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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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The genesis of setting International Labour Standards lies in the idea that the issues related to labour and social conditions are not merely matters of state concern. The objective of establishing the International Labour Organisation in 1919 was to undertake joint international action to improve labour conditions world wide along with achieving several inter-related motives. The preamble and the first Article of the ILO’s Constitution gives expression to these ideas by the following statement:
KEYWORDS: Pakistan, labour laws, ILO, labour standards, child labour, minimum wage.

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In a rapidly changing global economy, small enterprises are increasingly a force for national economic growth. Since the 1970s, SEs and the entrepreneurs who drive them have received serious attention by planners, multilateral agencies and governments the world over. Yet there is the need for the management of the environment at the macro level to facilitate the growth of the SE sector. There is a need for setting up and managing institutions and networks which support directly, indirectly, formally, informally, the growth business at the regional and national level. This also calls for the development of entrepreneurs and their team, development of the organisation and the business. The engine of change in all the new economies has been the small and medium enterprises (SMEs) but the growth of the sector was not a response to problems of economic crises of the 1970s and 1980s but it has been observed as a trend that emerged as a wave of change. Hence the chaos and scramble to move according to the trend. The other notable contributing factor for the emergence of Small Enterprises (SEs) is the IT business industry and the worldwide trend towards the service industry sector.
KEYWORDS: Developing countries, SME, support infrastructure, development.

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S. Akbar Zaidi, Issues in Pakistan’s Economy, Oxford University Press, Karachi, 1999. 462 pp. Price: Pak Rs. 450/-. In the last five decades, Pakistan’s economy has, as they say, gone places. Undoubtedly, this economy is much more broad-based, with increases in productivity in all sectors, incomes (even if nobody believes it), trade, infrastructure, social sectors. Living standards and consumption levels and patterns are more diversified than those in the early years, though the benefits are unevenly distributed. Such disparity and imbalances created additional complications because of a rise in expectations, which is invariably faster than production capacity and income increases. Developing countries, soft societies as these are, must face problems emerging from the resulting frustrations and frictions.
KEYWORDS: Pakistan, economy, distribution, economic situation.

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This study contributes to an understanding of locational determinants of FDI in Pakistan. Although there exists a great deal of literature in this area, there is hardly any evidence of such a study in the case of Pakistan. Economy level analyses are carried out to explore the determinants of FDI through multivariate regression analysis. The results of the multivariate regression analyses reveal that market size, relative interest rates and exchange rates are the major determinants of FDI in Pakistan. The variables such as market growth and political instability were consistently insignificant in the analyses. However, mixed findings were revealed by the variables such as consumer goods imports and the political regime in Pakistan.
KEYWORDS: Locational determinants, consumer good imports, market development, transnational corporations, foreign direct investment, FDI, Pakistan.

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Definitions: In this paper it is proposed to use the definition of selfemployed, small scale (2-9 employees), medium scale (10-99 employees) and large scale (100 employees and above) to discuss the issues relating to the Small and Medium Enterprise (SME) sector in Pakistan. The national pension (regulated through the Employees Old Age Benefit Institution Legislation) and health insurance (The Provincial Social Security Institutions Legislation) is applicable to institutions with 10 or more employees and provides a natural cut off point between the small scale and medium and large scale sectors. The cut off between the medium and large scale at 100 workers is also appropriate. Sources: Major sources of data were the: (i) The Census of Establishment 1988; (ii) The Labour Force Survey 91-92; (iii) The Report of the National Manpower Commission 1991; (iv) The Employment and Management Situation in Pakistan (ILO) 1997 and (v) The Economic Survey 1997-98. A large number of other sources were also used as required and these are indicated wherever possible.
KEYWORDS: SME, Pakistan, structure of employment, urban employment, rural employment, employment potential.

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