Lahore School of Economics

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Lahore School Conference on the Management of the Pakistan Economy
March 25, 2015

The first day of the Eleventh Conference on the Management of the Pakistan Economy hosted by the Lahore School of Economics was opened up with a welcome address by Dr. Shahid Amjad Chaudhry. The keynote speaker was Dr. Robert Wade (Professor, London School of Economics). He said that before 1980’s it was widely understood that development meant rising overall “prosperity” and that heavy investment in infrastructure and in industry were key drivers. After the mid 1980’s the content of development came to be “extreme poverty reduction”, “humanitarian assistance”, “primary school education”, “primary health care”, “anti-corruption”. Why this change? He argued that it was due to several factors: (1) the end of the Cold War, and the resulting change in the geopolitical strategy of western states led by the US; (2) the increasing strength of “post-materialist” values in developed countries and their translation into the content of western development thinking (eg World Bank, USAID, DfID); (3) business interests in the West; and (4) continued western control of inter-state organizations that are meant to be organizations for the world (eg World Bank).

The first session’s theme was Policy Environment and Manufacturing Performance.The first session was chaired by Dr. Ishrat Hussain (Dean and Director, Institute of Business Administration). He emphasized the importance of Pakistan as a regional manufacturing hub and how industrial policy can cater to all vital sectors. Macroeconomics stability and a favorable policy environment is likely to lead Pakistan towards economic growth. Dr. Inayat Mangla (Professor, Western Michigan University) analyzed the impact of macroeconomic environment on Pakistan’s manufacturing sector emphasizing in particular the role of monetary and fiscal policies in shaping incentives for industrial investment. Furthermore he argued that macroeconomic stabilization policies have often failed to produce the desired results owing to lack of coordination between monetary and fiscal policies.Though recent macroeconomic indicators show some improvement, fundamental weaknesses remain. In particular, the recent improvement in the current account deficit is driven largely by high inflow of remittances coupled with financial engineering such as payments from the IMF, friendly money, EU bond issue and ‘Islamic Sukuk’. Dr. Hafiz Pasha (Professor Emeritus, Lahore School of Economics) discussed the implications of varying incidence of taxes and subsidies on industries. In doing so, it quantifies the effective levels of protection to different industries and the value of export incentives.

Dr. Matthew McCartney Director of South Asian Studies, University of Oxford) established evidence that the exchange rate was managed in a way that should have helped a more liberalized trading regime contribute to economic growth. He explored wider evidence linking trade liberalization to economic growth and argues that the positive relation is at best only a contingent one. Those contingent factors that have failed to support the positive link between trade liberalization and economic growth in Pakistan are investment, tax revenue, and upgrading/learning.

The second session was on Pakistan’s Manufacturing Sector. Dr. Naved Hamid (Professor, Lahore School of Economics) explained trends in the share of manufacturing employment and value added over the last 50 years or more. According to him, it seems that turning point in Pakistan occurred in 2007. To understand the factors underlying the slowdown of the manufacturing sector, he analyzed the structural changes that occurred in the manufacturing sector over the last 30 years.

Dr. Azam Chaudhry (Professor, Lahore School of Economics) looked at how the establishment of different types of firms across the districts of Punjab has impacted district level socioeconomic outcomes in Punjab. He explained that the entry of firms has a positive impact on economic outcomes like employment and enrollment and this impact can vary by the scale of the firms that enter.

Dr. Theresa Chaudhry (Associate Professor, Lahore School of Economics) and Mahvish Faran (Lahore School of Economics) analyzed the production, management, wage practices, and quality and discussed issues related to how re-organization can spur future growth in the electrical fan and ready-made garments sector in Pakistan.

The last session of the day was on what makes manufacturing firms succeed or fail. Mr. Mujeeb Rashid (CEO, Michells Fruit Farms Limited) reviewed the business operations at Michell’s Fruit Farms focusing on supply chain efficiencies through a Rolling Sales Forecasting System supported by PDCA Concept among all operating units. He explained that together with these efforts Training and Development of Staff was undertaken to improve essential Skills and Attitudes. The resulting internally generated Value enabled the company to make new investments that would strengthen both Backward & Forward linkages to Growers and Consumers.

Dr. Shahzad Khan (Director Marketing and Sales at Getz Pharma Pvt Ltd) explained that Getz Pharma is the first and only manufacturing company in Pakistan and amongst few in the region to be certified by PIC/s. In the month of Feb, 2015 Getz Pharma initiated a ground breaking ceremony of its largest pharmaceutical plant to be constructed in South Asia at one site. It is being designed and being built to attain the WHO, US FDA and EU certifications. With US$ 300 million this Project largest investment in the manufacturing sector of Pakistan since independence. All this has been made possible because of our Vision to be the Top-10 regional, research-driven, branded-generic, pharmaceutical company with a global outlook. We will continue our journey of excellence by serving the needs of the patients and medical community worldwide.

Mr. Sajid Minhas (CEO, Delta Garments) illustrated the importance of the garment sector in the overall economic perspective is two fold. He analyzed that firstly, this sector has the potential to be the engine of Pakistan textile export growth, and secondly, it is the largest source of creating low cost employment at all levels. Pakistan’s garments and made-up exports have showed growth of over 20% in the last year. Ministry of Textile figures put it around one billion dollars of addition export in 2014. The duty free access to the EU through the GSP plus scheme has been a major cause for this healthy increase. The one major weakness - both at the firm level and the sector level – is the fact that we need to diversify and enhance our product lines. There are very few products that Pakistan offers to the export markets of the world. We need to further develop products in the man-made fibers. To achieve this we need a friendly import/export policy from the government which facilitates all, i.e Large, medium and small units as well as new entrant.