Paucity of human resources and materials, poor planning and management skills, and the inability of Pakistan to timely attract 'substitute' external implementation resources is making difficult the on-time and within budget implementation of large infrastructure projects.
A study conducted by Pakistan Infrastructure Implementation Capacity Authority (PIICA) suggests that the industry stakeholders, as a matter of fact, lack capacity to deliver the planned Medium Term Development Framework (MTDF) infrastructure. Majority of stakeholders agree that contractors keep getting work even though they lack the capacity to perform.
The business environment has delivery constraints, and planned projects often took longer to complete, and even longer to achieve a financial close. Issues such as poor project planning, insufficient programming and weak implementation were common, with contractors having a "give it to us and we'll do it" attitude.
Pakistan is on the list of the most water-stressed countries in the world, and forecasts indicate that available resources are depleting rapidly, possibly leading to a state of water scarcity in the next two decades. Much of the water infrastructure is in poor repair, and Pakistan has to invest almost Rs 60 billion ($1 billion) per year in new large dams and related infrastructure over the next five years.
In the energy sector, Pakistan will face severe power shortages of approximately 6,000 megawatts by the year 2010 (equivalent to about three Tarbela dams) and 30,700 megawatts by the year 2020. Similarly, the transport sector inefficiencies are costing the economy 4-5 percent of GDP each year, indicating need for massive investment in roads, rail, air and ports. Lack of adequately skilled HR is across the board in all related professions, trades and among all stakeholders.
A rapid brain-drain continues to threaten long-term development goals; over half of the number of engineers, produced in the country each year in civil, electrical and mechanical engineering fields, find employment overseas. This exodus is due to the wide disparity in remuneration between the local markets and regional countries. When compared to a few selected regional countries, the present remuneration in Pakistan is half to one-third.
The HR gaps are also widening as the number of fresh entrants is decreasing because of low professional salaries and poor work environment. In 2006, professional and technical staff remuneration was found to be nearly two-thirds to a half in the country as compared to that in 1995. The local markets are unable to attract back professionals due to decreasing local wages and higher regional wages.
Contractors and consultants are not being, paid the right cost for products and services. Costs of materials and equipment inputs in Pakistan were found to be about 200 percent higher as compared to other countries in the region (in $ PPP terms) while contractors' rates in Pakistan were more or less the same as those prevailing in the region. Local rates despite appearing to be "competitive" in a regional context are in fact unworkable.
Most contractors also contend that rates are low, precluding adequate profit margins and allowing better salaries to professionals and workers. Given the current disparity between market rates and actual product costs, demand-supply gaps will widen when the MTDF program is implemented, unless rates are increased.
Corruption alone is estimated to account for more than 10-15 percent of the project value, and approximate loss over the MTDF is estimated to be Rs l00 billion, which is equivalent to the entire PSDP for major infrastructure in FY2005. A review of the public expenditures process showed that there was a significant difference in planned projects, projects actually started, planned allocations and actual expenditures.
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