The Pakistan Development Review
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Demand and Supply Issue (2008-2009)
Get PDFIn 1994 our major source of power was hydel. Cost of hydel is
only in the beginning which includes construction of dam and water
reservoir. It is the cheapest source with no input cost and very low
administrative cost .It is the best natural way of producing energy. No
noise, no pollution and many associated benefits. This source cost wapda
less than Rs1 per unit. In 1994 IPPs came into action using thermal
power generators running on diesel. After purchasing electricity from
IPPs the purchase price of Wapda increased up to Rs 6 and 12 per unit
depending on the deals with different IPPs. This method proved to be
very costly and full of pollution. Due to price hike of diesel in the
past, the input cost (cost of diesel) increased by many fold. So the
economy was hit and the balance of payment was disturbed badly. Actually
this method was meant for short term solution. But due to political
instability we lost our sight from the real scene and based our future
energy plan on a very costly method. Why? Answer is, as a nation
including politicians, bureaucrats, policy makers and everybody enjoy
their present leaving and passing these queries, fears and problems to
the next generation hoping that all will be well. More than 35 years
past away and no concrete solution appeared. But the people of Pakistan
specially our new generation are facing this bitter truth i.e., load
shedding We have lost rather wasted our precious 35 years. We cannot
makeup this gap. Whenever we will try to make a deal with the foreign
investors regarding any power generation project, it will always be
unfair. unfair why? Because, when somebody knows that you are dying for
what he has, he will blackmail you and make u go his way. This is called
business. We have lost both the time and competitiveness. If we go on
making deals with IPPs now known as “Rental power houses” which will
provide us electricity as high as Rs19 per unit. We will lose a lot in
all fields. Such as
Wheat Markets and Price Stabilisation in Pakistan: An Analysis of Policy Options
Get PDFThis article provides a quantitative analysis of the effects
of Pakistan government domestic wheat procurement, sales, and trade
policies on wheat supply, demand, prices, and overall inflation.
Analysis of price multipliers indicates that increases in wheat
procurement prices (one means of promoting domestic procurement) have
relatively small effects on the overall consumer price index. Partial
equilibrium analysis of wheat markets suggests that fluctuations in
production, rather than market manipulation, are plausible explanations
for price increases in recent years. Comparisons of domestic and
international prices suggest that promoting private sector imports is
one alternative for increasing supply and stabilising market prices,
particularly in years of production shortfalls. Overall, this paper
concludes that market forces play a dominant role in price determination
in Pakistan, and that policies that promote the private sector wheat
trade can both increase price stability and reduce fiscal
costs
The Long Term Impact of Health on Economic Growth in Pakistan
Get PDFHuman capital plays pivotal role for sustainable economic
Growth. As different growth theories suggest the role of human capital
as a significant for growth process. The concept of human capital in
economic literature defined broadly by including education, health,
training, migration, and other investments that enhance an individual’s
productivity. However, the growth economists that have incorporated
human capital in the growth studies, paid greater attention on analysing
the impact of education on economic growth, while ignoring the role of
health human capital. It is only in very recent times that studies have
started looking at health and tried to estimate the relationship between
health status and economic growth. There exists a two-way relationship
between improved health and economic growth. Health and other forms of
human and physical capital increases the per capita GDP by increasing
productivity of existing resources coupled with resource accumulation
and technical change. Furthermore, some part of this increased income is
spent on investment in human capital, which results in further per
capita growth. According to Fogel (1994), approximately one third of GDP
of Britain between 1790 and 1980 is the outcome of improvements in
health especially improvement in nutrition, public health, and medical
care facilities and these improved health facilities should be
considered as labour enhancing technical change
Changing Revealed Comparative Advantage: A Case Study of Footwear Industry of Pakistan
Get PDFThe global export patterns are changing fast as a result of
reduction in trade barriers and technological advancements that have led
to gains in productivity and change in comparative advantage patterns in
world economies. Asian economies such as China and India are enjoying a
notable growth in changing circumstances across the world. Pakistan also
has great potential for higher growth however the political threats,
socioeconomic environment and lack of updated technologies are
obstruction in the way of progress. Some sectors of Pakistan economy
have shown a good performance in terms of production and exports.
Footwear is one such industry which has increased its exports at large
extent since 2003. This sector has pivotal importance in terms of
providing and creating jobs, earning of foreign exchange with the help
of exports and fulfilling the local consumption requirements. Both in
Pakistan and around the globe, the demand for footwear is increasing.
Pakistan is one of the most populous countries in the World and
according to an estimate with an average population growth of 2.25
percent, about 3 million children have been born during the year
2005-06, signaling the growing demand for footwear in Pakistan. It is
also estimated that about 60 percent of the World’s total consumption
consists of simple footwear made entirely of non-leather materials and
that for the remaining 40 percent only the upper part of the shoe is
made of leather. In the manufacturing of footwear, most frequently used
material consists upon leather, man-made materials, rubber / canvas /
synthetic and textile along accessories. Different type of shoes are
being produced by the local industry e.g. sportsmen, army, disabled
persons and safety shoes for the industrial workers etc. The population
of Pakistan is expected to be about 172 million in the year 2010.
Keeping in view the growth in population, the growth in the demand of
footwear industry is also anticipated
State of International Development Uneven Progress, Shifting Policy Paradigms and Lessons for Pakistan (The Gustav Ranis Lecture)
No full textIt is always a pleasure for me to participate in these annual
meetings. The knowledge and the talent displayed are immense. The
quality of discussion is high. I had never thought however that I would
have the honor of delivering the Aalama Iqbal lecture. To prepare for
this lecture I read extensively from Iqbal’s poetry. Of course I read in
translation, but even so I was overwhelmed by the beauty of the ideas
and the expression. My search for an apt couplet or set of lines for
this paper was in vain. Iqbal was speaking to his people and although he
was expansive in his view of society, it is still not meant for me to
carry the word of Iqbal to you. Nevertheless I do display at the
beginning of this paper three lines from Iqbal. He is clear on the
importance of doing for oneself and for ones country. At least in the
modern world ones efforts are so much more productive if government
provides a favourable environment for individual effort. And he would
embrace the brotherhood of mankind, leaving some potential for us to
help each other. He was very clear that learning from the West was
desirable, and he was very selective about that—science and technology
in particular. My paper is about what government must do, and
specifically the government of Pakistan must do, to create an
environment in which not just a few gather dew but in which all people
gather dew. As soon as ones concern encompasses the bulk of the
population food security comes to the fore. My paper can be seen as
addressing how all rural people can gather the dew. It has a prominent
place for science and technology
Persistent Food Insecurity from Policy Failures in Pakistan
Get PDFFood security means, “All the people, all the time, have
physical and economic access to sufficient, safe and nutritious food to
meet their dietary needs and food preference for an active and healthy
life” [FAO (1996)]. Three types of food insecurity generally exist in
any country, which are: transitory food insecurity that is short time
food insecurity occurs due to sporadic crises; chronic food insecurity
that arises as a result of long term but not easily changed conditions;
cyclic food insecurity that arises due to seasonal fluctuations. If
cyclic food insecurity existed in any country for at least six months
than it was called as chronic cyclic food insecurity and if it persisted
less than six months than called as transitory cyclic food insecurity.
Pakistan has made a lot of progress since independence in the field of
agriculture in terms of production, yields, and growth in area under
cultivation. Indus agriculture has experienced a Green Revolution and is
striving for yellow and blue revolutions. However, it could have done
far better. Though the overall growth of the Pakistan’s economy has
largely been dependent upon the performance of agriculture, over the
years, not much investment has been made for the development of this
sector. Agriculture performance still depends upon, quite a lot, upon
the weather conditions every year. The yields of most of crops are far
below the levels achieved at the progressive farms (extension gap). From
the Figure 1 it is evident that in the last decade (90s) food
availability was increasing and then went down and formed the inverted
u-shape. After that again fluctuating means there is no surety about
food security. It is also comparable with agriculture growth rate.
According to latest statistics in Pakistan as many as 50 million people
are engaged in agriculture operations and produce only 25 million tons
of food grains. As against this in India, 546 million people are engaged
in agricultural operations and produce 176 million tons of food grains,
in USA only 6 million people engaged in agriculture, produce 347 million
of food grains
Estimating Total Factor Productivity and Its Components: Evidence from Major Manufacturing Industries of Pakistan
Get PDFManufacturing sector of Pakistan accounts for 19.1 percent of
GDP and is the second largest sector of the economy. It grew by 8.4
percent during 2007 as against 10 percent last year. In the
manufacturing sector, large scale manufacturing (LSM), plays a vital
role and accounts for approximately 70 percent of overall manufacturing
[Economic Survey of Pakistan (2006-07)]. During 2006-07 relatively
slower pace of expansion exhibits signs of moderation on accounts of
higher capacity utilisation, difficulties in the textile sector and
lower than expected scale of operations of oil refineries. A number of
other factors have also contributed to the low pace of expansion in
manufacturing including zero percent growth in raw cotton production
which is a critical input for the textile industry, vegetable ghee and
cooking oil which comprise about 5.5 percent of the LSM sector, showed
uninspiring performance due to unparalleled rise in international palm
and soybean oil prices. The performance of the automobile sector has
been far less impressive this year as compared to previous five years
due to a fall in domestic demand for cars on account of increasing auto
financing rates. The higher imports of used cars in the beginning of
fiscal year 2006-07 also affected the performance of domestic auto
mobile sector
A Small Open Economy DSGE Model for Pakistan
Get PDFIn recent years there has been a growing interest in
academics, international policy institutions and central banks1 in
developing small-to-medium, even large-scale, open economy macroeconomic
models called Dynamic Stochastic General Equilibrium (DSGE) models based
on new-Keynesian framework.2 The term DSGE was originally used by
Kydland and Prescott (1982) in their seminal contribution on Real
Business Cycle (RBC) model. The RBC model is based on neoclassical
framework with micro-founded optimisation behaviour of economic agents
with flexible prices. One of the critical assumptions of this model is
that fluctuations of real quantities are caused by real shock only; that
is, only stochastic technology or government spending shocks play their
role. Later research in DSGE models however included Keynesian short-run
macroeconomic features (called nominal rigidities), such as Calvo (1983)
type staggered pricing behaviour and Taylor (1980) type wage contracts.
Hence this new DSGE modeling framework labeled as new-neoclassical
synthesis or new-Keynesian modeling paradigm. 3 This new approach
combines micro-foundations of both households and firms optimisation
problems and with a large collection of both nominal and real
(price/wage) rigidities that provide plausible short-run dynamic
macroeconomic fluctuations with a fully articulated description of the
monetary policy transmission mechanism; see, for instance, Christiano,
et al. (2005) and Smets and Wouters (2003). The key advantage of modern
DSGE models, over traditional reduce form macroeconomic models, is that
the structural interpretation of their parameters allows to overcome the
famous Lucas critique (1976).4 Traditional models contained equations
linking variables of interest of explanatory factors such as economic
policy variables. One of the uses of these models was therefore to
examine how a change in economic policy affected these variables of
interest, other things being equal. In using DSGE models for practical
purposes and to recommend how central banks and policy institutions
should react to the short-run fluctuations, it is necessary to first
examine the possible sources,5 as well as to evaluate the degree of
nominal and real rigidities present in the economy. In advanced
economies, like US and EURO area, it is easy to determine the degree of
nominal and real rigidities as these economies are fully documented. In
developing economies like Pakistan, where most of economic activities
are un-documented (also labeled as informal economy, black economy, or
underground economy), it is very difficult to determine the exact degree
of nominal and real rigidities present in the economy. However, one can
approximate results using own judgments and through well defined survey
based method
Pakistan’s Energy Security Challenge: Some Observations and Thoughts
Get PDFENERGY SECURITY 1.1. Energy security has become the burning
topic of the day both in country specific and international terms. Many
consider that the new alignments in geopolitics are strongly influenced
by the search for energy security which may be defined as “dependable
and affordable energy necessary for an economy.” It is even claimed that
in terms of strategic importance energy security is second only to food
security. Given the shortage of energy we are facing and the national
debate on its cost and affordability, there is no doubt consensus that
we have an Energy Crisis in the country and our Energy Security is at
risk
Macroeconomic Factors and Equity Prices: An Empirical Investigation by Using ARDL Approach
Get PDFThe relationship between macroeconomic variables and the
equity prices has attracted the curiosity of academicians and
practitioners since the publication of seminal paper of Chen, et al.
(1986). Many empirical studies those tested the relationship reveal that
asset pricing theories do not properly identify macroeconomic factors
that influence equity prices [Roll and Ross (1980); Fama (1981); Chen,
et al. (1986); Hamao (1986); Faff (1988); Chen (1991); Maysami and Koh
(2000) and Paul and Mallik (2001)]. In most of these studies, variable
selection and empirical analyses is based on economic rationale,
financial theory and investors’ intuition. These studies generally apply
Eagle and Granger (1987) procedure or Johanson and Jusilieus (1990,
1991) approach in Vector Auto Regressor (VAR) Framework. In Pakistan,
Fazal (2006) and Nishat (2001) explored the relationship between
macroeconomic factors and equity prices by using Johanson and Jusilieus
(1990, 1991) procedure. The present study tests the relationship between
macroeconomic variables such as inflation, industrial production, oil
prices, short term interest rate, exchange rates, foreign portfolio
investment, money supply and equity prices by using Auto Regressive
Distributive Lag (ARDL) bounds testing procedure proposed by Pesaran,
Shin, and Smith (1996, 2001). The ARDL approach in an errorcorrection
setting has been widely applied to examine the impact of macroeconomic
factors on economic growth but it is strongly underutilised in the
capital market filament of literature. This methodology has a number of
advantages over the other models. First, determining the order of
integration of macroeconomic factors and equity market returns is not an
important issue here because the Pesaran ARDL approach yields consistent
estimates of the long-run coefficients that are asymptotically normal
irrespective of whether the underlying regressors are I(0) or I(1) and
of the extent of cointegration. Secondly, the ARDL approach allows
exploring correct dynamic structure while many econometric procedures do
not allow to clearly distinguish between long run and short run
relationships