Policy Insights to Maritime Economy in Pakistan

The term “Blue Economy” originated in 2012 from the Rio+20 Conference of the United Nations on Sustainable Development and Growth. Given the vastness of oceanic resources, the blue economy has been touted as the panacea for all economic woes of less developed coastal countries. It basically refers to leveraging the coastal and marine resources for economic benefits, emphasising sustainable economic growth and environmental conservation. United Nations 2030 Agenda for Sustainable development directly linked sustainable economic growth and Blue Economy via SDG 14. World Bank defines Blue Economy as: “Sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem.” Due to its international obligations for SDGs, Pakistan has integrated SDGs into its domestic development agenda, which implies that Pakistan is cognizant of the blue potential

Don’t Fall in Love with Parity: Understanding Exchange Rate Depreciation

Key Takeaways from Global Research Exchange rate is like temperature in a human body: It merely reflects underlying weaknesses. Like the human body artificially holding the temperature down for long periods without addressing the causes is likely to lead to grievous consequences. There is no such thing as an active devaluation policy for boosting exports. Holding the exchange rate at an artificially appreciated rate is only possible through reserve loss. These losses cannot be incurred over the long run as reserves are finite and market participants know that reserves can be attacked to their advantage. Bolstering the exchange rate through exchange and import controls serves only to disrupt supply chains and eventually weaken the domestic economy. At best it is a short-run painful solution

Huzaima Bukhari and Ikramul Haq. Tax Reforms in Pakistan: Historic and Critical View

In their book entitled Tax Reforms in Pakistan: Historic & Critical View authors Huzaima Bukhari and Ikramul Haq take up the important yet often under-researched topic of the taxation system in Pakistan. The book is a collection of various writings on the topic by the authors spanning over three decades and has been published online by the Pakistan Institute of Development Economics (PIDE)

Endurance or Submission: How Terrorism Frame Households’ Time Allocation?

Terrorism cause psychological injury, placing an unsettling impact on human life. In Pakistan, the continuous stream of terrorism since 2009 induced fear, expectedly influencing households’ behaviour about their economic decisions. In this context, the study empirically investigates the effects of terrorism on households’ time allocation decisions in the pre-2009 and post-2009 periods to track their time allocation for business activities and leisure. For this study, 200 households are interviewed from district Peshawar of the KPK province in Pakistan, one of the worst-hit districts from terrorism. Findings of the study reveal that in general, terrorism has posed a significant impact on households’ time allocation patterns. Analysis explains that in the post-2009 period, increasing incidents of terrorism triggered fear in the people’s minds. Consequently, time for business activities shrunk while the time for leisure increased. To be more exact, households preferred to stay at home and spend time on leisure activities (with no financial yield) rather than engaging in business activities. JEL Classification: D91, R23, R28 Keywords: Terrorism, Fear, Violence, Time Allocation Pattern, Pakista

Remove Service Charge on IBFTs to Encourage Digital Transactions

The State Bank of Pakistan (SBP) announced on June 16, 2021, that it has now allowed banks to charge a transaction fee of 0.1 percent of the transaction or PKR 200, whichever is lower on Inter-Bank Funds Transfers (IBFTs). SBP has made compulsory free-of-cost IBFTs of up to PKR 25,000 per month per account. For accounts exceeding the limit, the banks will charge the transaction fee as mentioned above. Following the onset of the COVID-19 pandemic, on March 19, 2020, the Government of Pakistan and SBP decided to make all IBFTs free of charge. The idea behind this decision was to limit consumer visits to banks and thus restrict the COVID-19 threat. Before that, the banks were allowed to charge a transaction fee on IBFTs as per SBP’s defined schedule of charges. The practice did continue for a little over a year until after the third wave, the state bank, as mentioned above, assumed an improved COVID-19 position for reviewing the policy and thus reimposed the charges on digital funds transfer. Since then, Pakistan has entered the fourth pandemic wave as a much deadly delta variant and other new variants grow rapidly in Pakistan. Consequently, the basis of this review and policy change can be contested on the pandemic spread grounds, but for now, this policy viewpoint discusses the decision from an economic and financial perspective

An Analysis of Pakistan’s Agricultural Commodities based on Effective Protection Rate and Its Decomposition

This study analyses the impact of the government’s interventionist policies in the product and input markets for the two leading crops of Pakistan, wheat, and cotton. The study employs standard measures of the nominal rate of protection (NRP) and effective rate of protection (ERP). In addition, it also proposes a method to additively decompose the ERP into two components representing the effect of distortions in the product and input markets. The study finds that government policies in the wheat market are mostly designed to protect flour mill owners and thereby ordinary consumers at the cost of farmers. Since the consumers of wheat by far outnumber the wheat growers, this policy design seems to represent a political decision to appease the common public. Regarding cotton, the study finds that the government does not intervene much in the market to the extent that farmers are left at the mercy of monopolistic procurement agencies and better-informed rent-seeking intermediaries in the marketing chain. Export procedure is so cumbersome that only the well-informed and well-connected traders can benefit from price hikes in the world market. The study recommends serious reconsideration of government policies in the light of normative considerations. In this context, open debate on agricultural policy in Parliament and the Senate would be highly desirable

Experimental Evidence on Public Good Behaviour across Pakistan’s Fractured Educational System

This paper investigates how Pakistani higher education students from different social strata act within the context of a game that allows for cooperation and punishment. Findings reveal that both female and male madrassa students are the most generous players. Moreover, there is more gender and social consciousness in male students than female students when deciding to penalise or not. Male madrassa students penalise female students more than male higher-income students; moreover, elite male students penalise male madrassa students more heavily than fellow elite students. The latter result suggests the presence of spite among elite boys towards high contributors if they belong to another social class/group. This research helps us break from social stereotypes that depict lower-income madrassa students as particularly intolerant of other social groups. JEL Classification: C71, C90, D91, Z12, Z13 Keywords: Higher Education, Madrassas, Public Goods Game, Social Stratification

The Spatial Effects of Road Infrastructure on Employment in Pakistan: Quantifying the Role of Complementary Factors

This study uses district-level panel data to measure the spatial effects of road infrastructure on employment while accounting for institutional quality, rural connectivity, and labour productivity in Pakistan. The estimates based on the spatial regression model show that road density positively and significantly impacts employment. A 10 percent increase in road infrastructure would lead to a 4.3 percent increase in employment directly and indirectly—the spillover effects of road infrastructure help optimise the benefits of public investment in infrastructure projects. Empirical results reveal that institutional framework and access to rural areas complement road infrastructure in channelising road development’s employment effects. These findings suggest a call for a comprehensive policy to reap the potential benefits of road infrastructure. Apart from developing the road network, the government should also develop complementary factors, namely institutional reforms and rural connectivity. Keywords: Road Infrastructure, Employment, Institutional Quality, Spatial Analysis, Pakista

Friendly Fire: Wheat Subsidy in Punjab, Pakistan

During the past decade every year the Punjab government has faced an awkward situation at wheat harvest. It must buy millions of tons of wheat at an above-market price despite massive carry-forward stocks already lying in its granaries. Cost of procuring such huge quantities and subsidising sales to flour mills is enormous and is met with commercial borrowing. In recent years, the government has struggled to balance its accounts for wheat operations; its outstanding liability to commercial banks stood at Rs. 444.7 billion in June 2018, viz. 22 percent of the total budget of the province in 2017-18. Clearly, the government procures more wheat annually than it needs with borrowed money that it cannot pay back. Ostensibly, wheat procurement aims to benefit small farmers, but its procedures exclude, rather than include them. Conversely, consumers end up buying expensive wheat-flour. A significant beneficiary of the procurement regime appears to be commercial banks finance the procurement and earn interest thereupon. Keywords: Food Subsidy, Wheat Procurement, Subsidy Refor

Acemoglu, Johnson and Robinson’s Notion of Exogenous Imposition of Colonial Institutions onto Colonies— A Critique in the Light of Historical Evidence

This paper provides critique of Acemoglu, Johnson, and Robinson’s (2001, 2002) notion that rests on the hypothesis of exogenous imposition of colonial institutions onto their respective colonies based on conditions for their settlement. Our research brings forth the logical loopholes in Acemoglu, Johnson, and Robinson (AJR) by constructing arguments against the over-simplified assumption of exogenous imposition of colonial institutions in explaining the differences in development today. To prove our point, we build on two main arguments from history to show that some degree of endogeneity did indeed exist in colonial institutions that were imposed on the colonies. Our first argument revolves around the theme that how Atlantic slave trade evolved with colonialism and had meaningful technological and institutional consequences in the colonial metropolitan state. And these evolving conditions in coloniser’s mother country not only shaped incentives for mercantilist colonialism at one level and at the other became the base of institutional setup of progressive forms. In our second part of the argument, we demonstrate the role of native agency either in the form of local’s formal or informal pre-colonial institutions or in the form of their hold within the colonies, were all important in shaping what path colonisers eventually took for the institutional transfer. Based on these historical evidences, it is concluded that colonial institutions cannot be assumed as an exogenous transfer based on the notion of settlement as per AJR, rather it can be best described as an evolving fit between colonial and pre-colonial institutions. Keywords: Acemoglu, Johnson, and Robinson’s (2001, 2002), Reversal of Fortune, Institutions, Colonialism, Long-term Development Difference