Framework for Economic Growth, Pakistan - Planning Commission

International conference on “Framework for Economic Growth, Pakistan”growth, more than any other region in theworld. In terms of per capita GDP growth,the acceleration has been from 5 percent inthe 1970s to 8 percent in the 2000s in EastAsia, and from 0.6 percent in the 1970s to 5percent in the 2000s in South Asia. Thisgrowth acceleration has happened as aconsequence of a series of economicreforms- which led to a stronger states, morevibrant markets, and better human capital.With rising prosperity poverty has declined.In Asia, the absolute number of poor peopleliving on less than $1.25 a day has declinedsignificantly from 1.7 billion in 1981 to 933million in 2005. Despite rising population,Asia lifted about 712 million people out ofpoverty in that 25 years period. But despitesignificant progress on poverty reduction,Asia still hosts about two-thirds of theglobal poor.Pakistan has not so far fully shared thesuccessful Asian growth story and I believethe Framework for Economic Growth forPakistan comes at a very important time andour conference today gives us anopportunity to better understand what ishappening in the region and in the world andto see how best Pakistan can join the rest ofAsia in achieving high, sustainable andinclusive growth.I am by no means an expert on Pakistan asmany of you gathered here are, but a veryquick overview of Pakistan‘s economichistory tells us that there have been periodswhen Pakistan achieved very high rates ofeconomic growth. Pakistan achievedimpressive rates of economic growth in the1960s and 1980s, but growth fell in the1970s and 1990s. Over a 40 year period thetrend growth rate in Pakistan is declining,whereas in most other countries in SouthAsia it has been rising. What has markedPakistan out from others in Asia is thatPakistan’s growth spurts have not beensustained over a sufficiently long period oftime which is needed in order to lift largesections of the population out of poverty.We hope that the new growth strategy willhelp Pakistan reverse this trend and yourdeliberations over the next two days willaddress the issue of how best to ensuresustained growth in the future in Pakistan.Until recently the economic literatureprovided little guidance on the 'recipe' forstrong economic growth. One interestingexercise is the work of the 'GrowthCommission’. The commission closelyexamined 13 cases of sustained high growth- those economies that had achieved sevenper cent or more for 25 years or more andfound that there is no 'magic bullet' toachieving growth - 'orthodoxies only applyso far'. There were, however, five commonelements to those economies that didachieve sustained high growth: 1) they fullyexploited the world economy; 2) theymaintained macroeconomic stability; 3) theymustered high rates of saving andinvestment; 4) they let markets allocateresources; and 5) they had committed,credible, and capable governments.The Commission noted a big role forinfrastructure in high growth economies.These economies had investment rates of atleast 25 percent of GDP. The Commissionobserved that high growth economies putsubstantial public investment at least 7-8 percent of GDP into their people. TheCommission found infrastructure spendingin low-growth countries, on the other hand,to be badly neglected. The Commissionhighlighted the importance of governance ina fast growing economy. To promotegrowth, governments should facilitate theentry and exit of firms and labor mobility.Governments should protect people, not jobpositions through social safety nets tocushion the 'blows of the market'.While growth is necessary for povertyreduction it is not sufficient. Asia’s rise has17