By Dr. Ijaz Nabi and Dr. Naved Hamid
Garments manufacturing is the least energy and capital-intensive industrial activity and thus, resonates with Pakistan’s resource endowment to generate economic growth and employment. Despite, its major contribution to Pakistan’s exports, its immense potential is not being realized. An important reason for the poor growth of the garments sector is that Pakistan exports a limited number of products and barely (if at all) competes in those products that account for about 60 percent of the world trade. To fully realize its potential, garments manufacturing must move up the value chain.
Phase II of this projects is a result of strong stakeholder demand following findings of Phase I. Following a grant from the GSP Plus status to Pakistan there is also a need to develop the next generation of policy recommendations aimed at accelerating productivity growth and the move to higher value garments manufacturing. Continuing the same methodology as employed previously, IGC will conduct semi-structured interviews, based on a revised questionnaire, with randomly selected firms based in Sialkot and Faisalabad, Punjab. The team will also revisit some old firms to probe further on specific issues (e.g. the impact of GSP Plus status, the role of international collaborations, the barriers to relocating to proposed garments city, mapping paths to higher productivity). Researchers will also include document most recent developments that have taken place in garnering government support for this sector, and steps being taken by the Punjab government to improve the performance of garments manufacturing which can be replicated by other provinces.
Dr. Naved Hamid
This study has a twofold objective: (i) to investigate the determinants of firm growth, specifically the extent to which finance constrains enterprise growth; and (ii) to explore the determinants of external financial access in Pakistan. External financial access is defined as access to credit through institutional sources such as private commercial banks, nonbank financial institutions, and state-owned banks and agencies. The study uses data from the second round of the Investment Climate Assessment Survey conducted by the World Bank in FY 2007. The methodology entails using an instrumental variable approach to estimate the impact of external financial access on firm growth while employing a probit model to explore the determinants of external financial access. The results suggest the following: First, finance is a binding constraint to firm growth in Pakistan—a 10 percent increase in the working capital financed through external sources is predicted to increase the average annual growth rate by 5.6 percentage points. Second, financial depth is important for access—across the country, access is better where there is greater penetration of financial infrastructure. Third, a range of internal factors such as size, export status, quality of human capital, and organizational form emerge as important determinants of external financial access in Pakistan.
Dr. Naved Hamid
In many LDCs liberalizing the financial sector will involve creating new financial institutions in the private sector to attract untapped savings and provide new services. This paper provides a detailed account of an experiment with Private Finance Companies (PFCs) in Pakistan. The complex legal, ideological and economic factors that explain the initial success and the ultimate failure of that experiment are identified. It is concluded that PFCs have an important role in mobilizing rural savings, but to safeguard depositors a legal framework has to be provided. Care should be taken that nationalized banks, acting in their self-interest as monopolists, do not create hurdles in the provision of such minimum regulation.
By Naved Hamid
This chapter discusses the economic environment for investment in Asia. In the next section, the authors attempt to answer the question on “What factors are important for a firm it its choice of the host country for investment?” The chapter describes the existing economic environment for investment in Asia. It also discusses expected developments in the medium term. Estimates of the FDI flows to Asia and their sectoral composition are presented by region for the year 2001.