Dr. Farrukh Iqbal - Dean & Director IBA

Remarks on Pakistan Economic Update 2016, a report prepared by the World Bank

For three decades I was on the same side as the authors of the updates meaning I or my team were preparing such World Bank documents; I would often wonder how useful these documents were and to which audience? Now I am on the other side as a reader of the report and have a chance to answer that question; and my answer is that such documents are potentially very useful to a broad range of people including the development community, academics, the private sector, media and government.

I appreciate the present report for several reasons: it is short and well-written; it draws attention to some important economic issues relating to investment and exports; and it also draws attention to long run issues relating to nutrition and urban development.

Low investment rate

I appreciate the attention drawn to the stagnation of total investment in Pakistan and its implications for long run growth; the comparison with South Asia is apt; Low private investment is of particular concern

The explanation for low investment rates is sought in some recent events such as the global growth slowdown and energy shortages; and also in the volatile security situation

But private investment has been low for a much longer time than the last five or six years; I believe this topic deserves fuller treatment in a subsequent PDU on the basis of some econometric analysis

There is however one somewhat ironic aspect of the low investment rate. For Pakistan to get its present growth rate of 4.7% with an investment rate of just above 15% of GDP suggests a pretty high level of investment efficiency.

Decline in share of world exports

Good to point to decline in share of world exports; this should worry us more than the ups and downs of current account balances; this is a real structural problem; is it due to exchange rate appreciation? Declining competitiveness?

This should also get more attention in some future PDU and also on the basis of fresh econometric work;


Why no discussion of CPEC? This is a striking omission given the importance given to the matter by the Government as well as the observation of a low overall investment rate

Comments on poverty section

The section on poverty and wellbeing makes the following points:

a. Poverty declined rapidly from 2001 to 2008; then it declined at a slower pace until 2014
b. Some aspects of wellbeing corroborated this poverty decline; for example, school enrolment rates, particularly for girls, increased sharply between 2001 and 2008; ownership of assets such as motorbikes increased among the poor;
c. The share of food items in total consumption decreased; this was a result of improving diets shifting towards lower calorie foods; and not of a food squeeze arising from high prices
d. While other aspects of wellbeing, such as stunting, did not improve much, this had more to do with the failure of government to provide good sanitation and clean drinking water than with the availability of food

This is fine as far as it goes. But it does not go far enough. Two extensions would have helped.

First, this section could have benefited from a little comparative analysis. How well Pakistan has done in converting income growth among the bottom 20% into wellbeing (changes in child mortality, stunting rates and school enrolment rates) could have been better established by comparing Pakistan's experience with some neighbors or other comparators. What is the elasticity of school enrolment or stunting in Pakistan with respect to income growth and how does it compare with say India or Bangladesh or Nepal?

Second, child mortality data should have been used in addition to school enrolment and asset acquisition as measures of family wellbeing.

Research I have done recently shows that Pakistan has a higher rate of child mortality in its poorest quintile than India, Bangladesh and Nepal; this is surprising given the lower rate of poverty in Pakistan

Comments on nutrition section

Good to have put some basic data out in the public domain; it is startling to learn that Pakistan has the third highest rate of stunting in the world...12 million children are stunted

No improvement has taken place in the last three decades

Highest rates of stunting are in Sindh and Balochistan

Poor sanitation practices and lack of clean safe water are probably among the more important causes of stunting but many other factors are also involved

The fact that significant poverty reduction has not resulted in significant improvements in stunting suggests that more than private income growth is needed. Just generating private income growth, even at the lower quintile level, will not help if the delivery of certain government services is not assured. Income growth alone is not sufficient. It needs to be supplemented by the delivery of safe water, better and information about good nutrition, good health practices and good sanitation options.

The last section on the nutrition policy agenda says the requisite things about inter-ministerial and inter-government coordination, higher budget allocations to nutrition, and multi-sectoral investments.

But more could have been said about policy choices. Should governments aim for nutrition specific interventions or cash grants? What does the empirical literature say about the choice between cash versus in-kind aid to families deemed to be food-insecure? Or is this primarily a matter of educating households in good nutritional practices?

Comments on the Karachi City Diagnostic (based on inputs from Professor Nausheen Anwar)

The descriptive part of the Diagnostic feels accurate. The city is beset by crowding, traffic congestion, air pollution, road hazards, uncollected garbage, unsafe drinking water, open sewers, noise, lack of public transport options...did I miss anything?

There are some very shocking statistics: mass transport units account for only 5% of vehicles; the city is overwhelmingly reliant on unsafe, polluting private transport like motorcycles; Only 55% of water requirements are met daily.

Satellite evidence suggests a decline of light intensity or luminosity in central Karachi and an increase at the periphery. This is both novel and interesting. The report suggests that it is worrisome for the city's long run economic potential but it does not explain why. Does the same pattern and trend exist in other Pakistani cities? Some more discussion of this claim would have been useful, especially for the non-specialists.

The report claims that Karachi's competitiveness has declined relative to other cities in Pakistan and across the region. But no data are provided. It is possible that the data are available in the larger report that is mentioned in the footnote. It would have been useful to provide some relevant tables in this report as well.

The report claims that urban planning, management and service delivery have not kept pace with population growth in Karachi. To those of us who live and work and drive and breathe here, this is a huge understatement. The report is right to point out that the situation is not improving.

The report makes a very good point in noting that municipal functions are highly uncoordinated and fragmented across 20 different agencies who control 90% of the land in the city. It might have drawn attention as well to governance problems in land transactions and urban planning. A lot of money is made in the land and property development business. It might serve the interests of some groups to keep municipal development programs uncoordinated and fragmented. The land mafia contains state groups as well.

On the policy side, perhaps some attempt should have been made to discuss the role of civil society and NGOs in improving town planning and land use in the city.

The diagnostic and policy section is politics and governance-free; but city management in Karachi is deeply and thoroughly entwined with politics and governance problems. Technical solutions will not be sufficient.