47453143 lecture 6 overview of pakistan economy

7/31/2019 47453143 Lecture 6 Overview of Pakistan Economy

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Dr. Umar FarooqDr. Umar Farooq(Faculty Member)(Faculty Member)

DSDS--202/511: Rural Development Issues and Perspectives202/511: Rural Development Issues and Perspectives

Overview of Pakistan EconomyOverview of Pakistan Economy

Institute of Development StudiesInstitute of Development StudiesIQRA University, Islamabad CampusIQRA University, Islamabad Campus

IslamabadIslamabad


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FormatFormatInitial phase of Econ. Development (1947Initial phase of Econ. Development (1947--1958)1958)

Economic Development in 1960sEconomic Development in 1960s



Economic Development during 1990Economic Development during 1990--19971997

Economic Development between 1997 and 1999Economic Development between 1997 and 1999

Economic Development during 2000sEconomic Development during 2000s


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Initial Phase of Economic DevelopmentInitial Phase of Economic DevelopmentAt the time of independenceAt the time of independence

NonNon--existence of industrial sector and tradeexistence of industrial sector and trade ------ (previously Hindus)(previously Hindus)Majority of the population attached with agricultureMajority of the population attached with agriculture

Traders settled in KarachiTraders settled in Karachi

It was thought that the foreign trade sector would play anIt was thought that the foreign trade sector would play animportant role in the development of the countryimportant role in the development of the country

Bulk of primary agricultural commodities exported duringBulk of primary agricultural commodities exported duringKorean BoomKorean Boom

On import side, highly liberal policy adopted by offering variousOn import side, highly liberal policy adopted by offering variousincentivesincentives

To promote industrial sector, Pakistan Industrial DevelopmentTo promote industrial sector, Pakistan Industrial DevelopmentCorporation (PIDC) was set upCorporation (PIDC) was set up

Traders invested in textile by importing textile machinery. PIDCTraders invested in textile by importing textile machinery. PIDCtried to establish sugar, match and woolen and paper mills intried to establish sugar, match and woolen and paper mills inWest Pakistan. The Jute factories were installed East PakistanWest Pakistan. The Jute factories were installed East Pakistan


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Initial Phase of Economic DevelopmentInitial Phase of Economic DevelopmentAfter Korean War government imposed restrictions on importsAfter Korean War government imposed restrictions on imports

According to Pepnik, According to Pepnik, The rate of profit on industrial investmentThe rate of profit on industrial investmentwas so high that investor was in a position to meet the amount ofwas so high that investor was in a position to meet the amount ofhis investment in the period of one to two yearshis investment in the period of one to two years..

On the other side, agriculture sector was totally neglectedOn the other side, agriculture sector was totally neglected

The prices of agricultural commodities kept depressed in orderThe prices of agricultural commodities kept depressed in order

to ensure cheaper supply of raw products to infant industriesto ensure cheaper supply of raw products to infant industriesWith the passage of time, terms of trade went againstWith the passage of time, terms of trade went againstagricultureagriculture

As a result inefficient industries were established dueAs a result inefficient industries were established due

to highly protective policiesto highly protective policies


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Initial Phase of Economic DevelopmentInitial Phase of Economic DevelopmentA number of measures/events took place during 1950sA number of measures/events took place during 1950s

There was no clear cut strategy of economic development and planning inThere was no clear cut strategy of economic development and planning inthe countrythe country

Colombo and 1Colombo and 1stst five year plan was nothing more than the developmentfive year plan was nothing more than the developmentwishes written in the paperswishes written in the papers

The refugee settlement problem, the severe enmity with India as forcedThe refugee settlement problem, the severe enmity with India as forced

the country to divert maximum resources to defense.the country to divert maximum resources to defense.The political instability caused frequent change of the governments andThe political instability caused frequent change of the governments andstrong hold of feudals in the economic and political life of the countrystrong hold of feudals in the economic and political life of the countrywere serious obstacles in countrys developmentwere serious obstacles in countrys development

Unstable governments, corrupt administration and vested interestsUnstable governments, corrupt administration and vested interestsalways deprived the government from revenues.always deprived the government from revenues.

All the industrial development was based on heavy subsidies andAll the industrial development was based on heavy subsidies andconcessions awarded and industrial setup was confined to consumerconcessions awarded and industrial setup was confined to consumergoods, whereas the establishment of large industrial units in iron andgoods, whereas the establishment of large industrial units in iron andsteel sectors etc. were not taken placesteel sectors etc. were not taken place

There was a heavy reliance on the foreign aid and assistanceThere was a heavy reliance on the foreign aid and assistance

The social sector was completely ignoredThe social sector was completely ignored


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Over stressing industrialization over agriculturalOver stressing industrialization over agriculturaldevelopmentdevelopment

Heavy dependence on private sector for industrializationHeavy dependence on private sector for industrialization

Granting tax holidays to investors for the sake of industrialGranting tax holidays to investors for the sake of industrialdevelopmentdevelopment

Establishment of import substituting industriesEstablishment of import substituting industries

Ignorance of agriculture sectorIgnorance of agriculture sector

Depressing prices of agricultural productsDepressing prices of agricultural products

Installation of inefficient industrial structureInstallation of inefficient industrial structure

Greater emphasis on indirect taxes rather than direct taxesGreater emphasis on indirect taxes rather than direct taxes

Little regard to education, health, social welfare and humanLittle regard to education, health, social welfare and humanresource developmentresource development

Initial Phase of Economic Development:Initial Phase of Economic Development:Adopted ApproachesAdopted Approaches


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A

griculture sector share fall from 53.2% in 1949A

griculture sector share fall from 53.2% in 1949--50 to50 to45.8% in 195945.8% in 1959--6060

High growth targets in agriculture sector achievedHigh growth targets in agriculture sector achieved

The manufacturing sector share rose from 7.8% in 1949The manufacturing sector share rose from 7.8% in 1949--5050to 12% in 1959to 12% in 1959--6060

Annual imports increased from USD 276 Million in 1949Annual imports increased from USD 276 Million in 1949--5050to USD 379 Million in 1959to USD 379 Million in 1959--6060

Annual exports fell from USD 171 Million in 1949Annual exports fell from USD 171 Million in 1949--50 to USD50 to USD160 Million in 1959160 Million in 1959--6060

Loan burden rose from USD 0 in 1949Loan burden rose from USD 0 in 1949--50 to USD 145 Million50 to USD 145 Millionin 1959in 1959--6060

Population growth remained sustained at 2.5%Population growth remained sustained at 2.5%

The unstable political scenario culminated at taking up theThe unstable political scenario culminated at taking up the

government by General Ayub Khangovernment by General Ayub Khan

Initial Phase of Economic Development:Initial Phase of Economic Development:Achievements and NonAchievements and Non--AchievementsAchievements


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Tight economic measures taken byA

yub regimeTight economic measures taken byA

yub regimeMonetary policy tightenedMonetary policy tightened

Deficit financing reducedDeficit financing reduced

Imposing control over prices and profitsImposing control over prices and profits

Bureaucratic and technocrats control over decisionBureaucratic and technocrats control over decision

making process increasedmaking process increased

HarvardApproach adoptedHarvardApproach adopted ------ increased role ofincreased role ofprivate sectorprivate sector

Foreign assistance and loan was accorded inevitableForeign assistance and loan was accorded inevitable



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Strategy of increasing income of the rich people so that theyStrategy of increasing income of the rich people so that theyshould invest high profits into industrialization for achievingshould invest high profits into industrialization for achievinghigh industrial growthhigh industrial growth

Initial control over price, profits and imports abolished at laterInitial control over price, profits and imports abolished at laterstages. The number of imported goods on free list wasstages. The number of imported goods on free list was

increased.increased.Rather than adopting Export Bonus Scheme, MultipleRather than adopting Export Bonus Scheme, MultipleExchange rate system was followed to facilitate importersExchange rate system was followed to facilitate importers

IMF and WB pressurized for currency devaluation but notIMF and WB pressurized for currency devaluation but notacceptedaccepted

In the 3In the 3rdrd 55--years plan, priorities were given to export orientedyears plan, priorities were given to export orientedand import substituting industries. Agriculture sectorsand import substituting industries. Agriculture sectorsimportance recognized in the planimportance recognized in the plan

Neglecting social sector items like health, education, housing,Neglecting social sector items like health, education, housing,safe drinking water, communication, energy, water andsafe drinking water, communication, energy, water andsanitationsanitation

Economic Development in 1960s:Economic Development in 1960s:Adopted ApproachesAdopted Approaches


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Overall growth rate of GDP was 9.8% and GNP as 9.9%Overall growth rate of GDP was 9.8% and GNP as 9.9%Overall growth rate in agriculture sector was 9.5%Overall growth rate in agriculture sector was 9.5%

Overall growth rate in manufacturing was 11.3%Overall growth rate in manufacturing was 11.3%

Agriculture sector share further fell to 38.9%Agriculture sector share further fell to 38.9%

The manufacturing sector share further rose to 16%The manufacturing sector share further rose to 16%

Exports rose to USD 338 Mill. & imports to USD 690 Mill.Exports rose to USD 338 Mill. & imports to USD 690 Mill.

Loan burden rose to USD 2959 Million and debt servicesLoan burden rose to USD 2959 Million and debt servicesexpenses to USD 179 Million in 1969expenses to USD 179 Million in 1969--7070

Population growth rate increased to 2.93%Population growth rate increased to 2.93%

The rate of inflation was 4.1% in 1969The rate of inflation was 4.1% in 1969--7070Fall in agricultural production in 1965Fall in agricultural production in 1965--6767

Severe shortage of sugar in 1967Severe shortage of sugar in 1967--6868

Unequal distribution of income increased. Trickle down effectUnequal distribution of income increased. Trickle down effect

failedfailed

Economic Development in 1960s:Economic Development in 1960s:Achievements and NonAchievements and Non--AchievementsAchievements


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Fall ofAyub regime in 1969 and Gen. Yahya Khan took theFall ofAyub regime in 1969 and Gen. Yahya Khan took the

regime as Chief Martial Law Administratorregime as Chief Martial Law Administrator

War with India in 1971 and separation of East Pakistan onWar with India in 1971 and separation of East Pakistan on2020thth December 1971 under the leader ship of Z.A. ButtoDecember 1971 under the leader ship of Z.A. Butto

Z.A. Bhutto government toppled down on 5Z.A. Bhutto government toppled down on 5thth July 1977July 1977

Martial law period of General ZiaMartial law period of General Zia--ulul--Haq continuedHaq continuedduring 1970sduring 1970s

Challenges to Bhutto Government:Challenges to Bhutto Government:

To reconstruct the depressed and war affected economyTo reconstruct the depressed and war affected economy

To effectively deal with recessionary tendencies inTo effectively deal with recessionary tendencies inagricutlure and industrial sectorsagricutlure and industrial sectors

Search for new markets for textile sectorSearch for new markets for textile sector

Severe deficits in Balance of PaymentsSevere deficits in Balance of Payments

The IMFs strong pressure to devalue currencyThe IMFs strong pressure to devalue currency



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Introduction of Structural ChangesIntroduction of Structural Changes ------ Equality andEquality andequity is the corner stone of overall economic prosperityequity is the corner stone of overall economic prosperity

Drastic shifting from market economy to State CapitalismDrastic shifting from market economy to State Capitalism

Removal of regional disparities, unemployment, illiteracyRemoval of regional disparities, unemployment, illiteracy

Provision of basic health, water, education and recreation toProvision of basic health, water, education and recreation tomassesmasses

Slogan of From Growth to RedistributionSlogan of From Growth to Redistribution

Nationalization of banks, educational institutions, large scaleNationalization of banks, educational institutions, large scalemanufacturing units, ghee mills etc.manufacturing units, ghee mills etc.

Primate monopolies abolished in the market for cheaperPrimate monopolies abolished in the market for cheaperavailability of consumer goodsavailability of consumer goods

Wage security and higher wages considered as source ofWage security and higher wages considered as source ofproductivity increase and employment generationproductivity increase and employment generation

AU

AU--turn by Zia governmentturn by Zia government

Economic Development in 1970s:Economic Development in 1970s:Approaches AdoptedApproaches Adopted


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Structural changes in the economy introducedStructural changes in the economy introduced

Shifting from Medium Term Development Planning to AnnualShifting from Medium Term Development Planning to AnnualDevelopment PlansDevelopment Plans

Introduction of reforms in the land, education, industrialIntroduction of reforms in the land, education, industrial

labor, banking and administration sectorslabor, banking and administration sectors

Under administrative reforms, civil services were controlledUnder administrative reforms, civil services were controlled

Under IMF pressure currency was devaluedUnder IMF pressure currency was devalued

Export Bonus Scheme Introduced and Multiple ExchangeExport Bonus Scheme Introduced and Multiple Exchange

Rate System abolishedRate System abolished

Support price system introduced in the agriculture sector toSupport price system introduced in the agriculture sector toincrease agricultural productionincrease agricultural production

Strengthening of trade unionsStrengthening of trade unions

Economic Development in 1970s:Economic Development in 1970s:Adopted ApproachesAdopted Approaches


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PPP tried to implement socialism with increased role ofPPP tried to implement socialism with increased role ofpublic sector.public sector.

Emphasis shifted from establishing consumer basedEmphasis shifted from establishing consumer basedindustries to installation of Steel Mill in the countryindustries to installation of Steel Mill in the country

In social sector, more emphasis laid on education, waterIn social sector, more emphasis laid on education, water

supply, water sanitation, electricity and road undersupply, water sanitation, electricity and road underPeoples Works ProgramPeoples Works Program

Introduction of Integrated Rural Development ProgramIntroduction of Integrated Rural Development Programto increase agricultural production in the countryto increase agricultural production in the country

National Development Volunteer Program (NDVP wasNational Development Volunteer Program (NDVP wasintroduced to address unemployment problemintroduced to address unemployment problem

Because of rising inflation, industrial workers andBecause of rising inflation, industrial workers andgovernment employees faced lot of problems. PPPgovernment employees faced lot of problems. PPPgovernment took no measures to control inflation and/orgovernment took no measures to control inflation and/or

compensating these affected sections of the societycompensating these affected sections of the society

Economic Development in 1970s:Economic Development in 1970s:PPP Governments Economic StrategyPPP Governments Economic Strategy


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Liberal import policy resulted in industrial expansionLiberal import policy resulted in industrial expansion

Due to nationalization policies, the role of private sectorDue to nationalization policies, the role of private sectorin industrialization fell rapidlyin industrialization fell rapidly

Diversion of resources from manufacturing toDiversion of resources from manufacturing topurchasing land and gold and constructing shoppingpurchasing land and gold and constructing shoppingplazasplazas

Sluggish industrial development affected agri. SectorSluggish industrial development affected agri. Sector

also. Frequent incidence of floods, insect attack, alsoalso. Frequent incidence of floods, insect attack, alsoaffected the sectoraffected the sector

Economic Development in 1970s:Economic Development in 1970s:Achievements and NonAchievements and Non--AchievementsAchievements


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Incentive to private sector to revive their confidenceIncentive to private sector to revive their confidenceReduced interest rate and economic control, deReduced interest rate and economic control, de--nationalizationnationalization

Ginning factories, flour mills, rice husking mills first returnedGinning factories, flour mills, rice husking mills first returned

Introduction of tax rebate to exporters, SetIntroduction of tax rebate to exporters, Set--up of Exportup of Export

Processing Zones for attracting local & foreign Pak. investmentProcessing Zones for attracting local & foreign Pak. investment

Subsidies on agricultural inputs (fert., pesticide, seed, tractors)Subsidies on agricultural inputs (fert., pesticide, seed, tractors)

The process of Islamization of Economy initiatedThe process of Islamization of Economy initiated

Introduction of Zakat system on 10Introduction of Zakat system on 10thth February 1979February 1979

Introduction of interest free banking in the form of PLS a/c.Introduction of interest free banking in the form of PLS a/c.

Institutions like NIT, HBFC, ICP started working onInstitutions like NIT, HBFC, ICP started working on

Mudarba rather than interestMudarba rather than interest

Economic Development in 1970s:Economic Development in 1970s:Zia RegimeZia Regime--I (1977I (1977--80)80)


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Increase in exportsIncrease in exports6.4% growth rate in 19766.4% growth rate in 1976--77 to 6.5% in 197977 to 6.5% in 1979--8080

Increase in remittancesIncrease in remittances

The deficit in the Balance of Payments not decreasedThe deficit in the Balance of Payments not decreased

Budget deficit also increase, heavy deficit financingBudget deficit also increase, heavy deficit financingapproach adoptedapproach adopted

Gap between investment and saving sustained and levelGap between investment and saving sustained and levelof savings remained poorof savings remained poor

Private investment 4.73% of GNP in 1977Private investment 4.73% of GNP in 1977--78, 4.89% in 197978, 4.89% in 1979--8080

Private saving 11.25% of GNP in 1977Private saving 11.25% of GNP in 1977--78 to 9.05% in 197978 to 9.05% in 1979--8080

The share of large scale industries, 19.61% of GNP in 1976The share of large scale industries, 19.61% of GNP in 1976--77 to77 to15.08% in 197915.08% in 1979--8080

Low savings due to investment of remittance on luxuries andLow savings due to investment of remittance on luxuries andimported goods and increase in corruptionimported goods and increase in corruption

Economic Development in Zia Regime:Economic Development in Zia Regime:Achievements and NonAchievements and Non--AchievementsAchievements


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Private investment could not be boosted, because:Private investment could not be boosted, because:Higher costs of investmentsHigher costs of investments

High interest chargesHigh interest charges

Defective taxation systemDefective taxation system

Lower returns from investmentLower returns from investmentLimited market for many commoditiesLimited market for many commodities

Higher profits in commerceHigher profits in commerce

Tension between employers and employeesTension between employers and employees

Lack of facilities pertaining to infrastructureLack of facilities pertaining to infrastructurePerhaps greater demands for freedom by the investorsPerhaps greater demands for freedom by the investors

Sluggish industrial development affected agri. SectorSluggish industrial development affected agri. Sectoralso. Frequent incidence of floods, insect attack, alsoalso. Frequent incidence of floods, insect attack, alsoaffected the sectoraffected the sector

Economic Development in Zia Regime:Economic Development in Zia Regime:Achievements and NonAchievements and Non--AchievementsAchievements


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PeriodPeriod--II of ZiaII of Zia--ulul--Haq GovernmentHaq Government(1981(1981--85)85) ------ (Martial Law + Controlled(Martial Law + ControlledDemocracy)Democracy)

Prime Minister M. Khan JunejosPrime Minister M. Khan JunejosDemocratic Period (1986 to May 1988)Democratic Period (1986 to May 1988)

Prime Minister Benazir Bhuttos PeriodPrime Minister Benazir Bhuttos Period(Dec. 1988 to August 1990)(Dec. 1988 to August 1990)

Economic Development in 1980s:Economic Development in 1980s:Three Governments PeriodThree Governments Period


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Previous policies of building built private sectors confidencePrevious policies of building built private sectors confidenceto attract domestic investment continued. Two broadto attract domestic investment continued. Two broadcategories of inducements offered to private investorscategories of inducements offered to private investors

Measures to increase postMeasures to increase post--tax profits through offering tax holidays andtax profits through offering tax holidays andaccelerated depreciation allowancesaccelerated depreciation allowances

Facilitated utilization of capital like duty free imports of capitalFacilitated utilization of capital like duty free imports of capital

equipment and credit availability at low interest ratesequipment and credit availability at low interest ratesDespite these, the private sectors response was poor, especially inDespite these, the private sectors response was poor, especially inmanufacturing. Rather private sectors emphasis shifted to real estate.manufacturing. Rather private sectors emphasis shifted to real estate.

Some reasons of reluctance of private sector were:Some reasons of reluctance of private sector were:Uncertainty of Buttos future between 1977Uncertainty of Buttos future between 1977--79 and Zias79 and Zias

apprehensions regarding transfer of power by Zia to civiliansapprehensions regarding transfer of power by Zia to civiliansShortly after Buttos execution, Soviet invasion on Afghanistan createdShortly after Buttos execution, Soviet invasion on Afghanistan createdregional instabilityregional instability

Movement for restoration of democracy started in the countryMovement for restoration of democracy started in the country

After MRD failure, decision of controlled Martial law by inductingAfter MRD failure, decision of controlled Martial law by inductingcivilians in governmentcivilians in government

Fear of nationalization continuedFear of nationalization continued

Economic Development in 1980s:Economic Development in 1980s:PeriodPeriod--II of Zia Govt. (1981II of Zia Govt. (1981--85)85)


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Fear of nationalization continuedFear of nationalization continued

Despite insistence from industrialists, banks were not deDespite insistence from industrialists, banks were not de--nationalizednationalized

Islamic reforms increased the power of banks to intervene by new companyIslamic reforms increased the power of banks to intervene by new companyordinance in 1984ordinance in 1984

Taxation structure remain unchanged and discouraged big investorsTaxation structure remain unchanged and discouraged big investors

Energy crisis also played significant role in discouraging investmentEnergy crisis also played significant role in discouraging investment

A dramatic increase in remittances from the Middle East due to delinkingA dramatic increase in remittances from the Middle East due to delinkingof rupee with dollar in January 1982. By 1984, remittances became theof rupee with dollar in January 1982. By 1984, remittances became thelargest source of foreign exchange earningslargest source of foreign exchange earnings

Due to high remittances, living style abruptly changedDue to high remittances, living style abruptly changed

Due to rapid urbanization and rise in income, the demand for electricityDue to rapid urbanization and rise in income, the demand for electricityincreased. Energy supply increased at 11% visincreased. Energy supply increased at 11% vis----vis demand increase by 24%.vis demand increase by 24%.Investment in real estate also played a role in it.Investment in real estate also played a role in it.

Good weather conditions gave high agricultural yieldsGood weather conditions gave high agricultural yields

Resulted in record production of four major crops, i.e. wheat, cotton, rice andResulted in record production of four major crops, i.e. wheat, cotton, rice andsugarcane in 1981 & 1982sugarcane in 1981 & 1982

SelfSelf--sufficiency in wheat achievedsufficiency in wheat achieved

Agricultural Prices Commission established in 1983Agricultural Prices Commission established in 1983

DeDe--rationing of wheat and sugar from ration depotsrationing of wheat and sugar from ration depots



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1977 land reforms also cancelled1977 land reforms also cancelled

Provision of basic health, water, education and recreation to massesProvision of basic health, water, education and recreation to masses

Economic Problems Faced:Economic Problems Faced:

Low saving potentials. Domestic saving rate fell to 5.4% in 82Low saving potentials. Domestic saving rate fell to 5.4% in 82--8383

Shortages in energy sector developed. NonShortages in energy sector developed. Non--construction of Kalabagh damconstruction of Kalabagh dam

Rapid urbanization and rise in income, the demand for electricityRapid urbanization and rise in income, the demand for electricityincreased. Energy supply increased at 11% visincreased. Energy supply increased at 11% vis----vis demand rise by 24%vis demand rise by 24%

Since 1980, both industrial and domestic consumers faced electricitySince 1980, both industrial and domestic consumers faced electricityshortageshortage

1977 Land Reforms Cancelled.1977 Land Reforms Cancelled.

Private sector role reduced. No commendable response from privatePrivate sector role reduced. No commendable response from private

sectorsectorSoviet invasion after Bhuttos hanging faced. Influx of refugeesSoviet invasion after Bhuttos hanging faced. Influx of refugees

MRD agitation + fear of reMRD agitation + fear of re--nationalization + unchanged taxationnationalization + unchanged taxationstructure discouraged investmentstructure discouraged investment

Banks were not denationalizedBanks were not denationalized

Social sector suffered at the expense of defense, debt servicingSocial sector suffered at the expense of defense, debt servicing



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PM Junejos Democratic Government 1986PM Junejos Democratic Government 1986 May 1988May 1988Five points program initiatedFive points program initiated

Establishment of Islamic democratic systemEstablishment of Islamic democratic system

Reduction in unemploymentReduction in unemployment

Removal of illiteracyRemoval of illiteracy ------ adult literacy programsadult literacy programsEradication of corruption, injustice and other social evils from theEradication of corruption, injustice and other social evils from thesocietysociety

Strengthening of national prestige and integrityStrengthening of national prestige and integrity

Establishment of National Taxation Reforms CommissionEstablishment of National Taxation Reforms Commission

to increase collectionto increase collectionFor further denationalization, Regulation commission setFor further denationalization, Regulation commission setup in 1985 which recommended deregulation of edible oilup in 1985 which recommended deregulation of edible oiland fertilizer unitsand fertilizer units

Slight improvement in balance of paymentsSlight improvement in balance of payments

Economic Development in 1980s:Economic Development in 1980s:Approaches Adopted by Junejo RegimeApproaches Adopted by Junejo Regime


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PM Benazir Bhutto Govt. Dec. 1988 toA

ug. 1990PM Benazir Bhutto Govt. Dec. 1988 toA

ug. 1990Zia died on 17Zia died on 17--88--1988, new elections held, PPP win1988, new elections held, PPP winCircumstances facedCircumstances faced

Uncertain political situation in the countryUncertain political situation in the country

Ethnic conflicts and strife in Karachi and HyderabadEthnic conflicts and strife in Karachi and Hyderabad

Unexpected floods during September in Punjab and SindhUnexpected floods during September in Punjab and Sindh

New industrial policy announced in April 1989 with newNew industrial policy announced in April 1989 with newincentives to attract investment.incentives to attract investment.

Under the Chairmanship of PM, an investment board wasUnder the Chairmanship of PM, an investment board wassetup to supervise investment decisions.setup to supervise investment decisions.

Low agriculture growth due to low production of crops likeLow agriculture growth due to low production of crops likewheat, pulses and chilies in early years but goodwheat, pulses and chilies in early years but goodproduction of cotton.production of cotton.

Adhoc approach in planning was followedAdhoc approach in planning was followed

Benazir Bhuttos dismissed on 6Benazir Bhuttos dismissed on 6thth August 90August 90

Economic Development in 1980s:Economic Development in 1980s:Approaches Adopted by BB RegimeApproaches Adopted by BB Regime--II


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Nawaz Sharif PeriodNawaz Sharif Period--II ------ Nov. 1990Nov. 1990 --April 1993April 1993

Benazir Bhutto 2Benazir Bhutto 2ndnd PeriodPeriod Oct. 1994Oct. 1994 -- Nov. 97Nov. 97

Nawaz Sharif 2Nawaz Sharif 2ndnd PeriodPeriod Feb. 97 to Oct. 99Feb. 97 to Oct. 99

Economic Development in 1990s:Economic Development in 1990s:


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Lot of economic and social reforms announcedLot of economic and social reforms announced

Economic reforms announcedEconomic reforms announced

Privatization and deregulation policyPrivatization and deregulation policy

Export policyExport policy

Taxation policyTaxation policy

Policy of selfPolicy of self--sufficiencysufficiency

Industrial policyIndustrial policy

Policy for exchange and system of paymentsPolicy for exchange and system of payments

Privatization of nationalized commercial banksPrivatization of nationalized commercial banks

A number of new banks opened (Soneri Bank, Cres Bank, Mehran Bank,A number of new banks opened (Soneri Bank, Cres Bank, Mehran Bank,Bank of Bolan, Khyber Bank, Askari Commercial Bank, BankAlBank of Bolan, Khyber Bank, Askari Commercial Bank, BankAl--HabibHabibetc.)etc.)

115 industrial units of cement, ghee, chemical, light engineering and115 industrial units of cement, ghee, chemical, light engineering andceramics were privatized in three phasesceramics were privatized in three phases

Inviting private investment in production of electricity, air services,Inviting private investment in production of electricity, air services,

construction and telecommunicationconstruction and telecommunication

Economic Development in 1990s:Economic Development in 1990s:Nawaz Sharif GovernmentNawaz Sharif Government--II


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Foreign private investment attracted by measures like:Foreign private investment attracted by measures like:

Foreigners and Pakistanis working abroad can invest in any industryForeigners and Pakistanis working abroad can invest in any industrywithout prior permission except defense, ammunition, currency andwithout prior permission except defense, ammunition, currency andalcohol sectorsalcohol sectors

Foreigners can even purchase 100% shares of any projectForeigners can even purchase 100% shares of any project

Any foreigner can take profits to his country or closes his businessAny foreigner can take profits to his country or closes his business

without permission from State Bank of Pakistan. This was notwithout permission from State Bank of Pakistan. This was notapplicable to seas, air and insurance companiesapplicable to seas, air and insurance companies

Any foreigner can get loan from any foreign money market forAny foreigner can get loan from any foreign money market forinvestment in Pakistaninvestment in Pakistan

Those Pakistani working abroad can open their accounts in theThose Pakistani working abroad can open their accounts in the

country in the form of foreign currencies.country in the form of foreign currencies.Every body can invest without any permission and no body will askEvery body can invest without any permission and no body will askabout the source of investment who invest till 30about the source of investment who invest till 30thth June 1992. InvestorsJune 1992. Investorsin urban areas given tax holiday for 3 years and rural areas for 5 yearsin urban areas given tax holiday for 3 years and rural areas for 5 years

The machinery imported for installation in backward regions will beThe machinery imported for installation in backward regions will begiven 100% concession in custom duty and 50% for installation ingiven 100% concession in custom duty and 50% for installation in

urban areasurban areas

Economic Development in 1990s:Economic Development in 1990s:Nawaz Sharif GovernmentNawaz Sharif Government--II


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Growth rateGrowth rateSaving and InvestmentSaving and Investment

Price levelPrice level

Foreign trade and BOPForeign trade and BOP

Government revenuesGovernment revenues

BankingBanking

Economic Development in 1990s:Economic Development in 1990s:Achievement/NonAchievement/Non--Achievement of Nawaz GovernmentAchievement of Nawaz Government--II


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Pervaiz Musharraf Government (1999Pervaiz Musharraf Government (1999--2008)2008)

Zardari Government (2008 to date)Zardari Government (2008 to date)

Economic Development in 1990s:Economic Development in 1990s:


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At the time of independence, agriculture sector contribution

At the time of independence, agriculture sector contributionwas highly substantialwas highly substantial

Agricultural commodity prices were very lowAgricultural commodity prices were very low

Sectoral terms of trade were against agriculture sectorSectoral terms of trade were against agriculture sector

Policy makers emphasis was on industrial developmentPolicy makers emphasis was on industrial development

From 1947From 1947--58, average agriculture sector growth rate was58, average agriculture sector growth rate was2.8% vis2.8% vis----vis industrial sector growth as 9.6%vis industrial sector growth as 9.6%

Prices of imports remained high due to protection of importPrices of imports remained high due to protection of importsubstituting industriessubstituting industries

TOT of agriculture sector in terms of industrial sector wasTOT of agriculture sector in terms of industrial sector wasless than 2/5less than 2/5

According to Professor Lewis, in 1950s, industrial sector wasAccording to Professor Lewis, in 1950s, industrial sector wasgrown at the expense of agriculture sectorgrown at the expense of agriculture sector

The low input low output syndrome led to increase prices ofThe low input low output syndrome led to increase prices of

agricultural goodsagricultural goods

Performance of Pakistan Agri. Sector:Performance of Pakistan Agri. Sector:Period From 1947 to 1958Period From 1947 to 1958


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Major shift of irrigated agriculture from rainfall canalMajor shift of irrigated agriculture from rainfall canalirrigation system to reservoir based canal irrigation systemirrigation system to reservoir based canal irrigation system

Initiation SCARP project further increased water availabiltyInitiation SCARP project further increased water availabiltyat farm gateat farm gate

Investment in agricultural education, research and extensionInvestment in agricultural education, research and extension

was also increasedwas also increasedAs a result agricultural production increased at 4.1% perAs a result agricultural production increased at 4.1% perannumannum

Increase in agricultural income lead to agriculturalIncrease in agricultural income lead to agriculturaldevelopment along with increasing demand for industrialdevelopment along with increasing demand for industrial

goodsgoods

The use of agricultural machinery increased due to subsidizedThe use of agricultural machinery increased due to subsidizedprovision of tractorsprovision of tractors

Performance of Pakistan Agri. Sector:Performance of Pakistan Agri. Sector:Period From 1959 to 1969Period From 1959 to 1969


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47453143 lecture 6 overview of pakistan economy

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