has endured a number of challenges in the recent past — high inflation, insurgency and the assassination of popular political leader Benazir Bhutto being just a few. However, hope is a common denominator among its people. They believe that Pakistan will survive and thrive despite difficult times. February's parliamentary elections were an important step in that direction.
Keys to growthAccording to the report, Pakistan has been experiencing the longest spell of strong growth in years. Mansoor Ahmad Bajwa, Commercial Counsellor in Dubai, says that the commodity-producing sectors' (agriculture and industry) contribution was a key driver of growth last year. According to the report, agriculture contributed 15 per cent to real GDP growth while industry's input was 25 per cent. The services sectors contributed the remaining 60 per cent. Per capita income, an important benchmark for economic progress, grew by 11 per cent in 2006-07 to $925 (about Dh3,397), which were an increase from $833 (about Dh3,059) in 2005-06. Acceleration in real GDP growth, a stable exchange rate, and a five-fold increase in the inflow of workers' remittances, which was approximately $5.5 million (about Dh20.19 million) in 2005-06, contributed to the rise in per capitaincome.
Bajwa says that the country's good economic performance was a result of sound economic policies, on-going structural reforms and a favourable international economic environment. According to the economic survey report, growth was also driven by strong domestic demand. Another positive factor was the steep rise in investment, especially private investment which was high despite strong consumer demand.
The privatisation drive, especially in sectors such as banking, telecom, oil and gas and steel, has also helped push the economy (see box for more statistics). The flow of foreign direct investment (FDI), in particular, also reflects Pakistan's growing profile as an attractive destination for international investors. Foreign direct investment was seen in areas such as telecom, energy, banking and finance and food and beverages.
In the fiscal year ending June 2007, the country attracted FDI worth $5.12 billion (about Dh18.8 billion) — a 46 per cent increase over the year earlier, says Bajwa. He says that during the first four months of the current fiscal year, Pakistan managed to attract FDI worth $1.23 billion (about Dh4.51 billion), an increase of almost four per cent.
The government has also announced a number of incentives for foreign investors, including setting up special economic zones, a five year tax exemption and duty free import of machinery.
The banking sector is also a major beneficiary of the country's economic transformation. "Mergers and acquisitions of local institutions by foreign banks include Standard Chartered Bank's purchase of an 80.86 per cent interest in Union Bank (the country's eighth largest bank in terms of market share) for $413 million (about Dh1.51 billion). Further, enormous profits in recent years have attracted more foreign banks to Pakistan and local entrepreneurs to step into this sector," he says.
Poverty, a serious issue in Pakistan, has also been reduced by economic growth, high levels of remittances and social development and poverty related programmes. According to the finance ministry's report, Rs2,217 billion (about Dh130.3 billion) was spent on these programmes from 2001-02 to 2006-07.
At the national level, the count of poor people fell from 49.23 million in 2001 to 36.45 million in 2004-05. Rural poverty declined by 11.13 per cent while urban poverty fell by 7.75 per cent.
However, the gap between the rich and poor segments of society is still a bone of contention, especially with the growth in population and the resulting pressure on resources.