Lahore School of Economics

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Public Policy Innovation and Economic Growth: An Economic and Technology Perspective on Pakistan’s Telecom Industry
March 24, 2016

Inayat U Mangla, Lahore School of Economics

Musleh Ud-Din, Pakistan Institute of Development Economics, Islamabad

Muhammad Jamil, Independent Researcher

At a time of rapid technological advancements in every field, Pakistan must develop a comprehensive strategy for harnessing science and technology to promote economic growth on a sustained basis. In recent decades, successful economies have moved away from factor accumulation models of economic growth to productivity led growth that is underpinned by technological advancements and innovations. To this end, we provide a synthesis of literature review for developed and developing economies on numerous visions that have been advanced about the role of Schumpeter’s (1949) entrepreneurship in a capitalist society. Following Solow’s (1956) seminal work, the endogenous growth theory emphasizes knowledge as a key driver of economic growth besides traditional factors. Using the endogenous growth theory as a framework of analysis, the paper will provide a macroeconomic perspective on the importance of technological modernization and innovation for sustainable economic growth.

We argue that public policy must be geared to generate robust growth by encouraging investment in research and development (R&D) and human capital. The paper will conceptualize the role of technology in the process of economic growth and identify policy areas that can be instrumental in promoting technological modernization and innovations. The discussion on policy will focus on the role of domestic commerce, services sector, trade policy and macroeconomic policy in promoting technological modernization and innovations. In specific, in this paper, we show that there are patterns of innovation occurring in developing countries like Pakistan that have been overlooked in the conventional literature on modernization and innovation.

The paper will briefly survey some illustrations/ cases in information/ telecommunication industry and banking sector in Pakistan. Despite some pitfalls, these are perhaps the only two areas in which public policy in Pakistan has made some meaningful progress that demonstrates some degree of organisational and technological modernization and innovation. We try to evaluate telecom industry from a policy perspective. Telecom observers have long been pointing out that telecom regulation and taxes are too high in Pakistan compared to countries with similar level of development.In the latest quarterly report of State Bank of Pakistan (SBP) on the state of economy, it suggests that “there is large untapped potential in the broadband segment”, and urges the government to take measures to improve mobile and broadband usage. Furthermore, the report suggests that “heavy taxation on mobile services in Pakistan does not bode well for economic growth in the country”. We would provide some empirical evidence showing if and how high telecom taxes and other sectoral issues are leading to lost economic output and consumer surplus.

The paper will also provide a comparative perspective on how public policy is used for technological modernization and innovation in countries such as India and other competitors in South East Asia. Based on the analysis, the paper will come up with a set of policy recommendations to promote productivity led growth that are driven by technological modernization and innovation.

Bios

Dr. Inayat Mangla has been engaged in academic activities at several universities around the globe since 1966. He has taught, developed new curriculum, and conducted research on North American economies, Singapore, Japan, China, Malaysia, Indonesia, India, Pakistan emerging economies and U.A.E. to name a few. He has published more than 50 scholarly papers in international journals, more than 100 articles in conference proceedings, written five monographs, and he has conducted several research studies for the World Bank, CIDA (Canada), Planning Commission (Government of Pakistan), PIDE, and Q.A. University, Islamabad etc. His area of research includes Global Financial Markets, Banking, and Microfinance.

Dr. Mangla has served as a director of the Graduate Programs at the Haworth College of Business, Western Michigan University in the late 1990s. Dr. Mangla also serves as an Associate Editor of the Journal of Financial Issues, member of Editorial Board of the Lahore Journal of Economics and Pakistan Development Review.

Dr. Musleh ud-Din is presently head of governance and public policy division at the Pakistan Institute of Development Economics. He has published widely in national and international journals in the areas of macroeconomics, trade policy, and development economics. He has served as member of various high level committees and is currently a member of the Economic Advisory Council. He also serves as executive editor of the Pakistan Development Review. Dr. Din has conducted a number of research projects under the aegis of the World Bank, Asian Development Bank, and United Nations.

Labels: Abstract, Annual Conference, CREB, Management of Pakistan Economy, Twelfth Annual Conference