Economic recovery necessitates federal-provincial synergy

LAHORE: Economy is likely to languish in low gear while impoverishment of the people of Pakistan may continue apace, if the federal and provincial governments do not start working in tandem with each other. 

Constitution has assigned distinctive roles to the federal and provincial governments. Foreign policy, border security, foreign trade, currency and fiscal discipline come under the domain of the federal government. Provision of power and energy also comes under the domain of the center. Price control, food, provincial trade, agriculture, law and order, education, and health are the responsibilities of the provincial governments. While most of the development budget is at the disposal of provinces, the federation is still responsible for 30 percent of the development. 

Experts wonder why despite of four years of low inflation/stable currency, three years of low interest rates, and constant rise in revenues, the economy is languishing in low gear. Peace has returned to country’s financial hub, construction activities are booming, car production is at record high, foreign exchange reserves are swelling, but economy is not gaining a marked momentum. 

A study of almost four years of governance reveals the federal government has performed commendably well than the provinces. The only shortcoming of the center is its failure to bring exports to where they should have been. The government, in fact, never tried to find out the local reasons behind steadily falling exports for it pinned this decline on global recession. The misguided government functionaries never got tired of citing the examples of India and China’s declining exports to bolster their unsound theories.

They conveniently ignored the fact the export profiles of these two regional giants were quite different from that of Pakistan. Their exports were dominated by non-textile items while that of Pakistan by textiles. After getting GSP Plus status from European Union Pakistan was expected to compete with Bangladesh that was already enjoying the same status.  In textiles the exports from Bangladesh continued to rise in the last four years but we could not take advantage of that status. Vietnam, which entered the textile trade a decade back, saw its exports gallop at an astonishing pace. 

As far as the provinces are concerned the law and order in all four was far from ideal. In fact the law and order was much better in Azad Kashmir that does not enjoy the same autonomy as enjoyed by the four provinces. Punjab in particular acted like an ostrich and engaged the Rangers when the situation went out of control. 

Agriculture suffered the most in the last four years. The growth may pick up this year but from a low base as agriculture growth declined last year, perhaps for the first time in our history. None of the four provincial governments succeeded in introducing certified biotech seeds. Our cotton production badly suffered due to use of spurious seeds. Punjab and Sindh the two major agriculture centers should have acted more responsibly. Paddy farmers in Punjab suffered because of low productivity of the available paddy seed. Indian basmati production per acre is 50 percent higher than that of Pakistan and they captured the global market. The resultant glut in local market plummeted basmati rates in Pakistan. 

Encroachments are a hindrance in smooth functioning of formal markets and traffic. Moreover, encroachments also aid the terrorists to conceal explosive materials.  Decanting of LPG is dangerous but all the provinces failed to control this menace. The market committees in all the four federating units are riddled with corruption and impede proper functioning of agricultural markets. 

Provinces have failed to coordinate and cooperate with the federal government to widen the tax net. While most of the traders, doctors and engineers may not be paying any income tax, they do pay professional tax to the provinces. Provinces collect services tax from many sectors, which reveals their annual turnover but the details are not shared with the federal government. As far as revenues are concerned the provinces are dependents on federal transfers for over 90 percent of their expenses. They lack the political will to bring numerous influential services into tax net. If they lack the capacity to collect tax they should outsource these taxes to federal government and give them nominal collection charges.

All the four provinces have abdicated their responsibility of providing education and healthcare. They have given free hand to the private sector to serve the richer segments of society. The poor are left at the mercy of substandard and mostly unavailable provincial services.