Yes, the terrorist attack on Sri Lankan team has impacted upon all spheres of life heavily, but definitely the biggest losers are the cricket and the economy. I was in Jakarta, in connection with World Islamic Economic Forum, for the last four days and you cannot imagine how shocking was the news for all the participants. They were one voice that the efforts of the private sector to attract investment in Pakistan will not bear fruit unless peaceful environment is ensured.
But in my opinion peaceful environment hinges on political stability that is a prerequisite to achieve economic stability. But unfortunately the ongoing crisis has shattered all the dreams for a tolerant political culture that is now direly needed to put the country back on rails. This uncertainty could seriously deter economic growth as the absence of business-friendly atmosphere for a relatively long period could create a panic like situation for the businesses.
With every passing day the situation is getting out of hand and there are little chances of any respite for both the trade and industry. There are reports that the government has taken a decision to withdraw electricity subsidies by June 30. This definitely would increase financial strain on the industry that is already bearing the brunt due to acute shortage of gas and electricity.
The issue of lowering of mark-up rates is still there and despite repeated reminders by me to all the concerned no action has so far been taken. All the time the same old argument is forwarded that cut in interest rate would not be possible until the inflation rate goes down. I am unable to understand that when the industrial productivity is at its lowest point how it is possible to bring down inflation.
The saner elements in the government should at least try to understand it that inflation is due to high markup and not the other way round. The existing rate of markup in Pakistan has no parallel in the developed world because of only one reason that they wanted to facilitate their industrial sector. No industry in the entire world can survive at financial costs of 18 per cent and higher.
The overall economic scenario is also not very encouraging as Pakistans external debt portfolio is highly vulnerable to shocks that might lead to deterioration of balance of payment situation. This could include another spike in international commodity prices, a decline in exports and a slowdown in foreign exchange inflows into Pakistan.
There is a real risk that such shocks are in the pipeline amid the global recession and the rapid slowdown of forex inflows in all emerging economies due to turmoil in international financial market. The debt servicing increased to 4.7 per cent of GDP in 2008, compared to 4.2 per cent in 2007 and 3.1 per cent in 2006 At the same time public investment fell to 4 per cent in 2008, from 4.9 per cent in 2007 and 4.8 in 2006.
This is extremely worrying given that private investment also declined to 17 per cent of GDP in 2008 from 18 per cent in 2007. There is no doubt that the ongoing slowdown will have a very negative impact on the economy. A proactive approach is direly needed for reducing trade deficit through enhanced exports by exploring new markets as well as by ensuring increased penetration in the existing ones for Pakistani merchandise.
There are five to six issues that need a wise tackling by those who are sitting at the helm of affairs and in this regard they do get assistance from the top-notch businessmen who have become experts in their respective fields. The issues are: Shortage of energy; high cost of doing business; high mark-up rates; law and order situation; political instability; shortage of skilled labour and lack of proper policies to enhance agricultural yield.
The government would have to take concrete measures for the promotion of agriculture sector but unfortunately despite being an agro-based economy and abundant resources, Pakistan is not performing the way it should. Agriculture continues to be the single largest sector, a dominant driving force for growth and the main source of livelihood for 66 percent of Pakistans population. It accounts for 20.9 percent of the GDP and implies 43.4 percent of the total work force.
But the sector is facing two major problems: firstly, our productions per acre are lower than in many countries. For instance, our per hectare production of wheat is only 2.5 tons compared to 4.5 tons in India and 6.2 tons in Egypt. Our sugarcane production per hectare is 45.1 tons compared to 65.2 tons of India and 90.9 tons of Egypt. Our potatoes production is 17.2 tons per hectare compared to 20 tons of India and 23.8 of Egypt.
Secondly, around 40% of our production is lost due to lack of preservation. Pakistan is the fifth largest producer of milk in the world, but unfortunately is unable to preserve it due to lack of the use of bio-technologies and the cool chain systems. The use of biotechnology cannot only considerably enhance our productivity but also avoid post-harvest losses. The genetically improved varieties should be available in the market.
Genetically improved varieties of livestock at-c also being developed by the Livestock and Dairy Development Departments. Now we are increasingly trying to use bio-technology techniques in tissue culture. We need to use genetically modified varieties of seeds to maximise our income from agriculture.
(The writer is Vice President SAARC Chamber of Commerce and Industry, former President FPCCI)