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Strategic Dimensions Of Economic Revival And Poverty Eradication
Dr.Akmal Hussain
Published in: The News on DECEMBER 8, 1999

The challenge in designing a strategy for economic revival is not merely to substantially accelerate GDP growth but also to change the structure of growth itself such that it is accompanied by greater equity and employment.

A three pronged initiative must therefore be undertaken and carefully sequenced in time: (1) Winning both time and space for an independent national revival strategy through financial negotiations with the IMF and G8 countries. (2) Injection of aggregate demand into the economy by increasing investment in those sectors, which have the capacity of generating a relatively higher GDP growth, employment and exports per unit of investment. (3) Launching a national strategy for poverty alleviation characterized by rapid pace of coverage and cost effectiveness.

Let us examine each of these prongs of a possible national revival strategy:

1. The necessary financial space must be won through economic diplomacy with G8 countries and the IMF. We must reason with them that the rescheduling of some of our debts that occurred last year must be repeated again in the year 2001 to avoid a crippling increase in our debt servicing burden. Another three years of respite from debt servicing beginning from 2001 is necessary to win the financial space for launching a revival strategy. What makes this economic diplomacy particularly challenging is that together with achieving a second rescheduling of loans we must also persuade the IMF that a home grown, high growth strategy is necessary for sustainable macro economic stabilization.

The second prong of the revival strategy should be to sharply increase investment through public-private partnership in three key sectors of the economy: (a) Rehabilitation of the irrigation system which is currently in a state of acute disrepair with irrigation efficiency down to only 30%. Such a campaign would involve organising semi skilled labour for the desilting of canals, strengthening the banks, organising villagers for making "Pucca Khaalas" (concrete lined water courses) and to improve the gradient of water courses and farmlands in order to improve both the delivery and application efficiency of irrigation. Such a campaign being inherently labour intensive would not only generate large-scale employment rapidly but also help to improve water availability and yields per acre at the farm level. If the campaign is professionally designed and managed, the funding for financing wage payments to the newly employed labour force could be sought from the World Bank or the Asian Development Bank both of which have poverty alleviation and sustainable agricultural growth as their priority concerns.

In addition to the campaign for improved maintenance of the irrigation system other labour intensive infrastructure projects should also be undertaken to simultaneously generate employment and stimulate aggregate demand in the economy. Such projects could be the building of farm to market roads, national high ways and ports, together with improved infrastructure in small towns across the country. Such infrastructure projects would need to be undertaken through joint venture arrangements between domestic construction outfits such as the FWO and specialized foreign firms. The joint ventures would have to be pro-actively facilitated by the government. (b) Rapidly develop export led production capacity for milk, fisheries and high value added agricultural products such as fruits, vegetables and flowers. Let us illustrate this initiative by using the example of milk. At the moment Pakistan is producing approximately 177 billion rupees worth of milk annually for domestic consumption. This makes milk the largest agricultural product. By comparison, wheat, Pakistan's largest crop has an annual production value of approximately 111 billion rupees. Unlike wheat however, the output of milk can be accelerated sharply within a couple of years. Currently Pakistan's milch cattle have a yield per animal which is one-fifth of the European average. Demonstrable experience in the field has shown that the milk yields per animal in Pakistan can be doubled within two years through scientific feeding, breeding and marketing. If the institutional framework could be established for training the farmers in scientific feeding and breeding and if the logistics could be set up to collect milk from the farm door by means of refrigerated transport, milk output in Pakistan could be doubled. This would have a dramatic impact not only on the incomes of poor peasants, but also on exports and overall GDP growth. In view of the fact that Pakistan lies at the hub of milk deficit regions such as Central Asia, West Asia and South East Asia, if milk out put in Pakistan could be doubled our exports earnings could increase by US $ 4 billion annually. Keeping in mind that Pakistan's balance of trade deficit is about US $ 1.5 billion an additional four billion US $ of foreign exchange earnings from milk exports would resolve Pakistan's balance of payments problem. Such an initiative therefore can lead to accelerated exports, higher GDP growth and improved income distribution in Pakistan.

Marine Fisheries, also provide a significant potential for improving foreign exchange earnings although not as large as the potential for milk. Here again what is required is improved institutional support and better management rather than huge investments by the Government. In the case of marine fisheries currently there are large losses and failure to achieve significant exports due to the fact that the storage conditions of fish during transportation are both unscientific and unhygienic by international quality standards. Currently alternate layers of fish and hard sharp edged ice are placed in containers on the boat. Under the weight of upper layers of fish and the sharp edged ice, fish at the lower layers are crushed, and the resultant bleeding causes putrefaction. To avoid this it is necessary to provide shelves for layered storage of fish in boats, topped by dry ice, with fiberglass covers. Through such measures it would be possible to bring back the fish at the European Union standards of minus 7oC and thereby make it exportable. An export potential of 300 million dollars exists over the next three years if such improved management of the marine fisheries industry could be achieved.

Another element in increasing high value added production and export in the agricultural sector would be to facilitate the production of fruits, vegetables and flowers for exports. This would require institutional support for improved quality of output, improved grading packaging, and refrigerated transport right up to the cargo terminals for air freight to the export market. (c) Establish industry specific training institutions combined with institutional support for credit and marketing to the small-scale industrial sector in Pakistan. Large-scale training of software experts for example could quickly result in significant software exports from Pakistan. India with its 200,000 computer specialists, exports about 5 billion US$ worth of software and has a target of 20 billion software exports in the next five years. There is no reason why Pakistan cannot build a pool of software experts for a large increase in its export earnings. This would of course require a pro-active government to establish joint ventures between large software companies such as Microsoft and Pakistan's institutions such as LUMS and Private sector firms such as Informatics.

Similarly other high value added small scale industries such as manufacture of moulds, dyes, electronics and machine tools could be encouraged to produce quality products for export. This could be done by providing institutional support in terms of credit, quality control management, skill training and marketing. (A detailed blueprint on such industrial support institutions is available in my book titled: A strategy of Poverty Alleviation). Such support institutions while being facilitated by the government can and should be in the private sector and be market driven. Such small-scale industries have the advantage of having a low gestation period, are labour intensive, and can generate larger output per unit of investment compared to the large scale manufacturing sector. This would accelerate GDP growth in the medium term at relatively low levels of investment and would also increase employment and exports for given levels of GDP growth.

The third prong of the revival strategy should be to launch a national campaign for poverty alleviation. The objective of this campaign should be to facilitate rapidly and cost effectively, the establishment of village and mohallah level organisations of the poor through which they can identify income generating projects, initially at the household level; acquire skill training from governmental sources, private sector, NGOs and Donors; and access credit for micro enterprise projects through apex organisations such as the Pakistan Poverty Alleviation Fund. It is important that such village level community based organisations (CBOs) be autonomous and have the ability to form cluster apex organisation with other CBOs. Such organisations by means of social mobilisation, increased productivity through skill training, increased income, savings and investment would begin a process of localised capital accumulation. Such a process would be integrally linked with the emergence of a new consciousness of participatory development. The poor could thus break out of the poverty nexus and become active subjects of economic growth rather than being passive victims of it. Such a process of village/mohallah level increases in productivity incomes and savings, would not only constitute a direct attack on the poverty problem but would also contribute to a faster and more equitable macro economic growth.


The strategy proposed above, has three key features: (a) It requires economic diplomacy to win financial space through rescheduling of loans, without losing the freedom to launch an indigenously designed growth strategy. (b) It focuses on infrastructure, milk, marine fisheries, fruits/vegetables and small scale industries. Each of these sectors has a capacity to generate a relatively higher GDP growth, employment and exports per unit of investment and within a short time period. (c) It initiates a process of increased incomes and investment by the poor, through which GDP could be restructured for both a higher and more equitable economic growth.

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