Daily Times

Grappling with a battle against a virus, the economy of Pakistan is eclipsed with a conjunctural moment where it needs a revamping of the paradigm of policies of economic growth. This statement can be supported by the fact that our economy has not been able to sustain this multivariate shock – in the form of a pandemic. Our fiscal capacity as well as our informal economy was not able to absorb this shock resulting in waves of unemployment and loss of economic output. While similar trends have been witnessed worldwide, our country was already facing a slump in our ‘industry’, non-existent ‘innovation’ and a poor state of ‘infrastructure’. These three ‘I’ can be coined as sine qua non for economic growth – and relate to Sustainable Development Goal number nine – which seeks to ‘build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation by 2030’. Industrialization has linkages with both infrastructure and innovation. Without a sound infrastructure – access to markets, raw materials and employment for industries becomes difficult. Additionally, for any industry to develop, proper deployment of technology and innovations is a must to keep up with the domestic and global market. These innovations may be in terms of product diversification, financial management and/or even expanding operations and moving to global value chains.

Given the health of our economy, it is not surprising that according to the Pakistan Economic Survey of 2019-20, our mining and quarrying sector has seen a negative growth of 8.82 percent

SDG 9 is a multifarious goal and most of its indicators come under Tier 1, which relates to data being regularly produced by countries. Even before Covid-19, Pakistan still faced a sluggish performance with regards to a realization on SDG 9. Our economy has historically remained a consumption oriented economy – this is closely linked to our low savings rate, which is the lowest in the region – with an artificially appreciated exchange rate; this results in a balance of payments and trade crisis – falling exports and rising imports. Our taxation system may work for larger corporations and uber-wealthy who own them but this might not hold true for smaller businesses. All this may result in increased unemployment, increased inequalities and lower income per capita for the population, which is detrimental for us considering our demographics of an increasing youth population.

Target 9.2 aims to ‘promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries’. In this lieu, ever since, Pakistan became a signatory of SDG in February 2016, the manufacturing value added as a proportion of GDP witnessed an increase in 2019 to 12.46 percent after a decline in 2017 but historically we also observed this ratio to be 14.79 percent in 2008. In the case of China, this value was 27.16 percent in 2019. We can definitely look for ways to follow an evidence-based growth strategy, as of China. Given the health of our economy, it is not surprising that according to the Pakistan Economic Survey of 2019-20, our mining and quarrying sector has seen a negative growth of 8.82 percent. Similarly, our large-scale manufacturing sector has witnessed a decline of 7.78 percent. In particular, the following segregated sectors suffered a decline: textile by 2.57 percent, automobiles by 36.50 percent and electronics by 13.54 percent. Nonetheless, some optimism can be seen with respect to growth in few sectors such as fertilizers, leather and rubber products. That said, it is difficult to ignore the quandary of low value addition in various industries – for which the prime example can be the textile industry. With this corollary, obviously lesser profits and lesser economic growth transpires. Yet at the same time – we have the opportunity to divulge into increasing domains of higher value additions – by learning from technological and R&D spill overs from advanced economies and their corporations.

Going forward, target 9.3 discusses ‘increasing the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets by 2030’. Small and Medium sized enterprises (SMEs) have been described in the literature as ‘the backbone of the economies’. However, in the context of Pakistan, much of our SMEs are undocumented and hence they suffer from the problem of gaining access to financial services – such as bank loans. This can be linked to our deeply entrenched ‘pertinacious incentive structure’ – which favours trickle down. In 2018, the share of lending to SMEs was just merely PPKR 63 billion as compared to the lending in the private sector amounting to PKR 923 billion. By this context, in November 2019, the current government announced its aim to enhance the share of private sector credit for SMEs from 7.5 percent to 17 percent until 2023 – which will consequently increase the financial outreach to SMEs. Some statistics are promising in this regard. For instance, The World Bank’s Ease of Doing Business 2020 Report classifies Pakistan in the top 10 economies that improved the most after implementing regulatory reforms.

Dr Izza Aftab is the chairperson of the Economics Department at IT University, Lahore / Noor Ul Islam is currently working as a Research Associate at the SDG Tech Lab established in collaboration with IT University, Lahore