This paper discusses the institutional structures of the civil service. The author traces four periods in this service, pre-1971, 1972-1977, 1978- 1999 and 2000 onwards. In the first time period the author maintains the service worked well. In the second, the paradigm was vitiated. In the third period the anarchy continued by default. And in the last period the anarchy continued by accident. The author attempts to illustrate the growing disincentives in the paradigm for efficiency.
KEYWORDS: service worked well, paradigm was vitiated, anarchy continued by default.

JEL: N/A.

This paper investigates the relationship between exports and economic growth in Pakistan by utilizing the analytical framework put forward by Feder (1983). The hypothesis that marginal factor productivities are not equal in export and non-export sectors of the Pakistan economy is tested by using time series from 1973 to 2005. The estimation results indicate that marginal factor productivities are significantly higher in the export sector. Moreover, the difference seems to derive, in part, from inter-sectoral positive externalities generated by the export sector. In broad terms, therefore, the results of this study are supportive of the export oriented, outward-looking approach to trade relations adopted by policymakers over the past decade.
KEYWORDS: Pakistan, economy, developing countries, growth rate.

JEL: F1, F21, O53.

Unrestricted trade stimulates economic growth and bridges socio-economic gaps existing in different countries of the world. Pakistan has adopted trade liberalization policies since the late 1980s with the same expectations. This study has empirically analyzed how trade liberalization has affected economic development in the country. Its effects have been examined with respect to four measures of economic development: per capita GDP, income inequality, poverty and employment over the period from 1960-2003. The main analysis is based on a simultaneous equation model. Keeping in view the simultaneity of the chosen development measures, the model is estimated with the 2SLS technique of regression analysis. The analysis shows that, over the study period, trade liberalization has not affected all the chosen indicators of development uniformly. It has affected employment positively but per capita GDP and income distribution negatively. However, it has not affected poverty in any way. The obvious message is that trade liberalization has not affected all the indicators of development favorably in Pakistan. It thus implies the need of a cautious move towards liberalization. The focus of trade liberalization should be to bring about improvement in the performance of mediating factors and to focus exports on labor-intensive products.
KEYWORDS: Trade Liberalization, Economic Development, Poverty.

JEL: F41.

This study is designed to assess the macroeconomic performance of fund-supported programs, and the sequencing and ordering of macroeconomic policies in the context of the Pakistan economy. The generalized evaluation estimator technique has been used to assess the macroeconomic impacts of the IMF supported programs. GDP growth, inflation rate, current account balance, fiscal balance and unemployment are used as the target variables in order to gauge economic performance during the program years. The vector of policy variables (that might have been adopted in the absence of programs) and the vector of foreign exogenous variables are also taken as explanatory variables in the model, so that the individual effect of the IMF supported programs could be assessed. The result suggests that as the IMF prescriptions were applied, the current account balance has worsened, the unemployment rate has significantly increased, and the inflation rate has increased during the years of fund-supported programs. Only the budget balance has shown signs of improvement. Furthermore an inadequate sequencing of reforms has contributed to the further worsening of the economic scenario during the program period.
KEYWORDS: Pakistan, IMF, macroeconomic, policy conduct, policy variables, unemployment rate.

JEL: N/A.

This paper attempts to determine the capital structure of listed firms in the cement industry of Pakistan. The study finds that a specific industry’s capital structure exhibits unique attributes which are usually not apparent in the combined analysis of many sectors as done by Shah & Hijazi (2005). The study took 16 of 22 firms in the cement sector, listed at the Karachi Stock Exchange for the period 1997-2001 and analyzed the data by using pooled regression in a panel data analysis. Following the model developed by Rajan & Zingle (1995) it has chosen four independent variables i.e. firm size (measured by natural log of sales), tangibility of assets, profitability and growth and further analyzed the effects on leverage. The results, except for firm size, were found to be highly significant.
KEYWORDS: Capital structure, Pakistan, cement industry, tangibility of assets, leverage.

JEL: N/A.

The empowerment of women and improvement of their socio-economic status are essential ingredients of economic, political and social development. To achieve these objectives, the Government and NGOs have launched a number of programs in various parts of the country. The Aga Khan Rural Support Program (AKRSP) is working on the same agenda in Northern districts of North West Frontier Province (NWFP). The aim of the present research was to study the gender related interventions introduced by the AKRSP in District Chitral. The study findings show that the gender related interventions introduced by AKRSP have played a key role in the development of rural women in the area under reference. In addition to the provision of water supply schemes, health and credit facilities, training has also been imparted to the local women in different sectors of the rural economy including: agriculture, livestock management, vocational and enterprise development. This training has had a positive effect on economic activities performed by rural women and has enhanced the income of the respondents from various economic activities in their respective fields in the research area. Another major effect of the AKRSP interventions was the saving of time of rural women that had been spent on fetching water before these interventions. Though these interventions have improved the socio-economic conditions of women to a greater extent in the area, their sustainability requires regular monitoring and follow-up of training.
KEYWORDS: AKRSP, NGO, Gender, Pakistan, NWFP.

JEL: N/A.

Bonded labor is a dominant feature of the brick kiln industry of the country. Apparently an outcome of poverty, it is closely linked to the socio--cultural fabric of society. The vicious cycle of bondage subjugates the families physically and economically so that they are unable to break out of the trap despite putting in hard labor. The issue has a number of socioeconomic implications and its solution lies in a multi pronged strategy; economic uplift, social involvement and educational breakthrough of the bonded families. The paper explores the nature and extent of bonded labor in the brick kiln sector and analyzes its repercussions on children and women of the bonded families. It also examines the available legal infrastructure tackling bonded labor. Finally the paper proposes a comprehensive scheme to ameliorate the concerns of bonded families and ways to eradicate the menace from the industry.
KEYWORDS: Pakistan, bonded labor, brick kiln, economic uplift, poverty.

JEL: N/A.

This paper analyzes the impact of exchange market forces on Pak-Rupee/US dollar exchange rates during the 1965-1971 globalization period. The main findings are that a) the behavior of Pakistan’s fundamentals relative to those of the USA help to explain exchange market forces against the Pak-Rupee; b) during the run up to devaluation in the globalization period the monetary authorities in Pakistan were acting to reduce domestic credit; but that c) additional pressure was brought against the Pak-Rupee from speculative sources. These findings relate to current thinking on the choice of the exchange rate regime as even well behaved fundamentals may not be sufficient to sustain a currency on its peg.
KEYWORDS: Exchange market forces, pegged exchange rates, realignment expectations.

JEL: C53.

Bhagwati, Jagdish, In Defense of Globalization, Oxford University Press, New York, 2005, pp 308, Price US $ 15.95. The style is lucid in this provocative book and the author captures the reader’s attention throughout. Yet anyone anywhere including Jagdish Bhagwati who claims that extreme inequality is benign and good for the poor simply cannot by any means be taken too seriously, ‘evidence’ and analysis notwithstanding. Bhagwati, a Columbia University economics professor and author of many books on trade, has a brilliant intellect no doubt, but his thinking and ideas to my mind seem somewhat misdirected.
KEYWORDS: Globalization, book review, Bhagwati.

JEL: N/A.

The study argues for land reform in Pakistan by demonstrating an inverse relationship between students’ enrollment and land concentration and landlessness for 50 districts of the Punjab and Sindh provinces. With the help of enrollment data from the Population Census, a composite measure is constructed and linked with the inequality in ownership of land and landlessness. While the effect of the development level of districts on schooling is as expected positive and substantial, both the Gini coefficient for land ownership and coefficient of landlessness are negative and statistically significant.
KEYWORDS: Pakistan, schooling, land reform, Gini Coefficient.

JEL: N/A.

This paper provides a survey of the theoretical and empirical literature relating to industrial clusters. These clusters are groups of firms that are specialized by sector, located in close geographic proximity and consist of mostly small and medium sized enterprises. The benefits to firms from clustering are sometimes referred to as active and passive collective efficiency. Passive collective efficiency refers to benefits accruing to a firm by virtue of being in a cluster, such as access to markets and skilled labor, technological spillovers, flexible specialization, and reduced transaction costs. Active collective efficiency, on the other hand, stems from purposeful cooperation between clustered firms to undertake a large-scale project to upgrade production, such as entering into product marketing.
KEYWORDS: Industrial clusters, SMEs, transaction costs, passive, active, collective efficiency.

JEL: N/A.

Most behavioral sciences based on rationality have simplistic assumptions; and the same is true about consumption or investment decisions. The aim of such studies is to maximize either utility or wealth. The entire ‘financial economics’ theory revolves around an investor who wants to maximize his return at some given level of risk. To determine the optimal return at a given level of risk or an optimal risk for a given level of return has been widely discussed in the financial literature consequently raising the issue of asset pricing in financial markets.
KEYWORDS: Asset pricing, CAPM, financial literature, review.

JEL: N/A.

In a globalized world in which the structures of the financial service industries are changing rapidly and becoming more and more competitive, the cost efficiency of financial institutions along with better quality of service have assumed crucial significance for their long-term sustainability. Hence, the nature of efficiency of financial institutions will determine the prospects of their success in meeting the challenges of a globalized world. The commercial banks in Pakistan are also facing the challenges of increased competition from foreign commercial banks while their operations over the years have also been called into question. However, the literature, which deals with questions of cost efficiency of commercial banks in Pakistan in a professional manner is scant. The information on relative technical efficiency of commercial banks, if available, can be helpful in designing policy for this important sector.
KEYWORDS: Financial institutions, Pakistan, commercial banks, sustainability, banking sector.

JEL: N/A.

The purpose of this study is to test the efficiency of the Turkish Markets in terms of the monthly inflation announcement effect. The study examines the reaction of the financial services sector to monthly inflation announcements, particularly, in case of unexpectedly low or high levels of inflation. Strong evidence emerges that the Turkish financial services sector does not react significantly to the announcements that are in line with the expectations. In other words, the cumulative abnormal returns around such inflation announcements are not significantly different from 0. The results of the robustness tests for no news, indicate that the t-statistics calculated by means of the Moving Average Approach are insignificant for the sector, which is in line with the results of the original approach. The results of the two robustness tests are found to be supporting the original findings of the adaptive approach.
KEYWORDS: Abnormal Returns (ARs), Cumulative Abnormal Returns (CARs), effects of macroeconomic announcements.

JEL: N/A.

In this paper we investigate both the long and short-run relationship between real money balances, real income, inflation rate, foreign interest rate and real effective exchange rate with reference to Pakistan over the period 1982Q2-2002Q4 using ARDL approach which is a newly developed econometric technique. The estimated results indicate that in the long-run real income, inflation rate, foreign interest rate and real effective exchange rate have a significant impact on real money balances in Pakistan. The dynamics of real money demand show that the effects of rate of inflation, foreign interest rate and the real effective exchange rate are much smaller in the short run than long run. The results also reveal that the demand for real money balances in Pakistan is stable, despite the economic reforms pursued by the government since the late 1980s.
KEYWORDS: Pakistan, ARDL, exchange rates, monetary policy.

JEL: N/A.

This study was conducted to analyze the comparative advantage and competitiveness of wheat crop and its implications for resource allocation towards competing crops. The extent of policy distortion and agricultural protection was also determined by the study. The data were collected from APCom on cost of production of wheat crop over the three year period (2001-2003). Two main provinces contributing towards wheat production i.e. Punjab and Sindh were selected as the sample. This data were then averaged to obtain a national scenario. The crop budgets were prepared initially in financial terms and later on economic prices were utilized to evaluate the comparative advantage and competitiveness of the wheat crop. The Policy Analysis Matrix (PAM) was selected as the analytical framework. The policy distortions were measured through Nominal Protection Coefficient (NPC) and Effective Protection Coefficient (EPC). The Domestic Resource Cost ratio (DRC) was selected as a measuring tool for comparative advantage. Keeping in view the importance of wheat in the economy, the analysis was conducted in two price regimes i.e. import and export parity prices. The analysis results showed that at import parity price Pakistan has a comparative advantage in the production of wheat only as an import substitution crop. At export parity price, Pakistan is not competitive in the world wheat market and has no comparative advantage in wheat production.
KEYWORDS: PAM, Pakistan, NPC, DRC, EPC, wheat crop.

JEL: N/A.

In September 1997, the World Bank formally began its anti-corruption initiatives by adopting a series of official guidelines and policy statements to aid in anti-corruption strategies. One of the main areas of focus is international trade. According to World Bank (1997), the areas in which corruption is most often found is in, “customs and tax departments, social security agencies, land titling and environment agencies administering regulations and issuing licenses, public works departments and other agencies involved in significant public procurement, police and judiciary, and privatization agencies.” In particular, trade policies can be susceptible to corruption, even though many countries have successfully managed trade policies to promote industrialization. This susceptibility of trade policies to corruption is because they involve allocations made by the authorities on discretionary rather than efficiency bases. Examples of this are the discretionary actions of customs officials, the administrative actions of the authorities in the allocation of import licenses and foreign exchange, and bribery involved in maintaining high rates of tariffs.
KEYWORDS: World Bank, anti-corruption strategies, international trade.

JEL: N/A.

Pakistan was one of the few developing countries that had achieved an average growth rate of over 5 percent over a four decade period ending in 1990. Consequently, the incidence of poverty had declined from 40 percent to 18 percent by the end of 1980s. But the 1990s proved to be a lost decade for Pakistan; growth in per capita income dropped to slightly over 1 percent. Poverty resurfaced and about one-third of the population now lives below the poverty line of $1 per day. Social indicators became worse than those of other countries with comparable incomes. The country became one of the heavily indebted countries and was declared as one of the most corrupt countries in 1996. The challenge facing the government which assumed power in October 1999 was to put the economy back to its pre-1990 track.
KEYWORDS: Pakistan, economy, developing countries, growth rate.

JEL: N/A.

Despite impressive macroeconomic indicators, Pakistan’s economy has not shown the kind of investment and employment generation performance which is required to move the country on to a growth trajectory which will mean significant reduction in poverty levels and substantial improvement in its social indicators.
KEYWORDS: Pakistan, private investment, economic growth, macroeconomic indicators.

JEL: N/A.

It is remarkable that from a situation of default and unsustainable fiscal and balance of payments deficit only a few years back, Pakistan has come out of the debt trap, balance of payments turned surplus1, and fiscal deficit has declined below 4 percent of GDP. However, sharp increase in the inflation rate, widening trade deficit and re-emergence of balance of payments deficit in the current year are quite worrisome. With the widening of the balance of payments deficit and the possibility that fiscal deficit may start rising as the government provides for the higher levels of public expenditure, would the debt problem not emerge once again? Bilquees (2003) has examined the growth of debt over the 1980-81 to 2002-03 period by de-composing the effect of primary deficit, interest rates and exchange rate adjustments. She argues that primary deficits are basic to the growth of debt. Higher government public expenditure compared to its resources leads to higher domestic as well as external borrowings. The external borrowing with limited repayment capacity results in exchange rate depreciation with consequent implications for the debt. The differential between interest rates and growth of GDP also have implications for the debt but in Pakistan it did not result in rising debt ratio because the interest rates have always remained lower than the growth rate.
KEYWORDS: GDP, debt, debt trap, payment, surplus.

JEL: N/A.