The Vision 2030 for Pakistan presents a strategic framework for overcoming obstacles and challenges standing in the way of the preferred future chosen by the people of Pakistan. The government aims to achieve the vision within a generation, in a manner that sustains a high quality of life and provides equal opportunities to its citizens to reach their true potential. It plans to meet contemporary and future challenges by deploying knowledge inputs and developing human capital. Pakistan’s macroeconomic framework in 2030 will be linked to the level of globalisation present at the time. Whether globalisation is intense of benign, Pakistan may have little ground for manoeuvre, and the state would still be busy in maintaining the balance at the fiscal, monetary and external levels.
In both cases, low inflation would be an important goal, tariffs would also be low or within those set by the international environment, and the number of taxes would be few.
The vision sees Pakistan to have eliminated extreme poverty in all its manifestations much before 2030. The state would build upon this to increase the employability and quality of life for all its citizens.
High GDP growth rates exceeding 7- 8 per cent are envisaged in view of recent performance, however the low levels of savings and investments, broad-basing of growth, its sustainability over time and the trickle down of growth benefits to the poor, would remain major challenges.The vision expects the share of manufacturing to rise from the current 18.7% in 2005 – 06 to nearly 30 per cent by 2030. Within manufacturing there is also a need for diversification from textiles to machinery, electronics, automobiles, pharmaceuticals and chemicals, to match the global trade composition. Fortunately all these sectors are showing strong growth.
The services sector plays a vital role in sustaining the growth of Pakistan’s economy, with a share of about 60 per cent in GDP and 44 per cent in employed labour force. A cross-country comparison shows that share of services sector in GDP is currently about 75 per cent in most developed countries.
Boundaries between service and industry are changing fast and about half of all services in modern industrialised economies and sold and bought while being embedded in the form of goods. While the content and function of goods remain important, the designing, marketing, consultancy and advertising services claim a share of the value added goods. Manufacturing too has important contribution from services such as resource planning, warehousing, value chain analysis, financial services and inputs, after sales services and the logistics of transport and communication.
All these elements are a core focus of Vision 2030. The government will provide the necessary infrastructure, human resource development including skill development and the development of scientific and technological infrastructure. The government will also use fiscal incentives including tax holidays, depreciation allowance, tax credits, subsidy for R&D, freight subsidy etc. to promote the export orientated and technology based industries.
An important instrument to achieve Vision 2030 would be to enhance the trade/GDP ratio from the current 30 per cent to about 60 per cent by 2030 or around USD 600 Billion by 2030. The services sector accounts for nearly 60 per cent of the GDP but contributes very little to the revenue generation (telecommunications and electricity being the exceptions).
The major interventions required are strengthening of the infrastructure and assurance of quality standards and accreditation. Quality improvement and diversification would require active partnership between the private and public sectors with a focus on increasing export competitiveness.
In a world of aggressive competition in the global market, generating growth exclusively from factors accumulation makes a country uncompetitive. Empirical estimates suggest that 20 – 50 per cent of GDP growth has emanated from productivity gains in various countries. In Pakistan, TFP has contributed one third to its growth in recent years, but it reflected an extreme form of inefficiencies in the case year, rather than improvement in productivity.
Rising levels of investment without an increase in savings result in external debt; savings rate in Pakistan is around 15 per cent of GDP (with investment levels of 20 per cent) which is quite low in the perspective of 6 – 8 per cent growth rate envisaged in Vision 2030.
The country is entering into a capital intensive investment regime in order to diversify towards technology based industries, to meet the energy and infrastructure requirements and to provide for the human resource development. The minimum level of requisite investment would range between 27 – 30 per cent if the growth rates of GDP envisaged in the Vision 2030 are to be realised. Accordingly a major effort is to be made to increase the savings rate from the current 15 – 16 per cent of GDP to 25 per cent at least.