Part I: Our Economy's Future

Part I: Our Economy's Future

 Any economy's future is intertwined with its present and past. Pakistan's economic history has gone through a number of phases, including the 1960s, 1980s, 2000-2007, 2014-2016, and 2020-22 periods of impressive growth and poverty reduction.

If one projects into the future and disregards the past, the immediate precarious situation—consumer and business confidence are at their lowest point, international ratings and market sentiment are negative, and foreign exchange constraints are binding—may result in a very bleak outlook.

Should the current assumptions continue in their current form? Would these external and internal circumstances continue to exist in the future? It is important to keep in mind that the current situation is the result of a confluence of negative developments in the global economy that have increased inflation, slowed growth, increased food and energy prices, disrupted supply chains, and slowed growth. social polarization and internal political uncertainty; lack of understanding regarding the IMF program's future due to the government's actions that go against the agreements; and the devastating effects of the floods, which submerged a significant portion of the land and resulted in losses of at least $30 billion. It simply defies belief that these four aspects will remain unabated in the foreseeable future.

Logic dictates that scenario analyses, in which various alternative scenarios based on various assumptions are constructed and probabilities are assigned to their outcomes, are necessary for any accurate economic forecast. Based on the state of our knowledge, a thorough analysis of global economic trends and domestic economic strengths serves as the foundation. Because it does not take into account unforeseen, unexpected events or imponderables and unknowns that may arise when plotting the course of the future, this analysis has some limitations.

Let's begin by describing the global megatrends that are likely to have an impact on Pakistan's economy, either directly or indirectly. For the sake of completeness, we will only focus on three of these megatrends, though there are at least six of them. In the next 25 years, these trends are likely to have an effect: One, the demographic shift: a younger population in developing nations and an older population in developed nations. Two, the shift in economic power from the United States to China, which is expected to become the largest economy in the world by 2025 or close to it. The third factor is the speed with which technology is being disseminated and absorbed: the internet, software, growing connectivity and networks, high-speed mobile phones, e-commerce, cloud computing, and data analysis have spread throughout developing nations. However, as many nations lag behind in crucial areas like the use of mobile money, mobile government transfers, and fintech, the digital divide is widening.

Four, an explosion of information; Every few years, human knowledge becomes out of date. It is necessary to sort, screen, and select new information and concepts that are expanding at an exponential rate for their relevance and effectiveness. Five, the danger of climate change: Food, energy, and water resources in developing nations are being affected by global warming and greenhouse gas emissions. It would be "make or break" for humanity as a whole how we deal with these risks.

Integration of finances is the final aspect: The Western central banks' tapering of quantitative easing, the Fed and ECB's simultaneous monetary tightening and policy rate hikes, the strengthening of the US dollar, and the Federal Reserve's dominance of the international payment system have made it difficult for developing nations to manage their external accounts. Demographics, technology, and climate change, which are more important to us, would be the focus here.

Pakistan must acknowledge that the global economy's megatrends of 1982–2010 are no longer relevant when planning its future development path. Protectionism is gradually emerging as a result of the relatively open trade system. The levels and patterns of FDI flows to developing nations would no longer be comparable to those of the previous three decades. Exports from developing nations may not exhibit the same luster or buoyancy given that the world's major markets are experiencing steady, low growth. As supply chain bottlenecks brought on by external shocks have raised the stakes, transportation costs that had been steadily falling have reversed. As a result, the intra-industry or global value chain (GVC) no longer holds the upper hand. Migration would be limited to skilled and semi-skilled workers who can fill in the gaps in the labor force spectrum, and it would be selective.

How can we position ourselves to maximize the benefits and minimize the risks for the welfare of the larger portion of the population, given the recent experience of the weakening of globalization's drivers and these future risks? We must reduce income, gender, and regional inequality in order to encourage inclusive growth by: a) progressive taxation and public spending that benefits the poor; ( b) an increase in the number of women employed; c) particular focus on less developed regions; ( d) the expansion of technical and vocational education; and (e) extensive social security systems.

Pakistan will have a relatively young population for at least the next 50 years, while the advanced nations are getting older. Due to this disparity, we must provide our young people with the skill sets that countries with a labor shortage require. Until 2030, Japan wants 80,000 ICT professionals. Additionally, Korea has welcomed foreign workers. In a similar vein, Canada, Australia, and New Zealand have altered their immigration policies to prioritize skilled and technical labor. To meet this growing demand in a methodical and planned manner, the government, the private sector, and academia must collaborate. The following area of focus, technological assimilation and absorption, is closely related to this proposal.

Pakistan has a choice to make: either join the ranks of technology laggards or benefit from the spread of emerging technologies and their applications to industry, agriculture, education, health, and finance, among other fields. The applications of smart phones to the social, financial, and productive sectors of the economy have not been widely adopted. Freelancing, new startups, and e-commerce are attracting young people, but talent must be trained and nurtured in large numbers in order to make an impact. Cross-border payments and financial inclusion can be sparked by digital technologies.

The stability of the internet, the optic fiber network, the fiberization of towers, excessive taxation on the telecom sector and spectrum pricing, and a lack of free interflow of foreign exchange earnings between holding companies and their Pakistani subsidiaries all pose challenges to this emerging field in Pakistan. The lack of qualified individuals in the ICT field is the second constraint. Only 5,000 to 10,000 of Pakistan's 25,000 IT graduates can find work in relevant positions in the industry; Others lack the necessary skills and knowledge, and businesses are reluctant to invest in their training and development for fear that they will leave for better opportunities elsewhere.

A private-sector company creates a public good through this arrangement, but their competitors or other foreign businesses receive dividends. As a result, short-term courses should be offered by institutions like FAST, NUST, COMSAT, UET, PIAS, and others to graduates who are unemployed or underemployed, particularly engineers and mathematicians, to bring them up to speed with standard professional requirements. Bootcamps should be held at these establishments to prepare students for certification from global tech giants like Microsoft, Google, Amazon, and others. Students in higher secondary schools should be encouraged to pursue a college education in this field by career counselors.