Three alarm bells

Capital suggestion
Alarm bell 1: in 2011, we produced 95 billion kWh of electricity. Alarm bell:wWe are still producing 95 billion kWh of electricity. Yes, we have added Nandipur and we plan to add Neelum-Jhelum. Yes, the government has been inaugurating a new power project almost on a monthly basis but the hard reality is that we are still producing the same amount of electricity that we were producing four years ago.
Yes, the PML-N paid down a wholesome Rs480 billion worth of circular debt in 2013 but the World Bank now says that the circular debt has swollen to Rs661 billion (including Rs335 billion parked in the Power Holding Company).
Our overall production of electricity hasn’t budged in four years but the industrial electricity tariff in Pakistan is now one hundred percent higher than the tariff in India and Bangladesh (as a result our exporters are being priced out by our competitors).
Alarm bell 2: September-over-September export figures are down a sharp 17 percent. Export of cotton is down 29 percent in value terms and 13 percent in quantity terms. Export of cotton cloth is down 38 percent in quantity and towel exports are down 24 percent in quantity terms.
Outside of the textile sector, non-textile exports are also down rather sharply. Export of cement is down 34 percent, engineering products down 27 percent, jewellery down 70 percent and shoes down 27 percent. Yes, exports – textile and non-textile – are falling both in value as well as in quantity terms.
For the record, nearly 60 percent of all our exports are cotton related. And the import of textile machinery is down a hefty 21 percent. And what that means is that over the short to medium terms the prospects of exports picking up steam are low, to say the least.
Alarm bell 3: in 2007-08, foreign direct investment (FDI) was recorded at $5.2 billion (just when the ‘war on terror’ was at its peak). In 2012-13, the year that PML-N came back to power, FDI stood at $1.4 billion. FDI has since fallen to under a billion dollars, $851 million to be exact, the lowest in a decade.
To be certain, over the short to medium term, there is a direct relationship between energy generated in an economy and the economy’s GDP growth. The question that arises is that if we are still producing the same amount of electricity that we were some four years ago then why is the government reporting back-to-back GDP growth. The probability that national accounts are being fudged is therefore quite high – and that we might get caught.
One, we are producing the same amount of electricity that we were four years ago. Two, exports are falling. Three, foreign direct investment is falling. Question: where is the GDP growth then coming from?
We need to listen to the three alarm bells. And we need to look for solutions. The World Bank maintains an ‘Ease of Doing Business’ index. The index has a dozen sub-indices that include getting electricity, time consumed in paying taxes, getting credit, dealing with permits, enforcing contracts, transparency and resolving insolvency.
As per the index, over the past few years, doing business in Pakistan has become more and more difficult. If the government is serious salvation lies within this index.
The writer is a columnist based in Islamabad.
Email: farrukh15@hotmail.com. Twitter: @saleemfarrukh