Economies of the region

The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its report has stated that the economies in the Asia-Pacific region registered a robust growth in 2017 and the prospects for this year look promising. The UN development arm for the region has urged countries to take advantage of positive conditions and address underlying vulnerabilities.
ESCAP has underlined the fact that the resent strong growth can provide resources critical to realizing the ambitious 2030 Agenda for Sustainable Development.
"The prospects for mobilizing financing for development purposes are promising," said Shamshad Akhtar, the Executive Secretary of Thailand-based ESCAP. She is also a former governor of State Bank of Pakistan.
According to the Economic and Social Survey of Asia and the Pacific the developing economies recorded an overall growth rate of 5.8 percent in 2017, compared with 5.4 percent in 2016; for 2018 and 2019, these economies are projected to grow by 5.5 percent. There are serious concerns over debt levels in China offset by a recovery in India and a steady performance in the rest of the region.
It adds that the medium-term outlook sees more of a downward growth trend in several countries owing to ageing populations, slower capital accumulation and modest productivity gains.
At the same time, "rapid technological advancements, while promising immense opportunities are also posing considerable challenges in terms of job polarization and income and wealth inequalities," states Akhtar.
"Lifting productivity will require a "whole-of-government approach" for fostering science, technology and innovation and investments in relevant skills and infrastructure," ESCAP urged, highlighting the need to strengthen social protection and efficient use of resources.
Tax reform and strengthening tax collection could also add as much as 8 percent to the gross domestic product (GDP) of countries such as Myanmar or Tajikistan; and about 3 to 4 percent in larger countries like China, India or Indonesia, according to ESCAP.
India is increasingly perceived as a leading economy. This may hold true on account of the volume of its economy owing to its large population and supply and demand dynamics. But the economic fundamentals of India are no different from those of Pakistan.
For years, the two economies were comparable and only after the year 2000 that the gap between the two started to widen with India's economy growing at a faster pace than Pakistan's.
In early 90s, Pakistan's gross fixed capital formation as a percentage of GDP was 19, compared to 24 of India. In 2017, Pakistan, however, dropped to 14 percent while India rose to 28 percent.
'Private Investment Trend' was 10 percent of GDP in 1993 for Pakistan while for India it was 14 and in 2017 it remained 10 for Pakistan and jumped to 22 percent for India.
In Pakistan, the domestic investment remains stagnant for the last 20-25 years at around 10 percent of GDP.
The Foreign Direct Investment (FDI) in 1993 was 0.8 percent of GDP for Pakistan and 1.2 percent for India. In 2017, it was recorded as the same 0.8 of GDP for Pakistan and 2 percent for India.
Incidentally, in 2007-8, the FDI jumped to 3.8 percent of GDP both for Pakistan and India.
The GDP per capita in 1995 in case of Pakistan was 500 USD and 400 USD for India. In 2015, it escalated to 1480 in the case of Pakistan and 1540 in the case of India.
With all the perceptions of a 'Shining India and an 'Emerging Pakistan' the fact remains that after over 70 years of independence Pakistan, India and Bangladesh host world's largest populations struggling below the poverty line. The pace of development is not good enough to catch up with poverty in the region and India is no exception in this regard.
The key issue for Pakistan is that it has lost its competitiveness in global markets, adversely affecting country's exports, FDI and domestic investment.
The prime reason for this is Pakistan's declining 'Doing Business' ranking which has slipped by three notches from 144 to 147 in 2018 as per a World Bank Report.
The World Bank annually issues its Doing Business report which ranks 190 countries on how easy it is to set up and conduct business in the respective countries. Since its inception in 2003, these rankings have evolved to become a global benchmark for countries wanting to improve on their business environment. In fact more than 60 countries (including Pakistan, India and Bangladesh) have formed special committees and task forces with a view to improving their rankings as foreign investors now increasingly rely on this report before finalizing their choices for investment destinations.
Throughout last year, many seminars were held in the leading business hubs of Pakistan and the Ministry of Commerce tried to contribute to efforts aimed at improving Pakistan's rankings. The business chambers also presented a list of recommendations to all cadres of the government, spelling out steps in this regard. However, in spite of many serious efforts, the ranking of Pakistan declined three notches from 144 to 147. In South Asia, Pakistan is only ahead of Bangladesh and Afghanistan. On the contrary, India improved its rankings from 130 to 100.
Given some highly significant developments on ground in the last three years, Pakistan could have fared much better.
Lower oil prices, improved domestic energy supply, better domestic security, a low inflation environment and above all new economic activities generated by China Pakistan Economic Corridor (CPEC) are all positive ground realities on which Pakistan could have capitalized on. But it could not do so because of gaps in governance, loss of focus on the economy on account of political uncertainty.
The next elected government will not be able to take stock of the challenges to the economy before end of 2018. It is therefore quite likely that the economy of the country will remain vulnerable to numerous threats till then.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)