Modify your search
Modify your search
Agenda Change in Western Development Organizations: From Hard Production to Soft, Timeless, Placeless Policy
Robert H. Wade
Published:Sept 2015
Professor Robert Wade, Professor of Political Economy and Development at the London School of Economics, delivered the keynote address for the 11th Annual Conference on the Management of the Pakistan Economy.
This is a talk about the dramatic change in the understanding of what constitutes “development” that occurred in the West and in much of the developing world after the mid 1980s. Before that time it was widely understood that development meant rising overall “prosperity” and that heavy investment in infrastructure and in industry were key drivers. After the mid 1980s the content of development came to be “extreme poverty reduction”, “humanitarian assistance”, “primary school education”, “primary health care”, “anti-corruption”.
Why this change? I argue that it was due to several factors: (1) the end of the Cold War, and the resulting change in the geopolitical strategy of Western states led by the US; (2) the increasing strength of “post-materialist” values in developed countries and their translation into the content of Western development thinking (eg World Bank, USAID, DfID); (3) business interests in the West; and (4) continued Western control of inter-state organizations that are meant to be organizations for the world (eg World Bank). There are now small signs of change in favor of investment in production and infrastructure, thanks partly to the recent emergence of inter-state “by- pass” organizations not controlled by Western states (such as the New Development Bank, the Asia Infrastructure Investment Bank).
KEYWORDS:
Development,
production,
western countries,
policy.
JEL:
O29.
The Role of DFIs in Industrial Growth and Transformation: Why the East Asian Countries Succeeded and Pakistan Did Not
Shakil Faruqi
Published:Sept 2015
In this paper we explore how development finance institutions (DFIs) helped to promote industrial growth with active role of public sector in emerging market economies – Korea, China, India, Malaysia, Brazil, Mexico, Turkey. The DFIs provided long-term credit financing which led to structural transformation of their economies. These countries have succeeded in spectacular fashion at this transformation over the past four decades but Pakistan did not; why?
There has been an endless debate concerning the role of the public sector vis-à-vis the private sector in promoting economic growth and it continues in the present. I begin by asserting that historically public sector has been in the forefront in starting and sustaining economic growth. This not a leap of faith, rather this has been the experience of most emerging economies. They have gone through reforms, liberalization and structural adjustment, ushering in market-based policy regime and opening up foreign trade and capital flows.
Within this framework, the role of DFIs has been exemplary, an assessment I reach based on published researched evidence but from field experience in the East Asian economies during 1980s, where newly established industries, in part supported by World Bank (WB) funded DFI lending, nurtured industrial transformation. When the industries of advanced countries began leaving in droves, pressure mounted to end industrial financing.
It is a fascinating saga. We need to discover why Pakistan did not succeed in achieving the same industrial transformation the occurred in emerging economies. This failure occurred in spite of similar types of DFI lending over a long period and an almost manic devotion of government to the role of public sector. Reforms and privatization is still going on; but industrial transformation remains as elusive as ever.
KEYWORDS:
Industrial growth,
development finance institutions,
economic development,
Pakistan.
JEL:
O10.
The Return of Industrial Policy and Revival of Pakistan’s Economy: Possibilities of Learning, Industrial and Technology Policies
Akbar Noman
Published:Sept 2015
After being among the earliest countries to embark on the East Asian path, Pakistan fell away but was still among the ten fastest growing economies of the world during 1960–90. However, the seeds for the subsequent economic and technological malaise were also sown in that period. This paper provides an overview of recent theoretical and empirical work on industrial policies – more accurately labeled learning, industrial and technology (LIT) policies – and examines their implications for Pakistan. These include a selective, more sharply focused approach than the comprehensive agendas of reforms that have become common. Substantial islands of success with industrial policies have emerged in a variety of institutional and governance settings, different from those of the original East Asian developmental states. They offer valuable lessons. Raising the abysmally low level of investment in Pakistan is a requirement as well as an outcome and an instrument of industrial policies. This argues for a revival of development finance to stimulate investment as well as to direct it towards selective targets. How to mitigate the risks of this and other instruments of industrial policy to get the risk–reward ratio right is another concern of the paper. An important target of such policies should be the technological upgrading of existing industries. There is enormous scope for doing so, with international comparisons suggesting that Pakistani manufacturing does poorly – both in terms of variance in productivity between firms within an industry as well as in introducing new technologies and products. Whilst the constraints of the politics–governance–security/terrorism nexus are beyond the scope of the paper, their salience cannot be underestimated.
KEYWORDS:
Industrial policies,
learning,
technology,
industrialization,
development finance,
Pakistan.
JEL:
L60,
L52.
The Missing Economic Magic: The Failure of Trade Liberalization and Exchange Rate Devaluation in Pakistan, 1980–2012
Matthew McCartney
Published:Sept 2015
Pakistan and India were part of that wave of economic liberalization among developing countries from the late 1980s. This paper is about one aspect of that failure to ‘produce the economic magic’, in Pakistan. Pakistan substantially liberalized its international trade after the late 1980s, and contrary to some views managed its exchange rate in an exceptionally clear sighted and prudent manner. In response, Pakistan never experienced sustained and rapid export led-growth. In fact so disappointing was the performance of exports that Pakistan’s degree of integration with the world economy was little higher in 2015 than it had been in 1990. This paper first examines the exciting promise followed by the lackluster performance of trade liberalization. It establishes evidence that the exchange rate was managed in a way that should have helped a more liberalized trading regime contribute to economic growth. The paper explores wider evidence linking trade liberalization to economic growth and argues that the positive relationship is at best only a contingent one. Those contingent factors that have failed to support the positive link between trade liberalization and economic growth in Pakistan are investment, tax revenue, and upgrading/learning.
KEYWORDS:
Trade liberalization,
exchange rate,
exports,
Pakistan.
JEL:
F19,
O49.
Theory at Odds with Best Practice: The Travails of Industrial Policy
Irfan ul Haque
Published:Sept 2015
The problems that afflict Pakistan’s manufacturing sector are widely known. It is also recognized that the current state of affairs must change, but there is little agreement as to what that might entail. The lack of consensus on required actions and policies can be traced back to the end of the era of rapid industrialization in the late 1960s and subsequent withering away of the “developmental state” as Pakistan could then be characterized. The industry’s woes tend to be attributed to import substitution and high protection, with the policy implication that the country must further open up and liberalize. The paper questions this proposition and argues for a fresh approach to industrial policy, exploring what this might involve.
KEYWORDS:
Manufacturing,
industrial policy,
Pakistan.
JEL:
L52.
Pakistan: A Case of Premature Deindustrialization?
Naved Hamid and Maha Khan
Published:Sept 2015
While “deindustrialization” is now considered normal for developed countries, recent trends show that many developing countries have seen their share of manufacturing employment peak at far earlier levels of income than in advanced countries. This new occurrence, which blocks off the main avenue for a country to catch up with more advanced economies, has been called “premature deindustrialization.” As a result of stagnation in manufacturing since 2007, Pakistan is on the brink – if not already in the process – of premature deindustrialization. This paper focuses on (i) growth trends in manufacturing and the economy, (ii) developments in the context of premature deindustrialization in Pakistan, and (iii) the change in the country’s structure of industry.
We adapt and apply the industrial sophistication index developed by Lall, Weiss, and Zhang (2005) to the Pakistan Standard Industrial Classifications in the Census of Manufacturing Industries. The structure of industry in Pakistan, Sindh, and Punjab is mapped from 1990–99 to 2005/06 (2010/11 for Punjab) on the basis of a sophistication index score. Our analysis substantiates the conclusion that Pakistan’s industrial structure has stagnated, drawing on analyses of export data in other studies. It also indicates that our finding of modest upgrading in the industry sector on the basis of an intuitive division of industries into low-technology and high-technology industries may have been too optimistic. Revitalizing manufacturing growth will require Pakistan to once again adopt a proactive industrial policy to address the constraints and weaknesses of the manufacturing sector.
KEYWORDS:
industrialization,
premature deindustrialization,
manufactures,
manufacturing,
structural change,
growth,
exports,
sophistication of production.
JEL:
F1,
O14,
L60,
O25.
The Economic Impact of New Firms in Punjab
Azam Chaudhry and Maryiam Haroon
Published:Sept 2015
Despite the consensus that new firms have a significant economic and socioeconomic impact, there is very little empirical evidence to support this claim in the Pakistani context. In this paper, we start by looking at how new firm entry varies across districts in Punjab over time. We then look at how the establishment of different types of firms across these districts has affected district-level socioeconomic outcomes in the province. We find that firm entry has a positive impact on economic outcomes such as employment and enrollment, and that this impact can vary by the scale of the firms that enter.
KEYWORDS:
Firms,
entry,
Punjab,
Pakistan.
JEL:
O47,
M13.
Organization, Management, and Wage Practices in Pakistan’s Electrical Fan and Readymade Garment Sectors
Theresa Thompson Chaudhry and Mahvish Faran
Published:Sept 2015
The electrical fan sector in Pakistan has existed since at least the country’s independence and produced for the domestic market for most of its history, although the sector has had strong export growth in the last 15 years. On the other hand, the readymade garment sector has a shorter history, but has been export-oriented from the beginning. The fan sector has retained the traditional batch production system while garments are produced along a line. Nonetheless, both rely on piece rate-based wages to meet their production targets. In this paper, we describe production, management, wage practices, quality, and some barriers to reorganization in these sectors.
KEYWORDS:
Production,
management,
quality,
wage practices,
ready-made garments,
Pakistan.
JEL:
L67,
D20,
L23.
The State of Manufacturing in Pakistan
Rajah Rasiah and Nazia Nazeer
Published:Sept 2015
The history of successful industrializers, such as South Korea and Taiwan, shows a systematic shift in the production structure from low- to high- value added activities in manufacturing and its resulting impact on agriculture, mining and services. Within manufacturing, the transformation is seen in both a movement from low-value added sectors, such as apparel making, to high-tech activities, such as automotive and electronics products, and, within particular industries, vertical integration into knowledge-intensive activities.
Pakistan’s failure to engender the conditions to stimulate technological upgrading within its leading manufacturing industry of clothing, and a shift away to higher-value added industries is the prime reason why the country has not achieved rapid growth in GDP per capital over the long-term. This paper discusses Pakistan’s stagnation in manufacturing over the period 1960-2013 against the experience of the rapid industrializers of South Korea, Taiwan and Malaysia. Drawing on empirical evidence it argues that Pakistan requires a dynamic industrial policy that focuses on technological upgrading in its existing manufacturing sectors and the creation of competitive advantage in high value-added sectors if the country is to experience sustained long-term economic growth.
KEYWORDS:
Manufacturing,
industries,
policy,
Pakistan.
JEL:
O25.
Globalization: The Challenge for Pakistan
Khalil Hamdani
Published:Sept 2015
This paper makes the case for Pakistan to engage actively in globalization. At present, the country is more a recipient of globalization than a participant. There is a need to shift the terms of engagement from passive to active involvement. Particular effort is needed to encourage foreign companies already present in Pakistan to integrate activities with their global operations. Export-oriented investment requires a more favorable trade regime. Above all, global engagement will require Pakistan to build up its technological capabilities substantially, both at the enterprise level and economy-wide. These shifts imply a revitalized industrial policy endorsed by industry and a vigorous policy thrust aimed at investment-led growth.
KEYWORDS:
Globalization,
investment,
trade,
technology,
industry,
Pakistan.
JEL:
F21,
O38,
O53,
F63.