In Pakistan, historically, regional economic disparity
has been an important political issue. During the 1960s the economic disparity
between East and West Pakistan fueled the movement for national independence
in Pakistan's eastern wing that became Bangladesh in 1971. During the
subsequent three decades the issue of regional disparity between the remaining
provinces of Pakistan acquired a significant emotional charge. It may
be time now to begin a serious analysis of the problem in order to devise
policies for strengthening Pakistan's national integrity. An understanding
of the dynamics of regional disparity is also important as Pakistan embarks
on a programme of devolution of power to the district level.
In this article we will briefly analyze the mechanism
of regional economic disparity in Pakistan and propose an alternative
planning perspective for a more equitable regional economic growth.
Mechanism of Regional Economic Disparity
The earlier study by Naved Hamid and me and later
studies by Hafiz Pasha et al showed that not only have inter provincial
economic inequalities increased over time, but also the degree of inequality
within provinces has accentuated. It was interesting that the economic
disparity between the districts of each province was positively correlated
with the overall provincial economic growth rates, i.e., the rank ordering
of intra provincial inequality was congruent with the rank ordering of
provincial growth rates.
The evidence in Pakistan as indeed for the world as
a whole shows that when industrial growth occurs within the framework
of the market mechanism there is a cumulative tendency for the relatively
developed regions to grow faster than the relatively less developed regions.
The developed regions enjoy internal and external economies, and lower
costs of production relative to other regions which make the initiating
region cumulatively more advantageous for further investment. The specific
factors underlying cumulative divergence in the attractiveness of regions
for further investment and hence increased disparity in regional growth
rates are: Concentration of communications, banking facilities, public
utilities, technical know-how, trained manpower, and maintenance facilities.
Conversely, as growth is concentrated in the developed region, it pulls
capital and skilled labour from the backward region, thereby adversely
affecting the age composition, skill and capital endowment of the backward
areas. Agriculture growth following the Green Revolution in the 1960s
also served to accentuate regional economic disparity. This was because
the new high yielding varieties required a seasonally flexible supply
of irrigation water. Thus those provinces which had a larger proportion
of their cultivated area under irrigation, could achieve a relatively
faster agriculture growth.
Planning for Equitable Regional Growth
The attainment of regionally equitable growth means
a carefully designed government intervention for greater regional balance,
while allowing the dynamic growth factors of the market mechanism to remain
intact. At the moment economic planning essentially involves allocating
government resources amongst various "sectors" of the economy
such as agriculture, industry, energy, irrigation, etc. The current planning
exercise involves achieving consistency between sectoral growth targets
and external and internal financial resources. Space is assumed out of
the planning exercise except for sops like Special Development Programmes,
in which investment in backward areas is marginal to the overall plan.
Regionally equitable development requires placing the regional dimension
into the heart of the planning exercise. Each investment package must
be evaluated in terms of its impact on regional growth, before designing
fiscal/monetary policy incentives and institutional support. This has
become particularly important now that the government is envisaging a
major public sector development programme for building dams, ports and
Pakistan's experience has shown that the development
of backward regions cannot be stimulated simply by giving tax incentives
to entrepreneurs for investment in backward areas. For the entrepreneur,
the attractiveness of infrastructure and markets in the developed regions
far outweighs the attractiveness of tax incentives. In rare cases where
the entrepreneur does invest in the area designated "backward",
(e.g. Hub Chowki) he indulges in "border hopping", i.e., he
locates the unit just across the border between the developed and backward
regions. The industrial unit draws its inputs and sells its outputs in
the developed region, and therefore generates secondary multiplier effects
in the developed rather than the backward region.
If investment is to go deep into the backward regions to generate self
sustained growth, the development of infrastructure in these regions is
essential. The question then arises, where in the vast "backward"
region to set up the infrastructure and how much? A regional planning
exercise would involve mapping the economic and social infrastructure,
geographic location of markets by size and source of raw materials. On
the basis of such a "map", potential growth NODES could be specified
in the backward region. These would be locations which on the basis of
some existing infrastructure, closeness to a local market, or raw material
deposit, qualify for supplementary infrastructural investment by the government.
The first step towards specifying such growth nodes has already been taken
with our study on Industrialization potential of Selected Districts (A.I.
Hamid, A. Hussain, A. Qutub). This study has proposed growth nodes in
the following districts: Khairpur, Nawabshah and Sanghar in Sind; D.G.
Khan, Muzaffargarh and Bhakkar in the Punjab. A similar exercise could
be conducted for all the backward regions of the country. The nodes could
be specified in such a way that as growth begins to occur, they begin
to interact in terms of factor markets, thereby generating self-sustained
growth diffusion in the backward areas.
In conclusion one can propose that for a regionally balanced economic
growth and in the designing of fiscal/monetary policy incentives, the
regional dimension needs to be taken into account. In the same way in
the design of poverty alleviation measures by the government and NGOs,
differences in the level of poverty and the dynamics of poverty creation
as between provinces and districts should be an essential consideration.