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ECONOMISTS
tend to divide the world in terms of economic development or growth
potential. We have a group of G-7 countries, which are the most
industrialised and the richest. Also, there is a group of OECD
countries as well as a cluster of emerging economies.
There is, however, another set of countries which have been further
differentiated from the emerging economies and called BRICs. Goldman
Sachs, an international consulting group, in its 2003 paper coined
this acronym. BRICs stands for
Brazil,
Russia, India and China.
Because of their development potential, recent growth trajectories
and equally, if not more importantly, geographic and demographic
size, these are the countries which, it is suggested, have the
capacity to make a global impact and be a major force in the world
economy. If everything goes smoothly, and there is no economic
miracle either, then the authors project China could become the
largest economy in the world by 2041, India the third largest by
2035, and the combined BRICs GDP could exceed that of G-6 (G-7 minus
Canada) by 2041.In its December 2005 paper, the same consulting
group extended this concept even further and discussed the
probability of the ‘Next Eleven’ economies catching up with and
becoming like BRICs. Pakistan is also included in this group of the
famous Next Eleven, bracketed with countries like Bangladesh, Egypt,
Indonesia, Iran, Mexico, Nigeria, the Philippines, South Korea,
Turkey and Vietnam.
Before examining
Pakistan’s
potential to be a tour de force in the global economy, it would be
appropriate to look at the factors that have been taken into account
to declare a country a potential BRICs. The first and foremost, to
our surprise, is demographic profile. According to the authors,
without a sizable population, even economic miracles like Hong Kong
and Singapore cannot have a global impact in spite of their high
levels of income and living standards.
The authors also developed a Growth Environment Score (GES) to rank
each of 170 countries for their performance under closely
inter-linked performance categories. Stable macroeconomic policies
ensure low inflation, tight monetary policy and reduction in fiscal
deficit.Openness to trade and foreign investment is a prerequisite
for rapid economic development, and one of the many important signs
of healthy macroeconomic conditions. This provides greater access to
better investment rates, modern technology, larger markets and
greater employment opportunities. There is also a positive
correlation between openness and profits, productivity and output at
the micro level.
Another factor that constitutes part of GES is technological
capabilities. These relate to penetration of PCs, phones and the
Internet. These signify the presence of an educated workforce as
well as their linkage with the global world.
Quality of human capital is also a core determinant of the GES.
There is hardly any doubt now regarding a close and statistically
strong association between education and economic growth. According
to one estimate, one additional year of schooling leads to 0.3 per
cent faster annual growth over a 30-year period.
Political stability and rule of law depend on institutions which
include legal systems, functioning markets, health and education
systems, financial institutions and government bureaucracy. Their
quality is crucial to the promotion of trade and investment in the
country. Institutional capacity is needed to introduce efficiency in
the system and execute stable macroeconomic policies in the country.
Though all the BRICs countries (Brazil, Russia, India and China)
score differently on these criteria, as a whole they come in the top
half of the rankings for developing countries and above the
developing country mean. China ranks most high (16th), followed by
Russia (44th), while
Brazil and India
are further behind at 58th and 60th respectively. Had this been the
only criteria, some other countries such as South Korea would have
been part of BRICs, but it is their bigger size that lends them
greater weight.
The GES individual scores highlight where there is room for
improvement. Brazil scores relatively well on measures of political
stability, life expectancy and technology adoption, but quite poorly
on investment, education levels, openness to trade and government
deficit. Historically, the performance of Brazil on the
macroeconomic front has been pretty poor and it seems to carry this
baggage along.Russia also scores well in terms of education, fiscal
position, external debt position, openness to trade, technology
adoption and life expectancy, but is placed at less than an ideal
position in terms of political measures (political stability,
corruption), investment rates and inflation.
India scores relatively well in terms of rule of law, external debt
and inflation, but quite poorly in terms of levels of secondary
education, technology adoption and fiscal position. It, along with
Brazil, also lags behind in terms of the openness of its
economy.China ranks well above the mean on macroeconomic stability,
investment, openness to trade and human capital. Its rankings on
technology adoption are more mixed (PC usage is still quite low) and
corruption measures are also a little worse than the mean.
The GES scores are likely to be based on data provided by individual
countries (for example World Bank Indicators) and surveys which are
based on individual perceptions of businessmen working in those
countries. The latter are likely to be subjective and biased.
However, there is still some general truth in the analysis which
merits our attention.
Ref link:
http://www.dawn.com/2008/05/19/op.htm#1 |
