For my masochistic readership (it must be so to appreciate this Cassandra's tales of economic doom), the preamble (Part I) of the captioned series of articles, provided an overview of our faltering economy and identified the source of its engine failure, a mindless application of WB/IMF recipes that have condemned many a country to perpetually meander along a path of increasing per capita income disparity (rising Ginni coefficient) and sub-optimal GDP growth.
Unfortunately, the present Government seems determined to persist on this path of perdition, one of the consequences of which is our burgeoning national debt and rapidly depreciating currency over the last 24 months, as highlighted hereunder:
Consequently, while currency devaluation has failed to lift exports, our entire industrial sector is in deep distress due to high fuel and electricity costs, load-shedding, and (barring Venezuela), the highest bank interest rates in the world! Persistent terrorism, of course, only adds to our cup of woes that now runneth over.
Part II presented a brief analysis of the stellar growth of certain economies that were similar to ours barely 30 years ago but were blessed with insightful leadership that refused to accept economic orthodoxy. I am referring to the likes of Deng Xiao Ping, Lee Kuan Yew, and Mahatir Mohamed.
Their primary objective was to put a lid on population growth, followed by single-minded focus on its health and primary/vocational education. Concurrently, they implemented policies to promote domestic savings, which in turn were employed in massive development of infrastructure while consumption took a back-seat.
We have no choice but to do likewise...better late than never. Reference was also made to World Economic Forum's Global Competitiveness Index that lists the 12 pillars of economic development of which the first four relate to developing countries like ours. The message being that we cannot even get off the ground if we have dysfunctional "institutions", broken down "infrastructure", "macroeconomic instability", and "unhealthy and illiterate" masses.
This segment (Part III) and the next (Part IV) will endeavour to present components of a coherent economic policy relevant to our factor-driven economy. These need to be exploited by an illiterate and unskilled workforce, while investment efforts are focused on upgrading the four pillars mentioned above, so that in a couple of decades we are ready to enter the ranks of efficiency-driven economies (the so-called middle income group).
Let us see what we can do about our key priorities, identified in Parts I and II of this series, which, apparently, do not even register on our Government's radar of critical issues confronting us today:
Since our population continues to grow at an alarming annual compound growth rate of 2.4% (the rate acknowledged by the last census in 1998 when our population was 140 million), and in the absence of any credible proof to the contrary, mathematical logic says our current population (February 2010) is 185 million (= 140 x e 0.024 x 11.6 = 185)...a 500% growth since partition!
Unfortunately, while current Government functionaries routinely acknowledge that we number over 18 crore, our official stance is that our June 2009 population was under 164 million (an understatement that matches Karachi's population). This claim is based on an unsubstantiated and preposterous official line that our crude birth rate since 1998 had miraculously reduced from 52 per 1,000 to 20 per 1,000.
Deduct from the latter rate, a presumed death rate of 7 per 1,000. Presto, our net population growth rate is now only 1.3% per annum. If you believe the Federal Bureau of Statistics, the population growth rate during 2008-09 was even less...barely 0.85% (from 162.37 million to only 163.76 million)! Do you, dear reader, buy this canard? With negligible spending on population planning (PKR 3-4 billion per annum), how has this miracle come about?
My take on the issue is that if and when our much-delayed next population census is conducted, it will not only reveal the sad truth of our current population being 185 million, but that it is still growing at an annual compound rate of a shade over 2%, which will take our population to 230 million by June 2020 (185 x e 0.021 x 10.4 = 230). Where are we going to find resources to feed, clothe, and house the additional 45 million souls?
We need to urgently target the present 30 million married women of child-bearing ages between 15 and 45. Excluding the 1/3rd belonging to the well-to-do and middle-income families, the infertile, and the odd spinsters, our focus group reduces to around 20 million.
If these financially-strapped women, who often have the largest families, can be provided with a sliding scale monetary incentive (say, PKR 25,000 per annum for one child families and PKR 15,000 for 2 children families), we may achieve our objective. The outlay for such a program over time may look like the following:
In terms of budgetary burden, the proposed programme will start at around 0.27% of GDP and rise to only 0.73% in five years, when nominal GDP will be around PKR 30 trillion. If we do that, we may, by 2020, have prevented as many as half the unwanted births mentioned above. Now wouldn't that be a superb bargain?
We have fewer than a thousand hospitals and barely 100,000 hospital beds; each of our 130,000 doctors caters to 1,400 patients; 60% of our population lacks access to safe drinking water. One could go on listing indicators of woe, but for the present argument, the foregoing should suffice to impress any dispassionate reader that we have a monumental problem on our hands.
Of course, in light of budgetary constraints, we cannot do so immediately. However, a beginning can be made by legislating that nominal health budget must grow 50% per annum for the next five years. Projecting a reasonable 15% average annual growth of nominal GDP (5% real growth plus 10% inflation, or variations thereof), it would ensure that health expenditures reach close to 2% of GDP in five years. As the projections below indicate, given political will, the progressive need of incremental funding is not too daunting:
Japan followed suit in the following three decades. The Asian tigers did likewise for the next three decades by spending 15% to 20% of their respective GDPs on education. China launched its universal primary education drive under Deng Xiaoping to telling effect.
Where do we stand? For starters, I'd encourage readers to refer to my series of articles "Pakistan shining" that appeared in these columns three years ago. In these I had proved mathematically that our national literacy rate which began at barely 10% at partition was no higher than 32% today and that our adult literacy is barely 15%. Contrast this with official claims of a 56% adult literacy (a claim that, tongue-in-cheek, is true because our Government defines literacy as the ability to sign one's name!)
For the last three years, we have progressively reduced our public spending on education from a miserly 2.5% to 2% of GDP in 2008-09, ie an estimated PKR 275 billion (final numbers may turn out to be even lower). Given other pressing demands like fighting terrorism and resettling IDPs, it is quite likely that in the current fiscal year (2009-10) we'll spend even less than 2% of our projected PKR 15 trillion GDP.
UNESCO data shows that Pakistan is at the bottom of nations with public spending under USD 20 per capita on this key development indicator. Yes, our Prime Minister has been heard saying that expenditure on education will rise to 7% of GDP in 5 years. Don't hold your breath.
--- With 70% illiteracy among our potentially productive youth (ages 10-20), clearly, our first priority should be universal literacy defined as an ability to read and do four figure math (classes I to IV). Follow-up energies should be directed at middle and matriculation levels along with vocational education for drop-outs between primary and secondary education...a number currently estimated at 15-20 million.
--- Irrelevancy of curriculum, especially in Madrassa schools, that does not equip beneficiaries with any skills for earning a livelihood in society.
--- Dual education system...a dysfunctional public funded one for the masses, and an expensive private schooling system for the upper middle-classes and the affluent. It goes without saying that there should be countrywide uniformity of curriculum, at least through Class X...whether the school is public or private.
--- Near absence of vocational training (NAVTEC and its ridiculous budget of spending a couple of billion Rupees over the next 3 years notwithstanding), which by rights should today have priority over all other public educational outlays except for primary, middle and secondary education.
--- An outrageously high focus on higher education that has an annual budget of PKR 28 billion. That is like the 18th Century French Empress telling starving masses, "If you don't have bread, why don't you eat cake?" For a Factor-driven economy like ours economic development demands well-trained plumbers, electricians, mechanics, and masons, not Ph.D.s in esoteric sciences...at least not for the next couple of decades. That is not to say, we should discourage higher education. By all means have colleges and universities for all disciplines. But, they should be 90% privately funded, as most of them today are anyway. Governmental assistance should be restricted to judicious injection of periodic grants for the best among these private institutions.
Following the models described above for outlays on population planning, and health, lets see the impact of an orderly spending on education, with its share of GDP rising from current level of 2% to at least 5% over the next 5 years:
Having treated three of the four most pressing issues our nation is faced with, ie population, health, and education, readers may already be wondering where the resources will come from. That is what we shall address in Part IV of this series, ie a national policy framework for savings and investment. (To be continued)
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Feb '08 Feb '10 Increase
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Domestic Debt (PKR billions) 3,000 4,270 43%
Foreign Debt (USD billions) 38 55 45%
Total Debt (PKR billions) 5,470 9,100 66%
PKR to USD 65 86 32%
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2011 2012 2013 2014 2015
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Target Women (million) 20.00 20.50 21.01 21.54 22.08
Participation rate 10% 20% 30% 40% 50%
Impact (PKR billion) 40 82 126 172 220
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PKR (billion) 2011 2012 2013 2014 2015
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Projected GDP 17,250 19,840 22,810 26,240 30,170
Health allocation 119 179 268 402 603
Percent of GDP 0.7% 0.9% 1.2% 1.5% 2.0%
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PKR (billion) 2011 2012 2013 2014 2015
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Projected GDP 17,250 19,840 22,810 26,240 30,170
Primary education 250 345 476 657 880
Middle/Matriculation 100 138 190 262 335
Vocational Training 50 69 95 131 183
Higher Education Grants 30 41 57 79 110
Total 430 593 818 1,129 1,508
Percent of GDP 2.5% 3.0% 3.7% 4.3% 5.0%
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