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Towards Growth Strategy & Economic Reform
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Planning Commission
Outline
• What is the Current Growth Strategy?
• What are Constraints to Economic Growth?
• Why Move towards a New Growth Strategy?
• What is Planning Commission’s Approach?
• New Growth Strategy – Brief Overview
• What should be the New Role of Government?
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What is the Current Growth Strategy?
• Growth policy by default
• Projects being multiplied with no available resources
• Regulated markets and sector picking
• Result
• Sporadic growth usually created by external resources
• Preoccupation with crises and stabilization
• Lack of structural reform
No Long Term Thinking on Growth Strategy
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What are Constraints to Economic Growth?
Market Failure
• Lack of Competition
• No Incentives for Innovation & Entrepreneurship
Governance Challenges
• Poor Contract Enforcement
• Distortive Taxes and Subsidies
• Anti Competitive Practices
• Lacking Software of Economic Growth
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Pakistan Lacks Growth Software
Hardware
Infrastructure Quality
Country
Score
Indonesia
2.5
India
3.3
China
3.4
Pakistan
3.4
Thailand
5.0
Korea
5.1
Taiwan
5.4
Malaysia
5.7
Hong Kong
6.4
Source: Global Competitiveness Report
Country
Software
Global
Quality of
Innovation Education
Index (out
System
of 132
countries)
Spending
on R&D
Pakistan
79
99
80
India
30
37
36
Indonesia
39
44
28
Thailand
57
67
47
Malaysia
24
23
19
China
26
52
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Why Move Towards a New Growth Strategy?
• A bulge in the working age
groups in coming 40 years
• This increases potential
productive capacity
• BUT also raises challenges:
– UNEMPLOYMENT without
adequate investment
Projected Population by Age Groups
2050
85
85
85
84
83
83
80
77
71
67
63
2040
2030
2020
2010
2000
0
60
236
31
224
25
210
20
195
16
178
13
160
11
0-14
142
9
125
8
15-64
110
7
65≤
65>
95
6
81 5
120
180
240
300
360
Million
– COMPETING South Asian
countries also have young
populations
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Why Move Towards a New Growth Strategy?
• How much economic growth rate is required to
absorb growing labour force?
• Expected long run labour force growth rate is 3.6%
• Absorbing incremental labour requires 8% GDP growth
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Planning Commission’s Approach to a New Strategy
• Home grown
– Donor-driven models not working across developing
countries
– Growth possible during stabilization
– Taking stock of local knowledge
• Consensus-driven
– Meeting all segments of society including academia, civil
society, business community
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– Detailed consultation with provinces
New Growth Strategy
Economic Conceptualization
Human
Capital
Growth
Strategy
Social
Capital
Physical
Capital
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New Economic Growth Strategy
Economic
Discipline
Productivity
Responsible Fiscal &
Monetary Policies
Governance &
Institutions
Market Reforms
Restructuring of PSEs
Urban Management
Rationalization of PSDP
Youth & Community
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Short Term: Getting back to potential
• Utilization of existing capacity
– Up to 30% in industry
– Up to 50% in fertilizer, auto sector, sugar, cement and steel
• Requires:
1. Removing major constraints
a.
Energy (Electricity and Gas)
b.
Availability and pricing of credit
2. Macroeconomic stability
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Longer term: Increasing Potential
Economic Growth
Physical Capital
Public Investment
Sector based &
Project based
Human Capital
Skills
Productivity
Education
Missing: Innovation,
Entrepreneurship & Markets12
Growth Alternatives (2011-15)
7
6
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)
6.0
GDP Growth Rate (%)
5.5
5
5.0
4
4.0
3.4
3
3.6
3.8
3.9
3.0
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
2
1
0
2010-11
2011-12
2012-13
2013-14
13
2014-15
Growth Alternatives (2011-15)
9
8
GDP Growth Rate (%)
7
Stabilization + Reform: Market reforms
& productivity gains (Average 5.6%)
7.0
Stabilization : Reform of PSEs, increase
resource mobilization (Average 4.7%)
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8.0
6.0
6.0
5.5
5
5.0
4
3
3.0
4.0
3.4
2
3.6
3.8
3.9
Business as Usual: Low aid-led public
investment, high Inflation (Average 3.5 %)
1
0
2010-11
2011-12
2012-13
2013-14
14
2014-15
Ongoing PSE Reform Efforts
Reform for Power Sector Under
Implementation
Reforms Strategy for Railways Formulated
Reforms of Gas Sector under Formulation
TCP & PASSCO to be examined for closing
down
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PSDP Resource Allocation Strategy
PSDP Weaknesses
o Decreasing PSDP Size
o High share of bricks &
mortar (60% of total in
2011)
Prioritizing PSDP
o Projects nearing
completion
o Social sector projects
o Key infrastructure
o Money Spread thin (large
projects: energy, water,
sectoral & regional spread)
transport
o Project governance
o Projects for removing
regional disparity
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Potential Governance Agenda
Civil Service
Reform
Structure and
Incentives to
Attract Talent
Monetized
Salaries, Merit
based Promotion,
and Easy Entry &
Exit
Devolution
Devolving powers,
responsibilities and
resources to lower
tiers of government
for better service
delivery
Performance
based Governance
Business
process
reengineering
Need to address
outdated
regulations
Remove multiplicity
of processing
layers
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Markets & Entrepreneurship
Modernize Laws
& Regulations
for Markets
Deregulate
Markets
Encourage
Innovation
Domestic
Commerce
Agriculture
Market
Committees
Wheat, Sugar
&
Commodities
Exchange
Innovation
through
Incubation
Centers
Taxation
Regime, Rent
Laws etc.
Investment in
New Sectors
Review
Sectors where
Government
may Exit
Cluster
Strengthening
(e.g. Sialkot,
Gujranwala,
Wazirabad)
Legal System
for Common
Property
Ownership
(shops & flats)
Bankruptcy
Law
(legislation
drafted)
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Cities as Hubs of Commerce
Modernize Laws
& Regulations
for Cities
Reform
Zoning &
Building
Regulations
Address Excess
Demand
Need to
Bridge Excess
Demand for
Commerce,
Office Space,
Warehouses
etc.
Land Markets
Freeing
Government
Land for
Commercial
Purposes
Property Rights
Need to
Address
Issues of
Titles,
Taxation
Structures
etc.
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Youth & Community
Youth
Engagement
Strategy
Social Capital
Youth
Entrepreneurship
Voice
Making Social
Capital Available for
Youth
Difficult to
Productively
Employ Growing
Young Labour
Force
Empowerment
Social Infrastructure
(Libraries,
Community Centers
etc.)
Develop Framework
for Youth Self
Employment
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New Role of Government
Markets
Government
Ownership
of Assets
Financing
of Assets
Policy
Regulation
Production &
Management
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Quality
Governance
Creative
Cities
Quality of
Life
Vibrant
Markets
Energetic Youth
& Community
Thank
You
Thank You
www.pc.gov.pk
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