Sei sulla pagina 1di 23

GROWTH & INVESTMENT

– A CROSS COUNTRY
ANALYSIS

Talal Sajid
Omer Sadiq
Furqan Ishaaq
Alizeh Umair
Introduction

 Economy of Pakistan is the 42nd largest (GDP)

 With a nominal GDP per capita of $1,641

 GDP growth = 5.4%

 Exports = $24.824 billion, imports = $56.002


billion

 Pakistan as the potential to be amongst the


largest economies of the 21st century
Cont’d

 China-Pakistan Economic Corridor (CPEC) = a


collection of infrastructure projects throughout
Pakistan

 Valued at $62 billion, purpose is to modernize


Pakistani infrastructure

 Inefficient transport network cause 3.5% loss in


annual GDP

 Other projects purpose is to fulfill electricity


shortage, gas shortage etc
Growth & Investment in
Pakistan under Ayub’s Regime
1958-1962
Ayub’s Regime
• ‘Decade of Development’ of 1960s which started with the

imposition of Martial Law on 7th of October 1958


• Growth Targets
1. First Five Year Plan: 3%
2. Second Five Year Plan: 5%
3. Third Five Year Plan: 6.5%
• GDP growth in Pakistan of nearly 7% per annum during
the 1960s was exceeded among large countries only by
Korea, Thailand and Mexico.
• He created an environment where the private sector was
encouraged to establish medium and small-scale
industries in Pakistan.
Investment
• During 1960-1965 real investment grew very rapidly, reaching a peak of
21.5% of GDP in 1964-1965 before declining rather sharply to 14.6% in 1969-
1970.
• Private investment growth in West Pakistan during 1960-1965 was explosive
as it increased over three folds in short period of just five years.
• It declined over by 20% in next five years but still during the 1960’s, real
private fixed investment more than doubled, grew faster than public
investment, and accounted for nearly half of the total fixed investment by
1969-1970.
• Political stability, liberalization of investment controls and ample availability of
foreign exchange were key factors influencing a pronounced acceleration in
the pace of private investment. The policies were made less strict for private
investment.
• The increase in investment contributed to an increase in economic growth
naturally.
• Growth momentum in West Pakistan continued during 1965-1970
• Sharp reduction in the rate of investment mainly due;
1. Remarkable improvement in agricultural growth under the Green
Revolution
2. Large scale manufacturing growth dropped rather sharply reflecting
investment stagnation.
• Agricultural growth rate in Pakistan rose to a peak of 6.3%
• Record increases were registered in the production of wheat and rice.
• At the end of 1960s, the investment rate in West Pakistan was considerably
higher than it was a decade earlier
•Still substantially below the peak in 1964-1965.
Growth & Investment in
Pakistan under Bhutto’s
Regime
1971-1977
Zulfiqar Ali Bhutto
• During the five years of Bhutto's government, Average
annual growth rate of economy was 4.9%
• This followed the virtual stagnation of GDP at 1.7%
• Government deficits which had increased in 1970-2 due to difficult eco-pol conditions &
military operations in East Pakistan showed further explosive growth under Bhutto
• The budget deficit averaged over 8% of GDP compared with fiscal deficits of 2-3% of
GDP in the 50’s and 4-5% in the 60’s.
• Nationalization of Assets was done
• The Economic Reform Order nationalizing 32 large manufacturing plants in eight
industries.
• Domestic private banks, insurance companies, shipping etc were nationalized.
• Private investment in large scale manufacturing declined by 50% by 1973, and by 1976
public sector investment was higher than private investment.
Investment Policies

• As part of his investment policies, Bhutto founded the National Development Finance
Corporation (NDFC).
• In July 1973, this financial institute began operation with an initial government
investment of 100 million.
• Aim was to finance public sector industrial enterprises
• Later it was modified to provide finance to the private sector as well.
•The NDFC is currently the largest development finance institution of Pakistan - 42
projects financed by NDFC have contributed Rs. 10,761 million to Pakistan's GDP
• Bhutto’s government increased the level of investment less than Rs. 7,000 million in
1971–72 to over Rs. 17,000 million in 1974–75
Growth & Investment in India
1960’s-1970’s
India in 1960’s
 Persistent underdevelopment has afflicted the Indian subcontinent since the independence
from British Raj.

 At the time of Independence India and Pakistan both were at a similar socio economic level.

 Inspired by soviet union and capitalism, India designed a centralized state led economies.

 Congress ruled where the PM’s changed from Lal Bahadur Shastri (1904–1966)to Indira
Gandhi

 Between 1956 & 74, India’s GDP grew between 3 and 4 % per annum, due to closed and
highly regulated economy.

 Period from 1947 to 68 were years of moderate regulation by state and between 69 to 74 by
stringent regulation of private and foreign companies.

 Post Nehru’s death when Lal took over, Industrial sectors such as steel and cement were
decontrolled the decision to devalue the Rupee was taken which effected the export
revenues
India in 1960’s
 Under Indira, the droughts of 1964/65 and 1965/66 and the war with Pakistan in
1965 created a financial situation

 India became dependent on shipments of US PL 480 wheat.

 Food price inflation is a major setback for any Indian political party. The
government needed substantial external finance to fund

 India faced serious trade deficits since independence which increased in 1960’s
and therefore government couldn’t borrow internationally or privately.

 The policy of trade promotion and private sector participation was reversed by
1969. The government nationalized private sector assets in areas such as
insurance, banks, coal, wheat, and significant parts of the steel industry. Large
industrialists in the private sector were controlled stringently
India in 1970s’s

• Private sector flourished, and GDP increased to 5% between 1975 & and 1990.

• Low level of growth and productivity led to gradual process of liberalization of the
economy in 70s.

• GDP per capita grew 33% in 1960s reaching its peak growth of 142% in 70s

• before decelerating to 41% in 80s.

• From FY 1958 to 1979, economy grew at an average rate of 3.1 % .

• Industry during this period grew at 4.5% and agriculture 3%

• Towards the end of Nehru’s government, India faced serious food shortages as
agriculture growth decreased.
Growth & Investment in
Germany, Europe
1960’s- 1970’s
The Golden Era
• By the end of World War II, the country's economic infrastructure was completely
destroyed.

• West Germany embarked in its program of reconstruction with financial support


provided by the Marshall Plan and, guided by the economic principles of the Minister of
Economics Ludwig Erhard excelled in the economic miracle during the 1950s and
1960s.

• The Golden Age of European growth The period between 1950 and 1973 is
conventionally known as the Golden Age of European economic growth.

• First of all, growth became a most important policy objective due to the Cold War

• Many contributions in the 1960s thus focused on the rate of growth from the point of
view of economic policy

• As investment was assumed to depend on the level of aggregate demand, fiscal and
monetary policies were used to foster economic growth
• The West German boom that began in 1950 was truly memorable.

• The growth rate of production was 25.% in 1950 & 18% 1951.

• Reasons for rapid growth in the Golden Age included;

• Transfer of workers out of agriculture and postwar reconstruction

• Protectionism aided by macroeconomic environment gave rise to an


investment boom

• Table 1 reports growth rates of real GDP per person in excess of 4 per cent
per year for most western European countries

• Table 1 Highlights the point that 50’s-73 saw the highest growth rate in
western Europe; era in which fast growth experience was witnessed
 Annual growth rate in this period GDP per person ranged from 2.4% to 6.2%

 Growth in Germany were even higher than UK in this period due to high investment In

broad capital

 During this time capital needs of the country were met by great banks capable of

mobilizing resources on a large scale

 Thus, it was no coincidence that Europe had in place following World War II

 Bureaucrats decided how many factories to build, instructed state banks to mobilize the

necessary resources

 Decided what foreign technologies to acquire, whether through licensing or industrial

espionage.
Germany in the 1970’s
• The end In the mid-1970s, German unemployment was less about 2.5 percent, less than half of that of
the United States

• Inflation rate was close to zero it also experienced a satisfactory rate of real economic growth

• However, after the Golden Age After the early 1970s, European growth slowed down quite markedly.

• German policy approach that worked so well in those years has ceased to perform now

• Although inflation rate remained low, the unemployment rate had risen

• In short run, GDP declined and budget deficit reached the 3%t limit imposed by

• A number of root causes included

• The weakening of investment as the postwar boom went

• As growth slowed down, the postwar settlements came under severe pressure and became less
capable of delivering wage moderation

• Bank-based financial systems also failed at mobilizing resources for investment


Conclusion

• Major issues faced by Pakistan that hinder


growth are ;
- Power/gas shortages
- Changing political and economic policies
- Lack of new technology
- Higher interest rates
- Security issues
Cont’d

 Solutions:
- A stable political environment
- Decrease balance of trade deficit
- Stability in security
- Consistency in economic policies
- Lowered interest rates
 If sorted, Pakistan can become a booming
economy.
THANK YOU

Potrebbero piacerti anche