ECO610 Short Notes by Leo Artist

ISSUE IN THE ECONOMY OF PAKISTAN-[ECO610] · SHORT NOTES BY LEO-ARTIST · MODULE # 01 – STRUCTURAL TRANSFORMATION:

•  The reallocating of economic activity among three broader sectors of a developing economy.
•  And those sectors are: Agriculture, manufacturing and services.
•  It is also a developmental theory, which is explains that how subsistence economy or agricultures economy has been transformed a diversified towards more diversified structure, which is based on manufacturing and servicing setup.

AGENDA:

•  To evaluate the performance of our country over a period of about seven decades.
•  A brief overview to understand Pakistan economy's structural transformation.
•  Own development narrative.

STRUCTURAL TRANSFORMATION AT A GLANCE:

•  Sectoral contributions to GDP at the time of independence; i) Agriculture 53% (65% labor force involved) ii) Manufacturing 7.8% iii) Trade 11.9%
•  Sectoral contributions to GDP today; i) Agriculture 19.5% (42.3% labor force involved) ii) Industrial Sector 20.88% iii) Services sector 59.59%
•  The huge transformation in economic, social and hence political power from the agriculturist towards an urban and rural middle class.
•  One of the key indicators highlighting the extra ordinary structural transformation of Pakistan over the time period.

70 years of Development Or 7 Decades of Pakistan's Economy:

•  Pakistan today is less than half of the country it was in 1947 with reference to its population. (Since 55% of the population lived in East Pakistan)
•  Geographically West Pakistan was 6 times more than East Pakistan
•  Huge contributions to society and economy by East Pakistan.

1. LAYING THE FOUNDATION (1947-1958):

FEATURES:

•  Laying the Foundations (1947-1958) -Predominantly agrarian 4 -Undeveloped and newly independent nation
•  Little industry, few services -Absence of economic infrastructure
•  Adverse international conditions -Precarious domestic situation (with millions of refugees) -Attempts of bureaucracy to keep Pakistan on its feet
•  Lack of Capital
•  Colombo Plan launch 1951 (Rs.2600 million) -Provision of very basic necessities - Building an economic base by state sector
•  Ban on Imports of cotton textiles and Luxury goods
•  Emphasis on Industrial Growth
•  Manufacturing Sector Growth 34% (1952-54)
•  Korean war(1950-1953)
•  Decline in agricultural growth rate (1951-1958)
•  Severe floods in the Sindh and Punjab (1948)
•  Deficit financing throughout 1950's

2. THE DECADE OF DEVELOPMENT (1958-1968): · Military takeover by General Ayub Khan in October 1958; · FEATURES:

•  Considerable Economic growth
•  Economic policy-making Focus
•  Model Capitalist Economy
•  High growth rate in manufacturing
•  Progress in Agriculture sector (5% p.a)
•  Increase in Exports -Inflow of American Aid
•  Indus Water Treaty
•  Water & Power Investments
•  1965 War
•  Economic & political tensions grew between the two wings
•  Economic and social reforms
•  Increase in Investment (three fold )
•  Technological breakthrough in Agriculture (5% p.a)
•  Coordinated economic policies
•  Price stability
•  Regional Disparities (Industry and Agriculture in Central Punjab, Industry in Karachi)
•  Feeling of East Pakistan of Utter neglect Demand for full economic autonomy
•  Income Inequality (concentration of economic power, Few families acquired most of the national wealth)
•  Perpetuation of Industrial & Trade policies
•  Functional Inequality (as social sector was neglected) o Education sector o Health Sector o Little increase in real wages

AN ASSESSMENT:

•  Commitment to Development momentum disrupted by 1965 War
•  ( Foreign Aid, Defense spending Investment)
•  Growing Economic Disparity
•  An era with exceptionally successful period of economic management

3. THE BAD LUCK YEARS (1971-1977):

FEATURES:

•  This era brought fundamental structural and an institutional change is social, economic and political sectors.
•  Nationalization (Manufacturing industries, Banking, Insurance, Education etc.)
•  1973 oil price shock Balance of Payment worsened
•  Devaluation Pakistani rupee
•  Worldwide recession Exports