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Restructuring Growth For Faster Poverty Reduction
Dr.Akmal Hussain
Newspaper: Daily Times
Dated: Thursday, April 3, 2003

In the preceding two articles we had examined some of the main structural factors in the real economy that constrain GDP growth. Let us now outline a possible economic strategy that could be undertaken, to lay the basis for a sustainable pro poor growth.

A four-pronged growth strategy needs to be undertaken in the light of the structural constraints to growth and poverty alleviation specified in the earlier two articles.

Improving the Supply of Irrigation Water: The first prong of the growth strategy should be a national campaign on a war footing to rehabilitate Pakistan's irrigation system which is currently in a state of acute disrepair due to decades of poor maintenance. Such a campaign would involve organizing semi skilled labour for the desilting of canals, strengthening the banks, organizing villagers for making "Pucca Khaalas" (concrete lined water courses) and to improve the gradient of water courses and farmlands in order to improve both the delivery and application efficiencies of irrigation. Such a campaign being inherently labour intensive would not only generate employment rapidly but also help to improve water availability and yields per acre at the farm level. If the campaign is professionally designed and managed, the funding for financing wage payments to the newly employed labour force could be sought from multilateral agencies, some of which have poverty alleviation and sustainable agricultural growth as their priority concerns. The district level development institutions in the local government system could coordinate with union councils, village development councils and autonomous farmers associations to implement such a campaign.

Infrastructure Development: In addition to the campaign for improved maintenance of the irrigation system other labour intensive infrastructure projects should also be undertaken to simultaneously generate employment and stimulate aggregate demand in the economy. Such projects could be the building of farm to market roads, national high ways and ports, upgrading the railway system and enlarging its transport capacity for bulk cargo together with an improved communication system and increased production of cheaper energy through domestically available coal rather than imported furnace oil.

Milk, Marine Fisheries and High Value Added Agriculture Products: The third prong of the revival strategy is to rapidly develop export led production capacity for milk, fisheries and high value added agricultural products such as fruits, vegetables and flowers. Let us illustrate this initiative by using the example of milk. At the moment Pakistan is producing approximately 177 billion rupees worth of milk annually for domestic consumption. This makes milk the largest agricultural product. By comparison, wheat, Pakistan's largest crop has an annual production value of approximately 111 billion rupees. Unlike wheat however, the output of milk can be accelerated sharply within a couple of years. Currently Pakistan's milch cattle have a yield per animal which is one-fifth of the European average. Demonstrable experience in the field has shown that the milk yields per animal in Pakistan can be doubled within two years through scientific feeding, breeding and marketing. If the institutional framework could be established for training the farmers in scientific feeding and breeding and if the logistics could be set up to collect milk from the farm door by means of refrigerated transport, milk output in Pakistan could be doubled. This would have a dramatic impact not only on the incomes of poor peasants, but also on exports and overall GDP growth.

Pakistan lies at the hub of milk deficit regions such as Central Asia, West Asia and South East Asia. Hence it could be argued that if milk out put in Pakistan could be doubled, exports earnings would increase to such an extent that they would make a major contribution to overcoming the balance of trade deficit. Such an initiative therefore can lead to accelerated exports, higher GDP growth and improved income distribution in Pakistan. A possible institutional framework for such an initiative could be the establishment of dairy development boards at the provincial level linked up with development institutions at the district and union council levels in the local government structure.

Marine Fisheries, also provide a significant potential for improving foreign exchange earnings although not as large as the potential for milk. Here again what is required is improved institutional support and better management rather than huge investments by the Government. In the case of marine fisheries currently there are large losses and failure to achieve significant exports due to the fact that the storage conditions of fish during transportation are both unscientific and unhygienic by international quality standards. Currently alternate layers of fish and hard sharp edged ice are placed in containers on the boats. Under the weight of upper layers of fish and the sharp edged ice, fish at the lower layers are crushed, and the resultant bleeding causes putrefaction. To avoid this, it is necessary to provide shelves for layered storage of fish in boats, topped by dry ice, with fiberglass covers. Through such measures it would be possible to bring back the fish at the European Union standards of minus 7oC and thereby make it exportable. An export potential of 300 million dollars exists over the next three years if such improved management of the marine fisheries industry could be achieved.

The third element in increasing high value added production and export in the agricultural sector would be to facilitate the production of fruits, vegetables and flowers for exports. This would require institutional support for improved quality of output, improved grading packaging, and refrigerated transport right up to the cargo terminals for air freight to the export market.

Rapid Growth of Small Scale Enterprises: The fourth prong of the strategy would be to provide the institutional support necessary for the rapid growth of small scale enterprises. These SSEs. include high value added units in light engineering automotive parts, moulds, dyes, machine tools and electronics and computer software.

Training of a large number of software experts with requisite support in credit and marketing could quickly induce a significant increase in software exports from Pakistan. Pakistan could build a pool of software experts for a large increase in export earnings. This would of course require a proactive government to establish joint ventures between large software companies such as Microsoft and Pakistan's private sector institutions such as LUMS and INFORMATICS. The Ministry of Science and Technology is already moving rapidly ahead in facilitating the growth of information technology in Pakistan.

Small scale industries in the construction, light engineering, and automotive sectors have a low gestation period, are labour intensive, and can generate a larger output per unit of investment compared to the large scale manufacturing sector. Therefore the rapid growth of small scale enterprises would not only accelerate economic growth in the medium term at relatively low levels of investment, but would also increase employment and exports for given levels of GDP growth. The key strategic issue in accelerating the growth of SSEs is to enable them to shift to the high value added, high growth end of the product market.

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