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.
CONCLUSION
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.
|