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H.E. Naela Chohan

Speech of the High Commissioner H.E. Naela Chohan
Pakistan Summit II-Past, Present and the Future of Pakistan
through the Eyes of Emerging Scholars
at University of Sydney – 13 January 2018

I would like to thank the South Asia Study Group for organizing the Pakistan Summit-II. It is a propitious moment to highlight Pakistan in its correct perspective.
Today, I would like to avail myself of this opportunity to elucidate Pakistan's economy which has seen a noticeable turnaround over recent years. Pakistan has made significant progress in regaining macroeconomic stability. Fiscal consolidation through improved public financial management and tax administration led to shrinking of deficit from 8 percent of GDP in 2012-13 to below 5 percent in 2016-17. Inflation has been brought down significantly; it is now in single digit.

In the energy sector, through capacity expansion of electricity, LNG imports, strategic private public partnerships, reduction in inefficient subsidies and strengthening of regulatory framework, the problem of energy shortages and load shedding has been virtually resolved.

Improvements in the energy supply along with a turnaround in the security situation have tackled two key bottlenecks holding back the performance of the economy.

Overall economic growth has accelerated, and real GDP growth was 5.3% in 2016-17, the highest in 9 years. There has been a broad-based pick-up in all major sectors including manufacturing, agriculture and services. Higher infrastructure spending by the government and low interest rates also provided a boost to domestic demand;

The international ratings agencies are optimistic about Pakistan's economic performance and are predicting Pakistan to emerge as one of the fast-growing economies in the world in the coming years.

Last month Pakistan successfully executed US$ 1.0 billion five years Sukuk and US$ 1.5 billion ten years Eurobond transactions at a profit rate of 5.625% and 6.875% respectively. The order book for Pakistan's sovereign papers was over US$ 8 billion. However, the Government decided to pick up only US$ 2.5 billion in order to ensure low final yields on the Sukuks and Eurobonds. This reflects the confidence of global investors in Pakistan's economy.

The Global Economy

In redefining prosperity paths for the future, we have to carefully analyse the dramatic changes that are taking place in the world economy.

Over the past few years economic dynamism in the global economy has gradually shifted from advanced economies to emerging markets. There has been rapid emergence of China, the BRICs and other newly industrializing economies. China has overtaken Japan to become the second largest economy in the world. Today developing and emerging countries are home to 85 percent of the world's population: and account for almost 60 percent of global GDP growth.

Emerging markets are also undergoing transitions of their own, shifts that create challenges but also opportunities. China, is rebalancing its economy from manufacturing to services, from investment to consumption, and from exports to domestic services. This means a slower but more sustainable growth path. This transition has its effects, especially through trade. China is now among the top ten trading partners for over 100 economies that account for about 80 percent of world GDP. It is also Pakistan's largest trading partner, accounting for almost 23 of its total trade. As China moves up the value-added chain, it will reduce its production of some labor-intensive goods. This is an opportunity for our country to re-tool our economy to realize this advantage.

Moreover, the major economic powers of the world including the United States and European Union are facing structural issues including aging populations, growing debts, and weakening financial institutions. On the other hand, the global financial crisis has brought about a shift in policies that will allow a greater role to the public sector in steering the national economies. Recent political developments in the United States and European Union are expected to further shift the balance of global economic power as these economies become more inward-looking owing to domestic pressures. Furthermore, these changes in the world economy are also changing the structure of global output and trade.

New Opportunities

In view of rapid transformation of the global economic order, it is necessary for Pakistan to reposition itself in the world economy. No doubt, Pakistan's outlook for economic growth is favorable due to China Pakistan Economic Corridor (CPEC) investments, improved availability of energy, and growth-supporting structural reforms. In Pakistan, growth is also projected to remain robust at 5-6 per cent, driven by strong consumption, improved security situation, rising investment and supportive macroeconomic policies.

Pakistan has implemented some difficult reforms in the recent years. Now, with a more resilient economy. and growth picking up, Pakistan has reached a moment of opportunity. It can now embark on the next generation of reforms to generate higher and more inclusive growth, and tap into the dynamism of emerging economies.

Pakistan possesses fundamental advantages that can be harnessed to prepare the economy for a leadership role in global economy by becoming a regional food basket and an engineering hub. Pakistan has a fast-growing middle class that can serve as the backbone of the economy in the years to come. In addition, every year, more than two million young people enter the job market This could be a tremendous opportunity for growth but, how can we absorb so many new job seekers when the global economy is growing so slowly? Clearly, in this environment, Pakistan needs to rely on the strength of its own policies to generate more growth and jobs, and to join the group of dynamic emerging markets. For a start, buoyant and potentially productive sectors in the economy of Pakistan have to be targeted. One of the key areas that have historically worked in absorbing youth and accelerating overall economic growth and development has been the manufacturing sector.

Over the past decade Pakistan's manufacturing sector has grown at an average annual rate of over 5 percent despite significant challenges including the energy crisis and domestic security situation. This shows resilience of our entrepreneurs which is critical for sustaining the growth momentum. Pakistan Industrial Sector is the third largest sector of the economy accounting for 19% of the GDP. Now under CPEC there is great potential for industrial development in Pakistan.

One of the critical tools for accelerating the industrial development agenda will be the establishment of Special Economic Zones (SEZ). There has been a considerable increase in SEZs around the world, from 176 SEZs in 47 countries in 1986; to 3500 in 130 countries in 2010. SEZs not only contribute to national incomes but also provide employment, boost exports and attract FDI. Successful SEZs offer immediate access to high quality infrastructure, uninterrupted power supply, public facilities and support services.

Under CPEC, 9 SEZ's will be setup in different cities of Pakistan. This number will increase gradually and will target sectors like food, pharmaceuticals, engineering, auto and food processing. In Baluchistan the SEZs are planned to be set-up in Gwadar, Lasbela Industrial Estate, Turbat Industrial Estate, Dera Murad Jamali Industrial Estate, Winder Industrial and Trading Estate, Mini Industrial Estate and Bostan Industrial Estate. The three SEZ in Sindh would include an exclusive Chinese Industrial Estate near Karachi, Textile City near Port Qasim and Marble City Karachi. Once implemented, these SEZ's will be able to provide a major impetus for economic and social development through their backward and forward linkages with the rest of the domestic economy.

The next important sector is agriculture. For Pakistan, importance of agriculture cannot be denied; specifically, when more than 60 % of population is residing in rural areas and agriculture contributes 20 % to GDP. Agriculture and its associated industries are essential to growth and to reducing mass poverty and food insecurity. Not only in Pakistan, but in all countries in transition, rapidly rising rural-urban income disparities and continuing rural poverty are major sources of social and political tensions. The problem cannot be addressed through agricultural protection to raise the price of food, which adversely affects low income net food buyers, or through subsidies. Addressing income disparities in transforming countries requires a comprehensive approach that pursues multiple pathways out of poverty, shifting to high-value agriculture, expanding non-farm employment in rural areas, and providing assistance to help move people out of agriculture. This calls for innovative policy initiatives.

Agriculture in the twenty-first century is reinventing itself as a new business reshaped by globalization, standardization, high-value production, massive growth in demand (both for the food and the biofuel industries), retail and packaging innovations, and a ramp up in efficiency. Faced with constant productivity and market pressures, the "new agriculture" needs new tools to enhance its competitiveness and innovation capacity.

One of these tools is the promotion of clusters. An agro-based cluster is simply a concentration of producers, agribusinesses and institutions that are engaged in the same agricultural or agro-industrial subsector, and interconnect and build value networks when addressing common challenges and pursuing common opportunities.

Globally, we stand on the threshold of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.

A Fourth Industrial Revolution is building on the Third Industrial Revolution. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between micro-organisms, our bodies, the products we consume, and even the buildings we inhabit.

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have gained the most from it have been consumers able to afford and access the digital world. Technology has made possible new products and services that increase the efficiency and pleasure of our personal lives.

In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth. However, this revolution could lead to greater inequality, particularly in its potential to disrupt labor markets. As automation substitutes for labor across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labor. On the other hand, properly managed, the displacement of workers by technology can result in a net increase in safe and rewarding jobs. Therefore, there is earnest need to prepare for these significant changes.

Remittances from Pakistanis living abroad have played an important role in Pakistan's economy and foreign exchange reserves. Nearly 5.9 million Pakistani emigrants make up the world's 6th largest diaspora out of which approximately 100,000 reside in Australia. In 2016, Pakistan Diaspora sent home almost US$ 20 billion in the form of remittances, almost 7 percent of GDP. Pakistan has such a strong bond with its overseas population. The conditions are further improving faster in order to strengthen the Pakistani Diaspora.

I am very proud of our diaspora in Australia which is acting as a bridge between Pakistan and Australia. They are not only sending home the money to help their families and friends financially but are also contributing to development of both Pakistan and Australia through acquired advanced education and technical, professional and managerial skills and are contributing to technological advancement.

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Pakistan Summit II at the University of Sydney
(Exclusive Photos to Sada-e-Watan by: Ms Aasma Zia)