Concluding Remarks at the Pakistan Development Forum 2006 by John Wall, World Bank Country Director for Pakistan

First of all, I would like to congratulate the organizers of this PDF.  The format has wisely moved beyond a focus on the credibility of government policies and programs.  The credibility of Pakistan’s economic reform program lies in the impressive results for all to see.  Now the focus in on ideas—finding viable solutions to development problems, which are always the scarcest ingredients of success. I found the quality of discussion very high and I hope the PDF continues to build on this success.

Throughout the PDF we heard a pretty rosy picture that is greatly different than 3-4 years ago. Revived, rapid growth makes almost everything better. Poverty fell sharply, although we must remember we are comparing a very lean 2001 with a flush 2005. It is also clear that while the poor became better off, the rich became richer even faster, with some deterioration in equity.  Foreign trade has really flourished, bringing tremendous value and efficiency to the economy. Consumption has grown to the point of giddiness—cars, motorcycles, a/cs fridges.  Now we have major ad campaigns targeting the rural markets.  Investment is booming, both private and public.  And governments are flush with revenues.  People like me who tend to measure things as a percent of GDP forget that the real world lives in nominal terms; and in nominal terms everything looks very rosy, indeed.

Now Pakistan faces higher quality problems—the problems of success.  Demand has risen faster than supply.  This has shown up in high inflation and a zooming trade deficit. The “tight fiscal, easy money” formula to get growth going needs to be “tight fiscal, tight money and credit” to sustain rapid growth.  Idle domestic production capacity allowed the rising demand to be accommodated by rising capacity utilization in cement, steel, fertilizer, textiles, automobiles and motorcycles.  Now that capacity is more than fully utilized, resulting in backlogs and imports.  The problem I see is not comparing last year and this year; my horizon is first looking back over the last 3-4 years and then looking ahead to the coming 3-4 years.  What I see is a macro imbalance that, unless rectified, will prove to be unsustainable in terms foreign trade, inflation, exchange rate stability and foreign exchange reserves. 

Beyond maintaining financial macro balances, Pakistan has to focus on the topic of this PDF—growth, competitiveness and investment.  Professor Enright brought great clarity—most starkly I think to the huge role of modern infrastructure.  The governments of Pakistan are moving across all fronts to improve public infrastructure with the extra fiscal space made by the rapid growth. But I fear this movement will prove to be inadequate to provide the infrastructural services to sustain 6%-8% growth into the future.  Power probably will prove to be the most constraining service.  Reforming the power sector has proven to be full of political constraints and is moving very slowly and requiring very larges public subsidies.  Despite many recent efforts we heard about in this PDF, there is still a very big gap in public and private sectors in infrastructural investment.

Poverty reduction still remains the organizing principle for all our efforts.  Sustained, rapid growth takes us a long way, though we have to still worry about droughts and other natural phenomena; and worry about the equity of rapid growth.  The second major poverty issue is quality of basic services—education, health, transport, security, justice.  There is a huge performance and credibility gap between the providers and the recipients of these basic services.  It was great to hear Dr. Ishrat Husain describe the effort to reform public administration to improve these basic services and become I hope more citizen friendly.  Citizens themselves need to mobilize into viable organizations to help bridge this gap.  They need help in doing this and Pakistan requires a massive program of social mobilization of all communities using the tried and true methods developed in Pakistan over the past decades.

I would like to thank once again the organizers and participants of this PDF for the very valuable opportunity to discuss Pakistan’s development situation and prospects in such a stimulating way.

Thank you.