The Public Sector Development Program will continue to dwindle and foreign financing is not assured. It is therefore essential to create the space and incentives for the private sector to play a dominant role in the growth process and boosting economic activity, said Planning Commission (PC) Deputy Chairman Nadeem ul Haq in an exclusive interview with Pakistan Today.
Planning Commission has recently prepared a report titling ‘Pakistan: Framework for Economic Growth’ and has given certain recommendations including strengthening the private sector and giving special attention to innovation and entrepreneurs. While speaking on the importance of the framework in growth, Nadeem ul Haq said the strategy for economic growth focuses on the need to raise growth above its historical average. He said the strategy emphasises that growth should be market led and not government led.
“Previous development plans have also argued for the primacy of the private sector in generating economic growth. The problem has been a disjunction between the plans’ words and the government’s deeds, in other words theory and practice. He argued that the footprint of the public sector therefore still remains very large,” he said, adding there are two reasons that would compel a greater congruence between word and deed under the proposed strategy.
“First, Pakistan’s fiscal position is difficult and consequently the ability to expand the size of the public sector is limited. A very large amount, around Rs 3.0 trillion, is already committed to projects that have been approved and are in progress. Moreover, more than half this sum is allocated to vital projects in power and water that cannot be deferred or delayed.”
The PC Deputy Chairman said the government’s room for maneuver is thus extremely restricted and it cannot afford to undertake large-scale capital expenditures without facing heavy financing constraints. He said there is a great need to improve governance and strengthening departments and on the improvement of the state of national human resources. “We have a large, young population and we should think about them seriously, otherwise the situation will spiral out of control. We should take such steps which would create maximum jobs for youth, as in this way our economy would be strengthened,” he said adding by focusing on institutional strengthening, improvements in governance and human resource development.
He said a major goal is to maximise the opportunities provided to all citizens so that they can obtain a better life through hard work and ingenuity. He insisted that due to the rapid population growth, our labour force is expected to grow at over three percent annually over the coming years. “To absorb this addition to the labour force, we need our GDP to grow at a rate of around seven to eight percent annually and this growth must be sustained in the coming decades,” he added.
“Our growth in the last few decades remained very volatile and there have been no consistency, whereas, our neighbouring countries got a consistent growth. Our focus will be to make the growth consistent, seeking to generate opportunities everywhere,” he said. He said the economic structure has changed and the way forward must seek to build on the ongoing structural transformation. He said in the past agriculture was the largest sector in the economy, today it is services. “By 2010, the share of agriculture had dropped to about 20 percent, while that of services exceeded 50 percent.
These changes have significant implications for the growth of productivity and employment,” the deputy chairman said, adding the services sub-sectors by definition are more value-added, more labour-intensive and have greater potential of growth even under repressive circumstances which lead to curbing of growth in agriculture and industry. While speaking on the growth strategy, he noted that, “Given the right policies and a modicum of luck, it is not impossible to get the economy back to track in a reasonable timeframe.”
The deputy chairman was of the view that the correct policies are very important for consistent growth. “Through a combination of measures and reforms for increasing productivity, improving market and governance efficiency as well as developing the physical and regulatory space for entrepreneurial and innovation investments, the growth strategy seeks to achieve this target in the plan period of five years,” he said. While elaborating on the Global Competitiveness Report 2011, Nadeem ul Haq said the report indicates that infrastructure in Pakistan is at least on par with that available in neighbouring countries.
However, in the case of some important factors like innovation, entrepreneurship and marketing are relatively lacking which impacts on growth negatively. “We need to develop cities vertically and should stop them expanding, we need to be in a position to manage our cities very well,” he said, adding there is a need to integrate the cities using information technology.
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