Any economy’s present and history are inextricably tied with its future. The economic history of Pakistan has experienced several phases, with notable growth and poverty reduction in the 1960s, 1980s, 2000-2007, 2014-16, and 2020-22.
The current precarious situation, in which consumer and business confidence are at their lowest points, international ratings and market sentiment are negative, and foreign exchange restrictions are binding, could result in an extremely bleak outlook if projected into the future and discounting the past.
Should the current presumptions be maintained as is? Would these conditions—both internal and external—continue to exist in the future? Remember that the current situation is a result of a confluence of unfavourable global economic developments that have exacerbated inflation, slowed growth, increased the cost of food and energy, and disrupted supply chains; internal political unrest and fierce polarisation in society; a lack of clarity regarding the continuation of the IMF programme because some of the government’s actions are deviations from the agreements reached; and the devastation caused by the floods. It is absolutely unbelievable that these four elements will persist unabatedly in the future.
Any accurate forecast of the future economy should logically include scenario assessments in which several potential outcomes are generated using various assumptions, and probabilities are then assigned to them. Based on the current state of our knowledge, a thorough analysis of domestic economic endowments and global economic trends serves as the starting point. This study has drawbacks because it does not account for unforeseen, unanticipated occurrences, imponderables, and unknowns that might arise while determining the future trajectory.
Let’s start by outlining the major economic trends that are expected to have an impact on Pakistan’s economy, either directly or indirectly. We shall concentrate on just three of the at least six such megatrends that are briefly outlined for thoroughness. In the ensuing 25 years, the following trends are anticipated to have an impact: One is the demographic transition, which is marked by an ageing population in developed nations and a younger population in developing nations. Two, the predicted transfer of economic dominance from the US to China, which is expected to surpass the US by 2025 or thereabouts. The two nations are competing with one another to progress technology the fastest.
The third reason is the speed at which technology is disseminated and adopted; in developing nations, the internet, software applications, growing connectivity, high-speed mobile phones, e-commerce, cloud computing, and data analysis have all proliferated. However, since many nations lag in crucial areas like the adoption of electronic payments, mobile money, mobile government transfers, and Fintech, the digital divide is growing.
Four, the proliferation of information; human knowledge becomes dated after a few years. It is necessary to sort, screen, and choose new ideas and knowledge that are growing exponentially based on their applicability and effectiveness. The resources for food, energy, and water in developing nations are being impacted by global warming and the greenhouse gas emissions it causes. It would be “make or break” for humanity as a whole how we handled these risks.
The last factor is financial integration. As a result of the 2009–2010 global financial crisis, Western central banks tapered their quantitative easing programmes, the Fed and ECB simultaneously tightened their monetary policy and raised interest rates, the US dollar strengthened, and the Federal Reserve dominated the international payment system, making it difficult for developing nations to manage their external accounts. Here, the emphasis would be on factors that are more pertinent to us, such as climate change, technology, and demographics.
Pakistan must acknowledge that the megatrends that dominated the world economy between 1982 and 2010 are no longer relevant when planning its future route of development. Protectionism is slowly emerging as a result of the trading system’s relative openness. Rising FDI flows to developing nations wouldn’t be available at the same rate or in the same patterns as in the previous three decades. Exports from developing nations could not exhibit the same gloss or buoyancy as developed nations’ due to the constant low development path of the world’s key markets. Transport costs that had been sharply dropping have now started to rise as a result of supply chain constraints brought on by exogenous shocks. Global value chains (GVCs) or intra-industry value chains (IIVCs) are no longer as dominant as they once were as a result. Migration would be selective, especially including skilled and semi-skilled workers who might bridge gaps in the labour market.
How can we position ourselves to maximise the advantages and minimise the dangers for the welfare of the wider part of the population in light of the current experience of the weakening of drivers of globalisation and taking these future hazards into consideration? To encourage inclusive growth, we must lower income, gender, and regional inequalities through the following measures: (a) progressive taxation and pro-poor public expenditures; (b) increased participation of women in the workforce; (c) particular focus on less developed regions; (d) expansion of vocational and technical training; and (e) strong social safety nets.
Pakistan’s population will remain relatively young for at least the next 50 years while it ages in the developed nations. Given this disparity, we must provide our young people with the skill sets needed by nations with a shortage of labour. Up to 2030, Japan seeks 80,000 ICT professionals. Foreign workers are now welcome in Korea. Similar changes have been made to the immigration laws of Canada, Australia, and New Zealand in order to favour technical and skilled labour. The government, the corporate sector, and academia must collaborate to develop a methodical and well-planned strategy to address this expanding demand. The following area of attention, technical assimilation and absorption, is strongly related to this concept.
If developing technologies are adopted by industry, agriculture, education, health, finance, and other areas, Pakistan can either gain from this development or fall behind in technology. The usage of smart phones in the social, financial, and productive sectors of the economy has not become increasingly prevalent. Freelancing, new companies, and e-commerce are attracting young people, but for these initiatives to be successful, a significant amount of talent must be developed and nurtured. Cross-border payments and financial inclusion can be accelerated by digital technologies.
This industry is still in its infancy in Pakistan due to issues with the stability of the internet, the optic fibre network, the fiberization of towers, the high taxation of the telecom industry, the pricing of Spectrum, and the lack of a free exchange of foreign exchange earnings between holding companies and their Pakistani subsidiaries. The lack of talent in the ICT industry is the other restriction. Only 5000–10,000 of Pakistan’s 25,000 annual IT graduates are employable for relevant jobs in the sector; the remaining graduates lack the necessary knowledge and skills, and employers are hesitant to invest in their training and development because they might leave for better opportunities elsewhere.
In this arrangement, a private sector company produces a public good, but their rivals or other foreign companies profit from the dividends. In order to upskill these unemployed and underemployed graduates, notably engineers and mathematicians, and to bring them in line with the normal professional requirements, institutions like FAST, NUST, COMSAT, UET, PIAS, etc. should launch short-term courses. These universities ought to host bootcamps to get students ready for certification from top international tech firms like Microsoft, Google, Amazon, etc. Higher secondary school career counsellors should urge their students to choose a college degree in this area.