The global economy:
The rising technology has allowed our environment to be characterized as a global one. “The global economy" gave business the ability to market products and services all over the globe. It has also allowed them to develop partnerships and alliances throughout the world, which has become essential for success in today’s business.” Prior to Globalization, the United States dominated the global economy. In past decades, however, the U.S. share of the global economy has shrunk to approximately 20%. This trend is expected to continue as the economies of many newly industrialized countries continue to grow at a faster rate, this is called the balancing of the equilibrium.
Nagative impact of globalization on an economy:
The subjection of human rights and human wellbeing to the needs of global capital are some theories against a global economy.
These companies may also gain power greater than that of any country, as many pharmaceutical companies have been accused of using their power to influence governments, so too could these super companies but to a much greater extent.
More disadvantages to having a shared global economy is the transportation of resources and the impact it has on the environment
Positive impact of globalization on an economy:
There are numerous advantages to a global economy including the possibility to increase benefits from economies of scale. The breaking down of global barriers allows companies to benefit from the largest and cheapest workforces, raw materials, and technology. For example, “many North American publishers actually write and produce much of their software in countries such as India.” Other advantages that companies benefit from include: the opportunity for smaller companies to quickly expand globally, having more choices when recruiting a workforce and the opportunity to target a larger customer base (which translates to greater earning potential).
It is obvious how global economy also helps in promoting international cooperation and peace for the nations involved in the international trade by increasing mutual-dependence. For instance, India and Pakistan are often in dispute over land territory such as Kashmir. It can be argued that it would be less likely that these two countries will enter into combat due to the severe negative effects on their economies. However it can alternatively be argued that countries that are shut out of global trade are more likely to resort to armed combat for the same reasons that are mentioned above, therefore the subject needs a proper study to draw any conclusions on globalization’s effect on world peace.
Impact on the economy of Pakistan
VARIOUS agencies and experts have made a number of assessments of the impact of the earthquake on Pakistan’s economy. According to government officials, the targets for growth rate, budgetary deficit and revenue collection projected for the current year will remain unaffected. On the other hand, private financial institutions in their analytical reports have projected that the budgetary deficit will overshoot its target of 3.8 per cent of the GDP to over four per cent and the tax revenue will fall short of the target by about 1.3 per cent. They have also predicted that in the aftermath of the disaster prices of food and construction material will come under severe pressure as the loss of food grain stocks and livestock in the affected region, and the rush to donate basic necessities witnessed in other parts of the country, will create a serious supply gap. This will cause food prices to go up and the immediate construction needs in the affected areas will push up the prices of construction material.
Shahid Javed Burki, former World Bank vice-president who also served as finance minister in president Farooq Leghari’s interim cabinet in 1997, has assessed a loss of $10 billion to $12 billion to the economy which, according to him, will deprive Pakistan of an annual income of one billion to $1.25 billion. This in turn will reduce the annual GDP growth rate by about one percentage point a year in the next one to three years. He has added another quarter percentage point to this reduction because he feels the loss of human lives and injuries to working population also impact adversely on the overall economy. According to an ILO study, the earthquake has caused job losses to the extent of 1.1 million. Another rough estimate puts the houses destroyed at 400,000, almost equally divided between Azad Kashmir and the NWFP. The population affected by the earthquake is estimated to be about four million. None of these assessments are definite or final, of course. They would need to be revised periodically and fine-tuned to the real situation, which would emerge only after the relief work comes to its logical end, all the dead are buried, the injured are hospitalized and houses destroyed counted.
Early estimates of resources required to finance the gigantic task of relief, reconstruction and rehabilitation have been projected at about $10 billion. So far, the government has announced five billion rupees from the budget for this purpose. Another five billion rupees have come from local donors, and an amount of nearly Rs 700 million has been sent from abroad to date. Perhaps by the end of the month the total cash collection, both in local and foreign currencies, will go up to about billion dollars. On the basis of the pledges made and the financial concern shown by the world community, President Musharraf has announced an ambitious plan to turn the ravaged regions into those of model towns and cities. Even if only half of this proves to be true, not only will the affected have a better future to look forward to, but the economy of the country as a whole will also get an extra boost. In case the projected flows do not match the expectations and the final estimates of the damage to the economy turn out to be short by a significant margin, the country’s economy will face a very difficult situation indeed. This will also have serious socio-political implications for the country
Globalization impact on Pakistan economic development
Globalization and GDP growth rate of Pakistan
Pakistan’s experience also supports this conclusion because in the decade of 1990s, significant trade liberalization was accompanied by a steady decline in the GDP growth rate, from 6.1% in the 1980s to 4.5% in the 1990s. Similarly, wide-ranging policy changes and incentives to encourage foreign investment did not lead to any significant increase in investment, apart from larger investment in the private power sector in the mid-1990s in response to a very attractive incentive package. In fact, overall investment declined from about 19% of the GDP in 1989-90 to only 15% in 1999-2000. Even on the export front, the trade performance has not been satisfactory. Despite substantial reduction in tariff rates, removal of virtually all non-tariff barriers and successive devaluations of the currency (leading to an annual depreciation of about 10% in the exchange rate, from Rs 24 in 1990 to Rs 60 per dollar in 2000), the growth in exports in the 1990s was only 4.5% per annum, compared to 19% in the 1970s and 8.5% in the 1980s.
Globalization impact on the economy of Pakistan is shown by the graph as under.
And Pakistan expected GDP was:
Globalization and south Asia:
Globalization is also impacting south Asia.
A recent report by the Mahbubul Haq Human Development Centre in Islamabad has presented some revealing but grim findings on the impact of globalization on the poor people of south Asia:
1) Half a billion in South Asia or 40% of its population have experienced a decline in their income, despite a 5.4% increase in the South Asian GDP during the 1990s.
2) Under the influence of stabilization policies imposed by the WB/IMF calling for elimination of subsidies and price support measures and the resultant squeeze on the fiscal space, the provision of social safety nets has been weakened in the region.
3) Globalization has not been accompanied by a reduction in poverty or improvement in human development since most South Asian countries have failed to maintain a balance between economic and social development policies. For most South Asians, the outcome of the globalization process has been: higher prices, fewer employment opportunities, increased disparities in income and higher incidence of poverty, currently estimated at 515 million or 40% of the population of South Asia.
4) South Asia suffers from an additional disadvantage in the globalization process because of the worldwide movement creating regional trading blocs. In South Asia, by comparison, SAARC faces serious political obstacles and intra-regional trade, therefore, remains low when compared to such trade in other regional groupings.
These conclusions, in the context of South Asia, fully support the strong consensus at the global level on the negative aspects of globalization and he recognition that the globalization process cannot deal with the problems of poverty and the insecurities that arise from poverty. While echoing this consensus, a recent international conference organized by IFPRI at Bonn, Germany, in the first week of September 2001, also agreed that the ideology of opening of markets had gone too far and the policy options for developing countries were closing because of growing debt burdens, strict IMF conditionalities and unfair WTO rules.
globalization is impacting the whole south Asia.1982-1986 the globalization effects on the economy of south Asia is shown by graph as under:
the impact of globalization in south Asia is shown in graph as under. in which we can see that after economic globalization south Asia economy goes which way.
Pakistan experience with economic liberalization or globalization:
Pakistan’s experience with economic liberalization has thrown up some important lessons and criteria to judge whether or not such liberalization would lead to higher economic growth. These can be summarized as follows:
* Unless the initial conditions and the international economic environment are favourable to attract foreign investment and to utilize the opportunities created by tariff and market reforms, these can become counter-productive. In the case of Pakistan, the reform process, launched in early 1991 coincided with economic sanctions imposed by the US from October 1990 as a result of Pakistan’s unclear policy and by all G7 countries in June 1998, following the nuclear tests. Lower Tariffs weeded out some of the uneconomic industries and slowed down the industrial growth rate, but due to sanctions and recurrent political instability, this loss was not compensated by new investment in value added sectors.
* The speed and sequencing of reforms must be carefully orchestrated. If tariffs are reduced drastically before expanding the tax base and improving tax administration, revenues will fall, thus accentuating the fiscal problems. Similarly, financial sector reforms to raise interest rates for government borrowing should follow and not precede sustained reductions in public sector expenditures because higher cost of borrowing does not automatically lead to lower expenditures.
* All the components of globalization do not move in the same direction. While there is free flow of information and capital, labour movement is restricted. Even in trade, high tech products are traded freely, but simple manufactures like textile and leather goods continue to be protected and agricultural trade is heavily distorted by huge subsidies provided by the US, Europe and Japan ($390 billion in the year 2000). In such an unlevel playing field, countries like Pakistan, which are primarily dependent on agricultural or textile exports, cannot benefit much from globalization. In fact, successive devaluations lead to a progressive depreciation in export prices and therefore lower exports.
* Excessive reliance on demand management, at a time when the process of growth is being adversely affected by several non-economic factors, can further slow down the pace of economic growth. With the reduction of tariffs, revenues from custom duties in Pakistan declined from 6% of GDP in 1989-90 to only 2.2% in 1999-2000. The reduction in tariffs also led to closure of many industrial units, which were previously functioning under heavy protection. This not only slowed down the rate of industrial growth from an average of 8% in the 1980s to 3.9% in the 1990s, but also led to a corresponding decline in revenues from excise duties and sales tax.
With lower revenues from customs, excise and sale tax, the objective of the IMF’s structural adjustment programme to reduce the budget deficit (from 7.8% in the 1980s to below 6% in the 1990s) was achieved only by cutting down public sector development expenditure, from 7% of GDP to 3% of GDP. This decline also contributed to the slow down in GDP growth.
Unlike the manufacturing sector, which was adversely affected by the reform processes, the agriculture sector in Pakistan has continued its robust performance. Spurred by large investments in the water sector and favourable macro-policies, agricultural growth accelerated in the 1990s to 4.5% per annum from 4.2% in the 1980s. This not only assisted efforts to keep inflation under control but also contributed to exports.
In countries where the overall national and international conditions have been more favourable than say in Pakistan, the impact of economic reforms on economic growth has been more positive
RE-INDUSTRIALIZING PAKISTAN UNDER GLOBALIZATION
Economic globalization affects both local and global systems of wealth creation and distribution. The effects can be witnessed in micro-realities of workers searching new modes of livelihoods to make for the lost ones while macro-realities are manifested in processes of stat industrialization in many developing countries.
However, there is an enormous variety of debates around dynamics of economic globalization and possible policy responses. This article identifies competing perspectives related to industrialization under economic globalization. While arguing for a central role of state in industrial development coordination and building of national innovation system, it suggests that a focus on re-industrialization in Pakistan is possible under WTO regime.
Originating from free-trade doctrine, some opinions claim that Pakistan, under globalization, should forget about possibilities of a new wave for industrialisation altogether. Though controversial, the claim also argues that the East Asian ‘Gang of Four’ days are over, and globalization - meaning flow of foreign direct investment (FDI) and openness - will determine whether the country can industrialize or not. Such arguments also advise that Pakistan should try to attract FDI through the policies of liberalization, deregulation, and privatization. Most importantly, the government has to be cut-to-size and be kept out of markets in the process.
However, on the opposite side, forceful voices originate from at least two quarters, which at a certain level are mutually supportive approaches to long-term economic development. Broadly speaking, one is new institutionalise political economy and the second is new growth and new trade theory approach.
The first tries to focus on ‘getting institutions and interventions right’ and emphasises the importance of industrial policy and human development with a purposeful and accountable presence of government in support of long-term industrial development objectives and structural transformation.
The second approach lays emphasis on the pivotal role of knowledge and information related interventions, which can induce long-term economic growth dynamism. It also redefines the reasons behind foreign trade beyond traditional comparative advantage and seeking competitive advantage in production for exportable items which can provide increasing return to scale.
This stream of arguments supports the need of reasonable tariffs and protection for the industrial development. In a nutshell, this policy advice also prescribes efforts to generate economies of scale without unduly following the neo-liberal prescription for intense competition.
The above mentioned two approaches possibly advise economic managers of Pakistan to strategically think of the central role of state and public sector institutional arrangements in managing and coordinating investment and industrialization processes with strategic and cautious integration into the global market.
The moral of the story is that industrialization under globalization for long-term economic development is too important an activity to be left to blind forces of FDI and openness.
However, looking at the current wave of economic thinking in policy circles of Pakistan, one feels that the country is trying to maintain a cosy place in the lap of the ‘unholy trinity’ - The IMF, World Bank, and WTO. The search for a neo-liberal Pakistan has ultimately created immense stresses on different strings of possible export-oriented industrialization.
Interestingly, what is being pursued, at the moment, is a belief in export-led growth, which, for all practical purposes, means whatever any business can export should export. Export-led growth thinking does not argue for any economy-wide significant intervention to establish national system of innovation, which can support export-oriented industrialization for high quality value, added manufacture.
In reality whether a country exports low value added potato chips or high value added computer-chips does matter. In this way, secular export-led growth thinking should be a worrisome situation for the incumbent post-martial law regime in Islamabad.
Looking at from another angle, in the absence of national industrial policy and increasingly shrinking capacity of the government’s institutional arrangements for investment and information coordination, some experts also think that all industrial development eggs are being put in FDI-attraction basket.
Many researches, specially undertaken by economic geography specialists, show that increase in global flow of FDI has been towards selected countries of Asia and Eastern Europe.
The researches explain that one important feature, which Transnational Corporations (TNCs) seek is competitive advantage. This entails availability of skilled and highly productive labour force. TNCs are no longer fascinated with the idea of access to cheap human and natural resources but like to seek efficiency gains and strategic asset building.
Another stream of research shows that TNCs do not bring technology, which is highly relevant to the national development needs of the host country. They bring technology, if needed, for their own purposes not for an economy-wide structural transformation.
So the advises about looking for FDI as a source of long-term economic growth are at best fragile, which need sobering thoughts with a view of strategic national industrial policy. An egalitarian society and educated citizenry creates its own scale economies and externalities, which TNCs always assess before making strategic relocations for competitive advantages.
Towards the end, this is suffice to say that while some opinion-holders conclude that under globalization, industrialization in Pakistan is not possible because it has been unsuccessful industrialize in the past, is a hasty and faulty conclusion.
In addition, under the WTO regimes, though export subsidies are prohibited, which provided leverage to now-developed countries in the past but vents for investing in research and development for competitiveness, building national innovation system for industrial upgrading, and many aspects of industrial policy are still open.
These are replicable paths used by East Asian Gang of Four economies as well, one must understand. Industrialization under globalizations, however, requires a sound vision of democratic developmental state with a developmental bureaucracy - the bureaucracy, which can simultaneously be autonomous and accountable in managing the industrial development path.
ZUBAIR FAISAL ABBASI
ARTICLE (March 31 2008): http://www.opfblog.com/1438/re-industrialising-pakistan-under-globaliza… Courtesy: Business Recorder, 31/3/2008
Economic Development in South Asia - Comparative Analysis and Lessons for Pakistan
South Asia's2 economic growth has been steady over the 1990s but still remained below the potential. Growth in the region at 5.6 percent for 1990-99 continued to be robust and sustained compared to the rest of the world. Long term growth has also showed a similar trend. However growth in general was affected by drought that led to decrease in overall agricultural output in some parts of the region. India's GDP growth was highest among all the South Asian countries at 6 percent, while Bangladesh's growth rate stood at 4.7 percent. Pakistan average annual growth rate of GDP was at 3.8 percent for 1990-99.
In general, South Asian countries as a whole performed much better as compared to low income countries3, as South Asia's average annual percent growth of GDP in two decades (1980-90 and 1990-99) was 5.6 percent whereas for low income countries average annual percent growth figures were 4.7 and 3.2 percent respectively for the same period. Within the inter-regional context, Pakistan's GDP growth rate on average for 1990-99 at 3.8 percent, remained at the lowest level.
The sectoral average annual percent growth indicates that Pakistan remained mostly dependent on agriculture, reflecting low skill and technology intensity. In industry, manufacturing and service sectors, it is placed at the bottom in terms of growth rates. The performance remained lower than it was in the decade of the 1980s. Growth in the industrial sector was high in Bangladesh. Nepal led in manufacturing while India's performance was best in the services sector for the period 1990-99.
In the context of recurrent natural disasters and continuing political instability in some areas, the stability of South Asia's growth is fairly impressive. For instance, drought has persisted in northern India, Afghanistan, and Pakistan for the last 3 to 4 years and a massive earthquake killed thousands in India. Other more chronic obstacles to growth were poor governance, civil conflict and insufficient economic reforms. Political challenges at the state level slowed the pace of India's economic reforms. Pakistan continues to face pervasive inherited governance problems and economic distortions. The Government had to handle these effectively for the success of its economic revival program introduced in 1999. In Bangladesh, a sharply polarized political environment prior to the 2001 elections slowed implementation of second- generation reforms that were necessary to accelerate growth and reduce poverty. Over the year, political instability continued in Nepal, and in June 2001 the country suffered the tragedy of royal assassinations. Sri Lanka saw a combination of deepening of its 18- year civil war conflict and political volatility. In general, continued fighting in Afghanistan also affected regional peace.
Comparing the major indicators of development, it is clear that per capita income, both in dollar and purchasing power parity (PPP) terms have remained lower in the low-income countries as compared to South Asian countries. Sri Lanka performed well in the year 2000 having the highest per capita income as compared to other economies. Life expectancy and literacy rate also remained high. The per capita GDP in PPP term for 2000 was lower in Pakistan than in India. The high population growth rate in Pakistan has been a major factor in offsetting the gains in economic development.
The presence of pervasive poverty in South Asia is a profound development challenge. About half a billion people in the region live on less than $ 1 a day, accounting for 44 percent of the world's poor. The illiteracy rate is the world's highest, and women's education is about half of men. Lack of access to health care, the continuing acceleration of HIV infection, and environmental degradation are only a few of the problems that threaten the region's prosperity and undermine the quality of life for all, especially poor people. The percentage of population living below $ 1 and $ 2 a day is highest in India followed by Nepal, Pakistan and Bangladesh. Results based on the national poverty line indicators are not comparable across the countries because related poverty lines differ. The variation is attributable to the methodological difference adopted by various countries.
In South Asia's development agenda, the need for greater transparency and accountability in regulating the financial sectors, restricting the reach of state intervention and improving the delivery of basic services, such as health care and education are high on the list. One of the major problems of economic development in South Asia has been the expenditure by states in unproductive areas with corresponding cuts in spending in essential areas. In the case of Pakistan, a large share of the central Government expenditure has been financed by foreign aid. Public expenditure in South Asia shows that in general, an increase is indicated in the size of consumption expenditure across the countries. However on average, annual growth in Government consumption has gone down since 1980. Further, political interference, lack of transparency in public expenditure management and weak institutional capacity have also affected the quality of public expenditure.
In the social sectors, Pakistan compares unfavorably to other countries with similar levels of per capita income. The tendency to neglect social sectors because of national security focus of all Governments in Pakistan, was reinforced by the social and economic structure of the country. The big landowner/ feudal domination is quite visible on the economic and political scenes of Punjab and Sindh, NWFP and Baluchistan. The social, cultural and traditional taboos have further restricted the role of women in society, particularly in education and health. With the higher population growth rate for the 1990-2000, highest at 2.5 percent, the mortality rate and total fertility rates are also not favorable.
The human development indices reflect that among the South Asian countries, Sri Lanka is at the top in terms of ranking followed by India, Pakistan, Nepal and Bangladesh. Bangladesh spends more on health. Sri Lanka spends more on education followed by India and Nepal. Comparatively more people have access to sanitation facilities in Sri Lanka followed by Pakistan. As already stated Pakistan does not compare well with these countries in terms of social services. It is fair to say that South Asia still faces a challenging task to provide better basic facilities i.e. education, health, safe drinking water and sanitation facilities to a larger proportion of its population.
Trade among South Asian countries is not very open. The volume of imports and exports is lower in South Asia than in low-income countries in general. The globalization trend is not favouring these countries as the majority of these depend on agriculture where competition in the open market for products is intense. Due to natural calamities agriculture production is uncertain and prone to shocks. These countries will face big challenges ahead in terms of global competition.
The level of debt is another major area of concern where Pakistan remains at a disadvantage; the reason being the low level of saving and capital formation. The accumulation of large debts is putting a tremendous pressure on the economies of these countries. Low capital formation and the low level of savings are major contributing factors to the large borrowing in all countries of the region. On the average, savings in South Asia are lower than the average for low income countries.
Growth: The present Government's development agenda provides a good balance between growth and social development. It is giving macroeconomic stabilization major priority in the short term. However, during this period progress in poverty reduction and social development will depend largely on more effective use of existing resources. It therefore, has to focus on promoting growth in labor intensive sectors, employment generation activities, and on structural and governance reforms for improvements in efficiency and effectiveness of the public and the private sectors. However, the problems facing Pakistan are enormous and will require concerted Government effort to overcome in the long run.
Debt Management: The Government needs to make serious efforts to strengthen revenue mobilization, contain its unproductive expenditure, and utilize scarce external assistance more efficiently. It also has to make a concerted effort to substantially reduce the level of both external as well as domestic levels of debt.
Poverty Reduction. To mitigate the impacts of poverty, the Government has to rigorously implement its program of economic growth, human development, and governance reforms as outlined in the poverty reduction strategy.
Sustainable Economic Growth and Employment Generation. The growth targets set in the three-year and ten-year development plans represent Government sensitivity towards increasing the average annual growth rate. Improvements in the growth rate require both critical fiscal reforms and a substantial improvement in private sector confidence. Reduction in the fiscal deficit, increase in foreign exchange reserves, and successful implementation of the Poverty Reduction and Growth Facility and debt restructuring agreement with the Paris Club will help to bring back the confidence of the private sector. If the structural and governance reform agenda set out is successfully implemented, it should bring improvements in the law-and order situation.
Human Development. In order to improve social indicators and the need to utilize available resources more efficiently, the Government is relying heavily on the devolution program to have positive impact by promoting competition, ownership and accountability in delivery of public services. It has to involve people more actively in community development issues. However, it will take time to show the real impact as technical and institutional capacity at the district and local levels are not strong. It will need major capacity building initiatives to address this problem.
Improving Governance. The Government's governance reform agenda is at the core of its strategy for reviving growth, reducing poverty, and accelerating social development. In areas such as tax administration, the justice system, the police, and the civil service, the Government has to put in great efforts. However, for the success of the proposed development agenda it will be critical to consolidate the reforms first and then accelerate the process of its implementation.
Trade and Globalization: There is need for a coordinated and collaborative effort among the South Asian countries to expand trade in the region. Pakistan needs to diversify its exports base and shift from primary agricultural products to more value added and industrial products. Privatization will have to be placed at the top of the Government agenda. The agreement reached at WTO meetings in Doha in November 2001, to launch a new trade round is of particular importance for the region to meet the challenges of globalization.
From the domestic policy perspective, early adjustment where necessary remains critical accompanied by structural reforms. Greater spending on security, and an uncertain investment environment are important areas of concern for Pakistan.
PAKISTAN & WORLD TRADE ORGANIZATION (WTO)
Economic Growth is a wild horse; it needs to be tamed to serve the real interests of the society. If the horse misbehaves in some societies, leading to deprivation of many human lives, then the fault is not of the horse but the rider. Economic growth is essential in poor societies — but even more is its structure and distribution
Pakistan economic performance
Pakistan’s overall economic performance improved in FY2002 (ending 30 June 2002), primarily as a result of higher growth in the agriculture sector. Total consumption expenditure, particularly expenditure on defense and public administration, rose by 5.0% in FY2002, compared with 1.2% in FY2001, and the net contribution of the external sector also increased by over 30%. The real GDP growth rate was higher at 3.6%, compared with 2.5% in FY2001. Inflation fell further from 4.4% in FY2001 to 3.5% in FY2002. The overall fiscal deficit declined to 5.1% of GDP in FY2002, excluding one-off expenditures. Budgetary poverty-related expenditure closed at rupees (Rs)133.5 billion in FY2002, or 3.6% of GDP. A surplus of $2.7 billion was achieved in the current account, resulting from positive developments in almost all subcategories. Foreign exchange reserves held with the State Bank of Pakistan increased to $7.6 billion by the end of 2002. However, the investment climate remained unfavorable and total investment declined from 15.9% in FY2001 to 13.9% of GDP in FY2002.
ECONOMIC OVERVIEW OF PAKISTAN:
As countries become richer, on average the incidence of income poverty falls and other indicators of well being, such as average levels of education and health, tend to improve as well. In the real sense to achieve economic development in a daunting task. The patterns of growth, the changes in the distribution of income and opportunities, and improving standards of living reflect a complex set of interactions among the policies, institutions, history and geography. Understanding the forces underlying country's disparate growth experiences, and mechanisms through which this growth has to improve the living standards of people require a multidimensional approach bringing all sectors and stakeholders of economy into one framework, as outlined by the processes of trade liberalization under WTO.
Pakistan is a mixed economy consisting of a public sector domination of major sectors of the economy, which is changing very quickly under the freer market agenda of WTO making the role of government to minimum level under the globalization policies guided by World Bank and IMF. Although with the growing awareness among the intelligentsia of the country about the core issues of development not being address appropriately yet we have seen the growth role of institutions of globalization mentoring the economic direction of the country. In the preview of economic sanctions imposed on Pakistan in 1998, political instability, state-of-war with India, and most importantly the 11th September Crisis has not been able to hamper the country which these events has the potential. Economic growth remained mixed, in a year when many other Asian countries were recording negative growth. Inflation did not accelerate significantly, as was anticipated by most external forecasters. The current account deficit declined further, so that Pakistan's short-run balance of payments position remained viable once lending by the IMF and World Bank was resumed and the London and Paris Clubs had rescheduled debt. Complacency would nonetheless be out of place. Exports have been declining, normal capital inflows have almost dried up, and the country's weak credibility and policy uncertainties have discouraged foreign direct investment in particular and productive investment in general. Pakistan is the only country in South Asia that has recorded a lower rate of growth in the 1990s than in the preceding decades. Suspension of the convertibility of the foreign currency deposits, and the London and Paris Club rescheduling, were essential in the short run, but they will tend nevertheless to compromise Pakistan's ability to borrow internationally for years to come. The social indicators — literacy, mortality, fertility, and poverty — remain poor, even for a country with Pakistan's per capita income, and the squeeze on the budgets of the provincial governments suggests that this is unlikely to improve much in the short run. The country clearly faces a difficult challenge in reviving its economy and in achieving a level of social standards in which it can begin to take pride.
On the brighter side, government has undertook a series of initiatives to revive the economy such as tax reforms, trade and tariff reform, deregulation and privatization, financial sector reform, fiscal transparency measures, poverty alleviation program. If one observes that the genuine focus has been more and more on export led economic growth and for that matter the government has chalked out an intensive program to increase the capacity of key economic sectors specially Agriculture and Textiles. Information technology has become the most important sector as the modes of modern business become more and more sophisticated providing greater access and farther outreach to local exporters of foreign markets.
Source: World Bank