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Ans to Q 2
SERVICE PAPER
In 21st century economy is taken as ‘Religion’. It is the blood in the veins of nation
state, vitality in the human muscles, base for brutal wars and a reason for
governments to rule. The motherland has painfully experienced rising poverty and
sinking economy; despite world’s best canal system, profitable geostrategic location,
and unexplored resources. The nation, who earned nuclear position despite
miseable poverty and sever foreign pressure, can do wonders, if provided with
dedicated leadership.
Present Scenario:
Foreign investment in 2007 was $ 700, 63.5 million but in 2008 only $329 million.
Soaring oil prices due to increased demand from growing economics of China and
India, Iraq crisis, Iran holding its oil export, devaluation of Dollar after Iraq invasion
and limited supply by OPEC, refusal of Saudi Arabia to enhance its oil supply. More
population to use energy from to $ 134/ barrel in 2008.
Food crisis oil prices, low agriculture yield due to heavy cost of production (seeds,
pesticides, water and fertilizers), unavailability of small loans to small farmers, power
shortage, fast increasing of population, poor governance in managing the food and
to stop its smuggling to Afghanistan. Central Asia and Iran which stored big food
stocks due to American war. World Food Crisis encouraged its smuggling. Less
attention by the governments to live stock, dairy stock, increased circulation of paper
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World Food Crisis: population explosion, emergence of middle class with more food
consumption in India and China. Low yield in India. Earthquake in China, increase in
world oil prices.
ENERGY CRISIS:
Inflation means price hike, huge gar between demand and supply, too many rupees
chasing too few things. More supply of Money due to; AID after 9/11. Foreign
Remittances due to over seas Pakistanis, growth in banking sector and investment in
real estate. Poor supply of goods, food items due to low yield. Inflation due to rise in
oil prices, food, removal of food subsidy, devaluation of Rupee, higher import price,
Government borrowing from State Bank Rs . 544 billion. Resultantly increase in
wage-price. Delay in monetary tightening by the State Bank. Government claims
25% while actual is 32% while food inflation is 45%
Fiscal deficit: 6.5% of GDP, target was 4%. Due to slippage in revenue and
expenditure- Dismal Growth; lower Tax collection. Heavy subsidy on oil effected
current expenditure, increased in development expenditure. Decline external
financing flows, so the government borrowed from SBP which caused monetary
expansion, continuous Defense Budget.
Only salaried persons pay regular tax, while the major sectors find safe path through
corruption. Agriculture tax cannot be imposed due to feudal in policy making.
Unilateral growth:
China factor:
Cheaper Chinese products destroyed our industry thus created unemployment, more
burdens on economy.
Regional conflicts has marred the gas pipelines and usage of Gwadar.
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Positive Indicators:
Statistic:
GDP growth rate 5.8% investment declined to 21.6% of GDP. National savings to
13.9% of GDP.
Pragamatic Solutions:
· political commitment to formulate short term and long term policies with
consistency
· Limiting the extent of govt borrowing from the State Bank of Pakistan
· Given the multiple dimensions of uncertainty in the global, national and household
economy, it is essential that the highest priority for protection to the poor where
uncertainty can lead to irreversible damage-in the shape of high morbidity and
mortality, decline in the nutritional status of children and women, and withdrawal
from schools.
· A core structure weakness of the economy highlighted by the current crisis is the
lack of international competitiveness that retards an export-led growth strategy.
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· Worker skills are critical to give our firms a competitive edge in international
markets; programs for skill upgrading need to be modernized.
· The current debilitating power shortages have to be redressed quickly and a well
through medium term energy plan need to be in place that provides reasonably
priced and good quality power to industry.
· Given our natural comparative advantage in agriculture, i.e. the world’s largest
contiguous canal irrigation system, diversity of agro-climatic zones, good soil
conditions and cheap labor with a centuries old farming traditions, poor crop yields
and absence of high value added agricultural exports, is a glaring example of
unfulfilled promise.
· Accelerating the growth of small and medium farms where there is considerable
potential for increasing yield per acre and employment generation
Increase and modernize land trade routes, including investment in infrastructure and
allowing each others trucks and containers to carry cargo to market destinations.
Poverty reduction;
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Distribution of state land to landless and tenant households that support production
and provide extension services. Provision of credit to the poor, particularly small
farmers, to become equity holders in mainstream corporate enterprises and fields
such as milk, livestock, marine fisheries, processed food and even industries like
telecommunications, apparel and software.
During President Clinton’s visit to Pakistan in March 2000- he said, ‘This era does
not reward people who struggle in vain to redraw borders with blood. It belongs to
those in the region who look beyond borders, for partners and for commerce and
trade’.
Conclusion:
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7 Remedies
a:exploring hidden mineral resources
b: development of agriculture
c: effective short and long term policies
d: access to foreign markets
e: poverty reduction
f: effective taxation system
g: free trade agreement
h: knowledge based economy
i: human resource development
8 conclusion
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