10 May 2005
“This is an extremely important conference. It is critical because it deals with poverty alleviation which is focus of our govt. First of all I would like to start from the National Revival Strategy which we initiated in 1999. In that National Revival Strategy the main issue or the core ingredient happened to be the economic revival of Pakistan and when we look at the economy of Pakistan what did we see?
We saw an economy or a nation which was almost going to be declared a defaulted nation because of its economic mismanagement, a nation which was going to be declared as a failed state. So with in this we had to carry out our reforms and restructuring. We also saw that an investment has shied away from Pakistan. Why it had shied away? It shied away because of certain major wrong doings of the govt. I would like to highlight special issue of freezing of foreign accounts because of which investment shied away and why was the foreign currency accounts frozen. It was frozen because there was no foreign currency in the banks. Because almost the 11 billion dollars which were the money, investment or deposits of private account holders were all being transferred on the State Bank and State Bank very conveniently over the years was consuming all the money that belong to private account holders.
Since all the banks were nationalized, therefore, the system of transferring of the private account holders holding to the State Banks and consuming it on the current development project carried on very conveniently. So therefore when we saw the condition of the nation suffices to give three quotes.
First of all some body said that “investment shied away because of these terrible Govt’s actions and they flew away altogether like pigeons” when you take wrong decisions but when your are in the process of getting them back they don’t come altogether. They come one by one and that is process that we have launched over all these years. Trying to get investors back into Pakistan one by one and we are trying our best and we will continue trying that.
The other dilemma that we suffered was the debt dilemma and debt dilemma was over specially the decade of 90s which we were increasing our debt by roughly about 2 billion dollars per annum. This, therefore, had increased our debt service liabilities. So the dilemma that we suffered that we must not borrow because it would have been increased our debts and increased our debt liabilities but at same time when we saw that need to execute development projects to revive the economy to grow an get returns we had to borrow. So this was dilemma number one.
The other dilemma we suffered was the investment dilemma while an investor needs the security of his investment, sees the economy of the country, sees the return he will get and the foreign exchange reserves state of the country before investing in to the country but we on the other side wanted that investment to come into Pakistan so that our foreign exchange reserves could be enhanced but at the same time investor is looking at our foreign exchange reserves in order to come into Pakistan and get security. So this was the investment dilemma we suffered. I am proud to say we managed well and we have revived the economy of Pakistan.
Today all the macro economic indicators of Pakistan stand revived and positive. They are showing positive indicators each one of them. We, actually, started by seeing first of all the malice that the economy suffered from. We looked at the fiscal deficit which was very high and we realized that we need to control the fiscal deficit first of all. We did that by reducing our expenditures.
We froze our expenditure on the defence in real terms we reduced the expenditure because we even didn’t cater for inflation. Then we saw the hemorrhaging that was taking place in all sectors and corporations of Pakistan. We checked and control that hemorrhaging and of course other reduction in establishment cost. That is how we reduce the fiscal deficit to under 4 % from around 8 %. Then we saw the issue of balance of payment.
The current account which was in deficit by about 4 billion dollars and we saw this has to be converted in to surplus. We started working on that and I am very glad to say that the path to it was obviously reducing our expenditure. The expenditure mainly was in the debt servicing which was to tune of 4-5 billion dollars. So through reprofiling of our debts, through reduction, debt rights off and reducing our debts we are reducing our debt servicing liabilities.
And also we increased our earnings through increasing our exports from a paltry under the 8 billion dollars we hope to touch 14 billion now. We increased our exports. We increased the earning through remittances. Remittances were under 1 billion dollars. Today they are around 4 billion 2 dollars. So 400 % increase in that. FDI which was around 400 million dollars increased, although it has increased 100 % but I am not happy because the base line was very low, I am very glad in the first 7 months of this year it has grown by about 52 %. So while we increased our earning through FDI increase, remittances increase and export increase and reduce our debt services liabilities through debt reprofiling, reduction of debts and debt right of we converted the current account deficit into a surplus. This was a greatest achievement of our govt since 1999.
Therefore today, where as, you see foreign exchange reserves we are touching 13 billion dollars. We have achieved 6.4 % in our growth last year and we will cross 7 % this year, where as you see our debt profile has reduced substantially. So much so our debt to GDP which stood at 101 % when we came on to the scene it around 70 % now and we hope to reduce and bring it down to 50 %. I am assured we will achieve this target of 50 % soon. Then the same debt servicing which stood at the 64 % of our budget has come down to only 30 % which releases so much funds available for our development. If you see our exports it has risen from 7.86 billion dollars in 1999 to 40 billions and we hope to touch.
I keep pressing the commerce Minister. The target is 13.7 billions but I am sure that he will be able to achieve 14 billions that is 80-90 % growth. Our review generation from 304 billion rupees in 1999 should touch our target of 580 billion rupees. We need go up to 600 billion. This is again 100 % rise. Therefore our credit rating has increased in the Moody’s and standard on the poor. When we floated Islamic bonds we got the historically largest offering of 1.2 billion dollars.
When we floated the Euro bonds we had four times over subscription that indicates the world’s trust and confidence in Pakistan’s economy and that is revival of Pakistan’s economy. We feel very proud after having done that. Issue now that confront us and the subject of today is channelising this economic growth, economic wellbeing to the people of Pakistan. This challenge is in poverty alleviation and in employment generation.
These are two areas which we must address because I personally believe that this also happens to be at the root of extremism and terrorism. The root to terrorism and extremism other than political dispute resolution is lack of education and poverty. Therefore when we are addressing poverty we are contributing towards the fight against terrorism and extremism in the long term.
I have no doubt that when any investor comes I encourage him to invest in Pakistan because then I can tell him that you are sharing my load of fighting against extremism and terrorism. Therefore investment is that important. Now we strategize the issue of poverty alleviation and job creation. We have strategized it and we are moving in accordance with worked out strategy. We saw that there are four pillars of this strategy and four pillars quite clearly our economic growth first of all because economic growth itself has an automatic trickled down effect to the people. How ever that is enough while our economy is growing at 7 or over 7 %. It will have a trickled down effect but obviously no Govt should content with this simple trickled down effect.
The second pillar of this ought to be rural and urban project. We need to strategize where this rural and urban development is and where we should concentrate on? The third is human resource development that is the quality of skills and quality of human resource.
Last is targeted intervention through Zakat, through micro finance and Kushali Bank. We realize that we must address the issue of agriculture and agro based industry on the rural side. We realized both. On agriculture we must enhance growth and growth can be enhanced through water management and that is what we are doing but other than that we must pump in more money into agriculture into agriculture sector for the formers. Therefore we came out with formers packages. This has gone long way in alleviating the problems of formers. So with additional money available, the revolving credit system available the result is on the ground. They could spend money on fertilizer etc. therefore greater spending on inputs and we have seen a bumper cotton crops.
We have a record of 11 billion bails but we are touching 15 billion bails this year. So wheat is a bumper crop and cotton is a bumper crop this year. I am not going to talk of rest. This has resulted into additional money available in rural economy and we see 300 hundred percent growth in motor cycles, tractors, refrigerators, TV, washing machines and fans. All this mainly is going into the rural areas.
That is the revival of economy and that is the benefit going to people in the rural areas. Let’s come to the urban side. We are talking of the educated unemployed. So therefore we thought of IT and Telecommunication. Some kind of revolution is taking place but we need to do much better and much more. There 3 is total boom in telecommunication. There were only 600000 mobile in Pakistan in last one and half years. Today they are 10 million. When any one says that benefit is not going to people I want to ask them one thing. Nine and half million mobile telephones have been bought and if you multiply it with 7000 it makes 60 billion rupees. 60 billion rupees of telephone have been bought but by whom? It is by the lower people but not by rich. Rich people have already had the phone. So this is the IT and telecommunication and this addressing the educated unemployed.
Now we go into uneducated unemployed or semi uneducated unemployed. We look that labor and construction industry is labor intensive. We must facilitate and create boom in this sector and then off course on the industrial side textile is our main stay. Textile must grow.
The engineering sector must be revived. We saw in the world today that the 6 % trade of world trade is in textiles and 61 % is in engineering side. Then why are we anchored in this textile alone we must shift into industry and engineering sector. That is what we are trying to do and create jobs. This was an aspect of second pillar of rural and urban development projects which I tried to give you a bird’s eye view. I would like to come to third pillar of human resource development. In the human resource development I feel that we are falling behind the demand of industry. We need to make sure that our population is first of all focused to education in that particular field which we desire, our industry desires and also our skills through technical education and vocational training are directed towards the requirement of SMES and our industry.
Therefore we need to harmonize our education with our industry and we need to harmonize our vocational and technical training with the demands of SMEs of building and construction industry which ever direction our own SMEs are going. So, therefore, as far as human resource development is concerned our education strategy is that we are concentrating on science and technology. We are concentrating on PhDs in science and technology. We are concentrating on opening on vocational training and technical training education centers.
I even requested PM Koizumi the one area that I requested him was in opening technical school for Pakistan, skill development for our people so that they can get jobs. Today if our population had all the skills in electricity or plumbing or masonry they would all be employed because there is shortage of these skilled labor in building and construction industry. Therefore this is what we are concentrating on and I think we are doing well. Now the important issue is to generate maximum jobs through industry and through SMEs. We need to ensure man power intensive activities and we also need to ensure that the wealth generated is not concentrated in a few families, in few hands like in the 60s people would speak of 22 families.
We need to ensure that there is a good spread of wealth that is generated and also maximum employment. That is where I would say that issue of SMEs is of great significance because it is through SMEs that I think small firms are always labor intensive beside that the spread of wealth to more coming from the middle class up in to industry of Pakistan. So therefore the answer to our problems of job creation and spread of wealth lies in SMEs.
We know SMEs with agriculture cover about 90 % of employment. We are committed to reducing our poverty to 15 % from over 30 % by 2015 in ten years. We must reduce it to 15 %. Therefore it is the SMEs which have to absorb the bulk of this additional labor force and we think that we need to create at least one million new jobs through SMEs and we must do that. Now in spite of such a critical importance of SMEs, may I say this sector is grossly underserved by the bank and financial institutions. While we have concentrated on agriculture sector and I think we have done very well and I think bank has to be commended for all their efforts in rural economy. We have to generate the urban side.
These SMEs focuses and concentrate on it so that we create jobs and so that we address this issue of poverty alleviation and ultimately the issue of extremism and terrorism. Now what to do is the question. I would like to say we need to develop well targeted schemes and these schemes should reach out to maximum SMEs. I very much know that the govt have already formulated a very comprehensive SME development programme and this is done with the collaboration of Asian Development Bank. We need to pursue it vigorously on the issue of investments in Pakistan. We have created an investment friendly environment in Pakistan.
Pakistan should not be seen as a stand alone country. Any trade or commercial activity in this region of central 4 Asia, western region of China and with in Gulf and South Asia, Central Asia Pakistan is hub. Therefore Pakistan happens to be an ideal place for investment and since we are maintaining security, profitability and investor friendly environment I think there is no reason why all sector of industry in Pakistan and investment in Pakistan should not be forth