LAHORE: The Lahore School of Economics hosted its Thirteenth International Annual Conference on Management of the Pakistan Economy at its Main Burki Campus. The theme of this year’s conference was “Igniting Technology-led growth in Pakistan: Role of Monetary, Fiscal and Investment Policies”. The two-day event was devoted to discussions on past successes and constraints on technology-led growth and to draw insights on how macro- and micro-level policies can contribute to accelerating economic growth in Pakistan.
The second day of the conference opened with a session titled “Openness, Economic Growth and Firm Level Productivity”. The session was chaired by Matthew McCartney, director of South Asian Studies; associate professor in the political economy and human development of India, University of Oxford, UK.
The session started with the paper titled “Pakistan’s Experience with the Pakistan-Chine Free Trade Agreement: Lessons for CPEC”. In this paper, Dr Azam Chaudhry (professor of economics and the dean of the Economics Faculty) and his co-authors Dr Theresa Chaudhry (professor of economics) and Nida Jamil (teaching fellow, Lahore School of Economics), provided fresh insights on Pakistan’s experience with the Pakistan-China Free Trade Agreement (FTA) to draw policy-related conclusions for the CPEC-related initiatives. They tested the impact of the last major economic agreement between the two countries, which was the 2006 Pakistan-China Free Trade Agreement (FTA). The study found a significant impact of this trade agreement on the amount of trade between two countries, however it also pointed out its sub-optimal consequences in the context of Pakistan’s growth strategy.
More specifically, the authors found a positive relation between Pakistan-China FTA and imports from China and a negative relation of this trade agreement with the productivity of the firms and value added in these sectors with adverse consequences for the economy, especially on the incentives of the producers in the country.
The authors also pointed out that though Pakistan has still not been given the same level of market access to China as the ASEAN countries (since Chinese tariffs on Pakistani goods tend to be higher than those on goods from ASEAN countries), the level of exports in the sectors benefiting from lower Chinese tariffs is increasing (though it has not increased as a percentage of Chinese imports which means that as Chinese imports have grown, Pakistani exports have not been able to significantly benefit from this trend).
The rigorous analysis was followed by some interesting policy recommendations for CPEC-related industrial initiatives such as gaining the same level of tariff concessions from China as received by the ASEAN countries, promoting joint ventures between the Pakistani and Chinese investors, making the conscious decisions – which sector can lead to the greatest increase in value added and which sectors have the greatest potential to increase exports – and finally, developing a labour policy that enables the manufacturing sector to switch from low-skilled to high-skilled labour.
The second paper in this session by Dr Tayyab Shabbir (professor of finance at Wharton School, University of Pennsylvania) presented its finding on the effects of foreign capital inflows on economic growth in Pakistan. In order to build the argument, it started with a discussion of endogenous growth models to conceptualise the impact of FDI on economic growth. It stressed that subjects of foreign capital inflows and economic growth require tailor-made solutions within the context of Pakistan’s economy. The author identified some insightful areas for future research for example, relationship between micro-level (firm level) and macro-level variables in order to boost foreign capital flows in the country.
The second session titled “Investment, Technology Upgradation and Job Creation” was chaired by, Dr Pervaiz Tahir.
The first paper in this session by Dr Rajah Rasiah (professor of international development at the Faculty of Economics and Administration, University of Malaya) and Shujaat Mubarik (associate dean and associate professor, Faculty of Business Administration and Social Sciences, University of Malaya) focused on some main lessons from the experience of five east Asian countries namely South Korea, Indonesia, Malaysia, the Philippines and Thailand with regards to financing of technological upgradation in their economies.
Dr Hanns Pichler (professor at University of Economics and Business Administration, Vienna) presented the second paper in this session, which studied investment behaviour in Austria as a kind of regional central European case. The study showed that the structural change reflecting increased dynamics of immaterial investments with repercussions on otherwise overall sluggishness of investment – due to prevailing economic uncertainties, generally less conducive business climate with unfavourable framework conditions and overwhelming bureaucratic/administrative hurdles.
Sadia Hussain (teaching and research fellow at LSE) concluded the session with a presentation on her work co-authored with Farah Said (assistant professor and research fellow at LSE). This paper examined and identified the determinants necessary to survive in agriculture for small and marginal farmers across all four provinces of the country. By employing Pakistan Panel Household Survey (2001, 2010), the paper empirically investigated the difference between the welfare indicators in the diversified households and specialised households.