LAHORE: The state’s role in facilitating development in countries such as Pakistan through technical advice and financial support is very important, while the policies based on the ‘Washington Consensus’ may not necessarily be ideal for the developing countries and thereby should be taken ‘with a pinch of salt’.
Participants expressed these views at the second day of the Fourth Annual Conference on the Management of the Pakistan Economy, held at Lahore School of Economics (LSE) on Friday.
The day started with the session on ‘Rethinking Development Strategy’. Dr Shahid Javed Burki chaired the session.
Dr Naved Hamid, former Senior Economist, Asian Development Bank, said that unlike the development trajectory followed by the newly industrialised countries, growth prospects could no longer remain dependent on manufacturing and export orientation.
“The change can essentially be attributed to an in exhaustive labour supply in China due to which it is attracting high FDI flows,” he said adding that the new path is that of outsourcing tradable services encapsulating both high and low skill jobs.
The acceleration of globalisation has been made possible through the Information and Communication technology sector, which has resulted in the death of distance. Further propounding on the benefits of services led growth strategy, he said that the balance of payments constraint would be relaxed in addition to greater employment generation.
A key role must also be played by regional cooperation through which market access can be widened and higher investment levels can be achieved. However, to exploit this opportunity Pakistan must invest in expanding its knowledge economy.
The second sector deserving attention is the agricultural sector, as Pakistan can benefit from the rise in the international price of food commodities if it chooses to remove widespread distortions in the system. Dr Rajiv Kumar, Director and Chief Executive, Indian Council for Research on International economic relations, highlighted the problems being faced by the Indian economy with regards to the services sector development. He referred to it as unsustainable and conducive to the development of a dualistic society. This assertion was based on the fact that more than 50 percent of the Indian population is employed in the agriculture sector, which is only about 18 percent of the GDP.
He further briefed on the performance of the Indian economy and stressed on the need to revise prices upwards given the rising global prices scenario.
His participation was much appreciated due to the insight he provided on the various constraints that the Indian policy makers are faced with and their similarities with problems in Pakistan. The fifth session of the conference was a panel discussion on Inflation, Macroeconomic Stability and Growth. This session was aimed at delineating different perspectives on why inflation, global and domestic is rising, and what is the new route to be taken to minimise the impact of the crisis. The panellists were Dr Azam Chaudhry, Dean of Economics Department, LSE, Riaz Riazuddin, Economic Advisor, SBP and Sakib Sherani, Chief Economist, ABN Amro Bank.
The discussion in this session took into account both the monetarist and structuralist point of view with regards to the causative factors of inflation. The main conclusions pointed towards the need to remove distortions in the agriculture and oil sector in Pakistan so that the impact of rising food and oil prices can be dampened. It was also highlighted that the impact of food inflation is higher on poverty in rural areas as compared to rising fuel costs. However, in the longer-term rising food prices will benefit the rural poor engaged in farming of food crops, as the price of their produce will rise. Another interesting point raised in the session highlighted how rigorous monetary tightening can control food inflation. The adequacy of monetary tightening was also questioned, as peaks in reserve money have not been lowered in the contractionary phase post financial year 2005.
The effort made by the Lahore School in organising such an event must be lauded, given the urgent need to resolve economic issues impacting political stability in the country. It can be further said that such an event has not been organised before considering the quality of the papers presented by prominent policy makers and academicians.
Courtesy: Daily Times, 26/4/2008