MUCH of the current economic growth can be attributed to rising domestic consumer demand, as indicated by the dip in exports and lacklustre investment levels, while both foreign and domestic debts and remittances by overseas workers are helping stimulate the country’s economy.

In the first two months of the current fiscal year, large-scale manufacturing (LSM) grew by 4.1pc compared to a year ago, driven by a sharp rise in the local sales of automobiles like tractors, trucks and cars, in addition to fertiliser, leather goods and steel.

The latest trend shows that efforts are also going into import-substitution, like in the case of increased edible oil being produced from indigenous oilseeds. As the contribution of imports to GDP growth is negative, import-substitution helps push national economic growth.

Foreign investment is at a low ebb but corporate profitability is generally robust, as indicated by rising outward repatriation of dividends and profits. And to quote a foreign consultant, based in Austria and working for some multinationals in Pakistan, their businesses are growing at an average rate of 10pc per annum without making much, or even no, efforts.

Focus on domestic commerce will help remove disparities between regional and household incomes provided that the provinces and the districts are allowed to attain self-sufficiency in areas where they enjoy local advantage

He sees opportunities for foreign investment opening up as the pace of economic growth is expected to accelerate. He, however, says the grey market in the country is larger than the formal one.

Apparently, it is also supporting the formal economy in many ways.

On the other hand, despite a faster pace of rupee depreciation since July, the country’s exports have not picked up; in fact they have dipped. Latest official data show that non-textile exports fell by 25.52pc to $1.929bn during July-September from $2.59bn a year ago.

The rupee is being allowed to depreciate — a 3.5pc drop in its value against the dollar was witnessed between July 1 and October 28 — in the hope that exports would improve in the moribund international market.

Whether exports will improve or not seems uncertain at this point of time because of a commodity glut in the international market. But the latest depreciation of the rupee is expected to provide some stimulus for import-substitution as the imported goods become costlier. Cost-cutting has become a major issue for all businesses to remain competitive.

Though the government is slow to respond to changing realities, the commerce ministry is now working to identify bottlenecks in major sub-sectors of domestic commerce, such as transportation, supply chain, retail marketing, financing, investment and skill and product development to improve efficiency in the economy. The agenda includes doing away with regulations that are stifling domestic trade.

The ministry is also engaged with the provincial governments in formulating policies to remove barriers, particularly in the development of district economies and trade. Such efforts in the past — whether under the ambit of the then-representative district governments or in studies carried out for assessing the grass-roots development potential — have not been followed up by plans of action and implementation programmes.

This has perpetuated uneven regional development and retarded the county’s economic growth. For example, the setting up of an office of the District Officer Enterprise Development and Investment (envisioned in the Local Bodies Ordinance 2002) was abandoned because of opposition from the bureaucracy.

With the return of representative democracy at the district level, for which the process is underway, elected district governments and community organisations should be involved by the provincial governments in identifying and resolving problems to realise development potential that a district offers.

In fact, the district governments should serve as a catalyst for growth of community organisations as it is the partnership between the two that can work more effectively and widely for the uplift of the common citizen.

While successive governments have made strenuous efforts to integrate and unify national markets — acting on the concept of treating the country as one economic unit — and then to integrate the domestic market with the global one, not much thought has gone to removing the imbalances and the uneven development so created.

Focus on domestic commerce will help remove disparities between regional and household incomes provided that the provinces and the districts are allowed to attain self-sufficiency in areas where they enjoy local advantage. This will help save so much money that is being spent on developing physical infrastructure (like transportation), for which the governments lack enough funds.

Published in Dawn, Business & Finance weekly, November 2nd , 2015

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