Promoting Domestic Commerce for Sustainable Pro-poor Growth

To frame the issue, two characteristics of Pakistan should be noted. First, Pakistan has a very large market of 160 million people. For decades, this fact has been ignored in policy because of the focus on production and exports.1 Second, a large and growing population has now produced a huge youth bulge in the population which will work itself out for much of this century: 50 percent of the population is “under 20”.2 Progress of the spread of education has been slow, leaving this bulge largely unskilled, and hence with limited employment possibilities. Domestic commerce is the most pro-poor growth possibility in the country. Currently, it employs about 40 percent of the labour force and contributes about 52 percent to GDP. If it can be provided with an enabling environment, our estimates suggest that it could help increase the growth rate by at least 2 percentage points. In addition, a pick up of activity in this area would increase employment substantially. Following this agenda would need a huge increase in construction activity, strong development in hotelling, retail shop, transport, warehousing, storage, and other service industries. The employment impact of this would be far larger than through investment in any other sector.