Sunday, January 19, 2014

Economic and Human Capital Development in Pakistan 1999-2007

Pakistan experienced rapid economic and human capital growth in years 2000 to 2008 on President Pervez Musharraf's watch. Savings, investments and exports hit new records and the rate of increase in human development reached new highs not seen before or since this period.

Savings and Investments:

Domestic savings rate reached 18% of the GDP and foreign direct investment (FDI) hit a record level of $5.4 billion in 2007-8. This combination of domestic and foreign investments nearly tripled the size of the economy from $60 billion in 1999 to $170 billion in 2007, according to IMF. Exports nearly tripled from about $7 billion in 1999-2000 to $22 billion in 2007-2008, adding millions of more jobs. Pakistan was lifted from a poor, low-income country with per capita income of just $500 in 1999 to a middle-income country with per capita income exceeding $1000 in 2007.

Pakistan Per Capita Income 1960-2012. Source: World Bank 


The PPP government summed up General Musharraf's accomplishments well when it signed a 2008 Memorandum of Understanding with the International Monetary Fund which said:

"Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

Human Capital Development: 

In addition to the economic revival, Musharraf focused on social sector as well. Pakistan's HDI grew an average rate of 2.7% per year under President Musharraf from 2000 to 2007, and then its pace slowed to 0.7% per year in 2008 to 2012 under elected politicians, according to the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World”.



Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent. Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.

R&D Spending Jumped 7-fold as % of GDP 1999-2007 Source: World Bank

Acceleration of HDI growth during Musharraf years was not an accident.  Not only did Musharraf's policies accelerate economic growth, helped create 13 million new jobs, cut poverty in half and halved the country's total debt burden in the period from 2000 to 2007, his government also ensured significant investment and focus on education and health care. The annual budget for higher education increased from only Rs 500 million in 2000 to Rs 28 billion in 2008, to lay the foundations of the development of a strong knowledge economy, according to former education minister Dr. Ata ur Rehman. Student enrollment in universities increased from 270,000 to 900,000 and the number of universities and degree awarding institutions increased from 57 in 2000 to 137 by 2008. Government R&D spending jumped from 0.1% of GDP in 1999 to 0.7% of GDP in 2007. In 2011, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including Pakistan Steel and PIA, both of which  continue to sustain huge losses due to patronage-based hiring.

To see a discussion of the above subject and the current situation, please watch the following video:

http://vimeo.com/84504051



Civil-military Stand-Off on Musharraf Trial; Musharraf Govt's Performance Record from WBT TV on Vimeo.

Related Links:

Haq's Musings

Musharraf Earned Legitimacy By Good Governance

Musharraf Wants to Face Trial; Military Opposed to it

Saving Pakistan's Education

Political Patronage Trumps Public Policy in Pakistan

Dr. Ata-ur-Rehman Defends Pakistan's Higher Education Reforms

Twelve Years Since Musharraf's Coup

Musharraf's Legacy

Pakistan's Economic Performance 2008-2010

Role of Politics in Pakistan Economy

India and Pakistan Compared in 2011

Musharraf's Coup Revived Pakistan's Economy

What If Musharraf Had Said No?

Human Development in Musharraf Years

3 comments:

Anonymous said...

Human Capital and Economic Growth: Time Series Evidence from Pakistan

Faisal Sultan Qadri, Faisal and Dr. Abdul Waheed, Waheed (2011): Human Capital and Economic Growth: Time Series Evidence from Pakistan. Published in: Pakistan Business Review , Vol. 1, No. Jan 2011 (2011): pp. 815-833.

Human capital is generally considered as a positive contributor in the economic growth. In this study, we estimate this relationship using time series data of Pakistan for the period 1978 to 2007. A health adjusted education indicator for human capital is used in the standard Cobb-Douglas production function confirms the long run positive relationship between human capital and the economic growth in Pakistan. A sensitivity analysis was also performed in order to check the robustness of the initial findings. The estimation results supported the findings of the previous studies that human capital is positively related to growth and also that the results are robust. The health adjusted education indicator was found to be a highly significant determinant of economic growth, which indicates that both the health and education sectors should be given special attention in order to ensure long run economic growth.

http://mpra.ub.uni-muenchen.de/30654/

Riaz Haq said...

Democracy in #Pakistan: GDP grew avg 2.9% rate since 2008, less than half of 7% on @P_Mushharaf's watch until 2007. http://www.dailytimes.com.pk/business/27-Feb-2014/pakistan-s-gdp-grow-2-9-in-5-years

Riaz Haq said...

Here's a Express Tribune report on Pakistan Education Atlas 2013:

For the last few years, Pakistan’s adult literacy rate has stagnated at 58% – almost half the country’s adult population is unable to read or write. The figure is not surprising when you consider that only 50% of the country’s rural population has ever attended school; the number is higher for urban populations, at 73%.
According to the Pakistan Education Atlas 2013, launched on Tuesday, improvement in the education sector moves at a snail’s pace, with 32% of children aged 5-9 years out of school. 17% of primary schools consist of a single room.

It’s not all grim news, though – 91% of girls make it from primary school to middle school (higher than the number of boys, at 78%).
State Minister for Education, Trainings and Standards in Higher Education Balighur Rehman formally launched the report on Tuesday and reiterated the government’s pledge to improve education in the country. Even though education has been devolved to provinces, he said, they ‘have agreed to the constitution of a National Curriculum Commission to bring the education system on the same page across Pakistan’. Speaking at the launch, World Food Programme Representative and Country Director in Pakistan Lola Castro said the WFP had contributed to the report as it wished to ‘support and promote this important educational undertaking’ in the country.
According to the report, almost seven million children are out of primary schools in the country. “The quality of education across multiple levels is also lagging by most standards,” the report states. Some provinces fare relatively better than others in the education sector, with a ‘survival rate’ – the percentage of students completing primary school education – of 96% in Islamabad Capital Territory and a robust 95% in Gilgit-Baltistan. Khyber Pakhtunkhwa clocks in at 64%. The number is lowest in Balochistan and Sindh – 43% each. Survival rates in Punjab stand at 56%, 48% in Fata.

From primary to middle school
The results are encouraging with regards to the number of students able to reach middle school in Pakistan, particularly in Fata, where the number has crept up from 44% in 2010 to 61% this year. 100% of Islamabad students make it to middle school and 87% in Punjab. The number stands at 89% in G-B, 72% in K-P, 69% in Azad Jammu Kashmir and 67% in Balochistan. Sindh has the lowest number of students reaching middle-school level, at 59%.
Poor grade
Students in 64% of primary schools in the country have access to drinking water – in Azad Jammu Kashmir, the number plummets to 27%. In Islamabad, 185 schools out of 191 have access to clean water.
Meanwhile, 49% of government primary schools have electricity. Of more than 10,000 schools in Balochistan, only 1,662 schools are provided with electricity....


http://tribune.com.pk/story/687360/pakistan-education-atlas-2013-education-survey-reveals-mixed-bag-of-results/