Pakistan’s public debt, inflation decrease

www.Dawn.com

November 01, 2007
Thursday

By Ihtashamul Haque

ISLAMABAD, Oct 31: Pakistan has managed to decrease public debt and contained inflation but its health and primary education pillars showed a negative trend, says the Global Competitiveness Report 2007-08 of the World Economic Forum.The country-specific section of the report, released on Wednesday, shows that Pakistan’s public debt decreased from 53.5 to 52 per cent of the GDP and inflation from 9.10 to 7.20 per cent.Compared to last year, Pakistan improved its competitiveness position by seven ranks and now occupies 84th position in a tally for 122 countries.According to the report, Pakistan improved its key indicators after it established formal relationship with the World Economic Forum in 2006 and became a beneficiary of its Competitive Support Fund (CSF).The United States tops the overall ranking in report. Switzerland is in second position followed by Denmark, Sweden, Germany, Finland and Singapore. Pakistan has maintained its position by 92, whereas other major players lost their rankings by significant numbers.India lost five ranks on the GCI, whereas, Slovenia and Brazil lost six ranks, Egypt lost 14, United Arab Emirates and Indonesia lost five and four ranks, respectively.Pakistan remained more or less stable with respect to constant sample and not considering the countries which entered the rankings for the first time this year, above Pakistan.The report appreciated the government’s strategy based on deregulation, privatisation and liberalisation, where Pakistan realised important progress in a number of different dimensions captured in the indexes.Pakistan’s overall competitive performance is hindered by its position in some of the key pillars, mostly related to human capital: higher education and training, health and primary education, and labour markets.On education and training, the country has low primary, secondary and tertiary enrolment rates, (ranked 120th, 120th, and 116th, respectively), a poor assessment for the quality of educational system, and availability of staff training.Health indicators are also worrisome, placing the country 106th overall. This is, however, also due to the fact that the World Economic Forum used the data available prior to 2005-2006. Finally, the country receives poor marks for labour market efficiency (ranked 113th), with low female participation in the labour force, high firing costs, little reliance on professional management within companies, and wages that are not flexibly determined.Significant improvements were made in Institutions, including property right (+0.40), in institutional framework (+0.27 for diversion of public fund variable, +0.35 in the efficiency of the legal framework among other), in the level of security (+0.31). Also private institutions sub-pillar is assessed as more efficient and transparent than last year (+0.24).The pillar on Infrastructure shows improvement with respect to last year (+0.6 overall), with a notable increase in the number of telephone lines (+0.48) in line with the government’s effort to improve connectivity and infrastructure.The country has improved in important dimension, such as the extent and effect of taxation (0.32), the total tax rate, the effectiveness of anti-monopoly policies (+0.02) and the business impact of rules on FDI (+0.31).Pakistan has shown an overall positive delta of 0.15, with improvements in some variables on the pillar of Labour market efficiency.The pillar on Financial market sophistication shows a slight overall improvement (+0.03), with a positive delta (0.14) for the efficiency sub-pillar and some notable improvement in the soundness of bank (+0.18) among others.The economic reform strategy is registering gains, according to the new methodology used by the World Economic Forum for the GCR of 2007-2008. Pakistan scored relatively well for Prevalence of Foreign Ownership (72 to 64), Business Impact of the Rules on FDI (66 to 24), Cooperation in Labour-Employer Relations (77 to 70), Pay and Productivity (65 to 43) and Effectiveness of Anti Monopoly Policy (79 to 66).Pakistan ranked as follows on the overall pillars: institutions (81), infrastructure (72), macroeconomic stability (101), health and primary education (115), higher education and training (116), goods market efficiency (82), labour market efficiency (113), financial market sophistication (65), technological readiness (89), market size (28), business sophistication (79) and innovation (69). However, Pakistan maintained its overall position by 92 among the 131 countries.Pakistan’s identified competitive advantages by the GCR have been identified as the business impact of rules on FDI, protection of minority shareholder’s interest, interest rate spread, extend and effect of taxation, time required to start a business, non-wage labour costs, hiring and firing practices, pay and productivity, ease of access to loans, strength of investor protection, domestic market size and local supplier quality.In addition to these, the GCR also identified quality of railroad infrastructure, available seat kilometres, HIV prevalence and government procurement of advanced tech products as the indicators where Pakistan has competitive advantage.The CSF’s success to improve Pakistan’s key competitiveness indicators have also been recognised by the international community and in a recent meeting held at Portland, USA by the Competitiveness Institute (TCI) the Pakistan model (CSF) has been recognised as the model to be adopted for the Islamic countries.TCI will be recommending it as the model for all its new initiatives in the Islamic world.This could also be a road map for international donors, like USAID and other international institutions to implement successes made by Pakistan in their programmes in other parts of the world.