The development and expansion of infrastructure is a pre-requisite for increasing economic growth and social development in a country. In Pakistan’s case, investment is required in areas like transport and logistics, power, water supply and sanitation, as highlighted by a recent World Bank report.
“South Asia needs to spend $2.5 trillion on infrastructure by 2020 to bring its power grids, roads and water supplies up to the standard needed to serve its growing population,” according to a recent World Bank report titled “Reducing poverty by closing South Asia’s infrastructure gap”.
India being the largest regional economy has 79 percent share in required investment, followed by Pakistan with a 12 percent share. The South Asia region needs considerable infrastructure investment for basic service delivery as well as economic growth to lift standards of life, the WB notes.
Though the demand for investment in countries like Pakistan, India and Bangladesh is huge, financial resources are said to be limited. The policymakers are always in a dilemma as to which investment projects to tackle first or even second, whether short-term or long-term development needs should be met, or whether infrastructure investment in the electricity sector should be given priority over the transport sector.
So, there is always a fallacious dichotomy amid prioritising large-scale infrastructure versus addressing the needs of the poor.
As stated in the report, Pakistan requires investing up to 0.71 percent of its GDP in telecom every year, 1.23 percent of the GDP in transport and 0.83 percent of the GDP in irrigation. But all that requires financing which is higher than the country’s total tax revenues.
The report maintains that Pakistan will have to give the highest priority to electricity (generation and transmission) requiring investing about 5.5 percent of the GDP per year by 2020 to bridge the infrastructure gap. This would also entail contribution of private sector foreign investors and efficiency improvement in the government side.
The global lender proposes a strategy of a combination of investment in infrastructure stock and implementing reforms that will allow the South Asia region to close its infrastructure gap. Other policy options proposed are to establish transparent and well-designed, legal, policy and regulatory framework, rehabilitation and maintenance of existing infrastructure, improving women’s access to services and decentralising the centre’s authority to local bodies.
Post-18th Amendment, provinces have a bigger purse and greater responsibilities towards infrastructure development. One hopes the center and the provinces will take stock of the report’s recommendations and follow a coherent infrastructure development approach that bridges these gaps.
=============================================================================
INVESTMENT REQUIREMENTS 2011-2020 (% OF GDP, PER YEAR)
=============================================================================
Pakistan India Bangladesh
=============================================================================
Low High Low High Low High
=============================================================================
Transport 0.98 1.23 1.97 3.44 3.60 4.50
Electricity 3.66 5.49 2.17 2.71 1.10 1.65
Water Supply and Sanitation 0.53 0.80 0.55 0.94 1.20 1.80
Solid Waste 0.19 0.38 0.19 0.38 0.21 0.42
Telecom 0.71 0.71 0.87 1.30 0.50 0.50
Irrigation 0.55 0.83 0.81 1.21 0.77 1.15
Total 6.63 9.44 6.55 9.98 7.38 10.02
-----------------------------------------------------------------------------
Source: Andres et al. (2013), World Bank
=============================================================================