Pakistan is short of investible resources and that is the main reason for its under-development. Total investment which hovered around 17 percent of GDP during the last few years rose to 18.1 percent in 2003-04, but this is by no means sufficient to sustain a healthy growth of 6 percent or above in the long run.
The main reason for low investment rate is the abysmal level of domestic savings and the reluctance of foreign investors to choose Pakistan as a destination.
However, no less crucial is the inability of the government to collect enough revenues to meet its growing development needs.
The recourse to borrowings, both domestic and foreign, to bridge the gap between revenues and expenditures has resulted in accumulation of huge debt and high debt servicing cost.
This together with increased defence expenditures, necessitated by the geo-political environment, has led to a situation where there is only limited room for accommodating social sector requirements and development expenditures.
The present government has tried to reverse the situation by mobilising higher resources on the revenue side and building bridges with the country's neighbours and reducing the debt servicing cost on the expenditures side.
This has been expressly done with a view to provide more resources for neglected social sectors and up-gradation of the infrastructure to meet the requirements of the economy.
The increased fiscal space is largely utilised in these sectors by initiating projects through the Public Sector Development Programme (PSDP) - a document prepared by the Planning and Development Division of the Government of Pakistan.
Encouraging results of the government's policy are evident from the fact that the size of the PSDP has been increased from about Rs 130 billion in 2002-03 to a targeted level of Rs 202 billion in 2004-05, of which the Federal Government and provincial governments would utilise Rs 148 billion and Rs 54 billion respectively.
According to the PSDP document, the programme for 2004-05 "has been formulated within the basic policy agenda of the present government, which includes reducing poverty, ensuring good governance, generating employment and raising the quality of social services. Towards this end, the programme aims at laying a firm basis for enhanced future growth through investments in infrastructure and human resources."
Major investment, the document says, has also been programmed for the improvement of water courses to conserve scarce water for accelerated agricultural growth.
Adequate allocations have also been provided to road and power sector projects to meet the transport and energy requirements of the country.
These are indeed laudable objectives. Higher resources allocated for PSDP also indicate the commitment of the government at high level to steering the country towards a particular direction. But the overall system through which funds for various projects are earmarked and utilised seems much less than perfect, with the result that overall gains to the economy do not match the desired objectives.
Such a state of affairs may be attributed to many reasons. It is unfortunate that our members of parliament and ministers devote more time and exert all kinds of pressures to benefit their own constituencies and provide jobs to their kith and kin without merit.
Even in their own areas, they recommend various projects like electrification, building of roads, hospitals and schools around their own villages and those who had voted for them.
Since the Prime Minister and Finance Minister partly owe their existence to the members of the parliament, it is very difficult for them to refuse such demands from the party members. The bureaucracy also does not plan and present the best of projects.
The National Economic Council (NEC) meetings, chaired by the Prime Minister are a routine affair for various ministries and they don't put enough effort to prioritise the projects.
The overall project selection is, therefore, poor in the sense that the same amount of resources could have been utilised to yield more dividends from economic and social point of view.
The record of project execution is no better. Funds utilised during the year are always lower than the target and there is a tendency to spend the allocated amount in the closing months of the year.
This may be overcome if un-utilised funds are not forfeited as having lapsed. The element of corruption adversely affects the quality of the projects completed and the completion of the projects is usually delayed for a long period.
These are endemic problems, rooted in our culture and the way the country is governed. This practice, spanning decades, would not lend itself to easy solutions, but somebody has to make a beginning.
In our view, Shaukat Aziz, the Prime Minister-in-waiting, may be ideally suited to play such a role for obvious reasons. Public representatives, particularly the parliamentarians, must be made to understand that the country would be better served if they concentrated on constitutional matters and broad policy parameters of the economy rather than taking a narrow view of benefits to certain specific areas and a limited number of people.
Bureaucratic inertia and difficulties must be removed and Planning and Development Division should be given greater role and responsibilities so that what is decided at the higher level is properly delivered in time.
Being a priority area, the problems of agriculture need to be properly identified and resolved.
Water resources need to be developed by overcoming unnecessary political wrangling and timely availability of credit and unadulterated pesticides needs to ensured. By developing agricultural sector on modern lines, we would not only be exploiting the advantage of comparative edge of the country but also creating more employment opportunities and reducing food inflation.
In order to ensure efficient use of country's resources, we also need to maintain a higher investment level which is not possible without impeccable law and order situation.
We feel that if Shaukat Aziz has been selected by the powers that be with the explicit purpose to strengthen the country's economy further and reduce poverty, he must given the full authority to control all the relevant levers of the state without outside intervention.
Only in that case would he be able to deliver and change the economic destiny of the country.
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