noman history of economics in pakistan(1)

8/13/2019 Noman History of Economics in Pakistan(1)

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History of economics in Pakistan

Pakistan is a rapidly developing country and a major emerging market, with aneconomic growth rate of 7 percent per annum for four consecutive years up to 2007.Despite being a very poor country in !"7, Pakistan#s economic growth rate was better

than the global average during the subse$uent four decades, but imprudent policies led toa slowdown in the late !!0s.

Pakistanis anationwith a diverse economy that includes te%tiles, chemicals, foodprocessing,agricultureand other industries. &n terms ofpurchasing power, it is the2'thlargest economy in the world while in absolute dollar terms it is the "7th largesteconomy. (he economy has suffered in the past from decades of internalpoliticaldisputes, a fast growing population, mi%ed levels of foreign investment, and a costly,ongoing confrontation with neighboring &ndia. )ubstantial macroeconomic reforms since2000, most notably at privati*ing the banking sector have helped the economy. Pakistanhas seen a growing middle class population since then and poverty levels have decreasedby 0+ since 200.

DPgrowth, spurred by gains in the industrial and service sectors, remained inthe '-+ range in 200"-0'. &n 200/, the orld 1anknamed Pakistan the top reformer inits region and in the top 0 reformers globally. &slamabadhas steadily raised developmentspending in recent years,

&nflationremains the biggest threat to the economy, jumping to more than !+ in200/ before easing to 7.!+ in 200'. &n 200, following the surge in global petrol pricesinflation in Pakistan has reached as high as 2/.0+. (he central bank is pursuing tightermonetary policy while trying to preserve growth. )ince the beginning of 200, Pakistan#seconomic outlook has taken a dramatic downturn. )ecurity concerns stemming from thenation#s role in the ar on (errorhave created great instability and led to a decline inD& from a height of appro%imately 3 bn to 34./ bn for the current fiscal year.

5oncurrently, the insurgency has forced massive capital flight from Pakistan to the ulf.5ombined with high global commodity prices, the dual impact has shocked

Pakistan#s economy, with gaping trade deficits, high inflation and a crash in the value ofthe 6upee, which has fallen from '0- )D to over 0- )D in a few months. or thefirst time in years, it may have to seek e%ternal funding as 1alance of Payments support.(he 8& estimates that inflation should drop back to single digits in 200, and thatgrowth should pick up to over /+ per annum by 20. 9lthough less then the previous /year average of 7+, it would represent a overcoming of the present crisis wherein growthis a mere 4./+ : " +.

Pakistan is aggressively cutting tariffs and assisting e%ports by improving ports,roads, electricity supplies and irrigation projects. &slamabad has doubled development

spending from about 2+ of DP in the !!0s to "+ in 2004, a necessary step towardsreversing the broad underdevelopment of its social sector.rowing stability in the nation#s monetary policies has contributed to a reduction inmoney-market interest rates, and a great e%pansion in the $uantity of credit, changingconsumption and investment patterns in the nation. Pakistan#s domestic natural gasproduction, and its significant use of 5;in automobiles, has cushioned the effect of theoil-price shockof 200"-200/. Pakistan is also moving away from the doctrine of importsubstitution which some developing countries


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twentieth century. (he Pakistani government is now pursuing an e%port-driven model ofeconomic growth successfully implemented by )outh 8ast 9sia and now highlysuccessful in 5hina.

Stock market

&n the first four years of the twenty-first century, Pakistan#s >)8 00 &nde% wasthe best-performing stock market inde%in the world as declared by the internationalmaga*ine ?1usiness eek@. (he stock market capitali*ation of listed companies inPakistan was valued at 3/,!47 million in 200/ by the orld 1ank. 1ut in 200, after theeneral 8lections, uncertain political environment, rising militancy along westernborders of the country, and mounting inflation and current account deficits resulted in thesteep decline of the >arachi )tock 8%change. 9s a result, the corporate sectorof Pakistanhas declined dramatically in significance in recent times.

Demographics

ith a per capita DPof over 34000


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Structure of economy

(he economy of the &slamic 6epublic of Pakistan is suffering with high inflationrates well above 2'+. ver ,0 patent applications were filed by non-residentPakistanis in 200" revealing a new-found confidence. 9griculture accounted for about/4+ of DP in !"7. hile per-capita agricultural output has grown since then, it has

been outpaced by the growth of the non-agricultural sectors, and the share of agriculturehas dropped to roughly one-fifth of Pakistan#s economy.

Pakistan ranks fifthin the Buslim worldand twentieth worldwide in farm output.&t is the world#s fifth largest milk producer. Pakistan#s principal natural resources arearable landand water. 9bout 2/+ of Pakistan#s total land area is under cultivation and iswatered by one of the largest irrigation systems in the world. Pakistan irrigates threetimes more acres than 6ussia. 9griculture accounts for about 24+ of DP and employsabout ""+ of the labor force.

Economic aid

Pakistan receives economic aid from several sources as loans and grants. (he

&nternational Bonetary und


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(ariffs have been reduced to an average rate of '+, with a ma%imum of 2/+


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Research areas of Environmental economics in Pakistan

Willingness to pay and demand elasticities for two national parksempirical evidence from two surveys in Pakistan

!imayatullah "han

sing survey-based data approach for modeling the demand for environmentaloodsGresources, this study estimates income and price elasticities of demand forimproved environmental $uality of two ;ational Parks in ;orthern Pakistan. (he studyuses data from two studies. (he estimates indicate that improved environmental $ualityeffects can be described as a lu%ury and an ordinary and price elastic service. 5onIdenceintervals show however that the classiIcation as a lu%ury is not statistically signiIcant.&ncome elasticities of willingness to pay are estimated for a broad range of environmentalservices. (he study Inds that income and willingness to pay vary directly andsigniIcantly. (he elasticity estimates, in general, are greater than *ero, but less than

unity. (he study concludes that environmental improvements are more beneIcial to low-income groups than for high-income groups.

Introduction

Like many other developing countries, Pakistan is seeking torevitalize its tourism sector, including nature tourism to an expandingsystem of national parks and reserves. In South Asia, Pakistan is one ofthe poorest in biodiversity. It has experienced high rates ofdeforestation in recent years !"orld #esource Institute, $%%&'. (orestscover as little as ) * of the country+s area. ue to an everincreasingpopulation, it is losing more and more forest cover primarily because of

conversion of forest to agricultural as -ell as residential uses. he/overnment of Pakistan has, in recent years, expressed a seriousconcern over deforestation and has sho-n significant interest in thegro-th of a reno-ned national park system. Pakistan has a number ofnational parks, reserves, and -ildlife refuges in different parts of thecountry. espite the limited number of national parks and reserves,their management is far from satisfactory. his is partly because ofinsufficient government funds and open access of visitors to theseplaces. 0urrently, entry to national parks in Pakistan is free. 1o-ever,revenue can be generated by introducing entry fees that could bespent on the improvement of the 2uality of the parks. here is a need

for a thorough investigation of ho- these parks can be -ell managedand ho- these environmental resources can be valued. 3o study onthe valuation of national parks in Pakistan has ever been conducted.

;atural resource systems such as lakes, rivers, streams, estuaries, forests andparks are used e%tensively by people for various kinds of recreational activities. ;aturalresource systems provide valuable services to people. rom an economic perspective,these services have two important features. (he first is that the economic value of these

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services depends upon the characteristics of the natural resource system. >nowledge ofthe values of these services may be important for a variety of resource managementdecisions. (he second important feature is that access to the resource for recreation istypically not allocated through the markets. 6ather, access is typically open to all visitorsat a *ero price or a nominal entrance fee that bears no relationship to the cost of providing

access. 9nd there is no or little variation in these access prices over time or across sites toprovide data for the econometric estimation of demand functions


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0ombination &89 &8

All $999 $99

Demand curves-o linear demand curves for 713 Park visitation -ere

estimated from the survey data that are sho-n in (igure 8. he actualuser demand for the 713 Park is represented by e2uation % and as thelo-er curve in (igure 8. Similarly a hypothetical demand for the 713Park in case of improvement in the 2uality of park services is given bye2uation $9 and the upper curve in (igure 8.Figure-2: Park Visitation Demand Curves

Recreational &alue of the '!( Park

able& sho-s consumer surplus and total recreational valueof the 713 Park for the year 89989:. he total recreational valuee2uals the consumer surplus plus total cost of the visit. he annualmonetary recreational value of the 713 Park is about #s. 899 million!approximately >S ?:.;@ million'. his is the value that the parkyields every year for the economy. 1o-ever, this is not the revenueof the park. his value is distinguished into consumer surplus of thevisitors and total travel cost of the visitors. he total travel costspaid by the visitors go to transportation companies and agents forservice providers such as hotels, restaurants, tourist agencies, etc.In addition, the total recreational value -as also pro4ected in thecase of park improvements -hich amounted to #s. 89% million.

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Ideally, -e -ould have liked to compare revenues generatedfrom the entry fee -ith the costs of improvements in park 2uality.


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the plight of their natural resources and are developing managementplans accordingly. Such plans re2uire budgeting and support fromdifferent departments and agencies, but often lack economic4ustification to help decisionmakers appreciate -hat they aresupporting. In this regard, there is an effort to raise a-areness among

local and national government decisionmakers of the value of parkresources and -hat -ould be lost if they -ere destroyed or notproperly managed for longterm sustainability. his information helps4ustify investments in management and protection at a level ofgovernment that is directly concerned -ith its natural resource base.

he focus of this study is the valuation of environmentalresources and ho- this information can be used to improve planning tonational parks management in Pakistan. /overnment planners envisionthe 713 Park as an ecotourism destination. It is representative of anumber of national parks in Pakistan. It is in need of improved

management so that economic and other benefits can be restored andenhanced. he 713 Park can generate enormous economic valuethrough recreation. Beeping in vie- the large amount of consumersurplus and recreational value of the 713 Park, the (ederal andprovincial level governments can 4ustify larger annual budgetallocations for the management of natural resources.

9lternatively, the government may also consider using an entry fee to the BC;Park. (he generated Juser valueE of the park provides a guideline for the possibleintroduction of entrance fees and makes a strong argument for sustaining the area, as ithas been demonstrated that benefits derived are large. &n addition, the estimated value

may also help in promoting the protection of other natural areas, and are thus presumablyeven more dependent on fair decision-making within the policy arena. )ince theconsumers


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Economic Evaluation of Pesticide Use Externalities

in the Cotton Zones of Punjab, Pakistan

B. 9K88B >C9;, BC9BB9D &L19M, &(&>C96 9CB9D, and

B9;K6 C. )B6N

I* I(TR+D,)TI+(

9t the inception of Pakistan in !"7, there was practically no plant protectionservice in the country and economic soundness of plant protection measures was not evenreali*ed for a long time. (he use of chemicals as preventive measures to reduce losses byinsects and diseases was almost non-e%istent during !'0s. Cowever, the ?grow more@pressure rendered the traditional methods insufficient, to control the ever increasing pestproblem from !70s onwards. 5onsumption of pesticides in Pakistan has increased from''/ metric tones in !0 to '!!7 B( in 2002. (his colossal increase in pesticideconsumption has not led necessarily to an increase in the yield of crops, as demonstrated

by Poswal and illiamson


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gains of pest control were estimated by calculating 27 percent yield loss of cotton due toinsect pests and assuming /0 percent effectiveness of insecticide control under farmerconditions. (he production loss estimates are based on the results presented in the annualreports


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Environmental Preservation 0 Sustaina#le Development in Pakistan

(he subject of the environment has to be transformed into a movement. ith thelaunching of this movement the following objectives should be achievedH

-wareness

hen the subject environment would develop into a movement, there will be anincrease in awareness in public, at all levels. People would come to know of theimportance of this issue.

Participation of the People ;o scheme or plan launched by the government can be successful until and unlessthere is involvement on behalf of the people. hen people will get involved then theywill take personal interest in this matter and make the movement a success. &t is true thatunless the issue of environment is not so widely understood in the country, it will be verydifficult for the agencies to get the involvement and the participation of the people.

Planning the 'ovement

(o introduce and form environmental clubs in schools and colleges in variouscities. 8%hibition, debates and essay competitions in schools and colleges, emphasi*ingthe necessity and importance of a clean environment. Mearned people in the field ofenvironment and well-known personalities should be asked to address the students on thisissue. 5elebrities, sportsmen and television personalities can be involved at this stage.(he young people cannot be e%pected to do everything and anything on their own. orthem the easiest and most effective method is to set out certain scales in front of them.or e%ampleHO 5lassroomGComeO )choolG5ollegeGMocalityO District

O 5ityO 5ountryouth should first try to work towards one scale and then proceed to the ne%t.

Estimating entry charges for the 'argalla !ills (ational Park 1'!(P2in Pakistan

(he study reveals that the benefits from the park to consumers or consumersurplus, amounts to a significant 6s. 24 million per year. 1ased on simulated demand forpark services, the study recommends an entrance fee of 6s. 20 per visitor. &mplementingsuch a fee would generate annual revenues to the e%tent of appro%imately 6s. millionto the overnment of Pakistan. (his is a si*able sum, since it e$uals " percent of

PakistanEs budget allocated to the environment sector. or natural systems andovernment managers perpetually strapped for funds, this valuation e%ercise providesimportant lessons that go beyond the BC;P itself. Cimayatullah >han values therecreational benefits from Bargalla Cills ;ational Park in ;orthern Pakistan in what isthe first valuation study of its kind in the country. (he study is based on a survey of 000visitors to the Park in 2002-04.

W!+ &ISITS T!E '!( -(D W!-T D+ T!E3 4I"E5

(he authorEs survey of a 000 visitors to the BC;P provides an opportunity to

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assess the market for recreation in Pakistan. (he data shows that the average visitor whoenjoys natural areas around &slamabad is appro%imately 4! years old, has at least aprimary school education and is married with seven children. )i%ty + of the visitors arefrom urban areas. )ome '/+ of the sample respondents earned between 6s./000 to6s.20,000 in monthly income.

(he response from the sample respondents establishes that the majority of visitors

are happy with the recreational $uality of the park. Cowever, '2 percent of visitorswanted improvements in the $uality of the services available at the park. 9 significant 4percent of visitors felt that Park entry fees should be raised to finance improvements.(hus, this market survey suggests that the BC;P is visited often by middle-classhouseholds who live in nearby 6awalpindi and &slamabad, and also by people from out oftown. Qisitors appear to truly appreciate the amenities of the BC;P and may even bewilling to pay for improvements.

T!E RE)RE-TI+(-4 &-4,E +. T!E '!(P

Cimayatullah >han estimates the total recreational value from BC;P to be 4./million )D. (his sum e$uals economic benefits plus the total cost of the site visit. (otal

economic benefits alone are estimated to be a whopping 6s. 24 million or percent of thetotal budget allocation for PakistanEs environment sector. urther, the improved parkservices would increase economic benefits by 6s. ! million. (his jump in surplusindicates that visitors are willing to pay for park improvements.

,SI(6 -( E(TR3 .EE T+ R-ISE P-R" RE&E(,ES9nother relevant outcome from the study is the estimation of an entry fee. 9s

shown in the ne%t figure, a fee increase from the present charge of 0 to 6s. /0 wouldresult in revenues for BC;P first increasing and then decreasing as visitors

P+4I)3 +,T)+'ES9t a basic level the study underlines the importance of using non- market

valuation techni$ues to estimate hitherto un-captured and under-captured economicbenefits from environmental resources such as national parks. &n the conte%t of Pakistan,the study places the spot light on three important issues. &ncreased budget outlays forBC;P maintenance are viable and justified, as an improved park would attract morevisits and could in turn generate revenues. 5learly, the government should look at suchallocation as an investment in itself.

9n entrance fee of 6s.20 for BC;P could be introduced, as consumers arewilling to pay for benefits from the park. (his charge would generate close to millionrupees for the e%che$uer. (he implications of the valuation e%ercise for BC;P gobeyond this park, and need valuation more national parks

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.orest Resource -ccounting

orest industries the world over are considering the transition to sustainable forestmanagement


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Due to the absence of any action on the part of 8nvironm ental Protection 9gency, the oile%ploring company in >irthar ;ational Park did not pay as per its commitment to thelocal community, the cost of using water during its operations. Cere, the ultimate losseswere borne by the local community.(he speaker was optimistic that environmental management systems are becoming

popular in Pakistan, companies have become sensitive to environmental concerns mainlydue to 8nvironmental Protection 9ct !!7 which emphasi*es that all projects undergoinitial environmental e%amination or what is called 8nvironmental &mpact 9ssessment


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generating features. 1esides Pakistan is also trying to offer and portray itself as a

potential energy and trade corridor to the Biddle 8ast and 8ast 9sian countries. 5hina

has already e%pressed its willingness to engage in PakistanEs road and communications

sector so that it can secure an easy access to the 9rabian )ea. 9s the fiscal deficit position

improved in Pakistan , this created additional space for spending on social sectors such as

education, health and population welfare.ntil 2004 the development e%penditure as percentage of DP was on a

continuous decline. During the same time period the current e%penditures remained highthus compromising the social sector and infrastructure capital spending. (his trend hasnow reversed and considerable emphasis is being given to sectors essential for long termeconomic growth. 9s in most developing countries Pakistan has seen periods of highdeficits in the past. 9nd during those times it resorted to five different sources forbridging the deficitRa= Printing new notes,b= 1orrowing from public,c= oreign loans, aid and grants,

d= 1orrowing from banks, ande= using previously saved balance4.(he domestic debt burden has been ever increasing, which in turn contributed to risinginterest payments. &t was much later that the government slashed the state-run ;ational)avings )cheme rates in order to bring its long term debt commitments under control. nthe other hand ta% revenue has not increased on a similar pace. &n fact &B on its everymission in Pakistan has been e%pressing concerns over the low ta% to DP ratio inPakistan. &t was advised by the multilateral organisations that efforts should focus more ate%panding the ta% net further into the agricultural and services sectors, rather thanreducing too much ta% rates for the manufacturing sector in the hope of boosting growthin this sector, and thus future revenues. urthermore in the past few years, ta% revenues

have not shown the buoyancy that would warrant such an approach. Petroleum leviesneed to be cut back as these directly create inefficiencies in the economy. n the brighterside however Pakistan has achieved one of the fastest reductions in it e%ternal debtvolumes. (his view has been endorsed by the donor agencies such as the orld 1ank and9sian Development 1ank. (he e%ternal debt and liabilities to DP ratio was /2 per centin the year 2000 and within a time span of five fiscal years it was brought down to around2 per cent in 200'. &n the past however rising debt servicing levels and the conse$uentincreases in the deficits have led to increases in the inflation indices. or the past fiveyears the inflation seems to be increasing due to factors other than the budget deficit. (hegovernment is trying to look into the institutional factors that are impacting consumerprice inde% during times of high economic growth. 9s regards the food inflation

government has tried to neutralise the inflationary impact by liberalising the import offood items from abroad. 9nother factor that has recently contributed to an increase in thegeneral price level is the rising global oil prices. (his in fact has also deterioratedPakistanEs trade balance as the value of imports has risen. (able 4 shows the break up ofgroup-wise inflation. &t is interesting to see the group-wise linkages in price changes. (heenergy group has grown the most in 5P& basket of !2 items. (hese energy prices alsopushed up the transport and communication costs, which in turn were instrumental inadversely impacting the prices of the food group.


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&n line with the promise of bringing about fiscal discipline in the budgetary operations,

the overnment in 200/, enacted a iscal 6esponsibility and Debt Mimitation 9ct 200/.

(he main thrust of this act is to reduce and ultimately finish the revenue deficit and

minimise the public debt levels. (he main highlights of this act includeH

(o eliminate the revenue deficit by not later than Fune 40, 200 and to thereafter maintain

a revenue surplus, (o ensure that within a period of ten years beginning from Fuly , 2004, the total public

debt at the end of the tenth fiscal year


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Willingness to pay and demand elasticities for two national parksempirical evidence from two surveys in Pakistan

!imayatullah "han

sing survey-based data approach for modeling the demand for environmentalgoodsGresources, this study estimates income and price elasticities of demand forimproved environmental $uality of two ;ational Parks in ;orthern Pakistan. (he studyuses data from two studies. (he estimates indicate that improved environmental $ualityeffects can be described as a lu%ury and an ordinary and price elastic service. 5onIdenceintervals show however that the classiIcation as a lu%ury is not statistically signiIcant.&ncome elasticities of willingness to pay are estimated for a broad range of environmentalservices.(he study Inds that income and willingness to pay vary directly and signiIcantly. (heelasticity estimates, in general, are greater than *ero, but less than unity. (he studyconcludes that environmental improvements are more beneIcial to low-income groups

than for high-income groups. (his study is based on a merged data set from two differentstudies conducted by the author. (he author is highly indebted to the Cigher 8ducation5ommission, &slamabad, and the )outh 9sian ;etwork for Development and8nvironmental 8conomics


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References*

. httpHGGwww.unep-wcmc.orgGforestGprojectsGfra.htmDateH 24G2G2002. httpHGGen.wikipedia.orgGwikiGPakistan4. httpHGGmpra.ub.uni-muenchen.deG!2'7G

". orld 1ank5ountry 5lassification roups,

noman history of economics in pakistan(1)

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