Globalization AND ITS OWN EFFECT ON Pakistan Current economic climate Economics Essay

Globalization is an activity of connections and integration on the list of people, companies, and governments of different countries, a process driven by international trade and investment and aided by it. This technique has effects on the environment, on culture, on political systems, on monetary development and prosperity, and on individual physical well-being in societies throughout the world.

The proliferation of McDonald's restaurants round the world can be an example of globalization; the actual fact that they modify their menus to suit local tastes can be an exemplory case of globalization (also called internationalization), a combo of globalization and localization.

Globalization and its own effect on Pakistan economy:

This study looks at Pakistan's experience in the light of the international experience and

Suggests key tactical steps that are necessary for Pakistan to increase its expansion and

Poverty reduction advantages from globalization.

The whole process is predicated on increased efficiency arising from the international

Competition. For the fruits of the process to be extensively shared the indegent have to

Constantly seek to boost their skills and human capital. This requires a set of specific

Interventions by the Government. Increasing competitiveness reaches the center of the whole


Competing in the globalized world requires new organizations and processes. It requires a

New "culture". In particular, the study requirements to be able to stay competitive are

Becoming increasingly innovative. The necessity to build consciousness and consensus also

Requires insurance policy support. The analysis identifies the various areas for Authorities policy


The study recognizes in particular the necessity to have set up specific social protection net

Policies to be able to catch the marginalized because the procedure by description produces

Winners and losers and the inability to safeguard the losers can not only raise the damage

From the process but also shatter nationwide confidence and lead to a reversal towards


Challenges and importance of globalization in Pakistan

As mentioned previously, globalization, and even more in particular economic integration, presents

Both opportunities and costs. Greater economical openness, foreign direct investment, and

transfer of systems offer potential opportunities for financial expansion. Free trade

Allows specialization between different parts, permitting them to produce matching to

Their own comparative advantages; it also expands the utilization choices of individuals by

Providing increased opportunities to buy goods and services from other countries. In this

Respect, it is vital to keep in mind that international trade is not a zero-sum

Game where some countries are winners and more are losers. On the other hand, trade

Benefits all countries because it enhances the choices of the consumer and the product quality of

Products. If competitive, it reduces prices and boosts real wages. Additionally it is worthwhile to

Underline that unlike what's commonly presumed, "countries aren't in any degree in

economic competition with one another", or that "some of their major financial problems

can be attributed to failures to compete on world markets" (Krugman, 1994, p. 6)12. Firms

compete; countries do not. "If the European economy will well, it need not be at the

expense of the United States; indeed, if anything an effective European overall economy is likely

to help the U. S. overall economy by providing it with larger markets and reselling it goods of

superior quality at lower prices" (ibid. ). Furthermore, the data is quite strong that real

GDP progress is related mainly to home productivity growth, not to balance of trade or even to productivity relative to competitors. "Despite the fact that world trade is bigger than ever

before, nationwide living standards are overwhelmingly dependant on domestic factors

rather than by some competition for world marketplaces" (ibid. ). Trade is basically static, while

productivity, which is influenced by specialized change, is dynamic and so is

primarily in charge of economic growth. Therefore, focusing on international

competitiveness may lead to unwise decisions on local, as well as international policies.


Economic globalization has also provided opportunities for expanding countries in that it

expands the size of their markets for export and attracts overseas capital, which aids

development. Foreign investment is conducive to a transfer of technology and knowhow,

which increases production. Another positive effect of globalization is greater

competition among firms, which benefits consumers who have usage of products at

increasingly lower prices. Those who gain most from free trade in both developed and

developing countries are extremely often the poorest since they can purchase goods at more

affordable prices, and therefore have an increased standard of living. In this sense, free trade

can be observed as an indirect way to lessen poverty.

Unfortunately, until now developed countries have not lifted their defensive barriers in

many crucial sectors for growing countries. Actually, while "integrating with the world

economy is a robust vehicle for development and poverty reduction in growing countries,

it might be still better if the rich countries further increased the openness of

their own economies" (Stern, 2000, p. 5)13. We have to recognize that lots of sectors, like

textiles and agriculture, which could provide real new opportunities for developing

countries, havent been liberalized. Another section of great concern is related to

intellectual property privileges, and the use of anti-dumping procedures, which seem to

discriminate against suppliers in growing countries. Moreover, while it holds true that

globalization provides many opportunities in its path, additionally it is true so it has costs for

specific sectors of the population in countries that are integrating in to the world economy.

Economic summary of Pakistan overall economy:

From modest origins, Pakistani current economic climate has moved successfully to a low-inflation high-growth trajectory since 2000. The central bank has managed inflation at around 3% per annum lately - a record since 1980. Over 1, 081 patent applications were registered by non-resident Pakistanis in 2004 uncovering a new-found self-assurance. Agriculture accounted for about 53% of GDP in 1947. While per-capita agricultural outcome has grown ever since then, it has been outpaced by the growth of the non-agricultural industries, and the talk about of agriculture has decreased to approximately one-fifth of Pakistan's overall economy. In recent years, the country has seen quick growth in companies (such as garments, textiles, and concrete) and services (such as telecommunications, transportation, advertising, and financing).

Pakistan's Experience with Globalization:

Pakistan liberalized its market within the structural modification conditionality's of the IMF program and World Bank or investment company lending. Pakistan's development in trade has not been as impressive as that of some of the fast globalizers. Pakistan's exports merchandize exports never have kept pace your of the rest of the world.

Pakistan's experience with globalization between 1990 and 2002 has not been great. Pakistan's share on the planet merchandize exports has dropped from 0. 16 to 0. 15. China's talk about in world merchandize exports gone up from 1. 80 to 5. 04. Malaysia's show in world merchandize exports has increased from 0. 85 to 1 1. 44

Pakistan's Trade Sector:

Pakistani production sector was one of the highly protected

sectors among the list of developing countries by having a blend of high external tariff structure

and quantitative restrictions. The level and dispersal of tariff rates have both been excessively

high historically. Reforms in the modern times have substantially reduced the maximum and

average tariff rates, narrowed the dispersal and removed quantitative restrictions to lessen the

anti-export bias, promote competitive and successful market sectors and encourage investment in

industries in which Pakistan has a comparative edge. The utmost rate of tariff which

was 225 % a decade ago has been slowly but surely brought down and will be further reduced from

the present level of 30 percent to 25 percent effective July 2002. Similarly, the common tariff

rate in addition has dropped significantly to 11 percent in 2000-01 from 51 percent a decade ago.

The on-going trade liberalization also includes removal of Para tariffs, deregulation of

administrative settings, and simplification and rationalization of tariff structure by reducing

statutory guidelines and orders. THE FEDERAL GOVERNMENT will also stage out Trade Related Investment

Measures in accordance with the contract with WTO and will not present any quantitative

import limitations beyond the standard limitations related to security, health, general public morals,

religious and ethnical concerns. Legislation on anti-dumping and countervailing duties will be

used for safeguarding the interests of local industry against potential damage caused by

subsidized exports.

Exports of all goods are allowed except for a few items. Lately restrictions on the

main staple food of the united states i. e. whole wheat have also been removed. There are no subsidies of

any kind for exports. But the development of Pakistani exports in the 1990s has remained sluggish

and the country's show in world exports has in truth declined. The lack of diversification has

resulted in growing concentration indices through the 1990s and thus increased vulnerability to

market risk. Pakistan has just started to diversify its export bottom and export market segments. This will

insulate the united states from shocks arising due to the price fluctuations or development shortfall in cotton or lower demand in the prominent market.

Exchange rate is currently determined by market pushes in the Inter-bank market and the

currency is floating free of any involvement by the Central Bank or investment company. All current account

transactions are totally convertible and the foreign exchange plan has been liberalized.

There is strong empirical facts that the countries which may have increased trade as a

share of GDP considerably within the last twenty years and opened up to trade have observed their

economic performance improve significantly and reduced poverty rates keeping away from any

systematic upsurge in inequality. As Pakistan continues to pursue policies directed at

maintenance of any market-based and competitive exchange rate, strengthening of foreign

exchange market, import liberalization and tariff reforms and export advertising measures

there is strong probability that Pakistan's potential customers for exports in world marketplaces will improve

allowing it to increase its market share.

GDP Growth Rate:

Pakistan's experience also shows that in the decade of 1990s, significant trade liberalization was along with a steady drop in the GDP growth rate, from 6. 1% in the 1980s to 4. 5% in the 1990s. Likewise, wide-ranging insurance plan changes and bonuses to encourage international investment did not lead to any significant upsurge in investment, apart from greater investment in the private electric power sector in the mid-1990s in response to a very attractive incentive bundle. Actually, overall investment declined from about 19% of the GDP in 1989-90 to only 15% in 1999-2000. Even on the export entrance, the trade performance is not satisfactory. Despite significant decrease in tariff rates, removal of nearly all non-tariff barriers and successive devaluations of the money (leading to an gross annual depreciation of about 10% in the exchange rate, from Rs 24 in 1990 to Rs. 60 per dollar in 2000), the growth in exports in the 1990s was only 4. 5% per annum, in comparison to 19% in the 1970s and 8. 5% in the 1980s.

Globalization And Re-Industrialization:

Originating from free-trade doctrine, some viewpoints declare that Pakistan, under globalization, should just forget about possibilities of a new influx for industrialization entirely. Though questionable, the case also argues that the East Asian 'Gang of Four' times are over, and globalization - meaning flow of international immediate investment (FDI) and openness - will determine if the country can industrialize or not.

Such quarrels also suggest that Pakistan should make an effort to get FDI through the insurance policies of liberalization, deregulation, and privatization. Most of all, the government should be cut-to-size and be placed out of markets in the process.

However, on the opposite part, forceful voices result from at least two quarters, which at a certain level are mutually supportive approaches to long-term economic development. Generally speaking, you are new institutionalize political economy and the second is new growth and new trade theory.

The moral of the story is the fact that industrialization under globalization for long-term economic development is too important a task to be remaining to blind makes of FDI and openness.

All three areas, first (government), second (business), and third (civil culture) must work together towards achieving countrywide development aims and strengthen countrywide corporations. Each sector can contribute a couple of competitive advantages.

Growth in textile industry:

During the previous two years, textile industry has spent heavily in managing,

modernization and replacement and so way imported new machinery worthwhile $ 1 billion. This

will certainly increase the productivity, quality of products and capital efficiency but equal

attention needs to get to working out or more gradation of skills in textile industry at all

levels. The institutional infrastructure such as Textile University, Textile Institutes etc. does

already exist in the country however the quality, staffing, requirements of instruction, curriculum and

its relevance to succeeding job requirement are the issues which have to be quickly fixed.

Employers should invest in on-the-job training and coordinate in-house courses in basic literacy

for those are illiterate as the pay-off from this investment will be quite substantial in form of

higher labor output and higher dividends to the businesses making such ventures. Induction

level training and apprenticeship will be the other tools which can help update the product quality of

manpower in textile industry.

Foreign Investment program and Capital inflows:

The distinctive feature of the decade of 1990s that damaged the style and level of capital moves to expanding countries was the shift from official development assistance (ODA) to private capital. This is facilitated both by a growing dissatisfaction among the list of donor countries with the effectiveness of aid and by international financial deregulation and removal of capital settings.

Although these moves have increased the risks to recipient countries in form of exterior volatility and also accentuated the contagion result the net advantages to producing countries can be

maximized under the right insurance policy environment. Start financial market segments have been associated

with higher progress but not to the same level as openness to trade. Annual FDI moves to

developing countries now amount to around three times the value of official flows. But the

share of Pakistan in total private capital flows to producing countries has in reality declined.

Pakistan has deregulated financial markets, released full convertibility on current

account and incomplete convertibility on capital market, is pursuing a market based mostly flexible

exchange rate insurance plan, and liberalized investment plan. Both foreign direct and portfolio

investment can flow in and out readily without any constraints or prior approval. Remittances

and repatriation of income, dividends and capital can be made automatically by the authorized dealers.

Human development:

Pakistan is a low income, labor surplus economy. However, while income in Pakistan are low by international specifications they aren't low in accordance with near neighbors, India and specifically Bangladesh. Furthermore genuine cost competitiveness will be determined by production and allowance for differences in labor and capital output suggests that normally Pakistan might not exactly be a lower cost location than its neighbors.

Information technology and Communications:

In developing countries such as Pakistan there can be an additional reason for investment

in the IT related sectors and especially in IT education. The changing demographics in the

OECD countries along with swift scientific changes in IT and communications have

raised the demand for skilled professional workers from expanding countries. India and

Israel have been providing such personnel in good sized quantities to the United States and more

recently to the EU countries. Pakistan has came into in this field late and is starting to put its

act jointly.

The Administration has allowed a bunch of bonuses for the progress of software exports

and IT-enabled services. Private sector has extended IT educational services significantly.

The present basic is too small and therefore it will require several years of dedicated quality work,

enterprise and marketing for making Pakistan IT industry and Pakistani IT employees familiar

brand in the U. S. and Western markets.


In my all survey, I realize that how globalization has modified the monetary sector of Pakistan

In release I make clear that the starting of free trade in world provide Pakistan a huge opportunity to develop their businesses internationally.

Globalization helps in lowering poverty in country. Also it causes the progress of agriculture and textile industry. globalization bring changes in cultural and social behaviours in Pakistan.

Pakistan is facing difficulties as occur competitive conditions. Pakistan industry must compete with overseas industry, so require improvement in industry.

Trade sector is lead to progress because trade obstacles are reduced by globalization.

Manufacturing industry is growing which is less in past now exports are usually more in developing industry. Telecommunication industry is become a big part of economy also globalization in Pakistan brings about the individual development.


Pakistan trade is limited to few countries. It should expand its trade to the other countries as it offers many resources that are helpful in producing different products that are exchanged by other growing and developed countries. Pakistan also have to make good relationship with regional and with other developed countries so more obstacles will be reduced. It also needs to provide good police. Shareholders should be provided cover.


The degree of Pakistan's trade and financial integration has increased through the nineties as they have exposed its overall economy and followed a more liberal trade plan. However, this level of integration is still less than that attained by similar expanding countries. . In spite of this, exports have listed a rise while imports have declined during this period. In previous exports are mainly basic on agriculture sector. Without doubt still agriculture sector is god source of revenue generation for Pakistan A shift towards created goods in the export basket can be observed but the export base continues to be concentrated in a few low value added items, particularly textile and clothing products. To be able to survive in this more competitive environment, Pakistan needs to restructure its textile industry on modern lines while emphasizing the quality of done goods. In this respect, the federal government should execute international quality specifications like ISO 9000 and ISO 14000 in the creation of textile products.

The communication technology revolution also brings life in market of Pakistan overall economy. Now this industry is growing fast and getting involved in economical development.

However Pakistan need more overseas immediate investment as it offers different sectors that happen to be required development.

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