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An ñ

 consists of the economic system of a country or other area, the labor, capital and land
resources, and the economic agents that socially participate in the production, exchange, distribution, and
consumption of goods and services of that area.

(http://en.wikipedia.org/wiki/Economy)


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It refers to the expansion of economies beyond national borders, in particular, the expansion of production
by transnational corporations to many countries around the world. The global economy includes the
globalization of production, markets, finance, communications, and the labor force.

(colours.mahost.org/faq/definitions.html)

OR

The international network of individuals, businesses, governments and multilateral organizations which
collectively make production and consumption decisions.

(globaledge.msu.edu/resourcedesk/glossary.asp)

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Developing country is a term generally used to describe a nation with a low level of material well being

(en.wikipedia.org/wiki/Developing economy)

OR

A country with a low per capita income, and undeveloped secondary and tertiary sectors.

(kristianseconomics.blogspot.com/2009/11/a2-glossary.html)



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Mc 

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unable to feed their population or meet their daily requirements of food, shelter and good
health.
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the people is very low. They are unable to buy good clothes and have better standard of
living for themselves.
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earnings earned from various sectors are not very high.
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to developed countries. Of course, countries such as India are making much advance in
this sphere of activity also, yet it has a long way to go.

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account of which their economic growth is slower. They have to feed more people when
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developed countries to improve their economic conditions. They succumb to the
domination of the developed countries.
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 ± Inflation rate is high in these countries. Since economic growth is slow and
the general production output is also not very high, goods and service are available at a
higher cost.

The developing countries or economies have too much to achieve in the sphere of industrial and
agriculture sphere. They have to make tremendous efforts to feed their millions of people.

(http://www.paggu.com/business/world-economy/10-facets-of-developing-economy)

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While there is no one, set definition of a developed economy it typically refers to a country with a
relatively high level of economic growth and security. Some of the most common criteria for evaluating a
country's degree of development are per capita income or gross domestic product (GDP), level of
industrialization, general standard of living and the amount of widespread infrastructure. Increasingly
other non-economic factors are included in evaluating an economy or country's degree of development,
such as the Human Development Index (HDI) which reflects relative degrees of education, literacy and
health.

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Kofi Annan former Secretary General of the United Nations, defined a developed country as
follows. "A developed country is one that allows all its citizens to enjoy a free and healthy life in
a safe environment´

But according to the United Nations Statistics Division: ³There is no established convention for
the designation of "developed" and "developing" countries or areas in the United Nations
system.´

There many countries that are under development out of them we will consider Srilanka and
Bangladesh.

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"Sri Lanka has emerged from a decades-long civil war, and is enjoying an economic revival. It is
currently the second-fastest growing Asian economy after China, a fact not lost upon the IMF, which
recently upgraded Sri Lanka to middle income emerging market status.

Like Brazil, Sri Lanka enjoys an adult literacy rate of just over 90&#37. Sri Lanka¶s gross enrolment
ratio, which gives an indication of school attendance, is also comparable to that of China.

What is particularly noteworthy of Sri Lanka¶s growth is the narrowness of its gender gap. In the
Global Gender Gap Report 2010 published by the World Economic Forum, which measures gender-
based disparities on economic, political, education and health-based criteria, Sri Lanka ranked within
the top 20, the only South Asian country to do so.

Closing the gender gap is not just an issue of gender equity; it is also one of harnessing the current
human resource potential, and uplifting the potential of the next generation.

The most important determinant of a country¶s competitiveness is its human talent ± the skills,
education and productivity of its workforce. In any country, women account for half of the current
talent base and have a key role in nurturing the next generation."

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The statistics office said tea production grew 5.1 percent, rubber 3.9 percent helped by strong prices,
while coconut output fell 7.9 percent. Paddy had grown 10.2 percent with the highest ever recorded
paddy area during the 'Maha' cultivation season since 1952.

Livestock production had grown 3.2 percent with milk production increasing 9.1 percent to 58.1
million litres in the second quarter, helped by the end of war in the eastern province.

Higher costs had reduced chicken production by 5.2 percent and eggs by 0.9 percent.
The fishing industry was up 18.3 percent in the second quarter with inland fishing up by 15.7 percent
and marine fishing up by 18.6 percent.

Marine fishing was helped by the end of the war, with fish output in the Northern province up by
134.1 percent and Eastern province up 45.8 percent. In other areas production had fallen due to
migration of fisherman to the North, the statistics office said.cc

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Within industry, manufacturing had grown by 8.9 percent. Textile, apparel and leather had growth
7.9 percent, and chemicals, petroleum and plastics by 15.9 percent.

Electricity, gas and water had grown 7.5 percent and electricity generation was up 8.2 percent with
hydro power up 37.7 percent and thermal power down 7.1 percent. Higher hydro power output
indicates higher value addition.

Construction had grown 9.3 percent, driven mainly by large scale state projects, the statistics office
said. Cement production had increased 23.5 percent against an 8.7 percent fall a year earlier.

A building material import index showed an increase of 32.1 percent during the quarter against a fall
of 29.3 percent a year earlier. But last year also construction was estimated as having grown by a
positive 5.4 percent.c
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The 8.8 percent growth in the services sector was driven by wholesale and retail trade, hotels and
communication, the statistics office said.

Export trade had growth 5.0 percent, import trade 13.2 percent against a 22.2 percent drop a year
earlier. Domestic trade was estimated to have grown 7.5 percent.

Hotels and restaurants were estimated to have grown 25.5 percent against a fall on 0.4 percent a year
earlier, when the country was at the height of a war.

Transport and communications had growth 12.9 percent against 5.7 percent last year, with passenger
and goods transport up 13.0 percent. New registrations of motor vehicles were up 78.6 percent
against a decline of 36.2 percent last year.

Port and aviation sector had grown 15.9 percent, posts and telecoms were up 12.1 percent. Banking,
insurance and real estate had grown 8.5 percent up from 5.4 percent. Interest income at banks had
dropped 9.9 percent with falling interest rates.c


  


    
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Bangladesh is primarily an agrarian economy. Agriculture is the single largest producing sector of
economy since it comprises about 30% of the country's GDP and employing around 60% of the total labor
force. The performance of this sector has an overwhelming impact on major macroeconomic objectives
like employment generation, poverty alleviation, human resources development and food security.

Agricultural holdings in Bangladesh are generally small. Through Cooperatives the use of modern
machinery is gradually gaining popularity. Rice, Jute, Sugarcane, Potato, Pulses, Wheat, Tea and Tobacco
are the principal crops. The crop sub-sector dominates the agriculture sector contributing about 72% of
total production. Fisheries, livestock and forestry sub-sectors are 10.33%, 10.11% and 7.33%
respectively.

Meeting the nation's food requirements remains the key-objective of the government and in recent years
there has been substantial increase in grain production. However, due to calamities like flood, loss of food
and cash crops is a recurring phenomenon which disrupts the continuing progress of the entire economy. c

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Introduction
It is indeed great honor and pleasure for me to be spending this morning with you. I am quite
cognizant of the fact that this is one of the finest institution Pakistan has and I always keep
saying that if we had institutions like C & SC replicated in our civilian life, the country would be
much better off, therefore, I commend you and I am sure that all of you would be rising stars of
Pakistan Armed Forces and would make a contribution which is badly required for the uplift of
the country. Gentlemen! I am going to talk about a subject which practically affects every single
sector of life, which is economy. It underpins every walk of life and there is great deal of
interaction between health of economy and the defense forces.

Sectors of Pakistan

There are four sectors of Pakistan¶s Economy:

1-c Monetary Sector

2-c External Sector
3-c Real Sector
4-c Other Sector

Monetary Sector Contributes as:

'c Discount rate: Discount rate is a rate at which Central Bank discounted the treasury bills
of Commercial Banks on certain conditions. Discount rate policy try to control the
quantity of money and credit
'c NDA &NFA (Net domestic assets and Net foreign assets): Domestic reserves of a
country are called net domestic assets. Foreign reserves of a country are called net
foreign reserves.
'c Private sector credit: à
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'c Risk and challenges´ The persistence of the global recession and credit market
imperfections is likely to impact firm¶s capacity and propensity to invest globally.
'c >Government budgetary borrowings are increasing.


 
 c
As new policy statement of SBP tell us the recent situation of discount rate, NDA, NFA, private sector
credit and risk and challenges which Pakistan will face in future.

SBP take some measures to control recent position of economy and most important measure of SBP
is decrease in discount rate for supporting the real economy activities.
http://www.finance.gov.pk/survey/chapter_10/05_Monetary.pdf

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EXTERNAL SECTOR

Following are the major aspects of external sector

Mc   ñc 
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exchange rate
Mc ñ
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: Sharp deterioration in july-oct FY 09, Improvements in some sector
& its reasons, 83.9% Growth in overall external sector, Revival of financial inflows,
Increase in foreign reserves, Increase in value of rupee.
Mc  c 

: Financial account is concerned with classifying measuring &
recording the transaction of business mainly it includes investment & its sub parts.
Mc ñ
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: Investment means increase in existing stock of capital.
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ñ cExternal debt & liabilities recovered in 1st quarter & actually fell in
absolute relative term. It implies that EDL grew both in absolute & relative term. EDL
stood at 31% of the projected GDP. Highest increase in absolute term was recorded in
debt stock owed to the IMF as a result of inflow of 3.1$ bn.
c
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ñ cñññ Foreign exchange reserves are only the foreign currency deposits
held by CB & Monetary authorities. These are the assets of the CB held in different
currencies mostly in dollar, euro & yen. c

These indicators strongly influence the economy of a country.

REAL SECTOR
There are three major sub sectors in real sector:

1-c Agriculture
2-c Industry
3-c Services

July 24, º
. 

, the devastating floods in     The Sensitive Price Index of 53
items in July º
recorded a 
  of 13.9% over July

 ñ cEconomic survey (2009-10) )c csecond quarterly report for FY10

OTHER SECTOR
Other source of income is Foreign Remittances and aid.
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Let me give you a brief overview in simple terms as to what the structure of this economy is? In
1947, Pakistan had 30 million people with per capita income of 100$. Agriculture accounted for
almost 50% of economic output with hardly any Manufacturing, as all industries were located in
India. Therefore, it was unable to feed 30 million people and was dependent on PL-480 imports from
the USA. From thereon, Pakistan has come a long way. Today with 170 million people, our per
capita income in 2008 was 1000$ which was ten times more. Pakistan is the third largest exporter of
rice in the world and producing enough food grains to feed its people. 3 million tons of rice is
exported every year by Pakistan which is surplus to our requirements. Pakistan is also one of the five
major textile producing countries in the world. So if we measure in relation to where we were vis-à-
vis structure of economy, agriculture has come down from 50% to 20%. Therefore, out of total
national income, agriculture¶s contribution is just 20%, but instead of being deficient in food
production, we are actually surplus and that is what productivity means i.e. by using the same land
you produce more from the same inputs, that is how economic growth takes place. Agriculture is not
only crops, within agriculture there has been a significant change. Livestock, dairy, mutton, beef,
poultry and similar other products is 50% of agriculture output in Pakistan. Pakistan also produces
third largest quantity of milk in the world. So within agriculture sector, there is a change i.e. major
crops are only 36% of agriculture value added and 14% are minor crops, fisheries, orchards, fruits
and vegetables. Thus, we are moving in a direction where the same land and same resources are
being used more efficiently in order to produce more. As a contrast, agriculture is only 2.5% in the
US having a population of 300 million, out of which they not only feed the entire population, but also
export to the rest of the world. Therefore, it is important to understand that when it is said that
agriculture is producing/contributing more, it is the productivity of agriculture rather than the share
of agriculture in GDP. Manufacturing and industry now account for 25% of the income; when we
recall there was not even a single industry worth its name at the time of partition. So if we look
where we were and where we are, I think the justification for Pakistan in terms of betterment of
economic conditions of Muslims in this part is very strong. But where we have failed is that we have
not lived up to our potential. In 1969, Pakistan exports of manufactured goods were higher than the
combined exports of Indonesia, Malaysia, Philippines and Thailand. In 1960¶s Korea emulated
Pakistan in its five years planning process. The tragedy is that even a country such as Vietnam which
was completely devastated by the war has now overtaken Pakistan. Ten years ago, India which was
way behind Pakistan (till 1990¶s) is now way ahead. As an economist and student of globalization,
the biggest challenge is: how can we organize ourselves to reach that position where at least we can
be running not at the nine second a mile but at least ten second a mile race which is going on in the
global economy. Ten more important challenges facing Pakistan¶s economy are deliberated in the
succeeding paragraphs.
c

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c

Current Economic Situation of Pakistan according to Pakistan Economic Outlook:

ñc ñ



According to the assessment conducted by the World Bank and Asian Development Bank, the
floods that swept across Pakistan since July 2010 caused an estimated $9.7 billion in damage to
infrastructure, farms, homes, as well as other direct and indirect losses. Agriculture, which is the
mainstay of the economy, and livestock were the worst affected by the disaster, which seriously
damaged an already fragile economy. On the macro front, IMF announced a $450 million
immediate relief package and hinted at the release of $1.7 billion after completion of the fifth
review under the standby arrangement (SBA). The World Bank increased its commitment to $1
billion from $900 million for reconstruction of flood-affected areas.

Large scale manufacturing (LSM) registered a growth of 3.05% during July 2010 over July 2009,
contributed mainly by the automobile and electronics industries as consumer durables remained
in high demand. Production of motorcycles, jeeps and cars and tractors grew by 21.6%, 45.1%
and 15.1% respectively while food and textile group contributed negatively.




The Consumer Price Index (CPI) of 374 items increased by 15.7% during September 2010, over
the corresponding month last year. Prices of essential food items shot up unprecedentedly
53.86% during the month of September in the current fiscal year over the same period of
previous year mainly on account of floods causing severe damage to agriculture sector and
disrupting food supplies. The Sensitive Price Index of 53 items recorded a growth of 19.5% over
September 2009.


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The State Bank of Pakistan (SBP) increased the key policy rate by 50 basis points to 13.5% with
effect from 30 September 2010. The decision to increase the key policy rate was taken in a
meeting of the Central Board of Directors of SBP, held under the Chairmanship of the Governor,
Shahid H. Kardar. The justifications of this decision were; persistently high inflation especially
the post flood projections of further high inflation, lower economic growth and the resulting
pressures of the government borrowings. The broad monetary aggregate increased by 0.6%
during July-September 2010 as compared to the decrease of 0.03% during the same period last
year. Net government sector borrowings during this period stood at Rs.106.8 billion. Total net
government borrowing for budgetary support from the banking system was Rs131.8 billion
during July-September 2010.

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Pakistan¶s revenue collection stood at around Rs1, 330 billion in 2010 while the government has
set the target of Rs 1667 billion for the fiscal year 2010-11. The tax collections till end August
2010 recorded Rs 177 billion. According to the World Bank estimates, implementation of the
Value Added Tax (VAT) or reformed General Sales Tax (GST) is likely to increase Pakistan¶s
tax-to-GDP ratio to around 11 percent by fiscal year 2013. The Tax to GDP ratio is currently
around 9% which calls for immediate measures, like the reformed GST, to broaden the tax base.

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The country's current account deficit has declined by 7.2% during July-September of current
fiscal year over the corresponding period last year. The current account deficit during the first
quarter of the current fiscal year stood at $0.5 billion as compared to $0.6 billion during the same
period last year. The improvement in the current account balance owed largely to the high
workers¶ remittances during this period which compensated the increase in trade deficit. The
export of goods showed impressive improvement of 13.5% while the imports also grew by
10.5% during the period under review.

The workers¶ remittances surged 13.5% during July-September 2010 over the same period last
year and reached $2.646 billion. In September 2010, $922.06 million were sent home by the
overseas Pakistanis, up by 14.38 percent. The growth in remittances can be attributed to the joint
initiative of the SBP, Finance and Overseas Pakistanis Ministries launching ³Pakistan
Remittance Initiative (PRI)´. The initiative has started materializing and remittances through
normal channels are showing considerable growth.

The net inflow of foreign investment in Pakistan fell by 28.5% during July-September 2010. The
economy witnessed a downward slide in foreign direct investment (FDI) by 9.5%. The
deteriorated law and order situation, fragile political climate and the prolonged war on terror
have been the deterrents to the new investment ventures in the country.

ñ

The government postponed the implementation of Reformed General Sales Tax (RGST) till 1st
December 2010 in order to build further consensus.

The ministry of commerce agreed in principle to levy a flood surcharge of around 1 percent on
imports to generate up to Rs50 billion

Tags: Pakistan Economic Outlook

Categories:
Location: Blogs Economic Outlook
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$451.2 billion (2010 est.)
$439.4 billion (2009 est.)


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$174.8 billion (2010 est.)

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2.7% (2010 est.)
4.3% (2009 est.)

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$2,400 (2010 est.)
$2,400 (2009 est.)
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ñ extensive export of labor, mostly to the Middle East, and use of child labor (2010 est.)


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49.9% of GDP (2010 est.)
49.3% of GDP (2009 est.)



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13.6% (2009 est.)

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$71.45 billion (31 December 2010 est.)
$63.1 billion (31 December 2009 est.)

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840.2 billion cu m (1 January 2010 est.)

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-$2.641 billion (2010 est.)
-$3.583 billion (2009 est.)

 
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Cotton, Wheat, Rice, Sugarcane, Fruits, Vegetables, Milk, Beef, Mutton, Eggs



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$20.29 billion (2010 est.)
$18.33 billion (2009 est.)



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manufactures, carpets and rugs

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US 15.87%, UAE 12.35%, Afghanistan 8.48%, UK 4.7%, China 4.44% (2009)



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$32.71 billion (2010 est.)
$28.53 billion (2009 est.)



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Petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper
and paperboard, iron and steel, tea



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China 15.35%, Saudi Arabia 10.54%, UAE 9.8%, US 4.81%, Kuwait 4.73%, Malaysia 4.43%,
India 4.02% (2009)

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$16.1 billion (31 December 2010 est.)
$13.77 billion (31 December 2009 est.)

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$53.62 billion (31 December 2009 est.)

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$30.09 billion (31 December 2010 est.)
$28.09 billion (31 December 2009 est.)

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$1.047 billion (31 December 2010 est.)
$1.017 billion (31 December 2009 est.)

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$33.24 billion (31 December 2009)
$23.49 billion (31 December 2008)
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Pakistani rupees (PKR) per US dollar - 85.27 (2010), 81.7129 (2009), 70.64 (2008), 60.6295
(2007), 60.35 (2006)

(http://www.indexmundi.com/pakistan/economy_profile.html)

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Out of every hundred rupees of our national income, we consume 85 rupees and save only 15 rupees,
which means that the amount of money which is available to invest for economic growth and
advancement is too little. Because to grow by 6%, you need at least 24-25% investment rate - and if
you want to rely on domestic savings, your saving rate should be 25%. India¶s saving rate was about
the same, but last year they\ recorded 34% saving rates. China¶s saving rate is 50%, so this is the
contrast as to why we are in serious difficulty because as a nation this is a problem which we have to
recognize. We have to at least double on savings rate otherwise we will remain dependent on foreign\
sources.

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Till 2007-2008, 80% of our imports were financed by our export earnings. This ratio has come down
to only 50%, it may go up to 60% but a gap of 40% of financing needs in order to keep with the
import level still exists. As a nation we prefer to use even the basic commodities of foreign countries
rather than locally manufactured goods. Unless we do not change this attitude of preferring the
imported goods we have to keep on relying on outsiders to fill in this gap b/w our imports and
exports. Relying on outsiders¶ means that there are cycles, ups, and downs i.e. when things are good,
one gets financing, and when things are bad one starves for financing. No nation which strives to
preserve its honor must go through this particular route.

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In 1990, Pakistan¶s share was 0.2% of the world trade. After 20 years it has come down to 0.12% in a
very buoyant world economy. World trade has been growing faster as compared to the world output.
India in the same period had doubled its share from 0.7% to 1.4%, while Pakistan is going the other
way and that is the reason why exports/imports imbalance is increasing We are not taking advantage
of the opportunities which a buoyant world economy is providing. Pakistan is stuck with only a few
commodities ± textiles, leather, rice, sports, goods and the surgical goods.

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Another challenge we face today is energy and water shortages, and that is not because we are not
generating enough electricity or we are not having enough water. With the losses of KESC from the
point it has generated to the point they realize the billing is 45%, so 55%people are paying for those
who are stealing the electricity. Government of Pakistan out of its own limited resources is paying
200 billion rupees every year as subsidies for electricity. Our industry is at a disadvantage that they
get the orders from foreign countries but they cannot execute the orders because there are electricity
outages.

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c


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Every government whether military or civilian starts with a clean slate, as if nothing happened before
them and nothing will happen after them. This is not the way the real world works. You take the
projects and programmes which were initiated by the previous governments, evaluate them as to
what the strengths and weaknesses were, fix those weaknesses and carry them forward. It will take
only few years to bring these inherited projects to completion and the country will benefit from new
motor ways, new ports, highways, educational institutions etc.



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The overall arching theme is that for a downfall in an economy, we should have political stability,
law and order and security. The Armed Forces of Pakistan deserve gratitude for what they have done
in Malakand Division to bring about stability as far as the law and order situation is concerned. In
2007, Pakistan was one of the most favorite countries among the international investor community.

c
c
Summing up all of the above topics, we have to decide that how can we overcome these challenges
and problems and improve our economy? A lot has been written and talked about, but I will focus on
only a few action points.

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.
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We as a nation are too much negative oriented and too much cynical where we find everything wrong
in this country. Unless we change our mindset and unless everybody who is doing what he is
supposed to do, carries out his or her task with sincerity and honesty, we are not going to go
anywhere. We should not expect any Messiah to come and fix our problems we have to do it
ourselves individually and collectively. There are no short cuts available. Media is muddying the
water by their sensational stories and inviting so called experts who contribute in projecting negative
thinking and negative national psyche. Unless we have a positive ³can do´ mentality, it will be
difficult to progress. Unless each one of us changes our mindset rather than blame the government
and the system, we are not going to go anywhere in this race for global economic survival. This is
easier said than done. But I expect our younger generation to be more responsive and responsible.

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There is no substitute to building up human capital. Private sector, public sector, NGOs, local
communities, philanthropists etc, all here to put their hands on deck and participate in making sure
that every child goes to school. Every high school graduate has some technical and vocational skill or
goes for higher education. Unless we build up human capital, we are just going to be left behind
because the world economy is going to be a knowledge based economy. It is not an economy where
you memorize material or reproduce that in the exam and forget about it - that is no longer the case.
One has to acquire the knowledge and use it in order to apply to problem solving. This is a new
paradigm where human capital is as important as machinery and equipment. Pakistan lags behind
other countries in the institutions, infrastructure and incentives for human capital formation. We have
no choice but to accelerate the pace to catch up with others.

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The technology is spreading like a wild fire. How many people five years ago could have thought
that even in a small towns and villages of Pakistan, one would access to mobile telephones. 102.777
million Active SIM cards in Pakistan. You can use this technology in order to provide those banking
services, information on climate/weather, agriculture extension, health, education etc. It is a powerful
tool which can leapfrog a lot of time which we have wasted. Using technology particularly the
information/communication technology for the betterment of social and economic problems of
Pakistan is something which needs to be done but it cannot be done the way we have
compartmentalized this into different ministries. A more holistic and comprehensive approach that
deploys technology for poverty reduction has to be put in place.


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As the population is increasing, one cannot govern Pakistan sitting in Islamabad, Karachi, Lahore,
Peshawar or Quetta. One has to devolve powers, decentralize and delegate authority, provide
resources to the local/district governments so that they can take decisions at their own. Those
decisions would be very much in accordance with the requirements and the needs of those
communities. Sitting in Islamabad one cannot visualize what is needed in Chaghi, Thar and Loralai,
but the people in Loralai, Chaghi and Thar know exactly whether they need water, fertilizers or fruit
processing industry. Let us devolve powers to the people at the grassroots level and there would be
much better allocation and utilization of resources.
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There must, however, be accountability of the local governments by the provincial governments and
of provincial governments by the federal government but not interference or usurpation of powers. If
we do that, then a lot more can happen with same amount of resources which are being wasted today,
and the economic growth rate can be raised from 6-7 percent average to 8-9 percent annually.

Thank Youc