January 16, 2014
ISLAMABAD – Pakistan has many “positives” to achieve rapid growth and these positives include the legitimacy of its institutions, capacity to implement national projects, growth in remittances, natural resource base, potential in food production and mining, its strategic location, and the rapid growth of women in the labour force.
“These positives can help reinvigorate the economy”, the World Bank’s Country Economic Memorandum (CEM) said. In recent years, the World Bank had the honor and privilege of welcoming incoming administrations with a series of diagnostics studies and policy choices. Continuing this practice, the World Bank has put together a Country Economic Memorandum (CEM) and a series of 16 sector-specific Policy Notes for the incoming governments.
Whereas the CEM focuses on conditions for growth acceleration and jobs creation, the Policy Notes are wide-ranging, and look at issues from improving inclusion and human development, enhancing economic growth and providing jobs, and improving governance and accountability.
This effort, the CEM said was meant to facilitate a broad understanding of key topics and support a creative dialogue around menus of policy options, while being informative in the spirit of knowledge-exchange. Ultimately, both publications aim to help the incoming governments achieve their ambitious economic and social goals along with the Bank’s mission of fighting poverty and achieving shared prosperity. The Bank added that accelerated economic growth in Pakistan has been possible in the past, and it can be again. Pakistan’s economy, it said has shown it can be very resilient in preserving growth and poverty reduction despite civil conflicts, natural disasters, and complex political transitions.
In such regard, the CEM and Policy notes have three main messages: and these are Pakistan must aim to achieve higher growth linked to more and better jobs – especially among women and youth, Pakistan must strive for inclusion and improving human capital as a cornerstone of rebuilding productivity and Pakistan can sustain its growth, jobs, and inclusion agenda only by enhancing governance and accountability. The CEM and Policy notes emphasized that implementing required structural reforms adhoc and piecemeal would not yield results. Reforms should rather reinforce each other, as the issues cut across sectors.
For example, current tax and subsidy policies create avenues for corruption, as well as reduce the government’s ability to supply electricity, which then reduces business competitiveness and job productivity. The CEM of the World Bank highlighted six urgent major actions for government’s consideration. The most important would be to initiate reform in the power sector, as progress in all other areas depends on it. It is estimated that annual economic growth could be 1.5-2% higher without the load-shedding crisis, the CEM said.
The second most important reform to initiate early on would be revenue mobilization, as the creation of fiscal space is essential to increase urgent public investment. Third action would be to reinvigorate State Owned Enterprise (SOE) reform and the business environment.
Fourth would be the implementation of the regional agenda, focused on all regional countries.
The fifth priority would be to improve human development, with much room to grow in education, health, and social protection and the sixth, to make all these efforts more effective would be to strengthen governance and accountability.
Implementing these reforms, the World Bank said that requires strong political will and takes both leadership and building consensus.
Powerful individuals and well-organized vested interests will continue to avoid changes, in areas like taxation, agriculture, and trade reform.
Thus, broad consensus-building with a solid communication effort is needed as part of the process to overcome these interests.
Complementing leadership at the top will also require skilled managers with the capacity to champion, design and especially implement reforms through the political and social milieu of Pakistan. Financial support from donors is secondary, and not determinant. If reforms are forced, they can even be counter productive.
The World Bank said that special attention should be given to the most vulnerable people or areas.
Many of the proposed reforms are most likely to benefit those already well integrated into Pakistan’s economy.
Large groups of people particularly the poor, youth, and women-will need special measures to ensure that they too can participate in and benefit from these reforms.
Special measures will also be needed to ensure that the most conflict-affected areas are not left out.
The key to success will be implementation, implementation, and implementation. It will do no good, and probably some harm, to take half-hearted steps that will then be partly reversed when facing obstacles.
Host reforms, because they are complex and intertwined, will need concerted actions by multiple official entities over several years.