Ishrat Husain: Pakistan's development challenges for the coming decade: how
can overseas Pakistanis help?
Keynote speech by Mr Ishrat Husain, Governor of the State Bank of Pakistan, at the Pakistani
Professionals Forum, Toronto, Canada, 1 October 2005.
* * *
Let me thank the Pakistani Professionals Forum of Canada for inviting me to address this august
gathering. It is indeed a privilege and honour to be present here this evening and interact with such a
istinguished audience. The topic which I would like to address today s: How the overseas Pakistanis
can help Pakistan's development challenges in the coming decade.
Pakistan has been able to turn around its economy during the last six years from a situation of
imminent default in the late 1990s to the current status of a dynamic, vibrant emerging economy - one
of the fastest growing in Asia. Pakistan has successfully re-established its access to international
capital markets and its sovereign bond is trading at a price that is not enjoyed even by investment
grade countries. We have voluntarily said good-bye to the International Monetary Fund as the country
has regained its economic sovereignty.
Unlike the popular notion that the September 11 has benefited the economy, the fact is that
dependence on foreign assistance has been reduced to the extent that it is now less than 10 percent
of the entire foreign exchange earnings. The external debt ratio - one of the main indicators of the
country's dependence on the others - has sharply declined from over 50 percent to 30 percent of
GDP. More importantly, despite all the various shocks, such as the recent oil price shock, the
economy has remained resilient and has withstood these difficult times without any serious disruption
to the market stability. The abolition of quotas on textile exports under the WTO regime and the
withdrawal of preferential tariff arrangements by the European Union have not adversely affected our
textile industry.
Pakistan's share in the highly competitive world export market has in fact risen during the last few
years. In a survey of doing business in 150 countries around the world carried out by the World Bank
this year, Pakistan has clearly emerged as one of the top ten reformers in the world. Its ranking in
order of an enabling business environment was 60 compared to 116 for India. This shows that we
have come a long way from a highly bureaucratic, controlled and regulated economy to a market and
business friendly, liberal and deregulated private sector oriented economy.
But having made these impressive achievements, the road ahead of us is still arduous and torturous.
The imperatives of globalized economy demand that we should remain agile, dynamic and capable of
competing with the rest of the world while taking care that one third of Pakistan's population living
below the poverty line is uplifted. The difficulty is that our labor force is poorly trained and our social
indicators are so weak that we stand at number 137th in the country rankings of the Human
Development Index. One half of our population is still illiterate, the access to healthcare is limited,
mortality rates of infants and women are relatively high, the enrollment and retention ratios among our
school-going population are low, and the number of students and the quality of our science and
technical expertise are way behind other Asian countries.
In other words, we have many difficult challenges to tackle before we can compete with other
countries in the global economy. The good news is that if we are able to do so successfully, the
incidence of poverty will also fall. In my studies of China and India's development in the recent
decades, what struck me most was the important role played by the overseas Chinese and overseas
Indians. We have an estimated 3 million overseas Pakistanis concentrated mainly in North America,
Saudi Arabia and the Gulf and the United Kingdom. We are extremely grateful to them for their
invaluable assistance in the country's turnaround by sending their remittances officially through the
banking channels. Had we not received this large flow of remittances every year in the past four years,
it would have been difficult to accumulate the foreign exchange reserves to the level we have today.
We could neither have reduced our dependence on foreign assistance nor have been in a position to
finance our growing trade deficit. So I wish to publicly acknowledge the role of the overseas Pakistanis
who have helped us by sending remittances to their families through the banking channels. I hope that
this amount will continue to expand as more Pakistanis find jobs in countries such as Malaysia and
Korea, their incomes rise in the Middle East in proportion to the rise in oil revenues and as remittances
are diverted from informal to banking channels.
This is only one of the examples in which overseas Pakistanis have made a very important
contribution. But as I address you - the Pakistani professionals settled in Canada -- I would like to
take the opportunity of spelling out various ways in which you and other overseas Pakistanis can help
the country in meeting the difficult challenges ahead of us.
Most of the speeches delivered at gatherings such as this are normally at a highly abstract and
generalized level appealing to your sense of patriotism and urging you to help the country in a vague
manner. But I wish to deviate from this tradition as I would like to make ten specific and concrete
proposals for your consideration and through this forum to the larger community of overseas
Pakistanis all over the world. Each proposal is targeted at a different segment of this group and you
can pick and choose according to your own personal preferences and interests. Some of these
proposals are doable in the near future but others will take some time to crystallize. The purpose of
presenting these proposals before you is to provoke some further thinking, debate and discussion. It
will be quite understandable that some of these ideas are rejected after thoughtful evaluation but even
if a couple of these ideas survive and are implemented, my purpose would have been achieved.
First, the country is faced with a shortage of skilled manpower that is in high demand for sustaining the
growing economy. While we have hundreds of thousands of educated unemployed, we have at the
same time vacancies for hundreds of thousands of people in different skill categories. We would
therefore like you to help fill in this gap by setting up institutions of learning for imparting vocational
training and technical and science education ranging from universities, colleges, post-high school
institutes to post-primary and secondary school apprentice workshops. The curriculum, content, the
pedagogical tools and testing methods in these institutions should be designed and delivered in such
a manner that the employers compete with each other to hire the products of these institutions. The
Government is encouraging private-public partnership in this area and has a number of existing
physical facilities that can be used for this purpose. The Federal Government has formed an
independent authority for technical and vocational education and you should approach this body with
your specific proposals.
Second, groups of enlightened overseas Indians and Chinese have not only established institutions of
higher learning in their countries of origin such as the Indian Business School at Hyderabad set up in
collaboration with Kellog School at Northwestern University and Carnegie-Mellon but they are also
helping the existing institutions of learning and healthcare. Some of you, I know, are helping Aga Khan
University or Shaukat Khamam Hospital but we need more of such quality institutions dispersed all
over the country. We need them not only in Karachi, Lahore and Islamabad but we need them in
Peshawar, Quetta, Hyderabad, Sukkur, Bahawalpur, Multan, Sialkot, Faisalabad. Those of you who
belong to these areas owe it to your hometowns to get together and help some of these educational
and healthcare institutions at these places acquire eminence in the delivery of these services. Your
involvement will also help improve the governance and management structures of these institutions
which are badly in need of reform.
Third, many among you are highly respected researchers and innovators who are at the cutting edge
of their disciplines. We would like you to provide intellectual leadership in designing, organizing,
collaborating in practical-oriented scientific research and applying the results of this research to
enhance agriculture and industrial productivity. The link between academic research and the industry
in Pakistan is quite weak and the billions of rupees being invested in research establishments are not
producing the kind of benefits that are needed to boost the productivity and efficiency of our industry.
Some of you can help in strengthening these linkages by applying the business models that have
successfully worked elsewhere.
Fourth, the outsourcing of services in China and India was initiated by a group of overseas nationals of
these countries working in multinational firms. They acted as the conduit and honest brokers between
the foreign firms and the host country firms because they had the intimate knowledge of the
multinational firms' requirements and the understanding, contacts and knowledge of the capabilities of
the firms in their countries of origin. In many cases, they advised the recipient firms as to how to go
about writing contracts, developing quality assurance methods, and the means for delivery on time,
etc.
I am sure we have a large reservoir of Pakistanis working in the multinationals and there are now well
established firms in Pakistan who can cater to their outsourcing needs according to international
standards. What is missing is the link between the two and I would encourage you to work on this
missing link even on a fairly modest scale to begin with.
Fifth, as the cotton textile industry in North America and Europe is no longer competitive, there is a
great scope for formation of joint ventures in which the local companies in Canada and the US provide
design, technology, marketing, services while the actual production is carried out in the low cost
factories of Pakistan and the final output is shipped to North America. This is a win-win situation for
both parties as the dying textile firms in North America will be able to retain some jobs while Pakistan
will enhance its labor intensive exports and provide employment to a large pool of unskilled labor
force. The management consultancy firms and investment banks in which overseas Pakistanis are
serving can help identify such opportunities.
Sixth, the organizations of overseas Pakistanis can set up scholarship funds to enable some talented
young Pakistanis, who cannot otherwise afford, to study for advanced degrees in Science,
Engineering and technology at the top elite universities in North America. There is always an
apprehension that these scholars, if they are good, will not return to Pakistan upon completion of their
studies. But there is no harm if they acquire practical experience in their fields as today's world is
characterized by brain circulation rather than brain drain. The attractive prospects in Pakistan will
sooner or later take them back and this investment in human development will never be wasted. I will
very much hope that the organizations of overseas Pakistanis such as yours will give a serious
consideration to this suggestion.
Seventh, in this age and day, we have to play by the practices and rules of the countries we have
chosen as our new home. As you know better than I do, think tanks play an important role in
influencing public policy in Canada and the U.S. Some Pakistani businessmen have taken the lead in
establishing Pakistan Fellowship Funds at the School of Advanced International Studies (SAIS), John
Hopkins University and the Woodrow Wilson Center in Washington, D.C.. This initiative has proved
successful as is evident from the number of seminars, conferences held and working papers, policy
briefs, op-ed columns that have appeared on Pakistan's development issues in the U.S. in the last two
years. I suggest that similar ventures should be encouraged in other think tanks in the U.S. and
Canada. These think tanks can be our powerful allies in influencing opinion makers in the media,
parliaments, academia, governments, political parties in responding to their concerns about Pakistan
and inprojecting a realistic image of our country.
Eighth, those among you, who are medical professionals and are also enterprising and willing to take
risks, should consider setting up in the private sector, modern hospitals of world standards in Pakistan.
These hospitals can attract patients from the western countries and the Middle East for surgical
procedures and other quality services at costs which are a fraction of those charged in developed
countries. I emphasized the word 'enterprising' because these hospitals have to be run on a
commercial basis offering five star hotel facilities, meet and receive facilities at the airports and cater
to other needs of the patients and their families. Such hospitals are operating successfully in other
developing countries and I do not see any reason as to why they cannot be replicated in Pakistan
given the large pool of Pakistani medical practitioners. The banks and financial institutions are willing
to provide debt finance for such ventures and equity finance can also be raised through public
offerings. What is required is getting together top notch medical professionals working in concert with
the top class business and finance managers and hospital administrators.
Ninth, since the introduction of Oxley-Sarbanes legislation in the United States and similar stringent
laws and regulations elsewhere, the profession of chartered accountancy has become extremely
lucrative. There is an overall shortage of qualified accountants in all parts of the world. Those who
have qualified from the Institute in Pakistan are in heavy demand in U.K. and the Midddle East as they
have established a good track record. The limiting factor in producing more accountants as I
understand from my interaction with the Institute of Chartered Accountants in Pakistan, is the shortage
of qualified faculty. Some of you practicing or actively engaged in this field may consider the possibility
of helping meet this shortage by offering your services to teach at the Institute for short periods of
time. I am sure in this way, we will be able to produce a large pool of quality accountants whose
services can be exported abroad or utilized at home.
Tenth, the tourism industry has not taken off in Pakistan for a variety of reasons, including the
negative perception that the country is a dangerous place to visit. On the other hand, we have the
most beautiful places which would interest the eco-tourists as well as the heritage tourists. The
Northern areas and the KaraKorum range offer the potential for those interested in eco-tourism.
Mountaineering, tracking, etc. while Taxila, Harappa and Moenjodaro are the bright spots for the
heritage tourists particularly those having a penchant for the Buddhist and ancient civilizations. For the
Mughal monuments located in Lahore, the tour itinerary for India can be extended to include these
monuments. Those associated with the leisure and hospitality industry here can help in organizing
group tours and also investing in the supporting infrastructure - tourist lodges, hotels, transport, etc.
I have presented the above examples as simply illustrative of the many opportunities which exist for
the overseas Pakistanis to explore and exploit. In my view, you are in a relatively better position to
exploit some of these opportunities as compared with the foreigners because you have a better
understanding of the cultural milieu in which we operate. You have a more realistic appreciation of the
constraints which we face but at the same time you are in a better position to help in getting the
problems resolved.
I hope that some of you would give serious consideration to some of the proposals I have put forth this
evening. On our part, we can assure you that the Government is willing to assist you in all ways
possible to get these ideas implemented.