Fairer economic growth

ACHIEVING growth rates of 7pc plus to absorb the net annual additions to the labour force will
require: a) higher rates of domestic savings to finance the investments needed to attain and then
maintain such growth rates; b) better quality entrepreneurial and managerial skills. The
deficiency in skills is a product of our weak educational systems, poor work ethics and SROs
that protect different sub-sectors of industry, rendering irrelevant the need for quality skills to
improve industrial competitiveness; c) continued improvement in the productivity of resourcescapital and labour through induction of technology, improved skills and industrial, financial and
other complementary policy reforms.
Moreover, we have not been terribly successful in improving `inclusiveness` in `economic
growth`.
Much of the recent growth has been in the relatively capitaland skill-intensive sectors of finance,
telecommunications, IT, oil and gas and motor vehicle assembly in which the bulk of our
population with their limited education and skills has been unable to participate meaningfully. In
fact, because of inequalities in access to quality education, it is practically impossible for the
poor to participate effectively in the development process.
The less skill-intensive agricultural sector (from where 44pc of the workforce earns its
livelihood) benefited from good weather, higher procurement prices for wheat and sugar
announced by the government and higher commodity prices internationally.
However, it was Punjab, with its less skewed ownership of land holdings, which saw a wider
distribution of this prosperity. Punjab also profited from the growth in the sectors referred to,
because of a sounder educational and skills base, a more competent bureaucracy, greater ethnic
and linguistic homogeneity, better access to Islamabad, better governance etc. This resulted in
the widening of regional disparities. With a reduced public-sector role in financing/providing
services or infrastructure because of resource constraints regional disparity is likely to widen
more sharply unless, for example, the residents of Balochistan are given total control over their
oil, gas and mineral resources on which to base their development.
`Poverty` measured in terms of access to basicsocial and economic services (we lag behind most
developing countries) has become more severe than a poverty estimate based on nutritional
intake. The foremost issue is not just poor enrolment and retention levels but the quality of
schooling available to the less affluent segments of society, which is the biggest hurdle to social
mobility.
For creating employment opportunities focus on relatively labour-intensive sectors like housing
and construction, information technology and communications, wholesale and retail, our range of
merchandise exports and SMEs.
Even sub-sectors of industries like consumer appliances, auto assemblers, engineering, and
communications which are relatively capital-intensive, can generate large employment
opportunities. They can do so through backward and forward linkages, say, through the vendor

industry and the related service sector for sale and after-sale maintenance of these products.
Making investments attractive in these sectors will require policy and procedural reforms.
Future economic growth will face a slowing down of demand in our traditional export markets of
Europe and the US. To overcome this demand insufficiency for our products we will have to look
east, especially towards our neighbours, with young consumers and growing markets, as opposed
to aging populations and contracting markets in the West.
Growth in exports has become critical for financing our import bill, especially with doubts about
the continuing robustness of remittances from slowly growing Europe and US, and now the
Middle East following the collapse in oil prices.
Furthermore, with international capital flows destined to become more volatile with the poor
country image making it more difficult to access such funds at affordable rates the financing of
investments will require domestic resources to productively employ the one million annual
entrants to a workforce with limited skills.
These domestic resources will come from `public` and private savings. The former would be
through a credible time path to bring the fiscal deficit under control (more tax revenues and less
unproductive expenditures as a percentage of GDP) to find space for financing social sector
expenditures and physical infrastructure. This would require more than just higher rates of
economic growth. It will need tobe supported by ef forts to create greater austerity in the lifestyle
of officialdom financed by the public purse, and within the population at large fewer dependent
household members to feed.
Two economic sectors will require special attention, agriculture and commercial activity in urban
areas. Inclusive, robust and sustainable pro-poor growth may well have to be anchored in the
latter and agriculture and livestock. By providing earning opportunities for those with limited
skills this targeted approach will facilitate poverty reduction and more equitable development of
regions as well as bring more stability in growth, in a manner that ensures that gains accruing
from this process are safeguarded.
Today it is possible to double yields per acre employing modern agronomic practices using
technology, without aimless subsidisation of crops (eg wheat) and inputs such as fertiliser and
irrigation services. Furthermore, there is a need to shift from food crop to horticulture, dairy
farming and crop varieties less dependent on water.
Increases in productivity will require a package of initiatives, the most important being better
management of a key input le water. For the ef ficient use of water, greater focus is needed on
land levelling, zero-till cultivation, drip irrigation, greenhouse and tunnel technology (for
horticulture, fruit and vegetables), policies to facilitate development of private cold-storage
chains, logistics and infrastructure connecting farms to markets to check wastage, etc.
Modifications in building and zoning regulations, rationalisation of government levies related to
development, commercialisation and property taxes and the disposal of prime commercial land
tied up in unproductive state functions (eg elaborate housing for officials) in urban areas can set

into motion a virtuous circle of high and more `inclusive` growth.

Finally, because of underemployment in agriculture, a significant increase in labour productivity
will have to come from the shifting of labour out of this sector though not through forced,
distress migration as presently to more remunerative nonagricultural employment both in rural
and urban areas, the latter being more productive. The writer is a former governor of the State
Bank of Pakistar