project report factors on economy

Factors Impacting On Pakistan EconomyIntroduction

The economy of the country plays a vital role in international level. The economy of Pakistan is the 26th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP

TERM PROJECT REPORT ON

FACTORS IMPACTING PAKISTAN’S ECONOMY

Submitted By: Shahbaz Qureshi & Lala Rukh

Submitted To: Miss Nabila

Program: 3.5 Years

Title: Term Project Report

Economics Of Pakistan Page 1

S.no Particulars Page no1 Introduction 3

2 Factors Effecting Pakistan’s Economy 4

3 Economic Factors 4

4 Demographic Factors 9

5 Technological Factors 10

6 Social & Cultural Obstacles 10

7 Political & Administrative Obstacles 13

8 Comparison of Economies 16-17

9 Conclusion 18

10 Bibliography 19

TABLE OF CONTENTS


INTRODUCTION

The economy of the country plays a vital role in international level. The economy of Pakistan is the 26th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP. However as Pakistan has a population of over 183 million (the world's 6th-largest), thus GDP per capita is $4,141 ranking 140th in the world. Pakistan is a rapidly developing country, however, after decades of war and social instability and serious deficiencies in basic services such as railway transportation and electric power generation

FACTORS EFFECTING PAKISTAN’S ECONOMY

Economic Factors

1. Low Per Capita Income

The developing countries are characterized by low per-capita income. Per-capita income is low due to two factors i.e. high population growth and low real national income. People living in developing countries are poor because their per-capita income is low as Poverty reflected by low per-Capita income. The effect of low per capita income, it increases the poverty in country and saving are almost drop to zero on the other hand the consumption is high to fulfill their basic needs. According to World Bank recent survey on per capita income they ranked as

China…… 83

Indian…. 140

Pakistan.. 143

The per capita income of Pakistan according to World Bank 1,307 US $

China…..6,747

India……1,507

Pakistan..1,307


Per capita income comparison between Pakistan, China and India

China India Pakistan0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Per-capita income

Per-capita income

2. Shortage of Capital

It is also an-important characteristic of developing countries they have the shortage of Capital. The capital is called, blood of economy, so the countries having shortage of capital remain backward and poor. Pakistan capital is low in relation to their population. Deficiency of capital is due to low productivity, low income, low saving's, low investment, foreign debt, and adoption of consumption. Due to shortage of capital there is low investment, due to low investment the development of country’s economy is down and no developing in economy.

3. Foreign Debt Burden

Almost all the developing countries have to rely on foreign recourses because these, Pakistan do not have so much domestic resources to fill their internal gap (S — I) an external gap (X — M) So, dependence on foreign economic loans has increased to increase the pace of economic development. But the volume of debt and debt servicing is increasing quickly. In Pakistan, the liability of foreign debt and debt servicing increased manifold. Every Pakistani man, woman and child owes over Rs57,000 to foreign and domestic lenders, which is approximately Rs22,000 more than the per head level when the current government took over. Due under the of debt Pakistan’s economy is not growing rapidly due to debt the development of country is not affected and on the other hand Pakistan is also under pressure the other foreign countries.


4. Extreme Dependence on Agriculture

In Pakistan majority of people live and work in rural area. Pakistan is primarily agricultural. A great majority of population normal between 60 to 70 percent is engaged in agriculture and allied occupations. This extreme dependence on agriculture is due the fact that industrial sector has not grown up properly due to lack of investment. This major occupation of agriculture backward as well because of primitive technologies, poor organization Emil irrigation facilities etc. therefore farmers live at a subsistence level. In Pakistan people live 65% in rural areas and 35%-in urban areas. Due to lack of technology and old techniques our agriculture sectors is facing decline due to this decline Pakistan’s economy is also declining. We also waste our fertile land and heavy portion of budget. Pakistan is one of the world's largest producers and suppliers of the following according to the different sources i.e. Food and Agriculture Organization of The United Nations and FAOSTAT given here with ranking:

Chickpea (2nd)

Apricot (6th)

Cotton (4th)

Milk (5th)

Date Palm (5th)

Sugarcane (5th)

Onion (7th)

Kinnow, mandarin oranges, clementine (6th)

Mango (4th)

Wheat (7th)

Rice (14th)

Pakistan ranks eighth worldwide in farm output, according to the List of countries by GDP sector composition king. Now a days Pakistan’s agriculture faced decline.

5. Under—Utilization of Natural Resources

Natural resources play an important role in the development of a country. Natural resources mean all the' material and forces under and above the land with which nature has blessed any country. These countries are not lacking in natural resources but in fact, natural resources are under-utilized, un-utilized or mis-utilized in -: countries. So, their problem is that these resources are not properly utilized due to lack of capital, old techniques of production, sluggish nature of


the people and small size of markets. In Pakistan, cultivable land is being wasted due to limited irrigation facilities. The proportion of forests is just 5.2% while it should be 25%. Natural gas is used inefficiently. According to Japanese, , Pakistanis burn their silver to bake their bread.

6. Unemployment

High rate of unemployment is another prominent characteristic of the develop.no countries. High growth rate of population, spread of education, urbanization etc. la-;, the causes of unemployment. The problem of unemployment is getting severe i'," these countries and leads towards terrorism, robberies and kidnappings Unemployment ratio varies. From 25% to 35% in these countries. Disguised unemployed in Pakistan is 14 % to 20%.

One of the biggest tragedy of Pakistan is un employment the rate of unemployment rate of Pakistan increases very rapidly due to lack of jobs and development the directly effect on Pakistan economy due unemployment the rate of crime and terrorism increases and also decreases in foreign investments.

7: Low Level of Productivity

It has been observed that in Pakistan’s productivity of factors of production (especially labor) is very low as compared with developed countries, Due to low labor productivity, Pakistan is economically backward. There are many factors which are responsible of low labor productivity i.e. immobility of labor due to joint family system, lacking the of self-improvement, sluggish, less hardworking, shrink work etc., low labor productivity results in low income. Due to low income our saving is zero and due this our investment is also low which causes the decline in


economy growth. Pakistan facing this factor due to one of the major crises power resources like electricity.

8. Unproduction Utilization of Resources

In Pakistan, there is shortage of capital as national savings are very low. These inadequate saving are mostly used for unproductive purposes like for military expenditures; debt servicing, subsidies, bureaucracy etc. These non-developments, expenditures do not increase the productive capacity of economy. Due to this expenditures our one of the major part of budget is wasted on these Unproduction utilization so these expenses effects our economy and also decreases our economy growth .

9: Export of Primary Goods

Traditionally, Pakistan’s export primary goods or raw materials an import final goods and machinery. The following table shows some facts about Ill matter:

Country Commodity Export EarningsIran Cotton 90%Cuba Sugar 90%Pakistan Cotton 55%

Nature of export earnings of developing countries remains prey to fluctuations because prices of their exports are low. in the .world markets. So they have to face foreign exchange gap and saving-investment gap. Due to this we paid a handsome amount in dollars which badly effect our economy and our foreign reserve on the other hand we also start depending on other countries.

10: Unsuited Investment Decisions

Resources available in Pakistan are usually invested in those projects that are unsuited for them. In energy is produced by hydel projects but solar and nuclear energy is very cheap. In the same way, furnace oil is used to produce electricity rather gas. Due to this we import heavy amount of oil and gas which disturb our reserves and we face the burden of foreign debts which caused the declined in economy growth.

11. Market Imperfections

Market imperfections exist when demand and supply forces do not work properly. Market imperfections are also present in all developing countries. Market imperfections emerge due to factor immobility, price rigidity, ignorance of market conditions etc.


12. Poor Consumption Pattern

The low level of income in Pakistan is reflected in their low level of lying. Major part of their income is spent on necessaries of life particularly on food items. They are too poor to afford comforts and luxuries. The proportion of expenditure on housing and clothing is also very small.so they always trying to full fill their needs and want and there is no savings and due to this no investment and no economy growth.

14. Deficit in Balance

Fiscal Year Situation Reason

1950-51 Favorable Due to the Korean War (Rs. 578.0 Core)

1954-55 FavorableDue to Devaluation and restrictions on imports (Rs. 09.9 Core)

1955-56 Favorable Due to 20% increase in exports

1958-59 FavorableBonus Vouchers Scheme and Restrictions on Imports

1959-60 FavorableBonus Vouchers Scheme and Restrictions on Imports

1965-66 Unfavorable Deficit due to war against India

2007-08 Unfavorable Deficit ($ 16.8 billion)




Balance of payment (BOP) is a country's record of external trade with the rest of the world during a year. Balance of payment almost in all developing countries is in deficit because the value of exports is less then value of imports. Pakistan balance of payment is unfavorable. In 2013 our balance of payment is also unfavorable due to war against terrorism, energy crises and other factors which hits Pakistan’s economy very badly and caused un employment poverty or other problems


TABLE OF BALANCE OF PAYMENT

Demographic Factors

17. High Growth Rate of Population

An important characteristic of the developing countries is high growth rate e population. Growth rate of population is determined by birth rate; death rate or migration. Due to control of infectious diseases and improved health facilities, death rate is declining and birth rate is rising. Dependent population is more in the countries as the ratio of children below the age of 15 years is 40% so the active labor force (working population) has to support them. Working population in Pakistani 30% while in developed countries it is from 60 % to 70%. Rapid growth rate of population causes pressure on land, low per-capita income, shortage of food ,development is eaten up by rising population consequently no improvement' in standard of living.

18. Malnutrition

: Many people in developing countries fight a constant battle against malnutrition, diseases and ill health. In poor countries due to low productivity and low level of income, there is poor nutrition in childhood which often restricts the mental and physical growth of individuals.

19. Qualitative Aspect of Population

People in less developed countries in general are lazy and shirked work due to weather, illiteracy, poor training and backward institutional framework. There is no willingness to work and the people do not have spirit to develop.

20, Illiteracy

The low levels of living in less developed countries are also attributed to the poor educational facilities. These countries do not allocate so many funds to improve their education. So, human capital formation is not done as required to develop.

21. Lack of Initiative and Drive

In developing Countries, there are very few people who can be expressed as daring leadership is found and dynamic entrepreneurs. No dynamic Producers are risk averter and lack initiate due to illiteracy, lack of capital, small, size of markets, lack of infrastructure facility* shortage of loan facilities, ignorance of market opportunities and technological backwardness. In these countries, they have captured whole market. They have monopolies in pesticides, medicine, equipment’s automobiles and computer technology. They change higher prices of their goods, and reap abnormal profits.


22. Lack of Skilled Workers

The quality of population is measured by its skills, education and health which are poor in these countries. These have shortage of skilled workers like .engineers, technicians, managers, scientist etc. Due to unskilled and illiterate workers unemployment problem arises.

Technological Factors

23. Outdated Technology

People cannot use modern technology in developing countries due to many factors. These include lack of capital, unskilled and trailed workers, absence- of technical know-how, shortage of foreign exchange, lack of absorption capacity and lack of labor intensive techniques of production.

24. Inadequate Infrastructure

Means of transportation, communication and power are called infrastructure of the economy. In developing countries there is inadequate infrastructure to meet the requirements.

25. Energy Crisis

Self-sufficiency in energy is the assurance to excel any country’s economy. However, in Pakistan lack of planning has resulted in severe energy crisis including load shedding of electricity & gas for domestic and industrial sector. This situation has greatly effected the production capacities of units thus effecting the economy of Pakistan.

Social and Cultural Obstacles

The socio-cultural attitudes of the people also stand in the way of economic development of our

country as per following specifics

.26. Lack of Education:

In Pakistan, more than 39% of the people are illiterate. They are ignorant of the development

taking place in their own country as well as in the world. Even literate people do not possess the

knowledge or formal understanding of economics to contribute in economic development.

27. High Growth Rate of Population


An important characteristic of the developing countries is high growth rate population. Growth

rate of population is determined by birth rate; death rate or migration. Due to control of

infectious diseases and improved health facilities, death rate is declining and birth rate is rising.

Dependent population is more in the countries as the ratio of children below the age of 15 years

is 40% so the active labor force (working population) has to support them. Working population

in Pakistani 30% while in developed countries it is from 60 % to 70%. Rapid growth rate of

population causes pressure on land, low per-capita income, shortage of food ,development is

eaten up by rising population consequently no improvement' in standard of living.

28. Conservative Approach

The people are mostly conservative in their habits. They feel pride in the native culture and are

generally not receptive to foreign methods of production.

29. Lack of Initiative

People lack self-confidence and initiative. The joint family system, though on the decline, has

also killed the sense of initiative and the incentive to work.

30. Caste System & Occupational Classifications

The caste system functioning mostly in terms of occupation tailors, carpenters, goldsmiths, etc

restrict occupational and geographical mobility. The occupational classification which is mostly

village centered impede the economic development.

31. Religious Beliefs

The religious beliefs of the people condemning the accumulation of wealth, dependence upon

fate and the will of God only are also obstacles to economic growth. People forget here that God

has also said, ''Your duty is to do and then put the result in the hands of God.''

32. Reduction in Domestic Savings

The unnecessary expenditure on marriages, deaths, births, litigations, class pride etc. has reduced

domestic saving and has adversely affected economic progress.


33. Social Taboos

About half of the population comprises women folk. Our social taboos and customs prevent them

from working and improving, the standard of living and contributing in economic growth.

34, Brain Drain

The emigration of highly educated and skilled professionals and technical manpower from the

developing to developed countries is called brain drain. It is most striking feature in almost all

developing countries that, professional and skilled personnel (doctors, engineers, charted

accountants and economists) are moving to developed countries for the sake of higher salaries

and elite life style. They are unsatisfied with their low salaries and martial comforts.


Political and Administrative Obstacles

The impact of political and administrative factors on the development of economy of Pakistan is

stated as per following specifics:-

35. Political Stability

For accelerating the rate of economic development, there should be political stability in the

country. If there is a change in the government set up due to elections, or of dictatorship, the

planning job done by the previous government should not be altered altogether. In Pakistan,

since its inception, there are rapid changes in governments. These changes result in change in

economic policies which deter the confidence of investors especially foreign investors.

36. Law & Order Situation

Stable law and order situation is a must to encourage economic growth and to build the

confidence of investors. Various untoward incidents of bomb explosions at the public places,

perpetration of suicide bombings by extremist elements bathed in religion and dogmatism and

firing of bullets on the innocent civilians by the miscreants bear out that volatile law and order

situation is gravely affecting the economic fabric of Pakistan

37. Feeble Planning Machinery

The planning machinery and all others involved in administration should be competent

sympathetic and honest in the performance of the duties assigned to them. Each government

which came into power condemned the planning work done by the previous governments. They

framed their own plans, formulated their own strategies of development and left the claim

without achieving the targets of the Plans. The history of planning shows that with the exception

of the Faith Five Year Plan, all other Plans have failed to achieve their targets. The overall line of

the planning machinery in Pakistan is bureaucratic rather than professional.


38. Weak Administrative Working

The administration working in various departments is generally weak, incompetent and

unsympathetic. Self-interest is dominating over national interest which is a great barrier to

economic development. The appointment of important department heads is made on political

influences and affiliations which results in incompetency.

39. Indistinct Economic System

Another administrative obstacle line the way of economic development is that we have not so far

been able to decide about the nature of economic system to be adopted in Pakistan. Mixed

economy, Socialistic economy. Islamic economy all are talked about but nothing concrete has

actually been practiced. There should be clarity on this fundamental issue so that planning is

drawn up according to the socio-economic objective of that system and a path of development

laid out.


COMPARISON OF ECONOMIES : PAKISTAN VS INDIA VS CHINA

INDICATORS PAKISTAN INDIA CHINA

Rank in World (Nominal) 47 9 2

Growth rate % 3.7 6.5 9.5

GDP Size (Nominal) $233 billion $1.676 trillion $7.74 trillion

Official Center Islamabad Mumbai Pudong in ShanghaiCurrency 1 Pakistani Rupee (PKR) 1 Indian Rupee (INR) ( 1 Pakistani Rupee (PKR)

Financial Year July 1 – June 30 1 April – 31 March01 January to 31

December

Total Revenue $26.7 billion $218.7 billion $1.149 trillion

Total Expenditure $39.9 billion $311.2 billion $1.27 trillion

Public Debts as % of GDP 58.2 62.43 43.5

Budget Deficit 5.50% 5.90% -

Rate of Inflation (CPI) (%) 16.17 7.55 5.4

Gross External Debts $60.3billion$267.10

$406.6billionbillion

Economic Aid $ 5.0 billion$2.11

$1.12 per capitaBillion

FDI Stock$36.50

$100 billionBillion

Total Export$20.47 $303.70

$1.897 trillionbillion Billion

Main Export PartnersUS 15.8%, UAE 7.9%, China 7.3%, UK 4.3%,

Germany 4.2%

US 12.6%, UAE 12.2%, China 8.1%, Hong Kong

4.1%

US 20.03%, Hong Kong 12.03%, Japan 8.32%,

South Korea 4.55%, Germany 4.27%



Total Imports $33.15billion $488.6billion $1.664 trillion

Main Import Partners

China 17.9%, Saudi Arabia 10.7%, UAE

10.6%, Kuwait 5.5%, US 4.9%, Malaysia 4.8%

China 12.4%, UAE 6.5%, Saudi Arabia

5.8%, US 5.7%, Australia 4.5%

Japan 12.27%, Hong Kong 10.06%, South

Korea 9.04%, US 7.66%, Taiwan 6.84%, Germany

5.54%

Forex Reserves $17.21 billion $295.8billion $3.20 trillion

COMMODITY SECTORS

Agriculture to GDP (%) 21.2 18.1 9.6

Labour force in Agriculture 45.00% 52.00% 39.50%

Labour Force in services Sector (%) 36.6 34 33.2

Services to GDP (%) 53.4 55.6 43.6

Industrial Sector’s to GDP (%) 25.4 26.3 46.8

Labour Force in industrial sector (%) 13.7 14 27.2

Ease of doing business rank 105th 132nd 91st

Population 180.71 million 11892 million 13367 million



Population below poverty line % 24 37

Average Gross Salary ($ Yearly) 1,000 1,330

Labour Force (Million) 55.77 million 487.6 million 780 million

Un-employment % 6.2 9.8 4.10

CONCLUSION


Pakistan inherited an extremely narrow economic base at the time of Partition in 1947. Since

then, the Government of Pakistan is making rigorous efforts to build up infrastructure and

productive potential of the economy through the process of development planning. If the

economic performance since 1947 is evaluated, the overall results are not very encouraging. The

per capita income at market price is very low as compared to other countries like India & China.

The major portion of the population is just above the poverty line and the disturbing feature of

the economy is that whatever economic growth has been achieved, it is accompanied by unequal

distribution of wealth. This has created social tension in the country and has slowed down the

rate of economic growth. Pakistan has devised various strategies to quicken the tempo of

economic development but it has not been able to break the vicious circle of poverty and enter

into take off stage. The main obstacles which have affected the rate of growth in Pakistan include

economic factors, social & cultural aspects, administrative & political factors and many more. In

the race of economic growth, India & China- our next door neighbors are galloping due to

political stability, consistent policies and strong administrative & planning setups. In Pakistan,

poor law & order situation due to war against terrorism and energy crisis are further aggravating

economic problems of the country. The need of the hour is to pay full attention to eradicate all

factors contributing to economic demise of Pakistan, strengthen the financial institutions of the

country and declare an economic emergency to transform Pakistan in to a formidable economic

giant.

BIBLIOGRAPHY


http://www.worldbank.org/en/country/china/overview

http://saif113sb.hubpages.com/hub/OBSTACLES-TO-ECONOMIC-DEVELOPMENT-IN-

PAKISTAN

Article on “A lot of factors affecting Pakistan’s Economy”- The Nation dated 21 June 2013

www.google.com

www.googlescholar.com


http://saif113sb.hubpages.com/hub/OBSTACLES-TO-ECONOMIC-DEVELOPMENT-IN-PAKISTAN

http://saif113sb.hubpages.com/hub/OBSTACLES-TO-ECONOMIC-DEVELOPMENT-IN-PAKISTAN

http://www.worldbank.org/en/country/china/overview

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