in 2008 was 1000$ which was ten times more. Pakistan is the third largest exporter of rice in the world and producing enough food grains to feed its people. 3 million tons of rice isexported every year by Pakistan which is surplus to our requirements. Pakistan is also one of the fivemajor textile producing countries in the world. So if we measure in relation to where we were vis-à-

vis structure of economy, agriculture has come down from 50% to 20%. Therefore, out of totalnational income, agriculture¶s contribution is just 20%, but instead of being deficient in food production, we are actually surplus and that is what productivity means i.e. by using the same landyou produce more from the same inputs, that is how economic growth takes place. Agriculture is notonly crops, within agriculture there has been a significant change. Livestock, dairy, mutton, beef, poultry and similar other products is 50% of agriculture output in Pakistan. Pakistan also producesthird largest quantity of milk in the world. So within agriculture sector, there is a change i.e. major crops are only 36% of agriculture value added and 14% are minor crops, fisheries, orchards, fruitsand vegetables. Thus, we are moving in a direction where the same land and same resources are being used more efficiently in order to produce more. As a contrast, agriculture is only 2.5% in theUS having a population of 300 million, out of which they not only feed the entire population, but also

export to the rest of the world. Therefore, it is important to understand that when it is said thatagriculture is producing/contributing more, it is the productivity of agriculture rather than the shareof agriculture in GDP. Manufacturing and industry now account for 25% of the income; when werecall there was not even a single industry worth its name at the time of partition. So if we look where we were and where we are, I think the justification for Pakistan in terms of betterment of economic conditions of Muslims in this part is very strong. But where we have failed is that we havenot lived up to our potential. In 1969, Pakistan exports of manufactured goods were higher than thecombined exports of Indonesia, Malaysia, Philippines and Thailand. In 1960¶s Korea emulatedPakistan in its five years planning process. The tragedy is that even a country such as Vietnam whichwas completely devastated by the war has now overtaken Pakistan. Ten years ago, India which wasway behind Pakistan (till 1990¶s) is now way ahead. As an economist and student of globalization,

the biggest challenge is: how can we organize ourselves to reach that position where at least we can

be running not at the nine second a mile but at least ten second a mile race which is going on in theglobal economy. Ten more important challenges facing Pakistan¶s economy are deliberated in thesucceeding paragraphs.



Current Economic Situation of Pakistan according to Pakistan Economic Outlook:

R eal Sector

According to the assessment conducted by the World Bank and Asian Development Bank, the

floods that swept across Pakistan since July 2010 caused an estimated $9.7 billion in damage toinfrastructure, farms, homes, as well as other direct and indirect losses. Agriculture, which is themainstay of the economy, and livestock were the worst affected by the disaster, which seriouslydamaged an already fragile economy. On the macro front, IMF announced a $450 millionimmediate relief package and hinted at the release of $1.7 billion after completion of the fifthreview under the standby arrangement (SBA). The World Bank increased its commitment to $1 billion from $900 million for reconstruction of flood-affected areas.

Large scale manufacturing (LSM) registered a growth of 3.05% during July 2010 over July 2009,contributed mainly by the automobile and electronics industries as consumer durables remainedin high demand. Production of motorcycles, jeeps and cars and tractors grew by 21.6%, 45.1%

and 15.1% respectively while food and textile group contributed negatively.

Inf lation The Consumer Price Index (CPI) of 374 items increased by 15.7% during September 2010, over the corresponding month last year. Prices of essential food items shot up unprecedentedly53.86% during the month of September in the current fiscal year over the same period of previous year mainly on account of floods causing severe damage to agriculture sector anddisrupting food supplies. The Sensitive Price Index of 53 items recorded a growth of 19.5% over September 2009.

Monetary Developments The State Bank of Pakistan (SBP) increased the key policy rate by 50 basis points to 13.5% witheffect from 30 September 2010. The decision to increase the key policy rate was taken in ameeting of the Central Board of Directors of SBP, held under the Chairmanship of the Governor,Shahid H. Kardar. The justifications of this decision were; persistently high inflation especiallythe post flood projections of further high inflation, lower economic growth and the resulting pressures of the government borrowings. The broad monetary aggregate increased by 0.6%during July-September 2010 as compared to the decrease of 0.03% during the same period lastyear. Net government sector borrowings during this period stood at Rs.106.8 billion. Total netgovernment borrowing for budgetary support from the banking system was Rs131.8 billionduring July-September 2010.

Fiscal Position Pakistan¶s revenue collection stood at around Rs1, 330 billion in 2010 while the government hasset the target of Rs 1667 billion for the fiscal year 2010-11. The tax collections till end August2010 recorded Rs 177 billion. According to the World Bank estimates, implementation of theValue Added Tax (VAT) or reformed General Sales Tax (GST) is likely to increase Pakistan¶stax-to-GDP ratio to around 11 percent by fiscal year 2013. The Tax to GDP ratio is currentlyaround 9% which calls for immediate measures, like the reformed GST, to broaden the tax base.



Balance of Payments The country's current account deficit has declined by 7.2% during July-September of currentfiscal year over the corresponding period last year. The current account deficit during the first

quarter of the current fiscal year stood at $0.5 billion as compared to $0.6 billion during the same period last year. The improvement in the current account balance owed largely to the highworkers¶ remittances during this period which compensated the increase in trade deficit. Theexport of goods showed impressive improvement of 13.5% while the imports also grew by10.5% during the period under review.

The workers¶ remittances surged 13.5% during July-September 2010 over the same period lastyear and reached $2.646 billion. In September 2010, $922.06 million were sent home by theoverseas Pakistanis, up by 14.38 percent. The growth in remittances can be attributed to the jointinitiative of the SBP, Finance and Overseas Pakistanis Ministries launching ³PakistanRemittance Initiative (PRI)´. The initiative has started materializing and remittances through

normal channels are showing considerable growth.

The net inflow of foreign investment in Pakistan fell by 28.5% during July-September 2010. Theeconomy witnessed a downward slide in foreign direct investment (FDI) by 9.5%. Thedeteriorated law and order situation, fragile political climate and the prolonged war on terror have been the deterrents to the new investment ventures in the country.

R ef orms The government postponed the implementation of Reformed General Sales Tax (RGST) till 1st December 2010 in order to build further consensus.

The ministry of commerce agreed in principle to levy a flood surcharge of around 1 percent onimports to generate up to Rs50 billion

Tags: Pakistan Economic Outlook Categories:Location: Blogs Economic Outlook

Ref: http://115.186.133.2/pcportal2.0/Blogs/tabid/56/EntryId/8/Pakistan-Economic-Outlook-

September-2010.aspx



Data In Figures:

GDP (purchasing power parity)

$451.2 billion (2010 est.)$439.4 billion (2009 est.)note: data are in 2010 US dollars

GDP (off icial exchange rate)

$174.8 billion (2010 est.)

GDP - real growth rate

2.7% (2010 est.)4.3% (2009 est.)

GDP - per capita (PPP)

$2,400 (2010 est.)$2,400 (2009 est.)$2,400 (2008 est.)note: data are in 2010 US dollars

GDP - composition by sectoragriculture: 21.8%industry: 23.6%services: 54.6% (2010 est.)

Labor f orce

55.77 millionNote: extensive export of labor, mostly to the Middle East, and use of child labor (2010 est.)

Labor f orce - by occupation

Agriculture: 43%Industry: 20.3%Services: 36.6% (2005 est.)



Unemployment rate

15% (2010 est.)14% (2009 est.)

note: substantial underemployment exists

Investment (gross f ixed)

15% of GDP (2010 est.)

Budget

R evenues: $25.33 billionExpenditures: $36.24 billion (2010 est.)

Public debt

49.9% of GDP (2010 est.)49.3% of GDP (2009 est.)

Inf lation rate (consumer prices)

13.7% (2010 est.)13.6% (2009 est.)

Central bank discount rate

14% (31 December 2010)12.5% (31 December 200)

Stock of domestic credit

$71.45 billion (31 December 2010 est.)$63.1 billion (31 December 2009 est.)

Industries

Textiles and apparel, food processing, pharmaceuticals, construction materials, paper products,fertilizer, shrimp



Industrial production growth rate

4.9% (2010 est.)

Oil - production 59,140 bbl/day (2009 est.)

Oil - consumption

373,000 bbl/day (2009 est.)

Oil - proved reserves

436.2 million bbl (1 January 2010 est.)

Natural gas - proved reserves

840.2 billion cu m (1 January 2010 est.)

Current Account Balance

-$2.641 billion (2010 est.)-$3.583 billion (2009 est.)

Agriculture - products

Cotton, Wheat, Rice, Sugarcane, Fruits, Vegetables, Milk, Beef, Mutton, Eggs

Exports

$20.29 billion (2010 est.)$18.33 billion (2009 est.)

Exports - commodities

Textiles (garments, bed linen, cotton cloth, yarn), rice, leather goods, sports goods, chemicals,manufactures, carpets and rugs





Market value of publicly traded shares

$33.24 billion (31 December 2009)$23.49 billion (31 December 2008)

Exchange rates Pakistani rupees (PKR) per US dollar - 85.27 (2010), 81.7129 (2009), 70.64 (2008), 60.6295(2007), 60.35 (2006)

(http://www.indexmundi.com/pakistan/economy_profile.html)

We Consume More and Save Less.

Out of every hundred rupees of our national income, we consume 85 rupees and save only 15 rupees,which means that the amount of money which is available to invest for economic growth andadvancement is too little. Because to grow by 6%, you need at least 24-25% investment rate - and if you want to rely on domestic savings, your saving rate should be 25%. India¶s saving rate was aboutthe same, but last year they\ recorded 34% saving rates. China¶s saving rate is 50%, so this is thecontrast as to why we are in serious difficulty because as a nation this is a problem which we have torecognize. We have to at least double on savings rate otherwise we will remain dependent on foreign\sources.

We Import More and Export Less.

Till 2007-2008, 80% of our imports were financed by our export earnings. This ratio has come downto only 50%, it may go up to 60% but a gap of 40% of financing needs in order to keep with theimport level still exists. As a nation we prefer to use even the basic commodities of foreign countriesrather than locally manufactured goods. Unless we do not change this attitude of preferring theimported goods we have to keep on relying on outsiders to fill in this gap b/w our imports andexports. Relying on outsiders¶ means that there are cycles, ups, and downs i.e. when things are good,one gets financing, and when things are bad one starves for financing. No nation which strives to preserve its honor must go through this particular route.

Our Share in the World Trade is Shrinking.

In 1990, Pakistan¶s share was 0.2% of the world trade. After 20 years it has come down to 0.12% in a

very buoyant world economy. World trade has been growing faster as compared to the world output.India in the same period had doubled its share from 0.7% to 1.4%, while Pakistan is going the other way and that is the reason why exports/imports imbalance is increasing We are not taking advantageof the opportunities which a buoyant world economy is providing. Pakistan is stuck with only a fewcommodities ± textiles, leather, rice, sports, goods and the surgical goods.



We Are Facing Energy and Water Shortages.

Another challenge we face today is energy and water shortages, and that is not because we are notgenerating enough electricity or we are not having enough water. With the losses of KESC from the point it has generated to the point they realize the billing is 45%, so 55%people are paying for thosewho are stealing the electricity. Government of Pakistan out of its own limited resources is paying200 billion rupees every year as subsidies for electricity. Our industry is at a disadvantage that theyget the orders from foreign countries but they cannot execute the orders because there are electricityoutages.

Lack of Continuity

Every government whether military or civilian starts with a clean slate, as if nothing happened beforethem and nothing will happen after them. This is not the way the real world works. You take the projects and programmes which were initiated by the previous governments, evaluate them as towhat the strengths and weaknesses were, fix those weaknesses and carry them forward. It will takeonly few years to bring these inherited projects to completion and the country will benefit from new

motor ways, new ports, highways, educational institutions etc.

Political Stability, Law and Order/Security

The overall arching theme is that for a downfall in an economy, we should have political stability,law and order and security. The Armed Forces of Pakistan deserve gratitude for what they have donein Malakand Division to bring about stability as far as the law and order situation is concerned. In2007, Pakistan was one of the most favorite countries among the international investor community.

Summing up all of the above topics, we have to decide that how can we overcome these challengesand problems and improve our economy? A lot has been written and talked about, but I will focus ononly a few action points.

Change in National Psyche and Mindset.

We as a nation are too much negative oriented and too much cynical where we find everything wrongin this country. Unless we change our mindset and unless everybody who is doing what he issupposed to do, carries out his or her task with sincerity and honesty, we are not going to goanywhere. We should not expect any Messiah to come and fix our problems we have to do itourselves individually and collectively. There are no short cuts available. Media is muddying thewater by their sensational stories and inviting so called experts who contribute in projecting negativethinking and negative national psyche. Unless we have a positive ³can do´ mentality, it will bedifficult to progress. Unless each one of us changes our mindset rather than blame the government

and the system, we are not going to go anywhere in this race for global economic survival. This iseasier said than done. But I expect our younger generation to be more responsive and responsible.



Building up of Human Capital

There is no substitute to building up human capital. Private sector, public sector, NGOs, localcommunities, philanthropists etc, all here to put their hands on deck and participate in making surethat every child goes to school. Every high school graduate has some technical and vocational skill or goes for higher education. Unless we build up human capital, we are just going to be left behind because the world economy is going to be a knowledge based economy. It is not an economy whereyou memorize material or reproduce that in the exam and forget about it - that is no longer the case.One has to acquire the knowledge and use it in order to apply to problem solving. This is a new paradigm where human capital is as important as machinery and equipment. Pakistan lags behindother countries in the institutions, infrastructure and incentives for human capital formation. We haveno choice but to accelerate the pace to catch up with others.

Use of Technology

The technology is spreading like a wild fire. How many people five years ago could have thoughtthat even in a small towns and villages of Pakistan, one would access to mobile telephones. 102.777

million Active SIM cards in Pakistan. You can use this technology in order to provide those bankingservices, information on climate/weather, agriculture extension, health, education etc. It is a powerfultool which can leapfrog a lot of time which we have wasted. Using technology particularly theinformation/communication technology for the betterment of social and economic problems of Pakistan is something which needs to be done but it cannot be done the way we havecompartmentalized this into different ministries. A more holistic and comprehensive approach thatdeploys technology for poverty reduction has to be put in place.

Governance and Decentralization

As the population is increasing, one cannot govern Pakistan sitting in Islamabad, Karachi, Lahore,

Peshawar or Quetta. One has to devolve powers, decentralize and delegate authority, provideresources to the local/district governments so that they can take decisions at their own. Thosedecisions would be very much in accordance with the requirements and the needs of thosecommunities. Sitting in Islamabad one cannot visualize what is needed in Chaghi, Thar and Loralai, but the people in Loralai, Chaghi and Thar know exactly whether they need water, fertilizers or fruit processing industry. Let us devolve powers to the people at the grassroots level and there would bemuch better allocation and utilization of resources.

There must, however, be accountability of the local governments by the provincial governments andof provincial governments by the federal government but not interference or usurpation of powers. If we do that, then a lot more can happen with same amount of resources which are being wasted today,and the economic growth rate can be raised from 6-7 percent average to 8-9 percent annually.

Thank You

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Economy Assignment 1

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