incomes where almost 66 % of population and agriculture offers employments to 45 % of work force. concrete efforts are underway to enhance complementarity and synergies between the agriculture and industry by exploiting backward and forward linkages. third, pakistan ’ s corporate sector has been quite vibrant and highly profitable which is driving slowly contribution of industry to value added – risen by over 3 % between fy99 - 06. the private sector has been a key driver of this with the support of over 170 mncs 6 that have had a long standing presence in pakistan in financial services, chemicals, engineering and industrial products, pharmaceuticals and more recently in energy, shipping, trading and other services. barring few exception, most industry sub - sectors have been operating at near or full capacity utilization which has triggered an interest in additional capacity enhancement. consequently, gross fixed capital formation in the manufacturing sector has almost doubled in the past five years and 97 % of this is private investment. shifts in industrial production structure though slow are now emerging. while textile remains the major forte of industry, demand for consumer products catalyzed by rising income and accessibility to consumer finance has helped double the production of automobiles, white goods and electronics and construction demand has boosted cement production. together, corporate sector profitability in 2005 reached record highs estimated to be ranging around 6 % 7 ( net profit margin ). fourth, pakistan ’ s engagement in world trade reached $ 42 billion reflecting the pakistani companies ’ integration with the global standards of quality, productivity and efficiency. prospects for export that have reached $ 16. 5 billion in fy06 ( double the level of fy00 ) is to receive impetus as the government concludes free trade agreements with united states, china, malaysia, and sri lanka and hub ’ s like planned special economic zones and if joint ventures that would integrate pakistan in the international production network become a reality. pakistan has been able to somewhat diversify its exports : share of textile has fallen from 65 to 59 % over last few years and within this sector there has been growth in higher value addition products in particular in home textile where pakistan has a leading edge. concurrently, the share of manufactured goods has increased from 62 percent in fy96 and 72 percent in fy01 to 78 percent in fy06. aggressive regional competition supported by subsidization is, however, hurting textile export prospects even though pakistan private sector has well positioned itself by enhancing its capacities and upgrading its facilities and technology. to mitigate risks

ishrat husain : pakistan ’ s economic turnaround - an untold story article by mr ishrat husain, governor of the state bank of pakistan, reproduced from the pakistan supplement global agenda, world economic forum annual meeting 2005, davos, january 2005. * * * pakistan has come a long way since 1998 / 99 crisis when the country was on the brink of default and international reserves had been depleted, economic growth was anaemic, debt ratios were alarmingly high, confidence of the investor community was at its lowest ebb and credibility among international financial institutions was eroded. in a critical and fragile regional and domestic environment with constant threats to security, ( as a result of playing a key role as frontline state in the war against terrorism ), a prolonged and severe drought and high oil prices pakistan has made an impressive economic turnaround within a short period of five years. economic growth rate has reached solid 6 percent plus, inflation has been contained to 5 percent or so, exchange rate has been stabilized, fiscal deficit has been drastically reduced, domestic interest rates have declined dramatically, international reserves have jumped twelve times their 2000 level, debt ratios have fallen significantly and investment is booming. pakistan ’ s creditworthiness has been upgraded to b + by s & p. it is one of the few developing countries that has graduated from a successful completion of an imf program to directly accessing international financial markets. how has this remarkable turnaround taken place? amidst the hot news of al - qaeda, osama bin laden, assassination attempts on president musharraf, nuclear proliferation by dr. abdul qadeer khan and tension with india, the story of pakistan ’ s economic achievement remains confined to a small segment of informed observers around the world. this turnaround has not occurred all of a sudden but is the outcome of deliberate and carefully designed program of economic reforms undertaken over last five years, some of them still ongoing. the comprehensive strategy announced by president musharraf in december 1999 consisted of four key elements : ( a ) restoration of macroeconomic stability and pakistan ’ s relationship with the international financial institutions. ( b ) structural reforms to remove distortions. ( c ) improving economic governance and reviving key institutions. ( d ) poverty alleviation through targeted interventions and social safety nets. the interconnection between economic growth, poverty reduction, structural reforms and improved governance is fairly strong in the case of pakistan. macroeconomic stability and the consequent rapid economic