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Towards Growth Strategy & Economic Reform

Towards Growth Strategy & Economic Reform. Planning Commission. Outline. What is the Current Growth Strategy? What are Constraints to Economic Growth? Why Move towards a New Growth Strategy? What is Planning Commission’s Approach? New Growth Strategy – Brief Overview

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Towards Growth Strategy & Economic Reform

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  1. Towards Growth Strategy & Economic Reform Planning Commission

  2. Outline • What is the Current Growth Strategy? • What are Constraints to Economic Growth? • Why Move towards a New Growth Strategy? • What is Planning Commission’s Approach? • New Growth Strategy – Brief Overview • What should be the New Role of Government?

  3. What is the Current Growth Strategy? • Growth policy by default • Projects being multiplied with no available resources • Regulated markets and sector picking • Result • Sporadic growth usually created by external resources • Preoccupation with crises and stabilization • Lack of structural reform No Long Term Thinking on Growth Strategy

  4. What are Constraints to Economic Growth?

  5. Pakistan Lacks Growth Software Hardware Software Source: Global Competitiveness Report

  6. Why Move Towards a New Growth Strategy? Projected Population by Age Groups • A bulge in the working age groups in coming 40 years • This increases potential productive capacity • BUT also raises challenges: • UNEMPLOYMENT without adequate investment • COMPETING South Asian countries also have young populations 65> Million

  7. Why Move Towards a New Growth Strategy? • How much economic growth rate is required to absorb growing labour force? • Expected long run labour force growth rate is 3.6% • Absorbing incremental labour requires 8% GDP growth

  8. Planning Commission’s Approach to a New Strategy • Home grown • Donor-driven models not working across developing countries • Growth possible during stabilization • Taking stock of local knowledge • Consensus-driven • Meeting all segments of society including academia, civil society, business community • Detailed consultation with provinces

  9. New Growth StrategyEconomic Conceptualization

  10. New Economic Growth Strategy

  11. Short Term: Getting back to potential • Utilization of existing capacity • Up to 30% in industry • Up to 50% in fertilizer, auto sector, sugar, cement and steel • Requires: • Removing major constraints • Energy (Electricity and Gas) • Availability and pricing of credit • Macroeconomic stability

  12. Economic Growth Longer term: Increasing Potential • Physical Capital • Human Capital • Productivity • Public Investment • Skills • Education Sector based & Project based Missing: Innovation, Entrepreneurship & Markets

  13. Growth Alternatives (2011-15) • Stabilization : Reform of PSEs, increase resource mobilization (Average 4.7%) Business as Usual: Low aid-led public investment, high Inflation (Average 3.5 %)

  14. Growth Alternatives (2011-15) Stabilization + Reform: Market reforms & productivity gains (Average 5.6%) • Stabilization : Reform of PSEs, increase resource mobilization (Average 4.7%) Business as Usual: Low aid-led public investment, high Inflation (Average 3.5 %)

  15. Ongoing PSE Reform Efforts

  16. PSDP Resource Allocation Strategy Prioritizing PSDP • Projects nearing completion • Social sector projects • Key infrastructure projects: energy, water, transport • Projects for removing regional disparity PSDP Weaknesses • Decreasing PSDP Size • High share of bricks & mortar (60% of total in 2011) • Money Spread thin (large sectoral & regional spread) • Project governance

  17. Potential Governance Agenda

  18. Markets & Entrepreneurship

  19. Cities as Hubs of Commerce

  20. Youth & Community

  21. New Role of Government Markets Government

  22. Thank You Thank You www.pc.gov.pk

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