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Services-led Growth and Industrial Policy: Lessons for Pakistan

Sulman Hafeez, Siddiqui and Hassan Mujtaba Nawaz, Saleem (2008): Services-led Growth and Industrial Policy: Lessons for Pakistan. Published in: Socioeconomic Challenges Faced By Pakistan (2008)

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Abstract

The recent structural shift of global economy from manufacturing to services sector coupled with the pressure on economies to liberalize their services trade under GATS has brought the theorist and policy makers in services-dominated economies to devise appropriate theoretical and policy response to align their services-dominated economies with their industry, trade, and economic growth and development objectives. The emphasis on industry-led economic growth and development policy under both mercantilist and export-oriented approach has earned little success in developing countries like Pakistan due to lack of R&D base and lack of capital while the approach being highly intensive in both of these factors. Services today contribute more than 50% to the GDP in Pakistan and 44 percent to employment. The inter-sectoral linkages of services with industry imply strong existing and potential spillover effects for value added activities in these sectors. This paper through an extensive review of literature and empirical evidence from Pakistan examines the potential of services-led industrial, trade and growth policy for Pakistan to achieve objectives of value addition and diversification of production, competitiveness, employment, poverty alleviation, sustainable economic growth and development, and stability of external accounts. The proposed alignments in the overall economic growth and development policy, industrial policy and trade policy in line with the global trends and structural dynamics of services sector in Pakistan are discussed.

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