A growing and influential body of research has come up with new insights on the process of economic growth and development. The new thinking shifts the focus away from the so called ‘proximate’ determinants of economic growth to ‘deeper’ determinants of economic growth emphasizing institutional quality, entrepreneurship, and markets as the key drivers of growth and development. Many developing countries have embraced these ideas and have initiated economic reforms aimed at improving the quality of institutions to support a vibrant private sector-led economy that can form the basis of robust growth on a sustained basis. In Pakistan too, a fundamental shift in the development approach is clearly emerging, as manifested by the recently launched “Framework for Economic Growth” developed by the Planning Commission of Pakistan. The framework places the ‘software’ of the society --- institutions, property rights, and markets ---- at the heart of the country’s development strategy and emphasizes reforms to foster a dynamic private sector that is able to compete effectively in today’s knowledge driven global economy.
The theme of this year’s conference has been chosen to take the current dialogue on the new development thinking forward and to encourage research on future directions for policy reforms aimed at enhancing the country’s long-term growth prospects. The following is a brief on some cross cutting sub-themes of the Conference along with some suggestive questions for research.
1. Macroeconomic policies for sustainable growth
2. Economic Reforms
5. Poverty and Income Distribution
1. Macroeconomic Policies for sustainable growth
Pakistan’s growth experience is a story of boom-bust cycles of economic growth with periods of high growth followed by sharp downturns often triggered by macroeconomic imbalances rooted in low savings and tax revenues and reflected in high fiscal and current account deficits. The current macroeconomic policies have failed to deliver macroeconomic stability that is so essential for sustaining the growth momentum. There is thus a critical need to rethink macroeconomic policies for sustained economic growth. Some relevant questions for research include: What macroeconomic policies are required to pull the economy out of stagflation? How do we improve the savings and investment rates? How to bridge the savings-Investment gap? How the private sector credit, that typically stands at a relatively low level, be increased? What policies can be adopted to alleviate the fiscal constrain ─ how the abysmally low tax to GDP ratio be improved? How the bond and equity markets may be further developed for financial deepening? What combination of sectoral and macroeconomic policies can be helpful in easing the foreign exchange constraint? Has Pakistan employed an optimal criterion for the distribution of financial resources between the federation and the provinces and amongst the provinces? Is the criterion in accord with international best practices? Should Pakistan opt for revenue decentralization? How to tackle the problem of circular debt that has marred the performance of the power sector? An informed debate on questions like these would be helpful in designing macroeconomic policies that can ensure macroeconomic stability on a lasting basis.
2. Economic Reforms
Pakistan needs wide-ranging and deep economic reforms to sustain robust growth. Research in this area may focus broadly on the overall reforms agenda as well as specifically on some priority sectors such as energy, education, investment climate, institutions, and civil services. What ails the energy sector and how the sector may be revived? What changes are required in the education system to improve the state of human capital? How the investment climate, which among other things is a function of regulatory environment, be improved? To make contract enforcement efficient and property rights secure what reforms the administrative machinery and the judicial process merit? How the bureaucracy be made vibrant and efficient? What should be the entry and placement mechanism, compensation structure, and performance evaluation system for the civil service? Issues like generalist versus specialist civil servants and opening up the civil service for entry at senior levels also merit research and debate. The political economy of reforms also needs to be studied to have a better understanding of the potential challenges in pressing forward the reforms agenda and to identify ways to muster political support for the reform process.
The Global Competitiveness Index 2010-11 ranks Pakistan 123rd out of 139 countries in terms of overall competitiveness. The need for improvement is but obvious. Research in this area may focus not only on identifying the key constraints but also on finding innovative ways to improve productivity and competitiveness of Pakistani enterprises in all productive sectors including manufacturing, services, and agriculture. Other research issues may include the role of physical infrastructure, the regulatory environment, and the policy framework in shaping the overall competitiveness of the economy.
Entrepreneurship is considered as key to private sector development and economic growth. The main features of entrepreneurship, in the Schumpeterian sense, are innovation and risk taking. The questions then are: what constrains entrepreneurship in Pakistan and what measures are required to encourage entrepreneurship? How to foster a competitive environment in which entrepreneurship can thrive and rent-seeking is discouraged? How to minimize the presence of inherently risk-averse public sector in the marketplace so that more space is created for private enterprises? How can venture capitalism be promoted in Pakistan to provide the necessary financing to the promising start-ups?
5. Poverty and Income Distribution
It is well recognized that economic growth is a necessary but not sufficient condition for poverty alleviation, and that economic growth is often accompanied by rising income inequalities. The broader question for research and debate is that how can public policy be geared towards fostering private sector led growth while at the same time ensuring that the growth is broad-based and inclusive. More specifically, how can the vulnerable segments of the society be protected in a market-led model of growth and development? What measures are required to make the existing social safety nets more effective in terms of their coverage and scope? How can the international best practice models such as conditional cash transfers and employment guarantee schemes be usefully replicated in Pakistan? Research may also focus on the role of micro credit and skill development programs in empowering the poor households.