Pakistan & Indonesia: similar roots; different future

Pakistan & Indonesia: similar roots; different future
Why has Pakistans growth lagged behind that of Indonesia, even though the latter was exposed to recurrent bouts of state interventionism, and suffered one of the deepest crises in world economic history in the years 1997-98? That is one of the themes under the lens in the World Banks latest Directions in Development report.
The authors recall that after many years of colonial rule under the Netherlands and Great Britain, respectively, both Indonesia and Pakistan had gained independence in the 20th century. "Both had to solve border problems and build their institutional framework from scratch (amid numerous internal conflicts, as the shape of their territory was determined by the shape of the land held by the former colonial rulers rather than by the people living on the territory)".
Yet, from an almost identical per capita GDP, by 2004 Indonesias GDP had risen successfully over the course of years to be almost 50 percent higher than that of Pakistan.
While in their early years Pakistans economic performance had outpaced that of Indonesia, in later years, Indonesia benefited from the ballooning crude oil exports, whereas Pakistan remained a net importer. The report also highlights how the differences in how economic rents were distributed in the two countries led to growth in productivity.
"Pakistan adopted a growth strategy similar to that pursued in Indonesia - financing large-scale investments from public funds, except that the financing beneficiaries were state-owned enterprises and not government-linked yet private conglomerates as in Indonesia," the report asserts. It added that in Indonesia private conglomerates were more market-driven than state-owned enterprises in Pakistan, which affected changes in labour productivity growth in industry in both countries.
The overall message of the report is that while "stabilizing institutions did not see any major changes in either country, but their weaknesses were responsible for the occurrence and depth of their economic collapse". It is unfortunate that even todays day and age, Pakistan is doing nothing about its institutional weaknesses.