Current Economic Situation:
Pakistan, 27th largest economy of the world has been going through some rough times in recent years. The triumph of 6% plus gross domestic production GDP has been over since 2008. Hit with terrorism, rampant corruption and long hours of power breakdowns, Pakistan’s economy is truly bleeding.
Factors Affecting Growth:
There isn’t a single factor for this total disaster rather it seems that a whole lot of problems have “ganged up” against the fragile economy of Pakistan. If one would identify a single most difficult of challenges Pakistan faces today would undoubtedly be power crisis. No fuel for power generation plants, no money to pay GENCOS (generation companies) and on top of it no apparent policy or seriousness to resolve this issue.
Terrorism is also one of the major factors affecting foreign investments hence growth of the overall economy. The casualty of these factors is the job market.
Pakistan has one of the fastest growing and young populations in the world. Each year around 2 million people enter the job market and current GDP growth rate is not enough to provide them the jobs. That further aggravates the situation as the unemployed soon fall down the poverty line resulting in increase of crimes and providing a breeding ground for terrorism.
The below suggestions if implemented could help jumpstart the economy and increase the number of job opportunities for fresh entrants to the job market.
Effective Tax Regime:
Unlike developed or even emerging economies, Pakistan does not have an encouraging tax to GDP ratio. At around 10% of the GDP, it is the lowest in Asia. Effective policies should be evolved and implemented to increase tax to GDP ratio without increasing the current taxes rather, by expanding the tax net and encouraging direct taxation instead of indirect taxation.
Effective Energy Policy Implementation:
A lack of seriousness is evident on government’s part as there does not exist an energy policy for a country of 190 million people. Sincere and serious efforts have to be initiated to evolve a strategy to deal with the issue. Needless to say, input from the stakeholders (industries, business bodies, power regulators etc.) should be sought.
Industry/Job Market Diversification:
Instead of just focusing on energy/resource intensive industries (large-scale manufacturing, textiles etc.), Pakistan should explore the opportunities available in today’s global world, where knowledge economies are prospering. Besides attracting foreign investments, knowledge industries (BPOs, Software houses, ITES providers etc.) can also provide much-needed employment opportunities for the youth entering the job market. Revenue earned through IT/Software exports is an added benefit for the economy.
One such example is India. With year on year IT and ITES exports reaching $ 70 billion in 2012 alone, India is all set to lead the knowledge export market in the world.
Improvement in Law and Order Situation:
The issue of terrorism should be resolved on priority. In today’s globalized world, no economy can survive without substantial foreign investments. Overall law and order situation should be made investor friendly so that new investments could be made to generate economic activity hence creating new job opportunities.