Lahore School of Economics

The Fifth Annual Conference on Management of the Pakistan Economy is being held in Lahore School of Economics (Center for Research in Economics and Business) on 20-21 April, 2009. The underlying objective of the conference is to promote dialogue/discussion on key economic management and policy issues facing the country today. A distinguished economist or senior policy maker will be asked to present the keynote address, while eminent economists from the region will be invited to present papers or participate in the panel sessions. The papers and proceedings of the conference will be published in a special issue of the Lahore Journal of Economics.

The topics and broad areas that would be covered in the different sessions are as follows:

Session 1 – Promoting Stable and Sustainable Growth

Growth in Pakistan, after averaging almost 7% per annum during the last five years, is set to decline to less than half that in 2009. At the same time inflation remains high and the balance of payments fragile. The most important economic issue facing the country today is how to stabilize the economy and restore growth. The problem is compounded by the fact that the world is experiencing the worst financial crisis since the Great Depression, and there are fears that the resulting recession in the industrialized countries may be deeper and longer than any since the 1930s. Papers and discussion in the session will focus on the issue of restarting and sustaining growth in Pakistan and the implications of the global crisis for economic growth in South Asia.

Session 2 – Free Trade Agreements – Experience and Potential

Besides SAFTA, Pakistan has signed Free Trade Agreements (FTAs) with Sri Lanka, Malaysia and China and is negotiating FTAs with over a dozen other countries. However, the FTAs have not resulted in any significant increased trade with these countries. It seems that that Pakistan looks at a FTA more as a political gain than as a means of promoting trade. For example, since India-Sri Lanka FTA came into force in 2002, bilateral trade between the two countries has increased manifold, but there has been hardly any change in bilateral in trade between Pakistan and Sri Lanka since the FTA was signed in 2005. In this session, papers will focus on Pakistan’s experience with FTAs (in general, or SAFTA, or country specific), their potential for promoting Pakistan’s exports and what needs to be done to realize this potential.

Session 3 – Liberalizing Trade and Investment with India: A Recipe for Higher Growth

Because of sustained and accelerating growth since the early 1980s, India today is one of the fastest growing markets in the world. Pakistan, as a neighbor could be a major beneficiary of this growth. However, trade between Pakistan and India, especially overland, is highly restricted and direct investment from one country to the other is not permitted – in Europe and East and South East Asia intra-regional investment was a key factor in the growth of intra-regional trade. Besides political reasons, an argument often made for restricting trade, particularly overland, is that “India has a much more developed industrial sector and many Pakistani industries would not be able to survive the competition”. The papers in this session will discuss the potential of trade and investment with India providing the Pakistan economy with a new vent for growth which it badly needs, as well as its possible adverse impacts on industry and balance and payments.

Session 4 – Pakistan’s Stop-Go Growth – A Symptom of an Anti-Export Bias

Since the early 1970s, Pakistan has experienced several accelerations in growth but invariably these have been brought to an end by a balance of payments crisis. Generally, the acceleration in growth was the result of a sharp increase in capital inflows (foreign assistance, workers’ remittances, etc). However, each time imports expanded much more rapidly than exports and the growing current account deficit made the economy highly vulnerable to any external shock or slowdown in capital inflows. Throughout this period, Pakistan has maintained an overvalued exchange rate and an incentive structure that favored production for the domestic market or the non-tradable sector. Also the weak state of trade facilitation – regulations, customs and logistics – added to the anti-export bias. Papers in this session will examine the extent of the anti-export bias, and the role it may have played in the development of the current structure of the economy and the Stop-Go nature of growth in Pakistan.

Session 5 – Accelerating Export Growth – Looking Beyond Textiles

Textiles and clothing (T&C) exports account for the bulk of Pakistan’s exports. Most efforts to increase exports in Pakistan begin and end with T&C. But Pakistan’s share in world T&C trade continues to decline, and the industry’s exports remain in the low value added end of the product spectrum. Ironically, T&C exports in 2007-08 by Bangladesh, which had no T&C industry to speak of in 1971, were substantially higher than Pakistan. In terms of destination, Pakistan’s exports are equally concentrated with the US and a few EU countries accounting for a major share. Thus if Pakistan is going to accelerate export growth, it must diversify both in terms of products (for example, fresh and processed agro-food products and exports from expanded and modernized SME clusters in light engineering – including electrical - and sports goods have considerable potential) and markets (particularly the fast growing Asian markets such as China and India). The papers in this session will focus on factors responsible for the current export structure, potential for diversifying and accelerating exports, and policies needed to achieve this.

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