There can not be any doubt in the minds of economists, sociologists, political scientists or the general public that external debt has become a burden for poor nations rather than the much-advertised source of financial help to these countries. In the words of the late Cardinal Hume, Archbishop of Westminster, “Whatever the detailed history of today’s debt ridden countries, nearly all have one key fact in common: that those who could be blamed the least, the poorest people in the poorest countries, have suffered the most”. The British Chancellor of the Exchequer Gordon Brown said, “The debt of poor countries is a great moral issue of our day and this decade. It is the greatest single cause of poverty and injustice across the earth and potentially one of the greatest threats to peace”. He added, “We must cut the debt and do so now”. In the words of Mikhail Gorbachev, “Nothing is more important than the debt question. It is absolutely necessary to resolve the problem as soon as possible. We cannot keep waiting”. The great African leader Julius Nyerere said, “Is it right that we starve in order to pay our debts?”
KEYWORDS: Pakistan, debt retirement, debt burden, debt position, balance of trade.

JEL: N/A.

Vinod Thomas, Mansoor Dailami, Ashok Dhareshwar, Daniel Kaufmann, Nalin Kishor, Roman Lopez & Yan Wang - - - The Quality of Growth – Oxford University Press. 2000, pp. 231. Price not mentioned. “The Quality of Growth” is a combined effort of economists at the World Bank to give a broader perspective of development and the means of measuring it at the end of the 20th century. The 1st chapter focuses on the development scene over the last four decades from 1960 to 2000, in terms of natural and environmental growth factors besides the conventional GDP measures. It highlights the importance of sustainable development and the factors that need to be emphasised for growth in development in real terms, accounting for elements such as; life expectancy, education, air and water pollution, reduced mortality rate, higher literacy rates besides increased income levels.
KEYWORDS: Book review, quality of growth, World Bank, government agencies.

JEL: N/A.

Kanchan Chopra & S. C. Gulati, Migration, Common Property Resources and Environmental Degradation: Interlinkages in India’s Arid and Semi-arid Regions; SAGE Publications, New Delhi, 2000. pps 164. Price Rs. (Indian) 350/-. This book tries to develop linkages between poverty, environmental degradation, and migration. The premise is that poverty leads to environmental degradation, and degradation of natural resources in rural areas, which results in ‘degradation’ pushed ‘imigration’ to urban areas and this also happens to be the major cause of the degradation. The book uses a complex set of hypotheses, which have been tested with primary data inputs from field-based surveys in Rajasthan, India.
KEYWORDS: Book review, India, poverty, migration, environmental degradation, policy recommendation.

JEL: N/A.

Tasneem Ahmad Siddiqui, Towards Good Governance, Oxford University Press, Karachi, 2001, Price: Pak Rs. 495/-. Tasneem Ahmad Siddiqui is a bureaucrat turned author and that in itself speaks volumes about the book under discussion. It is an absorbing and refreshing publication, but somewhat lacking in expression. It is amply apparent that the author has his heart in the right place and the ideas are sound and convincing. In essence, though replete with insights and jarring home truths, it is an exhaustive litany of laments and then, eureka, the author has simple, easy to follow solutions to all the ills plaguing Pakistani society. The saving grace of course is that unlike the majority of Cassandralike intellectuals of whom there is no dearth, Siddiqui hopes against hope and sees a plausible way out of the morass.
KEYWORDS: Book review, good governance, mechanisms, Pakistan.

JEL: N/A.

The economics profession has recently started to give increased recognition to the need for restraining capital movements and exercising greater care in opening up capital accounts in developing countries.1 This is a significant development, for, not long ago, unfettered flow of capital across countries was being hailed as a means for improving global efficiency and promoting world welfare. At its annual meetings in 1997, the IMF had pushed to incorporate capital account convertibility into its Articles of Agreement. However, the gravity of the East Asian crisis drove home the dangers inherent in premature deregulation of financial markets and freeing of capital movements, at least as far as developing countries are concerned.
KEYWORDS: open trade regimes, free capital mobility, market liberalism, exchange controls, capital account.

JEL: N/A.

Everyone has the right to a standard of living adequate for the health and well being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. Article 25.1 of the Universal Declaration of Human Rights, 1948. States should undertake, at the national level, all necessary measures for the realization of the right to development and shall ensure, inter-alia, equality of opportunity for their access to basic resources, education, health services, food, housing, employment and the fair distribution of income. Effective measures should be undertaken to ensure that women have an active role in the development process. Appropriate economic and social reforms should be carried out with a view to eradicating all social injustices. Article 8.1 of Declaration of the Right to Development adopted by the General Assembly Resolution 41.28 on 4 December 1986.
KEYWORDS: Pakistan, social development, economic development, standard of living, equal opportunity, Constitution of Pakistan.

JEL: N/A.

The Arbitrage Pricing Theory (APT) of Ross [1976] is one of the most important building blocks of modern asset pricing theory, and the prime alternative to the celebrated Capital Asset Pricing Model (CAPM) of Sharpe [1964], Lintner [1965], and others. This paper briefly reviews the theoretical underpinnings underlying the APT and highlights the econometric techniques used to test the APT with pre-specified macroeconomic factors. Besides this, the prime objective of this study is to perform an empirical test of the APT in the Pakistani stock market by using pre-specified macroeconomic factors and employing Iterative NonLinear Seemingly Unrelated Regressions (ITNLSUR). These empirical results will be, hopefully, helpful for corporate managers undertaking cost of capital calculations, for domestic and international fund managers making investment decisions and, amongst others, for individual investors who wish to assess the performance of managed funds.
KEYWORDS: Arbitrage Pricing Theory,  Capital Asset Pricing Mode, Pakistan, arbitrage portfolio, macroeconomic factors.

JEL: N/A.

During the last three decades, the Ricardian Equivalence Hypothesis (REH) has been an important theme of economic research both theoretical and applied in the industrial countries especially the US. However, very limited work has been done in the developing countries to test the validity and consistency of this hypothesis. In this paper an attempt has been made to present some empirical tests of the hypothesis for Pakistan using the macroeconomic data for the period 1960-88 based on the standard Blanchard-Evans Models of intertemporal allocation of resources as affected by the perceptions of the consumers about debt accumulation. The paper has been divided into three parts. In part-I, a brief introduction to the Ricardian Equivalence Hypothesis as well its origins has been delineated. In part-II, the Blanchard (1985) Model has been outlined along with the testable hypotheses as derived by Evans (1988). Part-III summarily presents the results of the Blanchard-Evans Models as applied to Pakistan data. These results fail to validate the Ricardian Equivalence Hypotheses for Pakistan. However the results are sensitive to the manner in which the critical variable namely “wealth” is defined and the manner in which the models are estimated. Therefore, further research is required on the subject especially in the contest of Pakistan’s economy which has accumulated large public debt so as to analyse precisely the extent to which public debt is discounted by the consumers as future tax liabilities.
KEYWORDS: Ricardian Equivalence, Pakistan, Blanchard-Evans Models.

JEL: N/A.

Federal Minister for Labour Manpower and Overseas Pakistanis, Omar Asghar Khan has announced the draft of the labour policy. The policy focuses on the law to eliminate child labour in the country. According to the Minister the law would be implemented from January 2001 and before the year 2005 there would be no child or bonded labour in Pakistan. Moreover, Under ILO obligation Pakistan has to achieve the objective of elimination of child and bonded labour by the year 2005. ILO plans to impose sanctions on the exports of those countries where child and bonded labour continues. Furthermore, the country has to abide with the convention of the International Labour Organization as a member of this club1. Most of the studies about child labour in Pakistan are based on micro-data. The present study/survey is another addition to the previous studies with some additional variables. The focus of the study is socioeconomic aspects of child labour in auto-workshops, as 18 per cent of child labour is engaged in this establishment2 . Some comparisons between the conclusions of the present survey and that of the previous ones have also been made. On the basis, policy recommendations have also been proposed.
KEYWORDS: Child labour, Pakistan, ILO, legislation.

JEL: N/A.

credit? This question has acquired some urgency in the wake of the recent Shariat Court ruling banning interest in Pakistan. Some pundits have pronounced that great harm will result from the banning of interest1. Actually, such pronouncements are based on a lack of understanding of both the modern economic system, as well as the nature of the Islamic prohibition of interest. As we hope to demonstrate clearly below, the modern economy can function very well, indeed better in some ways2, with a prohibition on interest rate payments of the Islamic type.
KEYWORDS: Interest-based credit, modern economy, Islamic system, bank credit, Pakistan.

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This study explores the obstacles facing Saudi exporters of non-oil products. The sampling frame comprised 411 firms, which have been involved in exporting for at least two years as identified by the Saudi Export Development Center. The research has investigated twenty five obstacles that have some relation to non-oil export products. Competition with foreign firms was found to be the first obstacle with the highest mean of (3.212) followed by lack of information about potential export markets with a mean of (2.887). Moreover, with regard to the ways Saudi exporters might overcome these obstacles, the investigations suggested to Saudi exporting firms fifteen factors that might improve Saudi non-oil exporting products.
KEYWORDS: Saudi, crude oil, non-oil, exports, competition, targeted markets.

JEL: N/A.

This paper is concerned with the quantification of the rate of capacity utilisation and its major determinants in the large-scale manufacturing sector of Pakistan. A cross-section analysis has been made for 68 five digit industries for the period 1995-96. A number of hypothesis have been tested using the regression technique. Keeping in view the problem of load shedding in Pakistan, it has been taken as an important variable affecting the rate of capacity utilisation in the manufacturing sector. Regression results are in conformity with the earlier studies that supply factors are playing a major role in determining the rate of capacity utilisation. Among supply factors electricity consumption has appeared to be statistically significant.
KEYWORDS: Pakistan, manufacturing, capacity utilisation, models, positive relationship.

JEL: N/A.

Pakistan, India, Bangladesh, Vietnam, Indonesia, China and other Asian countries already face very serious challenges in infrastructure, agriculture, State owned enterprises and environment. Inspite of the increase in private investments, local or from outside, the situation could get worse in the next decade or so for lack of public finance. Such a shortage is bound to slow down future growth, particularly in China, Indonesia and Vietnam, and prevent an acceleration of growth in South Asia. One major remedy would be to reduce seepage and leakage of public money which has taken on such enormous proportions, that it looks like being the most critical issue for the coming decades. The leakages so often referred to in Pakistan are, in fact, far from confined to that country, as shown below. However, such leakages have worse effects in Pakistan than in India and China, because of the much more precarious financial situation of Pakistan
KEYWORDS: Seepage, leakage, Asia, corruption, misallocation, resources, public expenditure.

JEL: N/A.

Satu Kahkonen and Mancur Olson (Eds.), A New Institutional Approach to Economic Development; Vistaar Publications, New Delhi, 2000. pps 354. Price Rs. (Indian) 595/-. Recent successes attributed to the field of economics have been outside the theoretical conservative boundaries of the subject. Modern economic thought is expanding rapidly in all directions: in the study of politics, law, and sociology, economists and other specialists using theories of economic thought and models have had significant influence. The book focuses on ideas that have driven the expansion of economics, namely collective choice, new institutionalist and neo classical political economy. The book has been divided into two main parts. The first deals with “the broadening of economics and emergence of an integral approach to social science” that are fundamental to any economy. The second part includes “some applications of the integrated approach” to India
KEYWORDS: Book review, economic development, India, Indian economy.

JEL: N/A.

S. Akbar Zaidi, Transforming Urban Settlements, The Orangi Pilot Project’s Low-Cost Sanitation Model, City Press, Karachi, 2000, Price: Pak Rs. 225/-. This book is the story of the formulation and implementation of the Orangi Pilot Project’s Sanitation Model, and it is told with clarity and intelligence. Indeed, in this age of self-seeking and egoism, indifference and callousness, it is heartening to note that at least some amongst us somewhere still show a modicum of concern for the marginalised and less privileged in our societies. It is ample indication of the author’s empathy and identification with the human condition in its entirety.
KEYWORDS: Orangi pilot project, Orangi, Pakistan, sanitation model, OPP, Water Aid.

JEL: N/A.

This study represents an attempt at estimating the farmer supply response to different economic and material incentives. Several researchers have estimated the cultivator supply response to different techno-economic factors (Cummings, 1975a and 1975b; Askari and Cummings, 1977; Cooley, 1973; Chen, Courteny and Schmitz, 1972; Ghoshal, 1975; Tweeten, 1986). However, as agriculture modernises, the relative significance of different factors affecting farm inputs and outputs changes; factors regarded as significant determinants of farmer decision at one time may not be relevant at another time. Similarly, the transformation of agriculture in the desirable direction invariably necessitates and at times renders desirable the use of new measures and policy instruments. How farmers react to changes in market forces and government measures is important to know in different ways. In fact, policy makers are interested in knowing the appropriateness, effectiveness and impact of measures for the ultimate formation or legislation of farm regulations.
KEYWORDS: Pakistan, agriculture, supply response, legislation, farming regulations.

JEL: N/A.

A firm may resort to leverage in its capital structure for a variety of reasons; to capture the benefits of the tax shield of debt, to signal to the market that it sees a bright future for itself, or as a commitment device to reduce financial slack. Unforeseen circumstances, however, may force the firm into a situation where it is unable to pay its debts. If the environment is such that the firm has a single creditor, emerging from a situation like this may not pose too much of a problem. However, problems are likely to arise if there are multiple creditors. A resource-wasting race is likely to ensue as the creditors try to “be first” to seize the firm’s assets (in the case of a secured loan) or to obtain a judgement against the firm (in the case of an unsecured loan). This race may lead to a dismantling of the firm’s assets, which may mean a loss in value if the firm is worth more as an entity than it is as a collection of pieces.
KEYWORDS: Corporate bankruptcy, bankruptcy, transaction costs, bankruptcy procedure, mechanism.

JEL: N/A.

Efficiency of financial markets implies that prices fully reflect all available information rapidly and in an unbiased manner. Thus, market prices should provide an unbiased estimate of fundamental value. Despite strong empirical evidence supporting this theory, there are questions about its validity. In recent years, a significantly large volume of empirical research has been conducted to show predictability of asset returns using publicly available information. This is popularly referred to as the anomalies literature. These studies used different explanatory variables ranging from fundamental to technical factors and showed evidence of market inefficiency. The results indicate that returns exhibit trends of momentum in the short to medium term and reversal in the long term
KEYWORDS: Market efficiency, theoretical framework, economics.

JEL: N/A.

With only half of Pakistan’s rural population provided water through government sources, many observers may well be led to believe that this is a clear case of government failure. Yet, such conclusions ignore the way development thinking has changed over time. Currently, the new way of providing infrastructure and social services relies increasingly on communities, NGOs and the private sector, with the role of government considerably curtailed. In the Rural Water Supply and Sanitation (RWSS) sector, it is the Uniform Policy which now dominates planning and implementation Unfortunately, succumbing to donor pressure, an illdevised Policy has been approved for the sector which requires prerequisites which are just not available. A socially sensitive engineering department, and organised and active communities, which are the cornerstone of the Uniform Policy, do not exist. Hence the failure of the new thinking in the RWSS sector. While institutional failure and government sclerosis may be amongst the more critical causes of failed service delivery, it may perhaps be more instructive to analyse such institutions in a broader political economy perspective, where reasons for the failure of the state as much as of ‘civil’ society, may provide more useful answers.
KEYWORDS: Rural water supply, institutions, public health, public health engineering, Pakistan.

JEL: N/A.

To date no study has been made to explore the FDI motives of foreign firms in Pakistan. An attempt has been made to rectify this position through a survey of both wholly- and majority-owned multinational enterprises (MNEs) in the economy. Market size and growth variables appear to be the most cited reasons for FDI by MNEs in the sample. The use of exploratory factor analysis (EFA) also reinforces the significance of market size as the motive for FDI in Pakistan. The other underlying factors produced by the EFA are: expansion of business, low input prices, desire to lower the transaction costs and psychic distance.
KEYWORDS: Foreign Direct Investment, FDI, multinational enterprises, MNEs, Pakistan.

JEL: N/A.