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Competitiveness and Pakistan: A Dangerous, Distorting, and Dead-End Obsession?
Matthew McCartney
Published:Sept 2012
Competitiveness has become a mantra and organizing framework for much government policymaking in Pakistan and beyond. Rarely does anyone question the concept and use of the competitiveness paradigm itself. Krugman (1994) argues that this ”obsession with competitiveness is both wrong and dangerous.” This article draws from Krugman’s work and examines the use (or abuse) of the concept of competitiveness in the context of contemporary Pakistan. We focus on three recent and influential reports on competitiveness in Pakistan by the Asian Development Bank, World Bank, and Competitiveness Support Fund, and agree with Krugman’s negative view.
KEYWORDS:
Competitiveness,
policy,
Pakistan.
JEL:
E60.
Pakistan’s Quest for a New Growth Vent: Lessons from History
Ijaz Nabi
Published:Sept 2012
This article argues that a new growth vent in Pakistan requires tapping into external lucrative markets in a manner that will create multiple entre-ports for growth. Such a growth vent will enable the country to achieve a sustained growth path that is not as susceptible to the political vicissitudes of one mega-growth node. This will be good for regional equity within the country and will also bring new energy to the Indus Basin market. Sustained welfare improvements in this type of regional hub can occur when it transitions from being a transportation hub for goods and energy into a manufacturing hub that creates high-productivity, high-wage jobs in multiple regional growth nodes.
KEYWORDS:
Regional hub,
trade,
GDP,
Pakistan.
JEL:
F43.
The Opportunities and Pitfalls of Pakistan’s Trade with China and Other Neighbors
Naved Hamid and Sarah Hayat
Published:Sept 2012
While Pakistani trade with India could give a boost to Pakistan’s economy, there are other neighbors with whom trade could be equally important. We look at this aspect of regional trade and show that promoting trade with the rest of Pakistan’s neighbors could have a significant positive impact on the country’s growth. We show that Pakistan’s trade with these neighbors has grown rapidly over the last 10 years and at present they constitute the largest market for Pakistani exports. We also explain how these exports are not only important in terms of absolute value, they have also contributed to the development of new export products. The overall impact on Pakistan’s economy could well be to raise the trend growth rate for the next decade or so by 2 to 3 percentage points above the historical trend growth rate of 5 percent per annum.
KEYWORDS:
Exports,
regional trade,
Pakistan,
China,
UAE,
Central Asia,
Afghanistan.
JEL:
F13.
The Prospects for Indo-Pakistan Trade
Hafiz A. Pasha and Muhammad Imran
Published:Sept 2012
This article analyzes the volume and pattern of India–Pakistan trade given the extent of trade complementarity between the two countries and, in the presence of a restricted positive list of imports from India, the tariff regime and nontariff barriers in the two countries. The study also assesses the impact on bilateral trade of granting most-favored nation status to India, the removal of some of the impediments to trade, and the implementation of the final phase of import tariff reduction under the South Asian Free Trade Agreement. Finally, the article highlights emerging opportunities and possible threats to the process of trade normalization between the two countries.
KEYWORDS:
exports,
tariffs,
non-tariff barriers,
Pakistan,
India.
JEL:
F19.
Sri Lanka’s Free Trade Agreements with India and Pakistan: Are They Leading Bilateral Trade Beyond Normalcy?
Sirimal Abeyratne
Published:Sept 2012
Bilateralism arises as a “second-best” option when countries seek benefits beyond those of regional approaches to free trade and those of unilateral liberalization. In spite of the regional initiatives for free trade in South Asia along with policy reforms in individual countries, Sri Lanka entered into bilateral free trade agreements (FTAs) with India (2000) and Pakistan (2005). In a situation where trade within the South Asian region has been sluggish despite higher economic growth, trade liberalization, and regional initiatives for integration and cooperation, this article examines from the Sri Lankan point of view whether the bilateral FTAs have resulted in above-normal trade performance. The analysis suggests that better performance in bilateral trade cannot be attributed exclusively to the success of the FTAs any more than weak performance can be attributed to their shortcomings. Apart from this, merchandise trade does not appear to have performed in isolation as the extent of overall bilateral connectivity set the groundwork for greater integration. The article confirms that bilateral FTAs that seek reciprocity in integration and cooperation are indeed a “second-best” option, compared to the potential trade performance associated with unilateral liberalization in trading partner countries.
KEYWORDS:
Bilateralism,
trade agreements,
Pakistan.
JEL:
F14,
F15,
F13,
F53.
Published:Sept 2012
This article discusses how the 7th National Finance Commission award and the 18th Amendment to the Constitution have strengthened the autonomy of the federating units in Pakistan. The former has empowered the provinces by increasing their access to financial resources, but there is the danger that it may increase the consolidated fiscal deficit unless both the federal and provincial governments increase their fiscal efforts and rationalize their expenditures. The 18th Amendment has the potential to change the structure of governance, but has been implemented in such a way that effective decentralization has been at least partially rolled back. For devolution to work in Pakistan, financing and the delivery of devolved services will have to be more effectively organized and managed.
KEYWORDS:
Fiscal,
devolution,
18th amendment,
Pakistan.
JEL:
O16.
Adapting Public Sector Services to Local Delivery
Ishrat Husain
Published:Sept 2012
This article describes the local government system established in the 2001 Devolution Plan and its evolution over the period 2002-07, with a focus on two essential public services, education and health. We believe that the devolution of service delivery functions, delegation of financial powers, decentralization of authority, and deconcentration of executive powers, can, together, lead to better accountability of results and, hence, to improved public service delivery to the poor and marginalized. The Devolution Plan made inroads toward these goals, particularly in education, but their achievement was incomplete due to a number of factors, among those incomplete fiscal decentralization, limited targeting of backward areas, and centralizing tendencies of the provincial departments and civil service. Recommendations are offered on how to further develop the local government system more generally, with an eye towards increasing accountability and improving coordination both across local governments and between tiers. For this, complementary reforms to simplify business processes and revamp human resource management policies are needed; introducing a district level civil service is among the suggested changes. The article concludes with detailed recommendations on improving the decentralized delivery of education and health services.
KEYWORDS:
Devolution,
decentralization,
service delivery,
health,
education.
JEL:
H75.
The 18th Constitutional Amendment: Glue or Solvent for Nation Building and Citizenship in Pakistan?
Anwar Shah
Published:Sept 2012
The almost unanimous passage of a landmark consensus constitutional amendment—the 18th Constitutional Amendment—restored Pakistan’s constitution to its original intent of a decentralized federation of provinces as envisaged in the 1956 (two provinces) and 1973 (four provinces) constitutions. This article takes a closer look at the provisions of this amendment and highlights both the potentials and pitfalls of the new constitutional order for good governance in Pakistan. It argues that the amendment represents a step forward but encompasses several missteps in creating a harmonious political and economic union. The 18th Amendment has reinforced an outmoded “pot-belly” model (federalism of provinces) whereas an “hourglass” (federalism of local governments) model is more suited to Pakistan‘s circumstances. Major fundamental reforms are needed that right-size the federal and provincial governments, strengthen local governance, enforce fiscal discipline and citizen-based accountability for service delivery performance on all orders of government, dismantle provincial barriers to factor mobility and internal trade, and restrain beggar-thy-neighbor policies and unaccountable governance by “empowered provinces” to mitigate the unintended adverse consequences of the 18th amendment for nation building and citizenship in Pakistan.
KEYWORDS:
Governance,
fiscal federalism,
decentralization,
state and local governance,
nation and province-building,
constitutional division of powers,
intergovernmental fiscal relations.
JEL:
I31,
H10,
H11,
H83,
O10.
Civil Service Management in Devolved Government: Reconciling Local Accountability and Career Incentives in Pakistan
Musharraf Rasool Cyan
Published:Sept 2012
This paper looks at the case of Pakistan’s decentralization reform of 2001–09 and its impact on civil service management. A key point made in this paper is that the relationship between organizational change and civil service is, by no means, unidirectional. The issues are viewed in the context of decentralization, its opportunities, and outcomes for efficiency and equity. We then evaluate whether administrative decentralization has enhanced or diminished the potential for political and fiscal decentralization for service delivery in Pakistan.
KEYWORDS:
Decentralization,
government,
civil servant,
Pakistan.
JEL:
H10.
A Decomposition Analysis of Capital Structure: Evidence from Pakistan’s Manufacturing Sector
Attiya Yasmin Javid and Qaisar Imad
Published:Jan - June 2012
This study investigates the determinants of the various components of debt—short- and long-term debt and their categories—in the case of nonfinancial listed firms in Pakistan for the period 2008–10. We make a significant distinction between these determinants depending on the components of debt issued: long-term or short-term forms of debt. Our results show that large firms are more likely to have access to long-term debt borrowing than small firms and that, due to supply constraints, small firms resort to short-term forms of debt. Firms with higher potential for growth prefer using less long-term debt as well as debt with fewer restrictive arrangements in order to become more financially flexible. Firms with sufficient fixed assets can generate external finance more easily and at lower cost by using these assets as collateral, which supports the tradeoff theory. Firms generating high levels of profit, however, may choose to finance their investments using internal resources rather than by raising debt finance, which conforms to the pecking order theory. Our results also confirm the presence of the inertia effect and industry-specific effects, and are robust to alternative estimation techniques.
KEYWORDS:
Long-term debt,
short-term debt,
growth,
firm size,
profitability,
Pakistan.
JEL:
F23,
G15,
G32.