It is unfortunate that although the society has amassed education to the brink, as a complement (in the economic sense) it has nurtured self assurance and confidence that bar it from paying heed to any competing claims. While this has gone historically unchecked within this country at least, the results are ostensible from all angles viewed; the stock of knowledge has not grown despite a large multiplication in the number of degrees doled out. And hence there has been only regression. Thereby, the writer has dedicated the article to bringing all those who wish to read on the same background platform, which she hopes will aid to better understanding of, in short, an economist’s point of view. In the list of lessons, the first will hopefully take us all back to our freshman years; there is a great tendency to treat stock and growth variables as the same. So, in theory, while the output produced by the textile, cement and auto sector may be at the same level as last two years, the stock has not ‘grown’ or shown improvement. This can be considered a worrisome indicator, as it shows that the demand for a particular sector’s product is stagnant, thus limiting the opportunities for job creation and most importantly the incentive to invest in the industry. And while it is true that Pakistan is the fourth largest market for mobile phones, most analysts would point to the saturation in the sector, explaining why network providers and the government have delayed the introduction of new technology, 3G/4G, etc. The non-creation of demand in the sector has led to increased competition, declining average revenue per user (ARPU) and a lower space to make profit. Moreover, on the investment front, the total FDI in the telecom sector during FY11 amounted to $496 million down from $1,138 million in the preceding fiscal year. And, while the prospect of growth and more FDI lies through the 3G front, rest assured the government is looking forward to the auction license revenue for financing its deficit. Coming to the second claim and source of much pride; our ‘booming’ real estate market standing high in the face of economic challenges. Why an economist would not pay much heed to this sector is that rising land prices in the face of lagging economic growth implies that the extra liquidity in the economy is being channeled towards purchasing land! Unless investment growth in productive enterprise is revived, the economy will be a victim of greater debt, international dependence and more importantly brain drain. Analysts also claim that the billion dollar remittance that is buttressing the external account is primarily feeding land prices. What are we going to do with a rising stock of houses for a segment of the population when the larger segment lacks access to food, healthcare and education? A third lament, which gets counted as a huge plus, is that consumer demand in the economy is strong. The main source of consumer spending documentation relies on price data multiplied by the amount of goods sold. A steady growth in this multiplicative number implies that the 200 per cent growth in prices is far less than the fall in demand. And that too is demand for basic necessities such as food, fuel, clothing, etc, which is basically fixed, less responsive to price hikes or inelastic in nature. Aside from investment, positive indicators to judge any economy surround the prospects of improvement for the larger population. These could be high real income per capita, job creation, real improvements in state spending on health care and education. Give economists a reason to be happy?
The writer is an economic researcher and freelance financial journalist. She can be reached at sakina.husain@gmail.com