What other sectors of the economy would one support to absorb the large annual increments to the labour force and enable them to earn a respectable livelihood? The relevance of this question stems from the fact that our success in achieving better “inclusiveness” in the “economic growth” that we registered in the first six-seven years of this century has not been noteworthy. Much of this growth was concentrated in the relatively capital- and skill-intensive sectors of finance, telecommunications, IT, oil and gas and motor-vehicle assembly which favoured those at the upper end of the income scale; the bulk of the population, with limited education and skills, was unable to participate meaningfully in the growth witnessed in these sectors.
Sectors like housing and construction, information technology (especially in the form of BPO services) and communications, wholesale and retail, our range of merchandise exports and SMEs are essentially labour-intensive, with relatively higher employment elasticities. Even sub-sectors of industries like consumer appliances, auto assemblers, engineering, and communications, which are relatively capital-intensive, generate large employment opportunities through their backward and forward linkages – especially through the development of the vendor industry and the related service sector for the sale and after-sale maintenance of these products. Their growth will be stimulated by both the software and hardware referred to above and through appropriate amendments in banking regulations and credit schemes – e.g., by restricting export refinance to SME exporters.
Furthermore, to facilitate the growth of labour-intensive SMEs there is need for a programme to develop secondary/intermediate cities and towns by adopting a cluster-based approach (with the cities/towns to be connected, if necessary, through expressways) on the basis of economic potential (in terms of available markets and commercial centres), returns to the economy and payback period, instead of selecting individual cities in different parts of a province.
Such an approach will lower additional investment costs for both the government and the private sector. For foreign investors, in particular, the costs of investment or doing business and locating assets will become lower for each new venture as more clusters are developed in other geographical areas of the province. These investments could attract large multinational retail chains like Metro, Makro, and Carrefour to locate in these areas creating opportunities for the development of high quality supply chains and related skills, especially for agro-processed products. There would be a huge multiplier effect associated with the operations of such retailers. The experience and expertise gained by those supplying goods to such franchises, those providing services of warehousing and transportation and by those trained by such branded outlets in managing the entire range of services linked to retailing and timely delivery of goods and services would enable them to improve the standards of their products so that they can market their products and services internationally through the global networks of such companies, especially their stores operating in the Middle East.
One sector that will require special attention at the national level, despite being a subject in the provincial domain under the Constitution, is agriculture. Inclusive, robust and sustainable pro-poor growth has to be anchored in agriculture and livestock, from which 44 percent of the workforce (72 percent in the case of females) directly earns its livelihood. The sector requires support not only for poverty reduction and more equitable development of regions but also to bring more stability in growth in a manner that ensures that gains accruing from this process are safeguarded. The sharp rise in international prices for food crops and the opportunities arising for Pakistani farmers to trade in other cash crops and enhance their earnings (especially with the gradual removal of subsidies in OECD countries and the resulting increases in prices of such crops) can contribute significantly to the rapid enlargement of the middle class in rural areas.
The yields per acre can be doubled through modern agronomic practices using available technology, without aimless subsidisation of outputs like wheat and inputs like fertiliser and irrigation services. Furthermore, for achieving higher growth in agriculture earnings we will need to shift effort away from food crops to horticulture, dairy farming and crop varieties that are less dependent on water. Since horticulture produce is perishable, logistics of its transportation, storage, etc., (the value chain) will acquire importance, which will in turn require changes in the legislation relating to market committees which restricts the sale of such produce directly to the private sector.
Admittedly, however, to achieve such increases in productivity requires a package of several initiatives, the most important of which will be better management (both quantities and timing) of a key input – water. For the efficient use of water, greater focus will have to be placed on methods like land levelling, zero-till cultivation, drip irrigation, greenhouse and tunnel technology (for horticulture, fruits and vegetables) and policies to facilitate development of private cold storage chains.
Moreover, since there is lot of underemployment in agriculture, the challenge would be to increase the productivity of this labour from its movement out of the sector, but not as forced migration out of misery but as a shift to more remunerative non-agricultural employment. Ideally, so as not to aggravate the pressure of rural-urban migration, this would require its absorption in non-agricultural activities in the rural sector.
In view of the impending crisis in the availability of water, the importance of the efficient use of this scarce resource cannot be overemphasised. However, it will not be easy to conserve water use and improve use efficiency through the pricing mechanism. It is difficult to get public understanding, let alone acceptance, for the need to appropriately price the consumption of water by treating it as a scarce resource – the general perception being that it is a natural resource given to man by Allah. The demand for heavily subsidising electricity or diesel for running tubewells, the under-recovery of cost of canal irrigation services and the subsidy in providing water for drinking, washing and sanitation are examples of what efforts to curb its consumption are up against.
To address both transient and permanent poverty of different groups in society there will be a need to initiate employment guarantee schemes for unemployed able-bodied youth and administer transparent safety nets system for the disadvantaged, vulnerable and indigent. In this context it is important to note that although the more labour- intensive and less skill-intensive agricultural sector, from where a greater part of the population derives its earnings, also benefited from good weather, higher support prices for wheat maintained by the government and higher commodity prices internationally which kept domestic prices high as well. It was mainly the province of Punjab, with a relatively less skewed ownership of land holdings, which saw a wider distribution of this prosperity. Punjab also profited from the growth in the sectors referred to earlier above (a) because of a sounder educational and skills base (admittedly Karachi also benefited from this factor), a more competent bureaucracy, greater ethnic and lingual homogeneity, better access to the bureaucracy in Islamabad and stable single-party governments.
This writer fears that as Islamabad’s role is reduced in financing/providing services or infrastructure because of resource constraints, the disparity between Balochistan and, say, Punjab and Sindh will widen even more sharply unless the residents of this province are given total control over their oil, gas and mineral resources – their resource base on which their development can be founded.
Finally, “poverty” or deficiency when measured in terms of the controversial and much debated access to basic social and economic services (since we lag behind most developing countries similarly placed economically or faring even worse than us) has over time become more severe than the poverty estimate on the basis of nutritional intake. In this context the foremost issue requiring attention is not just poor enrolment and retention levels in schools, but the quality of the schooling available to the poor, the biggest hurdle in the way of their social mobility. Such improvements in schooling will need to be supported through skill development initiatives anchored in public-private partnerships, with international certification of those graduating from this system to enable them to achieve mobility, domestically and overseas, thereby enhancing their earning capabilities.
The writer is a former governor of the State Bank of Pakistan.