(especially energy), health and education (primary, higher and training), and
the business environment (international distribution networks, supplier qual-
ity). The report argues that a ‘comprehensive institutional reform program is
vital to Pakistan’s competitiveness strategy’ (Competitiveness Support Fund,
2010: 62). Aspects of this ‘comprehensive strategy’ include ‘working with
Pakistan’s leading export industries to remove obstacles to competitiveness,
lower cost of inputs, enhance efficiency of trade logistics, increase productiv-
ity and introduce innovative technology’ (2010: 43); also modernizing the
financial sector; ending electricity shortages; improving infrastructure;
improving education and training; commercializing research in Pakistani
universities; and creating an effective security and police system that reduces
the costs of doing business. This is no clearly articulated strategy for policy
reform but rather is a bewildering and overwhelming list of desirable
outcomes.
A further example comes from the government. ‘Pakistan: A Framework for
Economic Growth’ (Government of Pakistan, 2011) contains a familiar litany
of aspirations posing as policy advice: to ‘strive for institutions that support
free and fair markets,create a professional, well trained civil service’
(2011:17–18); ‘developing physical and regulatory space for entrepreneurial
and innovative investments’ (2011: 27); ‘governance and institutions reforms
are required’(2011: 41); ‘a focused effort will be required in areas such as
science and technology, attracting talent and investment, venture capital and
education policies that promote enterprising talents’ (2011: 56). The appendix
to the report (2011: 136–44) lists the short-term policies that should be
achieved within a year. These include: restructure public enterprises; rational-
ize subsidies; amend zoning laws and building regulations; establish a regula-
tory body for the real-estate market; enforce rules and regulations in energy
provision; and enhance literacy.
It is important to prioritize reform because policy change is not free but has
real costs. Open economies require foreign exchange reserves (usually dollars)
as an insurance, to reassure foreign investors they will be able to buy and sell
the country’s currency and, most importantly, be able to change it back into
dollars and exit if necessary. These reserves generate a huge cost in interest or
investment income forgone. India’s reserves, for example, grew from nearly
nothing on the eve of trade liberalization in 1991 to nearly $300 billion in
October 2012. This would have been enough to fund India’s rural employment
guarantee programme for almost forty years. Trade liberalization to promote
greater openness is likewise not just about mandating lower tariffs on imports
and correcting any overvaluation of the exchange rate. In fact trade liberaliza-
tion and trade integration actually have highly demanding legal and organiza-
tional requirements. WTO obligations including customs valuation, phyto and
sanitary measures (food safety and animal and plant health measures), and
enforcing intellectual property rights were estimated by Dani Rodrik in the
mid-1990s to cost the typical developing country $150 million. The 1997–98
Asian crisis generated a new round of complicated international codes and
Conclusion: Eight Principles for Policy-Makers 291