Speaking at a ground breaking ceremony of the Karachi International Container Terminal Phase III, Prime Minister Shaukat Aziz took the opportunity to reiterate his Government's support for a five-pronged economic strategy: development of infrastructure, building water reservoirs as a drought mitigation measure, a 35-year energy plan designed to ensure that electricity supply meets the growing demand, human development incorporating a range of support activities, inclusive of capacity building, training and research activities, and, lastly, a second generation of economic reforms.
While some may lump water reservoirs and energy as part of infrastructure development, yet Shaukat, by keeping them distinct, showed good judgement. Studies undertaken by international financial institutions have shown that Pakistan has been slowly moving towards drought like conditions for a decade and that unless appropriate measures are taken immediately we would not be able to meet the water needs of our people.
In addition, latest statistics reveal the disturbing fact that a little less than half of our population has no access to clean drinking water. Pakistan is also deficient in energy, an essential input for the manufacturing sector, and studies have shown that part of the problem of low productivity and high input costs, particularly in the manufacturing sector, can be attributed to the discrepancy between energy supply and demand.
Thus the focus on these two sectors as distinct from other infrastructure was necessary. The Prime Minister further added that the government was fully aware of the opportunities and challenges in the economic arena, and was determined to carry out its agenda.
There is no doubt that our economy requires investment support by the government, particularly in the regulated infrastructure sector. If prices of utilities are deregulated and allowed to reflect actual costs, then and only then, will the private sector be attracted to invest in a utility. That this, according to Shaukat, is the long-term goal of the present government is praiseworthy. But we have some way to go yet. Domestic productivity is on the rise but it is still largely agriculture-led and a bad crop year, due to drought or flooding, can reverse our economic fortunes in a matter of weeks.
Adequate infrastructure facilities do provide the basis for improvement in manufacturing and farm productivity, but, at the same time, a producer/entrepreneur also requires favourable conditions which maybe external to the economy he operates.
These include among others the prices of inputs, including oil, the prices of our traditional export items in the international marketplace, factors that have led to a dip in our balance of payments position in recent months.
Given the venue of his speech, the Prime Minister also focused on the importance of ports. He praised the contribution of the three ports - Karachi Port, Port Qasim and Gwadar, - to our trade expansion and stated that it was the need of the hour to ensure that ports have proper and adequate infrastructure to ensure the speedy transport of goods. Again, these are sentiments that few could disagree with.
The Prime Minister added that there is also a need to provide adequate intra-country transport facilities so that goods can be easily moved to the three ports. At present it takes a week to transport goods from Lahore to Islamabad, surely a long time that may not be acceptable to a foreign buyer who may then go to another country to fill his orders.
The government's objective, he said, reflecting the wisdom of many of our past governments as well as economists, is trade not aid, as aid has to be paid back with interest while trade is income earned on products and services sold. These are all salutary objectives.
However, one would hope that the second generation reforms also include elements of poverty reduction. Government statistics have revealed that the incidence of poverty has been rising since President Musharraf took over the reins of government and there is an urgent need to dispel the view that his government is focused on the old trickle-down theory that more often than not failed to bring about actual trickle-down of wealth to the poorer sections of society.
With capital flight as well as a large parallel illegal economy, the government would be well advised to include measures to combat these problems when it formulates its second generation reforms.
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