Trade competitiveness is a key driver to long term economic growth of countries. Aiding the competition is the availability of an increasing population and access to natural resources. Such were the findings of a recent survey by Goldman Sachs forecasting national incomes in major economies of the world.
The outlook for Pakistan is bleak according to the survey. The countrys position amongst global economic engines is going to be at the 20th spot by 2025. Economic performance is forecasted to be sluggish compared to other developing economies. As a result, the position is expected to drop to number 21 by 2050.
While Pakistan is endowed with a fair share of natural resources and the provision of a growing population is guaranteed, trade competition seems to be an ever elusive target for the country.
A senior economist suggested reform measures that could help overcome these barriers. Firstly, reliance on domestic natural resources as opposed to foreign oil imports. Investments in human resource capability will reap long term benefits; and a focus on increasing the trade as a proportion of GDP.
Today, many in Pakistan believe that the damage is beyond repair. However, lessons from economies that have recently emerged may act as a guiding light for economic recovery.
Brazils economic reforms, initiated in 1994 in the form of "Plano Real" have realized the promise of the land of great potential. Brazil has come out largely unscathed from the global recession of 2008. Output slowed 0.2% last year and GDP is expected to grow by 6% in 2010.
The obvious question, how did Brazil manage?
For starters, a keen focus on balancing budget deficits was seen as a stimulant to long term economic growth. Government spending was cut down in favour of the private sector. Strict rules for adhering to allotted budgets were imposed on legislators; with severe punishments for non compliance. Such fiscal prudence has allowed Brazil to develop immense cash reserves.
Another area of learning could be the reforms in taxation. Brazil has had a steadily evolving taxation system. In 1960, public revenue was 10.4% of GDP. Increasing to 17% in 1980 and now stands at 38.8% according to the most recent data.
Perhaps the most important factors in Brazils emergence have been stable and consistent economic policies. When Lula da Silva assumed power in 2002, many in the West were skeptical given his leftist origins. He continued the policies of his predecessors and the benefits of the Plano Real are set to make Brazil the fourth largest economy in the world by 2050, Goldman Sachs believes.
The parallels are there for everybody to see, but lessons to be learnt are for the wise.
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