Despite a devastating earthquake less than a year ago and an extraordinary surge in global oil prices, Pakistan's economy has delivered yet again. It registered economic growth at 6.6 per cent, and its investment rate touched a new high at 20 per cent of gross domestic product (GDP).
Real per capita GDP had grown by 4.7 per cent and per capita income in current dollar terms was up by 14.2 per cent to $847 (about Dh3,111) during 2005-'06.
In 2005, the World Bank reported, "Pakistan was the top reformer in the region and the number 10 reformer globally." Pakistan is now one of the emerging economies among growing nations such as China, India and Brazil.
Pakistan is a developing country with the world's sixth-largest population, and an economic growth rate that has been positive since 1951.
At purchasing power parity, Pakistan's GDP in 2005 was estimated at about $384.9 billion (about Dh1,414 billion), larger than that of Saudi Arabia, but slightly smaller than the GDP of the Philippines.
The economy averaged an impressive growth rate of six per cent per year during the 1980s and early 1990s.
Wide-ranging reforms
In recent times, wide-ranging reforms have accelerated economic growth. Pakistan's manufacturing and financial services sectors have experienced rapid expansion and there is great improvement in its foreign exchange position.
In May 2006, Pakistan's foreign exchange reserves were more than $13 billion (about Dh48 billion). According to the State Bank of Pakistan (SBP), as per current estimates, the nation's long-term growth momentum remains intact, with real GDP growth exceeding six per cent for the third successive year despite a few dips in agriculture.
In its bid to further speed up the growth process, Pakistan has embarked on a profitable reform agenda based on deregulation, liberalisation and privatisation. The newly created Trade Development Authority of Pakistan (TDAP) plans to increase and diversify the country's exports by exploring new markets and identifying new export products.
To increase market access for goods produced in Pakistan, the government is vigorously pursuing signing of Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) with various countries. Islamabad also hopes to position itself as an energy corridor linking oil-and-gas-rich countries in the Gulf and Central Asia with the growing economies of India and China.
For 2006-'07 Pakistan has set an export target of $18.6 billion (about Dh68 billion). According to Prime Minister Shaukat Aziz, a former Wall Street banker, Pakistan has exceeded the revenue collection target of Rs690 billion (about Dh42 billion), and the economy has doubled in size to $134 billion (about Dh492 billion) in the last seven years.
The liberalisation in the international textile trade has benefited Pakistan's exports and it also expects to profit from freer trade in agriculture. As a large country, Pakistan hopes to take advantage of significant economies, and replace China as the largest textile manufacturer as the latter moves up the value-added chain.
A perception of stability in Pakistan's monetary policies has contributed to a reduction in money-market interest rates, and a great expansion in the quantity of credit, changing consumption and investment patterns in the nation.
Pakistan's domestic natural gas production and its significant use of CNG in automobiles have cushioned the effect of the oil-price shock of 2004-'05. Pakistan is also moving away from the doctrine of import substitution and is now pursuing an export-driven model of economic growth.
Reducing poverty
As a developing nation, Pakistan knows that its progress will depend on the equitable distribution of wealth. Towards this, the government spent more than Rs1 trillion (about Dh60 billion) on poverty alleviation programmes reducing poverty from 32.1 per cent in 2000-'01 to 25.4 per cent in 2004-'05.
Rural poverty has also declined from 39 per cent to 31.8 per cent and urban poverty from 22.7 per cent to 17.1 per cent.
Acknowledging the need for technology in the nation's progress, Pakistan has granted numerous incentives to technology companies.
As a result, there has been impressive growth in the IT sector; IT exports grew 50 per cent from 2003-'04 to 2004-'05, with total exports standing at $48.5 million (about Dh178 million). This year the government has set an export goal of $72 million (about Dh264 million).
Pakistan had more than 20 million internet users as of 2005 and is said to have the potential to absorb up to 50 million mobile phone and internet users in the next five years. In 2005, there were six cell phone companies operating in Pakistan with nearly 28 million mobile phone users.
Wireless local loop and the landline telephony sector has also been liberalised increasing the teledensity rate from less than three per cent to more than 10 per cent in a span of two years.
Pakistan's principal natural resources are arable land and water. About 25 per cent of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world.
Agriculture accounts for about 23 per cent of GDP and employs about 44 per cent of the labour force. In 2005, Pakistan produced 21,591,400 metric tonnes of wheat, more than all of Africa (20,304,585 metric tonnes) and nearly as much as all of South America (24,557,784 metric tonnes).
Pakistan's industrial sector accounts for about 24 per cent of GDP. Cotton textile production and apparel manufacturing are Pakistan's largest industries, accounting for about 64 per cent of total exports.
Other major industries include cement, fertiliser, edible oil, sugar, steel, tobacco, chemicals, machinery and food processing.
Booming construction
Construction in Pakistan is also booming. Dubai Ports World announced on June 1 that it would spend $10 billion (about Dh37 billion) on transport infrastructure and real estate in Pakistan.
Emaar Properties has also recently taken over three realty projects in Islamabad and Karachi. With an investment of $2.4 billion (about Dh9 billion), it has embarked on a series of master planned communities that will set new benchmarks in commercial, residential and retail property in Pakistan.
International funding is also pouring in. The Asian Development Bank (ADB) will provide close to $4 billion (about Dh15 billion) development assistance to Pakistan during 2006-'08.
The World Bank unveiled a lending programme of up to $6.5 billion (about Dh24 billion) under a new four-year, 2006-'09, aid strategy aimed largely at beefing up the country's infrastructure. Japan will also provide $500 million (about Dh1,836 million) annual economic aid to Pakistan.
In addition to increased remittances from Pakistanis living abroad, the foreign direct investment (FDI) in Pakistan soared by 180.6 per cent year-on-year to $2.22 billion (about Dh8 billion) during the first nine months of fiscal 2006.
According to the SBP, during July-March 2005-'06, FDI year-on-year increased to $2.224 billion (about Dh8 billion) from only $792.6 million (about Dh2,911 million) and portfolio investment to $407.4 million (about Dh1,496 million), from $108.1 million (about Dh397 million) in the corresponding period last year.
Exports from July 2005 to June 2006 were $13.52 billion (about Dh50 billion) marking an increase of 17.80 per cent compared to $11.48 billion (about Dh42 billion) in the corresponding period last fiscal. Export projections in the current fiscal are over $17 billion (about Dh62 billion).
Sustaining growth
Pakistan has sufficient momentum to sustain rapid growth in the coming decade. To help materialise this, the World Bank is working in partnership with the government in systemic reforms to improve governance and service delivery.
The signing of the South Asia Free Trade Agreement (SAFTA) in January 2004 is an important step towards higher intra-regional trade in South Asia.
The first phase of SAFTA tariff reductions was expected to come into effect from July.
President Musharraf believes that Pakistan's central geo-strategic location at the heart of critical regions, including Western parts of China, Central Asian states, Afghanistan, Iran, India and the oil-rich Gulf countries, gives the country a pivotal role. In a recent statement, he hoped that Pakistan would become a trade and energy corridor for China and landlocked Central Asian countries.
"We are talking of Pakistan-China inter-connectivity in terms of energy and trade, improvement in the Korakoram Highway (KKH), development of railway link and gas and oil pipeline linkages and even fibre optics connectivity along the KKH under one project simultaneously," he said.
He is also hopeful of a strengthening of a quadrilateral arrangement between Pakistan, China, Kazakhzstan and Kyrgyzstan for mutually beneficial economic growth.
