Devising a Growth Strategy for Pakistan (5): Answering The Critics

Posted on February 24, 2011
Filed Under >Ahmed Jamal Pirzada, Economy & Development
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Ahmed Jamal Pirzada

(Editor’s Note: In this, the fifth in a series on Pakistan’s New Growth Strategy – see here and here and here and here – the author (a consultant with the Pakistan Planning Commission working on the new growth strategy) responds to some of the concerns raised by critics of the strategy.  The Planning Commission of Pakistan has invited ideas and suggestions on this and we invite and encourage our readers to please help in highlighting the best and most innovative ideas they can think of.)

Much of the response received by the Growth Strategy document of the Pakistan planning commission has so far remained very much encouraging. It will be alright for me to reveal that significant number of comments received from the civil society, youth, educationists, donor agencies etc. have been incorporated in the revised draft which will be shared in few weeks time. However, there still are some comments which can only be answered through increased interaction between the strategy team lead and the interested community.

In the interest of encouraging exactly such a conversation, here I present some of the criticisms which have been observed on different forums and some preliminary responses.

Whats so ‘New’ about it? The word ‘new’ is often received with lots of skepticism. A clear distinction needs to be observed between growth theory and strategy. While the growth theory remains the same, overall strategy is significantly new when looked at in context of Pakistan. In economics, growth (output) is treated as a function of productivity, labour and capital. Throughout Pakistan’s history, productivity has been observed as an exogenous variable – something that will happen on its own. The ‘New Growth Strategy’ endogenizes productivity by looking at the microeconomic underpinnings of this macroeconomic problem. The result will be improved growth levels through enhanced productivity even if labor and capital do not change.

Expecting people’s welfare from Private Sector? The strategy does not talk about complete withdrawal of government from market management. Instead it is to confine its role to market regulation: away from its current approach of acting as an active market player.

Formulating and implementing regulations is a sufficient tool to deal with cartels/monopolies. One needs not be a market player but require a strong regulatory framework in the form of regulatory bodies such as competition commission, PTA etc.

Why do we still have cartels despite having numerous regulatory bodies? We often tend to hear this question in response to the idea of government withdrawing itself as a market player. Answer to this question lies in the strengthening of regulatory bodies and not in government re-entering the market. Our existing institutions not only lack the required strength but in some cases their own organizational structure is also contrary to promoting competition and fighting cartels. It is well established that privatization without regulation often leads to consumer exploitation. This is exactly what the role of government should be – ensuring that overall consumer welfare is not marginalized.

Why talk about cities alone? In almost all the conferences organized by the Planning Commission as a part of consultative process, one standard question was always raised. What about the rural areas? This takes us to another interesting question. What are cities? Out of many things, cities must also be seen as markets for rural areas. It is in the cities where much of the rural products are bought and sold. Therefore cities are the only place where major chunk of rural income is generated.

However, the Growth document is not silent on rural development. Under the ‘Markets’ pillar, the document talks about agricultural markets in great detail. Similarly, constraints to infrastructure development at municipal level are also highlighted under ‘Connectivity’ theme.

‘Implementation.’ Here comes the tricky bit! Ask this question and many policy makers would prefer to shy away. In my personal view, it’s not up to any policy maker to implement his/her policy unless the public wants it. This is especially true when you are a democratic country. Why is it that the judiciary gets restored despite significant pressure from the opposing group? The answer is simple. Our general public wanted it to happen.

What we here at Planning Commission intend to do is to get people to own this strategy. It is exactly this reason why this wide consultative process is being carried out. It is exactly this reason why we are doing our best to incorporate majority of the received comments. And it is exactly this reason why we are having this much more direct and interactive blog to reach people. Once people – like the respected reader – start owning the Growth document and wish for the proposed changes to take place, implementation will soon follow its own course.

(Editor’s Note – 2: ATP readers who may wish to submit posts of their own on the growth strategy and what should go into it are encouraged to do so.)

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14 responses to “Devising a Growth Strategy for Pakistan (5): Answering The Critics”

  1. Mazhar Mughal says:

    @Talat: I guess your French guide was not much informed. The so-called muslim marauders didn’t last in France for more than two, three decades, and all this was thirteen centuries back. May be the reason of the French South’s supposed backwardness is something other the religion your guide hates so much?
    Having lived both in the North and the South, I find Southern France much more peaceful, open and tolerant. Should I make the same correlation?
    And one correction: Two of the South’s 5 regions are among the richest in France, and according to the latest economic figures (4th quarter 2010), jobless rate in the South is lower in the South and economic growth higher.

  2. Ahmed Jamal Pirzada says:

    the issue is not with privatization but with how to privatize…

    Following is the reason given for the failure of privatization in-case of British rail:

    “The private train operating companies, with their de facto monopolies and their undemanding contracts, have had little incentive to deliver a better service to customers.”

    state monopoly is better than private sector monopoly. but a competitive private sector is way better than anything.

    in our case we need to think about how to privatize so that the end result is competitive private sector. taking railways as our example: if we unbundle railways and then individually privatize its many assets, we will succeed in generating competition.

    unbundling is only a necessity in sectors where state monopoly exists. for sectors where there are already other market players (private), such a procedure will not be required.

  3. Anwer says:

    Here is some commentary on the consequences of privatization in UK.
    =============================
    http://www.independent.co.uk/opinion/leading-artic les/leading-article-highspeed-is-still-the-right-t rack-for-britain-2228575.html


    Yet high-speed rail is no solution to that other great curse of the British rail network: bad management. The Conservatives failed to invest adequately in British Rail in the 1980s. And under John Major in 1993 they imposed a disastrous privatisation. The private train operating companies, with their de facto monopolies and their undemanding contracts, have had little incentive to deliver a better service to customers. Fares have soared even as the public subsidy for the rail network has increased. One of the reasons public enthusiasm for high-speed rail is absent is that many people’s experience of British trains has been so unsatisfactory.

  4. Ahmed Jamal Pirzada says:

    in response to the ‘tribune’ article, I have got following to say:

    the ideals are to gain efficiency and productivity whether through privatization or any other means.

    looking at our ground situation, we must realize that we dont have adequate institutional infrastructure. plus all the red tapism and poor administrative structure makes it almost impossible for the state to effectively run the businesses. also we cannot undermine political interventions which have taken place in existing organizations such as PIA, PR etc.

    another issue which cannot be ignored is financing of development plan of any business. do we have enough financial capital to develop such entities? obviously not.

    keeping our ground realities in mind, we must consider other means of achieving efficiency and productivity.

    as per my limited understanding, privatization is the best option available to us today.

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