State of research in Pakistan…

Nadeem ul Haque, a senior, respected economist has some insightful remarks to make about the state of policy research institutions in Pakistan

For 5 years the position of the Chief Economist of the Planning Commission has been vacant. The PIDE Director/Vice Chancellor has served in an “acting” capacity! Why “acting?” And how do you keep someone in an “acting” position for years? Is that good governance?

Every few months the government runs expensive ads (the most recent is produced below). They seem to be content with placing the ad! There is no serious effort then made to fill the position.

This is not the only position this has happened with. The SECP position too was left vacant for many months on a number of occasions.

The government seems to find it very hard to find professional economists. Why is this so? I would welcome your views on this subject!

I would like to point out that very few senior positions are filled by the mere placement of an ad! Often this is a matter for a search committee and serious effort by several competent people to seek an ideal candidate and persuade him or her to accept the proposed position. Since the government is unwilling to form such a search committee and seek out serious people, perhaps it should stop wasting tax-payer’s money on such ads! (Even when they form a search committee they will pick on the most well known establishment figures who in turn will find a very well known non-professional or a house-broken professional who will not rock the boat.) No wonder the government seems to have no fresh thinking.

Read the full post here

The Global Food Crisis is not over. Our obligations go beyond fixing the financial system,” says UN Special Rapporteur

26 June 2009

(GENEVA – NEW YORK) The United Nations Special Rapporteur on the right to food, Mr. Olivier De Schutter, calls on decision-makers gathering in New York for the UN Conference on World Financial and Economic Crisis not to forget the global food prices crisis. This crisis is continuing in many countries. It is connected not only with the financial and economic crises, but also with the climatic/environmental crisis.

Bhasha Dam project: another perspective – Will a Large Dam Increase Access to Electricity in Pakistan?

Bhasha Dam project: another perspective
Will a Large Dam Increase Access to Electricity in Pakistan?
Fast Track Power Generation

This article by Ann-Kathrin Schneider has first appeared on the website of the Heinrich Boell Foundation in September 2008.

Men of all ages, most of them wearing dashing black moustaches and white cotton caps that contrast with their pitch dark eyes and brown skin, pass each other on the narrow lanes of this market, just north of the Pakistani capital Islamabad. Some appear to have no reason to be here, leaning leisurely against graffiti-soaked house walls, waiting for something to catch their interest. Others are hard at work, exposing sweaty muscular torsos as they unload three, four or five wooden boxes filled with yellow mangoes from a truck onto their shoulders. The weight of the boxes challenges their balance – but not a mango is spilled.

Life in this market hasn’t changed for a long time. Trucks bring wheat, spinach, apples, cucumbers, mangoes, herbs and pumpkins from the villages. The produce changes hands quickly; fathers, shopkeepers and restaurant owners carry the food on bicycles, motorbikes and minibuses out of the market and into the city. More food arrives.

Pakistan – The coming economic tsunami

by yousuf nazar

PAKISTAN’S economic outlook for the next year or two is serious even if it manages to get the planned three billion dollars in external financial assistance in the next few months.

Its currency has lost 10 per cent against the US dollar since the beginning of the year, trade deficit has jumped by 50 per cent this year, Standard & Poor’s has cut its rating by a single notch to a B with a negative outlook on May 15, and its Euro bonds are being quoted at a spread of 500-600 basis points to the US treasuries compared to an average spread of 261 points for emerging markets bonds.

It is not unlikely that key macro indicators will deteriorate as follows:

— The GDP growth may drop sharply to three per cent or less from 6.6 per cent in 2007. This would imply a drop in the real per capita income of around 80 per cent of Pakistanis due to an approximate population growth rate of 2.4 per cent and skewed income distribution.

Financial Liberalization and Crisis in the Age of Globalization

by Muzaffer Vatansever & Mustafa Kutlay (courtesy Turkish Weekly opinion)

“Periods of high international capital mobility have repeatedly produced international banking crises, not only famously as they did in the 1990s, but historically.” Reinhart and Rogoff[1]

 Globalization has turned out to be one of the most controversial topics of our time. It is almost impossible to conclude a debate without touching upon at least one aspect of globalization. Moreover, it is not an easy job to make a comprehensive and adequate definition of it that leads to overselling of this term. Notwithstanding the definitional ambiguity, there is more or less consensus on what economic globalization is: It briefly refers to the abolishment of customs and trade barriers, the surge in technological developments and knowledge, the widespread liberalization and integration of financial markets, and the movements in labour markets (Figure-1)

 Arguably, the most dynamic and unstable part of economic globalization is the financial side of the story. The recent financial crises have clearly demonstrated this fact, and proved that the deterioration in the financial system has the potential to plunge the overall economy into a crisis, per se. For instance, the perversion of the financial globalization had caused huge economic meltdown in Mexico and South Korea even these countries have solid macroeconomic fundamentals at the very beginning of the crises. For example, before the crisis in Mexico, the inflation fell from 130% in 1987 to 7% by 1994; economy was growing at an annual rate of 4.4%; while the government budget was -0.7%. The only problem was the current account deficit with 7.2% of GDP[2]. The uncontrolled and very fast liberalization of the Mexican financial system has paved the way to full-fledged financial crisis. These and the similar other crises brought up one important point into the agenda of world economy: What are the risks associated with capital market liberalization, and in which ways: 

Pakistan: Stress on poverty reduction

By Ali Cheema

THE emphasis on eliminating poverty through the pursuit of social justice in the prime minister’s hundred-day programme is a welcome change from President Musharraf’s policy, which favoured the trickle-down recipe of poverty alleviation.

The previous regime’s erstwhile economic gurus went about the business of calculating the percentage decline in mean poverty in relation to the increased rate of growth, which became its battle cry. The much-advertised official verdict was that poverty in Pakistan had declined by over 10 per cent in the last four years.

The merits and demerits of the official calculations notwithstanding (the veracity of the official calculations is subject to intense debate), by becoming obsessed with average reductions the previous regime’s policy approach to poverty failed to develop an appreciation of the deep structural constraints impacting poverty in Pakistan.

These structural constraints impact poverty in a number of ways. Their primary impact is the tremendous variation in household poverty that is caused at the district and sub-provincial level. These constraints have resulted in the creation of high-poverty districts that are stuck in ‘poverty traps’, where endemic poverty is persistent over the long run. The socio-economic channels through which growth ‘trickle down’ is said to happen remain extremely fragile in these districts. That is, growth alone has not and will not deliver in these districts.

World Bank’s advice to Pakistan

World Bank’s advice
 
While the new government is learning to walk, the World Bank (WB) has warned it to watch its steps on its way to economic stability. The WB has advised the new government of Pakistan to carry out economic reforms and make quick adjustments to steer clear of an economic crisis. The reminder to keep in view the economic aspect while making policies came from Praful Patel, WB vice president, at the end of his three-day visit to Pakistan. Patel’s word of caution reflects his concern that Pakistan is likely to miss targets of fiscal deficit, current account deficit, inflation, and foreign exchange reserves. Patel has observed that there is no crisis at the moment but he believes that the economic indicators of Pakistan are not a good omen for the future economic picture of the country. According to Patel, the economic growth Pakistan had seen over the past few years, in addition to foreign direct investment and remittances, could be maintained only if the government had adjusted to the global prices of oil and wheat. Patel’s saying that since re-adjustments in the economy would be painful “there must be an appropriate safety net for the poor” should be heeded to. This is not the first that IFIs have painted a bleak picture of Pakistan’s economy in terms of achieving its economic goals. According to the WB’s and Asian Development Bank’s (ADB’s) projections, Pakistan’s economy will not be able to meet its target of 7.2 percent GDP growth rate in the year 2008.

‘Making sense of Pakistan and its economy’

Dr. Kaiser Bengali’s address delivered in Karachi under the “The Green Economics & Globalisation Initiative”.

Let me begin by thanking Shirkat Gah for arranging this opportunity and you all for being here to exchange views. I am happy to see so many young faces here. This represents a change. I sensed the first indication of change in October 2005 when the earthquake hit. Young educated people, many of whom had never washed a spoon in their own houses, lived in tents and helped the victims. I think that something happened to bring a generation alive and we are seeing it again. In the current movement today, we may agree with a lot of things, not agree with a lot of things, but the point is that you are concerned, and that has been missing for 20 years, and 20 years is a long time. It’s a whole generation of people; people especially those in their 30s today, who in their own student days and youth were completely unassociated with any social issues. So I find this a very refreshing change and I consider myself fortunate that I am being able to interact with you today.

Now to the subject of economics. I know most of you do not have any economics background, but I will try to be simple. My ability to speak economics in rather simple language developed because when I started my career I started working with trade unions and I had to explain economics to people who were at best matriculates or even less, and that’s where I developed this ability to talk economics in the lay person’s language. I guess there was some kind of a social consciousness. I had no need to work with trade unions; I could have done consulting for the World Bank, or joined the World Bank. In fact I had an offer from an international bank. But like you, I thought I have to work with people and it is working with people that gave me the ability to speak the language of the people.

You have heard for the last 5 years at least, stories of economic miracles. Why is it that this miracle has begun to evaporate overnight? What kind of miracle can it be that is not sustainable? When General Musharraf made his speech on 2nd or 3rd November 2007, one of the things he cited as a reason for taking this extreme action was that the economy was going down. This was the first time anyone from the government side had admitted that the economy was going down. Otherwise when we were saying that the economy is not doing well we got very angry responses. So now we see that there are so many problems with the economy; there is a wheat crisis and flour is simply not available. It was in the newspaper a few days ago that oil stocks are down to less than a week. Why? What happened? Why are oil stocks down? There are other crises. Power of course is not there, we are all living with power shortages and power breakdowns, exports are stagnant and some categories of textile exports have actually declined. Our inflation is out of control and even the rich are feeling its pinch. So why has this happened all of a sudden? Where has the miracle gone? Where was the miracle?

World economy: Rich get richer, poor get poorer–new global PPP data

February 4th 2008

FROM THE ECONOMIST INTELLIGENCE UNIT

New estimates of GDP at purchasing power parity paint a sharply different picture of the global economy. Emerging Asia’s GDP is sizeably lower than previously thought, with India and China both suffering 40% cuts; as a result, emerging markets account for 41% of world GDP rather than 47% as previously thought. Global economic growth in the last five years is probably half a percentage point lower too. And oil-producers seem to have avoided the so-called resource curse that is supposed to condemn them to systematic underperformance.

Comparing incomes

In order to make inter-country comparisons, GDP has to be expressed in a common currency. The use of market exchange rates as conversion factors can give very misleading results, mainly because they do not adequately reflect relative price differences. Developing countries typically have relatively low prices for non-traded goods and services, so conversions based on market exchange rates systematically underestimate the value of output of a developing country relative to an advanced economy. Also, exchange rates fluctuate for reasons that have little to do with the purchasing power of a currency. For example, based on market exchange rate weights, world growth during the boom of the past five years (at 3.4%) was slower than in the 1980s. Measured at market exchange rates, the emerging economies’ share of global output is now, most implausibly, lower than in 1980–even though these economies have been growing more than twice as fast as the developed countries.

IFIs held responsible for economic decline

ISLAMABAD, Jan 25: Pakistan’s economy could have developed faster and would have made substantial gains had governments not invited world bodies to intervene in its development planning.
This was Dr Noor Fatima’s assessment in her lecture on “International economic agencies and Pakistan economic development”.

Speaking at the Pakistan Social Forum’s fortnightly meeting at TVO on Friday, she described the factors that led to intrusion of IMF and World Bank in economic governance of Pakistan.

Take stock of economic policies in Pakistan

“The central bank has admitted the economy has shifted into a slower gear, with the GDP growth target of 7.2 percent expected to be missed. Foreign exchange reserves are under pressure and depleting, while the rupee is weakening against the dollar. Core inflation will be to the order of 7.5 percent against a target of 6.5 percent. It will be impossible to meet the agricultural growth target of 4.8 percent because of the poor performance of rice and cotton crops and fears of reduction in wheat output.

The threat of renewed macroeconomic complications, after five years of good performance, would be heightened if prompt actions are not taken to correct the recent drift in fiscal indicators. Given the government’s limited capacity to fix the fiscal imbalances, we don’t yet know how painful the new period of economic downturn will prove, nor how long it might last.”

Source: Dawn

Full story: http://www.dawn.com/2008/01/08/ed.htm#1

Not an economic miracle

THE NEWS -Saturday, December 15, 2007
Aasim Sajjad Akhtar

In his speech following the imposition of martial law, General Pervez Musharraf mentioned the need to consolidate the gains made by the Shaukat Aziz-led team of economic managers during his eight-year stint in power. In fact he more or less admitted that the ‘economic revival’, which was trumpeted as a major achievement by the current regime, was in genuine danger of being reversed if things did not go according to plan.

In the days and weeks that have followed the November 3 announcement, commentators have focused on the general’s claims that the executive machinery was paralysed and that ‘extremists’ have been running riot, but too little has been said about the extent to which the fears of economic downturn are in fact valid.

The ‘economic revival’ has been almost universally lauded as one of the (few) successes of the current regime. But for a handful of dissident economists, experts in Pakistan and abroad have corroborated the government’s claims that its team of technocrats rescued Pakistan from a position of virtual collapse upon taking over from the Nawaz Sharif regime.