What Will it Take to Realize
Pakistan’s Potential?
Sri Mulyani Indrawati Higher Education Commission Islamabad, Pakistan
As Prepared for Delivery
Good Afternoon. Assalam o Alaikum. Ladies and gentlemen, students and
scholars. It is a great pleasure to be here today. This isn’t my first visit to
Pakistan, but it is the first time that I have the opportunity to talk with
educators and students. I am looking forward not only to share my views, but
to hear from you as well, especially as you get ready to celebrate your
country’s 69th independence day in less than two weeks.
Too often we frame Pakistan purely in form of challenges instead of
opportunities. Today, I want to look at both. So the question I would like to
pose to you is a simple one: What would it take for Pakistan to reach its full
potential?
I hope you will agree with me that Pakistan can do much better, and should
do much better.
For the past two decades, Pakistan’s growth rate has been only half that of
India and China. If current trends continue, by 2050, India’s economy will be
40 times larger than Pakistan’s, and China’s economy a 100 times.
Pakistan has many assets, of which it can make better use – from its vast
water and river endowment, to its coastline and cities, to its natural resources,
including its mining potential. Pakistan’s growing middle class – an
estimated 40 million people – represents a powerful engine for change,
demanding both improved services and access to opportunities. They are also
key to driving growth and creating jobs. The informal economy is also lively.
Pakistan has made enormous progress in restoring macroeconomic stability, a
key prerequisite for further economic success. The government deserves
credit for it.
Last year, Pakistanis living and working abroad sent home $18 billion to
support their families. This is the equivalent of 6.5 percent of the country’s
GDP and the largest source of foreign income after exports. All of these
factors can help Pakistan become economically resilient.
Pakistan should also be proud of its first peaceful transfer of power between
two civilian governments, a truly encouraging sign of the country’s
strengthening democracy. As a citizen of Indonesia, a country that once
emerged from a dictatorship, I know that a peaceful change of government is
a critical achievement. And Pakistan’s people have proved resilient in the
face of extremist attacks, natural disasters like the 2005 earthquake, frequent
floods, and extreme weather.
But I want to focus on what, in my view, are the two most important
challenges, both obvious and urgent: To reach its full potential Pakistan
needs to make better use of its people and its position in the neighborhood
and the world.
Pakistan needs to ensure that its people can participate in the economy and
benefit from economic gains. And it needs to integrate itself more, globally
and regionally.
To achieve both, Pakistan must take bold steps
The Demographic Challenge.
Let me turn first to the people of Pakistan, this country’s most important
asset.
As a result of rapid population growth, Pakistan is now the 6th most populous
country on Earth, with half the population younger than 24. At the present
rate of growth, Pakistan’s population will exceed 300 million by 2050.
As a result of this population boom, 1.5 million young people reach working
age each year. Will the private sector be able to provide the jobs they need
and want? And will the youth have the skills to get good jobs?
Pakistan must do far better on education. Primary school net enrollment in
Pakistan is about 57 percent and stagnant since 2009, well below other
countries in the region. Enrollment drops by half in middle school, with much
lower levels for girls and children from poor families. This is not a good
foundation to build on.
It is not surprising, then, that Pakistan struggles to give all Pakistanis the
opportunity to participate in building better lives for themselves. Only 25
percent of women work professionally, far below most developing countries
where between 50 and 80 percent of women participate in the labor market.
The women and girls of Pakistan deserve better. Our research shows that
girls with little or no education are far more likely to be married as children,
suffer domestic violence, live in poverty, and have little say over household
spending or their own health care compared to better-educated girls. This
harms not only them, but also their children, their communities and their
country’s economy.
You cannot expect a country to prosper when it is difficult for half of its
citizens to work outside the home. Our groundbreaking World Development
Report on Gender and Development shows that closing the gap between boys
and girls and men and women is ultimately smart economics. Greater gender
equality can enhance productivity, improve development outcomes for the
next generation, and make institutions more representative.
Pakistan has moved forward to empower women. The Benazir Income
Support Program, which is supported by the World Bank and which I had the
privilege to visit yesterday, has provided millions of women with national ID
cards and makes direct payments to them, strengthening their ability to take
decisions on the use of money within households.
Reducing population growth while expanding opportunity can play an
important economic role. Shifting from a family of six with one working
adult to a family of four with two working adults triples income per
person. And this enables young people to save and invest more, which
increases productivity.
Other countries have made this transition. Just take my own country,
Indonesia, the largest overwhelmingly Muslim democracy in the world. My
own family is an example. I am the 7th of 10 children, which was not unusual
for my parents’ generation – and I am sure it is not unusual for your parents’
generation either. My mother and father made sure that all of their children,
boys and girls, were well educated. And as a result we all have fewer children
– I have three – and we are better off today. Why not encourage the same
trend across Pakistan?
Think of the dividends if more youths and more girls are better educated, if
women can participate freely in the economy, and if households have fewer
children and have the room to save and invest more.
There are many countries that have influenced their demographics to boost
their development; Pakistan has a great opportunity to be one of them.
The Geographic Challenge
Let me turn now to Pakistan’s second biggest challenge and opportunity:
regional integration.
My country, Indonesia, is part of ASEAN, which was founded to bring peace
and stability to the region, but has morphed into an economic community
pursuing open trade, economic growth, and global integration. Overcoming
initial skepticism, ASEAN is today one of the most dynamic regions in the
world.
Pakistan has the good fortune to be positioned between two of the largest and
fastest growing countries in the world, China and India, yet its trade with
them is negligible. And Pakistan is losing ground. While its world market
share has declined over the past 20 years, those of Malaysia, Mexico and
Thailand have doubled, and China’s has tripled.
Discussion on the China-Pakistan economic corridor is very encouraging, but
now must be implemented. And a parallel priority should be to normalize
trade relations with India.
Pakistan is also well situated between Europe, the Middle East, Central Asia,
East Asia and South Asia. Improving logistics, transport and customs can
position Pakistan to play a major role in both national trade and transit trade.
A key benefit of opening links with neighbors is energy. As we all know,
Pakistan has a large energy deficit. Energy trade with Central Asia and other
countries in the neighborhood can be an important piece of the
puzzle. Indeed, Pakistan has shown great leadership in moving forward on
the CASA-1000 transmission line, which when built will connect Pakistan
with Afghanistan, Tajikistan and Kyrgyz Republic. Of course, cross-border
power trade requires a well-performing power sector domestically, with the
incentives to boost energy production, minimize cost, and avoid losses.
One lesson of East Asia’s growing prosperity is that there can be strong
benefits of increasing trade and investment links, but also that these gains can
be uneven without a parallel internal effort to strengthen competitiveness.
This is an urgent agenda for Pakistan. Pakistan currently ranks low on the
World Bank’s 2015 Doing Business report at place 128. A better business
environment, skills training, use of innovation, and cutting edge technology
will be essential if Pakistan is to compete.
Attracting foreign investment and creating the conditions to transform the
high savings rate of a young country into a high investment rate, will also
require progress on governance. This includes ending special regimes and
privileges, improving tax compliance, and reducing corruption.
As a former finance minister myself, I know that the logic of better policies
often clashes with entrenched attitudes and real or perceived security
concerns. Reform efforts can face the opposition of the elite who fear change
threatens their own power and wealth. It takes tough decision making and
staying power to succeed.
But change is possible. Pakistan has used innovative ways to tackle
corruption and improve services that could be spread more widely. A
“Citizen Feedback” model is being scaled up across Punjab, with support by
the World Bank. Users of government services receive a phone call or text
message asking them about their experience. So far, some 8 million citizens
have been contacted, more than a million have provided feedback, and some
3,000 corrective actions have been taken. This approach is being replicated
both within Pakistan and in other countries.
Closing: Be Bold, Be Focused
In closing, I want to acknowledge that the issues I have talked about are well
known. So this forces the question - why hasn’t more been done? Major
policy shifts require both boldness and staying power. They require building
consensus across the political spectrum, and focusing on a few key items well
over a long period.
There is no greater vulnerability than losing economic ground. People need
hope and confidence that they can do as well as their neighbors. They need to
feel that they can benefit from being part of this world. They need to own a
stake in their own country’s economy and its social contract.
Now is the time for Pakistan to move forward. The ticking of the
demographic time bomb is getting louder – the big question is whether it will
lead to Pakistan becoming more or less productive and inclusive.
Every day the papers report new agreements by major powers in forging
trade, energy and investment links –Pakistan can chose to participate and
strengthen its partnerships or be left behind.
With determination Pakistan can take full advantage of its location, build
dynamism into its economy, unleash the power of youth and women, and
defuse the demographic time bomb.
As Quaid-i-Azam Mohammad Ali Jinnah said: “With faith, discipline, and
selfless devotion to duty, there is nothing worthwhile that you cannot
achieve.”
I think we can all still agree with him. Thank you.