View Full Version : Pakistan and the OIC - Javaid Laghari - 19th November 2012

19th November 2012, 09:53 AM
Recently the OIC Economic Forum was held in Istanbul under the auspices of the Capital Market Regulators Forum (COMCEC). The commerce, development and finance ministers of the 57 Islamic countries attended the forum, which was chaired by the Turkish prime minister. Two reports were presented: The Annual Economic Report and SWOT Outlook on OIC Member Countries, 2012. The reports show how far Pakistan has fallen behind many OIC countries and the emerging economies in Asia.

For emerging economies like Turkey, Malaysia and Indonesia, the average GDP growth rate for the last three years has averaged around eight percent, as against 6 to 8 percent for other developing countries, and 4 to 6 percent for the rest of the world. In South Asia in 2011, according to the Economic Survey of Pakistan 2011-12, Sri Lanka averaged eight percent, and India and Bangladesh seven percent.

However, Pakistan averaged between 1.7 percent and three percent of GDP growth over the same period, which is less than half the world average, and about quarter the average of the emerging economies. Pakistan already has among the lowest GDP per capita (purchasing power parity, PPP) at $2,700 (the average for emerging economies is around $6,100), and its GDP is ranked 134th in the world (even below Laos and Nicaragua). Pakistan will soon fall below countries like Rwanda and Sudan within a decade, unless some drastic economic measures are undertaken with immediate effect.

Things are getting worse by the day for the common man in Pakistan due to high inflation and a shrinking economy. While world inflation averaged below five percent for the last three years, and emerging economies registering less than seven percent inflation, Pakistan continued with double-digit inflation. Even where world prices have dropped (like in energy, which peaked worldwide in 2008 but are 40 percent lower now); prices in Pakistan continued to rise every year.

Pakistanís budget deficit was reportedly 8.5 percent last year. The government continues to borrow Rs5 billion every day. It took Pakistan 60 years to accumulate a public debt of Rs6 trillion. However, in the last five years alone, the debt has doubled to over Rs12 trillion. As our tax collection as a percentage of GDP is among the lowest in the world (9.5 percent, compared to 18 percent for India), we need another $12 billion to survive over the next 12 months.

Pakistanís reserves have fallen to less than $10 billion, from $14 billion last year. Foreign direct investment (FDI) in 2008 was $5.4 billion, which has dropped to around $700 million, a mere 13 percent of the 2008 figure. According to the 2011 Legatum Prosperity Index, Ethiopia, Zimbabwe, and the Central African Republic are the only three countries worse off than Pakistan.

Pakistan needs to invest in education. Unfortunately, education has remained a low priority in our country. The literacy rate in Pakistan is about 58 percent, compared to an average of 81 percent for the developing world and 84 percent for the world. Only Sub-Saharan Africa is behind us.

Our expenditure on education is only about 2.3 percent of the GDP. According to Unesco, there are only six countries that spend less than Pakistan on education, including Zambia, the Central African Republic, Burma, Ecuador and Nigeria. According to the Education Sub-Index, the Central African Republic, Mali, Sudan, Ethiopia and Nigeria are the only countries worse off than Pakistan.

The key to prosperity lies in the creation of a knowledge-economy through investment in higher education. Developed countries like Singapore, South Korea, Taiwan, Hong Kong and Japan, and more recently emerging economies in Asia like Turkey, Malaysia and Indonesia in Southeast Asia, are investing heavily in higher education.

Even the oil-rich OIC countries have figured it out that real long-term prosperity lies in creating a knowledge-economy. While the developing world continues to invest in higher education, our investments have fallen over the last five years from 0.32 percent of the GDP to less than 0.2 percent of the GDP. As a result, our gross enrolment rate in tertiary education is a measly eight percent, while it averages around 26 percent for the emerging economies, and 77 percent for the developed world.

We also have among the lowest number of researchers per capita. In the OIC countries, Tunisia (3,240), Jordan (1,934), Turkey (1,715) and Iran (1,715) are the top four, while Pakistan has less than 350! Out of 106,000 scientific articles published by OIC countries in 2011, half originated from only two countries: Turkey and Iran.

Pakistan accounted for only six percent of the total. And on top of that, whatever research takes place in Pakistan it is not transferred to the industry as there are hardly any incubators and technology parks. Only 1.5 percent of the world patents and four percent of global high-tech exports came from OIC countries, out of which 81 percent came from Malaysia alone. As a result, Pakistan is not even listed among the top 10 OIC countries by technological intensity of exports, neither in high nor medium skills, whereas Malaysia, Jordan, Turkey and Tunisia are top technological exporters.

We need to educate Pakistan. We need to make it a constitutional requirement to allocate at least four percent of the GDP to education. We need to engage our youth and create a knowledge-economy.