Home » The 4U’s of Pakistan’s Economy – Modern Diplomacy

The 4U’s of Pakistan’s Economy – Modern Diplomacy

by Arifa Rana

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Pakistan has inherited a miserable economy since its inception. It has adopted different sets of operations from classical capitalism to mixed economic initiatives therefore; it faced huge losses from down trends of growth. Pakistan’s economy is unsustainable, unstable, uncertain and unfair. Throughout the period of 1990 to 2015 its economic status haven’t beckon stability but presenting the disturbing pictures of stagnation. While, showing parochial nature of growth with abject and erratic variations, it has impacted the sovereignty of state at large. However, Gross Domestic product (GDP) is still unstable as that of past. It is estimated that core of the economy of Pakistan is concerned with commodity producing sectors, manufacturing and agriculture. If the functioning sectors cannot present the growing value than the legs of economy are in crippling stage as along. Moreover, major sectors from where the estimation of economic condition can be judged such as large-scale manufacturing, major crops, and minor crops are unstable. These areas provide inclusive output, employment and exports to the stability of state. Firstly, average growth rate from past had caused unstable dramas of ups and downs either it’s about industrial boosts or agricultural concerns. According to the statistical data, the investment over the relevant infrastructure has been grounded which has severely impact the rate of productivity. Secondly, lowering fixed capital formation in both manufacturing and agriculture sectors had been proved heinous for economy. Furthermore, unstable, and unsustainable performance in agriculture substantially proffered the unproductive value over industry. Major crops such as Wheat, sugarcane, cotton encompassing other crop sectors has demonstrated unwavering growth patterns in initial period but later on these even shown less than 4 per cent rate. Variations from 1990 to 2015 have impacted these statistical figures of economy. While, minor crops like mango, banana, almond, apricot and rapeseed are shunned in low growth patterns. This has resoundingly affected the profile of both minor and major crops at large. Moreover, manufacturing sector had been representing more than fifteen industrial aspects with less estimation. However, products like varnishes, paints and few others have exhibited the double and stable digit of growth in past. And net outliers have impacted anxiously over-all. Pakistan on the other hand considered as consumer state. With this thought it has used the electricity for industrial, commercial or for household purpose at significant pace. Reluctantly, this shown alarming utilization of energy.
Furthermore, external debts have been the major curse to spinal-cord of the economy. However, such problematic debts are due to increased expenditures over revenue or income. Debts are smudged problems entangled with exports, services, revenue and imports. Undoubtedly, imports have overturned with exports while creating the phenomenon of trade deficit. Products for imports in major concerns are like chemicals, petroleum and machinery. Initially, during period of 1947 to 1977, it was recognized as development state. Every state system either capitalist or socialist was concerned with political legitimacy to its development. And later come the period of 1977-88 where the state of has faced heinous draw backs because of undemocratic involvement in others affairs. Country had registered deficit of 1.85 billion dollars in FY2021. This is mainly concerned with record imports in especially in the form of oil and vaccine arrivals. This created disparity between status of surplus and deficit and due to this current account deficit of state fell to 0.6 percent. Exports of goods lack in quality and no progress to maintain such quality, with this line of export have remained same. Moreover, in current stage it is touching 25,630 million dollars. Earlier the current account deficit remained 4,449 million and reason behind this was the unilateral transfer. Current account deficit has been influenced by negative growth of balance of trade. It has been expanded up to 33% with more ratio of import as compare export. Imports in 2021 have jumped with 23% with pace having severe ramifications as compare earlier.  Imports of consumers’ goods and finished goods are in rise in 2021 because earlier it was considered as pandemic has affected level of imports. Moreover, with imbalance in exports and remittances the current account deficit is also influence through this.
Remittances from workers outside the country shows growth track for secondary income. Such workers are indulged in improving the circumstances of good remittances. Meanwhile, this has surely impacted the growth rate.  Furthermore, investment either Foreign Direct or portfolio has been reduced in 2021 due to certain unpredictable conditions at domestic level. Rise in instability and political uncertainty have drastically affected to capital account balance for year 2021. Trade deficit remained at level of 28 billion as compare 21 billion dollars of FY20. Therefore, overall import and export touched 50 million and released the unprecedented pressure on rise of imports.
Meanwhile, the ramifications of irregular growth are enhancing the Balance of trade deficit, structural problems posing undesirable results, economic infrastructure losses, and most importantly economic capacity is being compromised. Moreover, non-commodity sectors such as real estate’s are cause of no strengthening economy. Such trends have been substantial loss for economy which demonstrates the hot air balloon effect. Further, sluggish speed of growth seems to impact poor people in general. Policy-prescriptions in the form of suggestions are inevitable need of the hour. Firstly, structural changes desperately implemented to adjust the status. Secondly, lowering the gap of rupee or dollar needs to be revisited with substantial steps of research and development to increase the exports over imports. Thirdly, certain revenue measures in the form of reduction in taxes with reforms in taxation mechanism. Fourthly, expenditures either of government oriented or individual related should be minimized so to level the revenue at times. Fifthly, there should be limitations on imports of products and domestication of own products ought to be the priority. Promotion of exporting products must be the priority and so on and so forth.
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The pandemic has hit Latin America and the Caribbean hard, and Mexico is no exception. But if an opportunity can be found in every crisis, then this could be the moment for Mexico to make up for lost time. 
Over the last three decades, Mexico has underperformed in terms of growth, productivity, inclusion, and poverty reduction compared to similar countries. 
But now, at the World Bank, we see a clear opportunity for Mexico to embark on a dynamic economic recovery that is more inclusive and sustainable, with favorable international headwinds thanks to the growth of demand in the US. Three areas require special attention: unleashing productivity; increasing financial inclusion; and protecting the most vulnerable.
Most importantly, an agenda of inclusive growth must kickstart productivity and job creation. A recent report by the World Bank reveals a severe misallocation of resources in the Mexican economy due to a lack of competition and regulatory barriers. Too often, young firms cannot grow because of a lack of access to credit and market distortions, while underperforming firms suck up key resources that could be put to better use elsewhere.
There is great divergence in productivity across firms, sectors, and regions. Firms connected to global value chains deliver double the productivity of those that are not, so the challenge is for more companies to be better integrated. Similarly, well-managed firms are better at innovating and exporting. However, access to markets, competition and institutional obstacles reduce incentives to improve management practices, leaving large untapped opportunities. 
Financial inclusion in Mexico must also improve, given its importance in reducing poverty and driving prosperity. The government’s Mexico 2020-24 plan includes several policies to promote financial inclusion that the World Bank is supporting, such as developing the regulatory framework to strengthen the fintech sector and digitizing social programs to make it easier for Mexicans to open bank accounts, especially remotely. 
These policies will benefit two key groups that can do much to alleviate poverty and improve equality in Mexico: women and migrants. Regarding migrants, vulnerable Mexican families rely more heavily on remittances than those in higher-income strata, and access to bank accounts increases migrants’ savings, particularly those less well off. 
Financial inclusion of women is even more important if we are to achieve inclusive growth. Companies run by women typically have less access to credit, since women own fewer assets that can be used as collateral. Women are also often under more family pressure to use loans for purposes other than their businesses. Financial instruments specially adapted to women’s needs are required.
Women also need greater economic inclusion more broadly. Everywhere, female workers have been hit harder by the pandemic, just as their participation in economic activity is fundamental for economic growth. Even before the pandemic, just 45 percent of working-age women had jobs in Mexico, compared with 77 percent of men. In the OECD, only Turkey and Italy perform worse, in Latin America, only Guatemala. That represents a huge loss for the Mexican economy.
Finally, great strides can also be taken toward protecting the most vulnerable. One of the most important objectives in Mexico is to mitigate the impact of climate change and natural disasters. Notably, earthquakes and climate-induced hydro-meteorological events affect poorer states in the south disproportionately.
Mexico must seize this moment to redress these historic challenges. The pandemic may have left death and economic destruction in its wake, but the country can turn this to its advantage by building back better. Mexico can count on the World Bank’s whole-hearted support.
World Bank
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Pakistan’s economy has remained the prey of political unrest. Despite its vast economic resources the country still faces severe economic stagnation due to the menace of political instability. An unstable political system is the hazard that halts smooth running of governance and enforcement of law and authority in a country. It is caused due to irregular political exchanges resulting into breakdown of policy implementation and feeble institutional structure, disobeying social behavior that affects or alters decision making parameters of the society. As a result, it badly affects economic activities and thus reduces economic development of the country. Therefore, Political stability is a must for a prosperous and progressive economy else the country shall doom into the darkness of economic recessions.
Research shows that the countries facing low economic growth are the victim of irregular flow of government exchange due to political unrest. It is evident that economic development was severely affected in those countries where government shuffles were unanticipated. Irregular change in government involves a critical change in ideology which negatively affects the implementation of policies and weakens institutional infrastructure.  
In case of Pakistan the above argument fits well. Taking into account the tenures of Pakistani regimes from 1999 to 2022, it is obvious that due to political disparity the country’ economic growth remained low, corruption increased and unemployment and low production were witnessed. Starting from the 1999 when military regime ousted civil government in Pakistan, the country’s economy was growing at 4.2% rate and by the end of military regime in 2008 the economic growth stood at 1.7%. This decrease in economic development was caused by political tensions as, political stability index shows that political stability was -2.4% in 2008 compared to -1.1% in 2000. Similarly, during the tenure of PPP regime from 2008 to 2013 the country faced massive increase in corruption and low economic growth owing to surge in political instability which increased to -2.6% in 2013 compared to -2.4% in 2008. Moving further to the tenure of civil regime from 2013 to 2018 Pakistan’s economic progress faced drastic political unrest in the shape of demonstrations, rallies and protests by oppositions especially by Pakistan Tehreek Insaf. Due to PTI’s sit in Islamabad for 126 days country’s economy witnessed unprecedented losses because trade routes were, business activities were frozen which resulted a loss of Rs. 500-600 millions. Also foreign direct investment was affected during this tenure due to political turmoil. It was observed in 2014-15 that foreign Direct Investment was decreased due to unstable political situation incorporated by panama leaks and PTI’s continuous protests to throw out PML-N’s government. If we observe the tenure of 3.5 years of PTI government from 2018 to 2022 the political turmoil increased and from the very first day of Imran Khan’s regime the opposition political groups started protesting to disregard PTI government’s performance. For that PDM was formed which created challenging situation for PTI government to run the country with huge foreign debts, inflation, unemployment and inappropriate utilization of economic resources.
The country has faced various insubstantial exchange of power due to which a stagnant and poor economy remained the fate of the country. Governments in power implement short term policies for rapid results to sustain their rule which causes long term threats to the economy. Further, upon collapse of political governments the incumbent political groups terminate the policies of formers. Such instant change in political power created uncertainty in the country. Resultantly, large investment groups avoid investing their money just at the stake of indeterminate government policies which are seem to be short term with no future vision. Investment and political stability has direct relationship with each other. The more politically stable a country is, the more investment will come into the market. Due to political insecurity people does not invest their money which results into increased unemployment and lack of productivity in the country. In addition to this, political instability also created disharmony among the institutions in Pakistan. Consequently, the institutions failed to perform to their full potential. It further caused inappropriate handling of resources and poor planning.
Further, an obedient political behavior plays a vital role to establish a stable political system. It is a compliant attitude of individuals in a society towards the distribution of authority to make decisions about what laws should be made and how these laws to be enforced in the country. When the society is acquiescent to these laws, political stability prevails in the country which enhances consistent development in all aspects. Therefore, an obedient political behavior is necessary to sustain policy implementation and decision making in the state. In contrast a defiance political behavior of social groups influences decision making patterns in the country. Various social and political parties play the role of pressure groups in the country to alter decisions of governance in their particular interests due to which vast cost-effective economic policies are changed and general public’s interest is sacrificed. Indeed, such pressure groups are necessary in a democratic country but defying attitude towards governance authority negatively impacts the political stability in the country and destabilizes economic growth.
To conclude, political unrest badly impacts economic activities in the country and results into slow economic development. Therefore, stable political system must be established in the country. As political stability is the back bone of a country to run governance system smoothly. It plays a paramount role to sustain progress of the country. It is evident that political stability has direct and paramount effect on economic growth of a country. A firm political system strengthens efficient policy mechanism, institutional effectiveness and regular political exchange i.e. exchange of governments through regular elections or whatever the way of power exchange a country possesses.
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Indonesia is a country that is rich in the agricultural sector. This has caused Indonesia to become one of the contributing countries in meeting the world’s needs, one of which is contributing to the supply of basic ingredients for processed foods. One of Indonesia’s agricultural products which have become a new leading export commodity is Palm Sugar. Palm sugar is currently widely consumed as a natural sweetener which is quite safe for the body. In addition, the content contained in palm sugar has an important role to help meet the body’s needs for certain nutrients. This shows that Indonesia as one of the contributing countries in producing Palm Sugar to meet the world’s needs has a very important role in contributing to balancing the supply of raw materials for making food. Currently, Indonesian Palm Sugar has succeeded in exporting to various countries. Reporting from the Indonesia Stock Exchange Channel explains that palm sugar from North Sulawesi has always managed to have an increase in palm sugar production. Not only palm sugar production has increased, but Palm Sugar from North Sulawesi has also succeeded in carrying out export activities which have exported to three countries during 2021, namely Hong Kong, Japan, and Singapore. The number of palm sugar exports carried out by North Sulawesi to the three countries amounts to 531.02 kg, with the largest exports to Japan at 381.52 kg with a value of 43.6 million rupiahs (Loupatty, 2022).
A large amount of palm sugar production in North Sulawesi, this has made a positive contribution to the local community of North Sulawesi, including a large number of palm sugar production, this can provide opportunities for the local people of North Sulawesi to get jobs, develop culture, and preserve the environment through cultivation, palm plants by being managed into palm sugar. Reporting from the Media Indonesia page, there are 500 thousand sugar palm plants in the Tomohon area. This shows that sugar palm plants to be produced into various processed products, this can contribute to improving the economy of the local people of North Sulawesi by increasing micro, small, and medium scale businesses which can be maximized by producing various local products originating from Indonesia independently. North Sulawesi’s independent business in producing local products through palm sugar. This is necessary for the contribution of various parties in introducing Indonesian local products to foreign countries. In addition, not only North Sulawesi has the potential to produce palm sugar, but there are other regions in Indonesia that are capable of producing large amounts of palm sugar, one of which is Palm Sugar in Lebak Regency, Banten, Indonesia. Which palm sugar produced from Banten is one of the best palm sugar producing areas in Indonesia (Mardika, 2021.). However, the new achievements shown by North Sulawesi, this shows that actually, the Indonesian people can participate in export activities through the production of palm sugar which can produce the best palm sugar products and has the ability to maximize local natural wealth to be able to contribute to improving identity. country, the country’s economy, and meet the world’s supply in the food sector.
Currently, Indonesian palm sugar export activities have entered various international markets. Countries that import palm sugar from Indonesia include Saudi Arabia, the United States, Australia, New Zealand, Japan, and Canada (Yudho, 2021, #). In 2020, Indonesia’s palm sugar production which is exported to the American and European markets will increase by 16.5 percent. After that, in 2021, North Sulawesi succeeded in exporting its processed palm sugar to Hong Kong, Japan, and Singapore (Siti, 2020). The potential of various regions in Indonesia in producing processed palm sugar, this can contribute to increasing cooperation with various countries in the world and promoting the quality and characteristics of Indonesian palm sugar. Even in the Covid-19 pandemic situation, Indonesia continues to increase its potential to continue to balance the supply of the global market. With the huge potential of each region in Indonesia in contributing to producing palm sugar processed products, this can be an opportunity for Indonesia to continue to maximize the results of processed products. Which by maximizing this opportunity, this can not only be a contributor in balancing the global market, but Indonesia can also continue to meet the needs of the Indonesian local community where the Indonesian people also really need processed palm sugar as one of their household needs. Because palm sugar is more in demand by many people, which is healthier than white sugar.
With Indonesia’s huge potential in producing palm sugar, however, there are several challenges that are still faced by the Indonesian people in processing palm sugar. Among them are lack of technology, production management, processing, and marketing that are still traditional, technology dissemination which has not reached most of the farmers. These challenges, this has become an obstacle for the Indonesian people in maximizing the marketing and production of processed palm sugar in large quantities. Due to introducing, promoting, carrying out export activities, and balancing domestic needs, sufficient and maximum tools and labor are needed. Because currently, the tools used by local Indonesian people in processing palm sugar are still traditional. Therefore, taking advantage of Indonesia’s opportunities in maximizing the potential it has in the agricultural sector, especially palm sugar production, this requires contributions from various parties, both from state actors, namely the government and non-state actors, namely the community. The government can continue to maximize its negotiating role with partner countries so that they can continue to promote their local products to foreign countries, Indonesia can continue to carry out various strategies to introduce its local products through international expo events, introduce Indonesian agricultural processed products, especially palm sugar in Indonesian diaspora institutions that located overseas, and makes it easy for the Indonesian people to be able to use more sophisticated technology to process palm sugar, due to producing palm sugar products on a large scale, to balance domestic and foreign supplies, tools and human resources are needed. sufficient. However, the most important thing is the need for tools with advanced technology to make it easier for people to produce palm sugar because currently people in various regions in Indonesia still use traditional tools in processing palm sugar. Therefore, with the opportunities and potential that Indonesia has, Indonesia should be able to continue to improve and maximize the opportunities it has.
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