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Pakistan’s Economic Prosperity
10 Focus Areas to spur growth
Hamna Yousaf
In times of political manoeuvrings and the understandable focus on the Covid-19 crisis, it is important to remind ourselves that we still need an economic system that provides prosperity to our people. Here are top ten most important things for the government of Pakistan to get right in order to have sustained economic growth.
- Reforms in the energy sector
The government needs to introduce market-based reforms in the energy as well as petroleum sector based on a transfer of control over the distribution infrastructure to provinces. The government has to move away from actively participating in markets to a role of a regulator of markets through empowered institutions that encourage competition.
- Establishment of science-based institutions
These knowledge spillovers will be critical to support long-term productivity growth. The government should also to support e-learning and upgrade the primary and secondary school curriculum to include problem-solving (logic/mathematics), critical thinking/reasoning (science/philosophy), creative expression (art and humanities) and principle-based decision making (values/ethics). 
- Price water usage and end subsidies
Water is already scarce in Pakistan as we have less than 1000 cubic metres per capita of it, yet we are producing water thirsty, low value-added crops which can easily be imported, and yet at the same time we are importing water value-added crops like vegetables and legumes. The government needs to increase the tax net through proper documentation whilst reducing taxes on the formal sector.
- Expand the tax net
Expanding the tax net through proper documentation whilst reducing taxes on the formal sector will help access to formal financing for the SMEs, which currently account for only 5% of bank financing. The government also needs to push for the elimination of the practice of double bookkeeping, as well as encouraging greater use of technology-based solutions, which will lead to more productivity gains.
- Diversify and expand the exports
Cotton textiles and foods still account for over 70% of Pakistan’s exports. The government should create specialised industrial zones that will be based on manufacturing of goods to export but for new products and markets. Also, the government needs to support the development of formalised information technology services export sector through a cluster approach. We need to target an exports-to-import ratio of 2, from the current 0.5.
- Development of a digital infrastructure
Every 10% increase in broadband penetration increases GDP growth by 1.2%. Fixed-line broadband penetration is still only 0.25% of the population. Over 50 million people live in areas that have 3G or 4G cellular coverage but still do not have access to a smartphone. This needs to change.
- Market-based reforms in transport sector
Currently, about 92% of all land transport is through trucks, which is among the highest in the world. Poor logistical efficiency leads to a loss of competitiveness for local industries, poor city planning, environmental degradation, and poorer living standards.
- Encourage tourism
There is a tremendous opportunity in this sector, given Pakistan’s natural, historical, religious, and cultural assets. The potential for large-scale employment and foreign exchange inflows through tourism is enormous, yet a total of 17,823 tourists visited Pakistan in 2019 compared to 1.9 million visiting Sri Lanka, 10 million in India, and 39 million in Thailand.
- Real estate sector
Propensity for real estate to be used to park black money artificially increases asset prices, thereby reducing the ability for people to buy homes through mortgages. Pakistan has one of the highest home price-to-annual income ratio at 11:1 versus 8.35 for the UK, even though interest rates are much lower there. The government should consider federal insurance schemes to kick start mortgage-based financing.
- Invest in environmental and social assets
Pakistan is the 7th most vulnerable country to the effects of climate change and has one of the lowest forest cover—currently at 2% of our land area. Furthermore, the health impact of a poor environment is large due to poor water and air quality-related medical issues, especially amongst the most vulnerable segments of the population. About 75% of medical issues in children in Pakistan are due to water- and airborne diseases.
In addition, greater involvement of women in the labour force will also drive economic growth. The female labour force participation rate in Pakistan is 18% versus 59% in Thailand
