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Towards a Growth and Development Strategy

Towards a Growth and Development Strategy. Planning Commission. Characteristics of Growth in Pakistan. Preoccupation with stabilization and crisis Growth policy by default Aggregation of projects Sectoral focus Result: sporadic growth

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Towards a Growth and Development Strategy

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  1. Towards a Growth and Development Strategy Planning Commission

  2. Characteristics of Growth in Pakistan • Preoccupation with stabilization and crisis • Growth policy by default • Aggregation of projects • Sectoral focus • Result: sporadic growth • Lack of structural reform: declining potential growth rate

  3. Economic Growth 1972 - 2010 Volatility and decline in potential GDP growth Boom – Bust Cycles

  4. Demographic Challenge Projected Population by Age Groups • A bulge in the working age in coming 40 years • Required growth: • 8% per annum to absorb growing labor force 65> Million

  5. Growth Alternatives (2011-15) Stabilization : Reform of PSEs, increase resource mobilization (Average 4.7%) Business as Usual: Low aid-led public investment, high Inflation (Average 3.5 %)

  6. Short Term: Getting back to potential • Utilization of existing capacity • Requires: • Removing major constraints • Energy (Electricity and Gas) • Availability and pricing of credit • Macroeconomic stability

  7. Growth Alternatives (2011-15) Stabilization + Reform: Market reforms & productivity gains (Average 5.6%) Stabilization : Reform of PSEs, increase resource mobilization (Average 4.7%) Business as Usual: Low aid-led public investment, high Inflation (Average 3.5 %)

  8. Economic Growth Longer term: Increasing Potential Physical Capital Human Capital Productivity Public Investment Skills Education Sector based & Project based Missing: Innovation, Entrepreneurship, Markets

  9. Pakistan Lacks Growth Software Hardware Software Source: Global Competitiveness Report

  10. Developing a Growth Strategy • Productivity through economic reforms • Better management of public resources • Better managed PSDP • Restructuring and privatizing PSEs • Consultative process in a federal structure (post 18th Amendment) • Taking feedback from provinces, chambers of commerce and civil society organizations • Building ownership through academia and media

  11. PSDP Resource Allocation Strategy Prioritizing PSDP • Projects nearing completion • Social sector projects • Key infrastructure projects: energy, water, transport • Projects for removing regional disparity PSDP Weaknesses • Decreasing PSDP Size • High share of bricks & mortar (60% of total in 2011) • Money Spread thin (large sectoral & regional spread) • Project governance

  12. Rationalization for Results • Maintaining infrastructure development through a better managed PSDP 1,905 projects withRs 3,057 Billion throw-forward 1,421 projects withRs 2,509 Billion throw-forward

  13. Project Approval Process Improvement Measures • Ongoing: • Modernization of feasibility reports • Project approval (PC-I) stating benchmark parameters for monitoring and evaluation • Proposed: • Harmonize rules of donor agencies with GoP policies • Constitute joint donor – GoP appraisal teams

  14. Need to Restructure Public Sector Enterprises

  15. Ongoing PSE Reform Efforts • Reform of Power sector under implementation • Reform Strategy for Railways formulated • Reforms of Gas Sector under formulation • TCP and PASSCO to be examined for closing down

  16. Pillars of New Growth Strategy Increasing Productivity

  17. Potential Governance Agenda • Civil service reform –structure and incentives to attract talent • Monetized salaries, merit based promotions, and easy entry & exit • Devolution of powers, responsibilities and resources to lower tiers of government for better service delivery • Performance based governance • Business process reengineering with technology (outdated regulations & multiplicity of processing layers)

  18. Markets & Entrepreneurship • Modernize laws and regulations for better markets • Agriculture market committees • Entry of new investment into the engineering sector • Bankruptcy law (legislation drafted) • Deregulating markets e.g. wheat, sugar & commodities exchange (under implementation) • Encouraging innovation through incubation centers, cluster strengthening (e.g. Sialkot, Gujranwala, Wazirabad) • Improving environment for domestic commerce • Taxation regime, rent laws • Legal structures for common property ownership (shops & flats)

  19. Cities as Hubs of Commerce • Reform zoning and building regulations • Two zoning laws • Restrictive limits on heights • Various needs unmet (office space, commerce, flats, warehouses, schools etc.) • Property rights and land markets (issues of titles, taxation structures etc.) • Freeing government land for commercial purposes

  20. Youth & Community • Youth bulge - policy priority • Making social capital available for youth • Community & social infrastructure (libraries, community centers etc.) • Difficult to productively employ growing young labor force • Develop framework for youth self employment

  21. Conclusion • Reform, reform reform! • Focus on productivity • Merit and competition

  22. Pillars of New Growth Strategy Increasing Productivity

  23. Thank You Thank You www.pc.gov.pk

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