Presentation on Globalization and it's impact on Pakistan course: Pakistan Economic Policy Instructor: Mr,Zia Abbas by: Shumaila Zaheer Siddiqui and Nauman Ahmed Institute of business management (Iobm),Karachi

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Globalization and it’s
impact on Pakistan

2. Question : What is the truest definition of Globalization ?
Answer : Princess Diana's death .
Question : How come ?
Answer :
An English princess with an Egyptian boyfriend crashes in a
French tunnel, driving a German car with a Dutch engine, driven by
a Belgian who was drunk on Scottish whisky: followed closely by
Italian PaparazzI's in Japanese motorcycles; treated by an
American doctor, using Brazilian medicines. And moreover this is
sent to you by a Indian, using American (Bill Gates') technology,
and you're probably reading this on your computer, that use
Taiwanese chips, and a Korean monitor, assembled by
Bangladeshi workers in a Singapore plant, transported by Pakistan
lorry-drivers, hijacked by Indonesians, unloaded by Sicilian
longshoremen, and trucked to you by Mexican illegal's.....
That, my friend, is "" Globalization ""

3. Globalization can be
described as a process by
which the people of the world
are unified into a single
society. This process is a
combination of economic,
ecological, technological,
socio cultural and political
forces.
— Markus Gattol
• A process which strengthens the
links between people,
communities and economics of
the world.
• The greatest challenge faced by
globalization is the fight against
poverty.

4. 1. Globalization opens up markets and ensures
healthy competition.
2. Removes inefficiencies, leading nations toward
greater economic growth.
3. Ensures specialization takes place in areas of
comparative advantage.
4. For labor abundant economies this means
increased employment as well as growth.

5. ORIGINS OF GLOBALIZATION
• The origins of globalization can be traced back till the 16th
century
• West began to explore and discover the new land, bringing
Englishmen to India in form of East India Company, where first
multinational was born for us
• After World War II and the first Great Depression, the leaders
of Britain and the US fumbled with the idea of reconstructing
the war-torn world monetary system

6. • Federal government allocated Rs. 59.28 billion for education
• The liquid foreign reserves have declined to US$ 11.5 billion.
• 3G/4G technology is expected to generate 900,000 new job
opportunities in the next four years
• The clearance of Rs. 480 billion stock of circular debt has
added 1,700 MW of electricity
• The public investment has recorded a growth at the rate of
17.12 percent
• Population growth rate has decreased from 1.97 to 1.95
percent
• According to Pakistan’s Millennium Development Goal Report
2013, the poverty rate decreased from 22.3 to 12.4 percent of
population

7. World Trade Organization
WTO is the international organization whose primary
purpose is to open trade for the benefit of all.
Goal of WTO
The ultimate goal is to help producers of
goods and services, exporters, and importers conduct their
business
Objectives
The WTO’s overriding objective is to help
trade flow smoothly, freely, fairly and predictably.
Rules of WTO
1. Protection to Domestic Industry through Tariffs.
2. Binding of Tariffs
3. Most Favored-Nation (MFN) Treatment
4. National Treatment Rule

8. IMPACT OF WTO ON PAKISTAN
• Pakistan joined WTO in 1995 when the organization came
into being.
• WTO negates anything which blocks the way of free
movement of goods and services from one market to another
on a basic assumption of improving the human lifestyle.
• It provides special preferential treatment to developing
countries like Pakistan by giving them more time and
flexibility to adjust to the global trade liberalization system
• Influential trade relations with other countries
• Helps Pakistan develop an indigenous model of economic
development based on local stakeholders.

9. • Settlement of trade disputes between countries
• Helps mobilizing the poorest fraction of the country
especially women by providing credit loans to them
• To invest in local self-employment and business
opportunities, and accessing market information using
communication facilities
• Tries to ensure full employment and a large and steady
growing volume of real income and effect demand
• Monitoring and reviewing Pakistan’s trade policies, as well
as ensuring transparency of regional and bilateral trade
agreements

10. World Bank
• Is a United Nations International Financial
Institution
• Established in July 1945
• Provides loans to developing countries for
capital programs
• Motto: Working for a World Free of Poverty

11. WORLD BANK AND PAKISTAN
• The World Bank, Pakistan is helping the Federal and
Provincial Governments in implementing reform programs
aimed at encouraging growth, investment, and employment
generation.
• Reforms are aimed at improving delivery of social services
like education, health, clean drinking water, and sanitation.
• Investing in Education
• Responding to natural disasters
• Protecting the poorest
• Operating in conflict areas
• Supporting rural livelihoods
• Connecting the Poorest

12. World Development Indicators

13. • Pakistan ranks 110
among 189 countries on
the ‘Ease of doing
business’ index
• Rakings based on:
 Regulatory
requirements
 Start – up procedures
 Time taken to register
a new business
 Hence, private sector
investment remains
low

14. HIGHLIGHTS OF PAKISTAN
ECONOMIC SURVEY 2013-14
Growth and Investment
• The outgoing year witnessed global recovery as the world
economy started picking up in
• the second half of last year and the global outlook indicates
some signs of optimism.
• In South Asia economic performance of Pakistan is
improving quantitatively and qualitatively as growth is broad
based and touched all sectors of the economy and is the
highest achievement since 2008-09.
• China and Pakistan have entered into a comprehensive plan
of “economic corridor” between the two nations. It will serve
as driver for connectivity between South Asia and East Asia.

15. • Major success of the outgoing fiscal year includes: picking up
economic growth, inflation contained at single digit,
improvement in tax collection, reduction in fiscal deficit,
achieving of GSP plus status by EU, worker remittances
touches new height, successful launching of Euro Bond,
auction of long pending 3G and 4G licenses; foreign
exchange reserves significantly rise, Rupee strengthened
and stock market created new history.
• The GDP growth accelerates to 4.14 percent in 2013-14
against the growth of 3.70 percent recorded in the same
period last year.
SOURCE:
http://www.finance.gov.pk/survey/chapters_14/Hig
hlights_ES_201314.pdf

17. IMF AND PAKISTAN
The IMF works to foster global growth and
economic stability. It provides policy advice
and financing to members in economic difficulties and
also works with developing nations to help them achieve
macroeconomic stability and reduce poverty.
SOURCE:
http://www.imf.org/external/about/overview.htm
• Pakistan became member of International Monetary Fund
in 1950
• First loan was borrowed in 1958, amounting to USD 25
million
• In a 20 year span, from 1958 -1979, Pakistan has been
granted a total amount of USD 460 million in IMF
packages.

19. IMF LOAN 2013
• IMF agreed to lend Pakistan an amount of USD 5.3 Billion
(originally asked for USD 7.2 Billion) under the Extended Fund
Facility (EFF) to boost Pakistan’s FX reserves and to help the
economy
• Urgency of the loan demonstrated the precarious situation of
FX reserves especially when the State Bank of Pakistan had
almost USD 6.25 Billion left in foreign reserves, an amount that
couldn’t even cover six weeks of imports

20. • The Asian Development Bank has
estimated that Pakistan will need an
amount in the range of USD 6 Billion to
USD 9 Billion to meet its obligations.
• IMF’s EFF program comes with conditions,
the government would have to reduce
subsidies, particularly in the power sector
which would result in higher bills.
Therefore, development expenditure
would have to be cut down.

21. RECOMMENDATIONS
• STOP this culture and practice of “BORROW AND
WASTE”!
• Instead borrow when needed only and invest the borrowed
money so that the return can be paid back as debt.
• Expand the tax base by bringing in agriculture, services
and evaders into the tax net
• Promote private investments
• Promote an environment that is conducive to attract donor
funding in sectors such as education, health, social
development and research and technology

22. LIBERALIZATION POLICY OF PAKISTAN
• Pakistan adopted the liberalization policy in late 1980’s due to the
problem of deficit in current account
 Denationalization of industry
 Liberalization of trade i.e. Expansion of exports and removal of import
barriers,
 Deregulation of institutions
 Delinking of rupee from US dollar
 Privatization
 Foreign exchange regime
 Opening up capital markets for foreign investors
 Exchange rate regimes
• Trade liberalization policy under the Structural Adjustment Programme
(SAP) did not give fruitful results

25. RECOMMENDATIONS
1. Open trade and investment policies along with other
sound policies
2. Empower poor people
3. Strong governance
4. Improve human capital
5. Workable social protection measures
6. Common global goals
7. Clear policy perspective
8. Institutional mechanism
9. Improve competitiveness strategy

26. EMPLOYMENT OPPORTUNITIES
• Pakistan is the 10th biggest in the world according to the
labor force size

27. RECOMMENDATIONS
• Encourage foreign investment
• Free trade, and trade barriers removed
• Quality and quantity of the exports promoted
• Population kept at the optimum level
• Increase health expenditure

28. POSITIVE EFFECTS OF GLOBALIZATION
Increased Standard of Living
Access to New Markets
Increased Competition
Investment and Capital Flows
Spread of Technical Know-How
Spread of Culture
Spread of Education
Legal and Ethical Effects

29. NEGATIVE EFFECTS/CRITICISM ON
GLOBALIZATION
. Weaker countries loose their culture.
Counties become more dependent on each other. That is why economic
crisis move from one country to other countries very fast. become poorer.
 More powerful countries dictate their "rules of game" for others.
 Growth of international crime.
 Countries are not able to control financial flows and migration.
Companies from developed countries move their business to developing
countries with less salaries. It causes growth of unemployment in developed
countries.

30. Globalization And Its Discontents
Joseph Stiglitz

31. • One of the most celebrated dissenters of
globalization.
• Chief Economist of the World Bank till Jan
2000.
• Nobel Prize in Economics in 2001.
• Chairman of Clinton’s Council of Economic
Advisors.
• Currently teaching at the Columbia University.
• Stiglitz says:
The average European cow gets a subsidy of
£1.20 a day, more than what is earned by half
the people in the developing world. For much of
that world, globalization seems like a pact with
the devil.

32. THE BITTER TRUTH!

33. What is the phenomenon of
Globalization?
• Closer integration of countries & peoples of the world
that has been brought about by the enormous reduction
of costs of transportation and communication, and the
breaking down of artificial barriers to the flow of goods,
services, knowledge and people across borders
• Creation of new institutions working across borders
• Three main institutions govern globalization: IMF, World
Bank and WTO

34. The Promise of Global Institutions
Globalization has helped:
• Countries grow faster by opening up to international trade
• Reduce the sense of isolation
• Millions by bringing them foreign aid benefits
Then, why has globalization become so
controversial?

35. The Promise of Global Institutions
(Cont.)
• Growing divide between haves and have-nots has left
increasing numbers in the Third World in dire poverty
• Neither has globalization succeeded in ensuring stability
• Western countries have pushed poorer countries to
eliminate trade barriers
• Environment has been destroyed

36. The Promise of Global
Institutions (Cont.)
• IMF was founded on the belief that there was a
need for collective action at the global level for
economic stability
• IMF is a public institution established with money
provided by taxpayers around the world
• Major developed countries run the show, with only
the USA having effective veto

37. BUT IMF FAILED!
• The IMF has failed in its mission of promoting global
instability; has also been unsuccessful in guiding
transition of countries from communism to a market
economy
• Jobs have been systematically destroyed before
countries’ industrial & agricultural sectors were able to
grow strong and create new jobs
• Maintaining tight monetary policies has led to interest
rates that would make job creation impossible
• Those who lost jobs were forced into poverty

38. LPG – Liberalization, Privatization,
Globalization (Freedom to choose)
• LPG surely has the power to do a lot of good. But at what
cost?
• Pursuing LPG at an alarming rate defeats the very purpose
of developing the countries.
• Many LPG policies become being an end in themselves
instead of being the means to an end.

39. Freedom to choose?
• U.S – the prosecutor, the judge and the jury.
• Studies on various countries prove that steps laid out by
IMF also did not guarantee progress. (Failures – Bolivia,
Argentina, East Asia. Success - Chile)
• Premature liberalization results in increased instability.
The costs of such instability is, disproportionately, borne
by the poor

40. “If globalization continues to be conducted in the way
it has been in the past, globalization will not only
succeed in not promoting development but will
continue to create poverty and instability. Without
reforms, the backlash that has already started will
mount and discontent with globalization would
grow.”
~ Joseph Stiglitz, Globalization and its discontents
Nobel Laureate in Economics 2001, former Chief
Economist at the World Bank.

41. THANK YOU
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