Framework for Economic Growth, Pakistan - Planning Commission

International conference on “Framework for Economic Growth, Pakistan”Session 2: Openness and Competitive MarketsSpeaker: Muhammad AliChairman, Securities & Exchange Commission of PakistanI would like to start my presentation bysharing a story with you first. Mid last year Iwent to the office and found that one of mygood staff persons has resigned. My officestaff told that the person resigned because hewants to start his own business and he isinterested to meet me. The gentleman cameto me and I asked him that how could I helphim? He requested me for a loan of hundredthousand rupees for two years period to starta grocery business. After listening to hislogic I provided him the required money.Today that gentleman is running his ownshop successfully, employing two peopleand paying back the loan every month.Twelve hundred dollars were needed by thatgentleman and he was not able to get thatmoney and start his own business in thiscountry.Entrepreneurship and human capital is thebasis we need for competition in ourcountry. In my presentation I would like tofocus on two important areas viz. opennessand competition. The theme is that we as anation for the last so many years have onlyrewarded the financial capital in Pakistan.Because of short sightedness we valuedfinancial capital and failed to value humancapital and talent. We have not been able todevelop a competitive environment in ourcountry.Pakistan’s economic growth since 1972shows a volatile growth with boom and bust.I would like you to note that Pakistan havehad high economic growth rate only in timeswhen there was financial assistance from theoutside world. In 1979, after the Afghanwar, we saw an economic boom in thecountry. After 1990 when sanctions wereimposed on Pakistan there was only oneyear in which we saw real economic growth.In 2001, after the incident of 9/11, westarted receiving financial assistance and wewere able to achieve economic growth.Government’s reliance on borrowings andforeign resources has undermined theeconomic growth in the country.We have not been able to develop acompetitive environment in this countrywhereby businesses and manufacturingsector can lead us to growth. Foreignassistance has played a major role in ourgrowth and that can’t go on in future. Wehave under developed markets. We havefinancial markets in our country. We can’tbe competitive without creatingentrepreneurship in our country. We can’tcreate entrepreneurship without financialcapital. We have developed only equitymarket in the country which is less than 25%of our GDP. Debt market is non- existent inour country. Commodity markets are also ininfancy stages yet and we need to promoteit.We are a banking centric nation. Withoutbeing financially strong we can’t havefinancial capital. If someone needs financialcapital it is almost difficult to get it unlesshe is already financially strong. Our savingsare lying in the banks and the banks havebeen lending only to the government orlarge size corporate sector. We have notbeen able to develop an effective SMEsector. For the last 20 years I keep hearingtwo words – debt market and SME sector. Ihave not seen any of these two developed inour country. Unless we create a competitivedebt market where people can borrow from29