Efficiencies of existing infrastructure can better aid growth

LAHORE: The growth strategy needs a paradigm shift to ensure the efficiencies of existing infrastructure and the Rs4 trillion worth of lingering projects instead of announcing new projects from the meagre resources.

No one ever tried to evaluate as to why we have failed to perform consistently despite adding new infrastructure every year. When the resources are scarce it is not prudent add new infrastructure projects and squeezing funds from existing ones. Take the example of 969MW Neelum-Jehlum hydropower project launched in 2008; it was scheduled to complete by 2012. The funds for the project were not released in time which escalated the cost by over hundred percent, while many similar projects like Diamer Bhasha, Dasu and others were announced.

The 969MW power project is still incomplete and now bank loans have been arranged for its final phase of completion. Timely completion would have generated much more revenues than the last five years allocation of the government for hydro electric projects.

In our single minded approach to build roads, buildings, and other projects we neglected factors like governance, human capital, efficiencies, and strengthening domestic commerce vital for growth. This has resulted in wavered economic performance. We grow at a high speed for few years and then go in to recession. This is injurious for the economy than even slow but sustained growth. Industries that become sick during downturns rarely revive.

Sustainable long term solutions need an integrated approach to ensure that infrastructure after completion creates job opportunities. Through this integrated approach reforms in infrastructure, education, skill development and labour laws are introduced.

Evidence from more than a hundred countries with different cultures and economic systems shows high school and college education coupled with adequate state provided healthcare facilities greatly raises a person’s income. This is even after netting out direct and indirect costs of schooling, and even after adjusting for the fact that people with more education tend to have higher IQs and better-educated, richer parents.

The main reason for unemployment is due to the planners failure to realise that Pakistan’s labour market is going through five transitions that from farm to non-farm, rural to urban, unorganised to organised, subsistence self-employment to decent wage employment, and school to work. We need industries and services that have acceptability of the skills acquired during these transitions. Moreover, we need to close down programmes that do not produce the required skills.

We promoted industrialisation on special incentives that failed to deliver if we look at the progress made in industrialising by competing economies. Shortage of power and energy is not a valid excuse for slow industrial growth.

How many green projects were launched during the 1997-2007 decade when both power and energy were surplus? The interest rates and inflation was also lower during most of this period. India and China experienced the same infrastructure constraints but they continued with sustained growth.

The only difference was that we neglected prudent management, efficiency, innovation and productivity while China and India did not.

We in fact still persist with rent seeking mentality instead of providing fair opportunities for everyone.

In our endeavour to promote industries we loaded ourselves with too many things that we could not manage.

We forgot other sectors of the economy that could trigger more growth. We mimic other economies without realising that those successes came more from better governance and transparent policies.

There is a dire need to change the mindset of planners.

Growth will not come from exports only; domestic commerce is equally important; hurdles in domestic commerce should be probed and removed.

Rural development should be given priority. Growth model should shift incentive based industrialisation in few sectors to thematic approach where all sectors get the same incentives and facilitation.

Market reforms, innovation and entrepreneurship should be the basis of new economic planning.