Poverty powder keg

Speaking at the Brookings Institute the other day, Finance Minister Shaukat Aziz, who is in Washington these days for the annual meetings of the IMF and World Bank, reiterated the economic achievements of the government over the last four years.
He pointed to the GDP growth rate expected to exceed the target of 5.3 percent this year, the healthy forex reserves, external account surplus, budget deficit under control at 4 percent, debt servicing down from 66 percent of revenues five years ago to 30 percent currently, inflation at acceptable levels, etc.
He also expressed his satisfaction that Pakistan would be leaving the IMF programme when it ends in September this year.
In the social sector, Shaukat remarked, the private sector's involvement in health and education delivery was yielding positive outcomes. Last but not least, the minister referred to the reforms in a whole range of areas in the agricultural field.
There is no denying the relative economic and fiscal stability achieved by the belt tightening policies of the government over the last four years.
However, the government needs to pay heed to the State Bank of Pakistan's strictures, in its latest report, against existing monopolies or cartels in the automobile and cement industries.
The former is becoming a sore point with consumers having to pay huge premiums to get automobiles delivered in a reasonable timeframe, while the latter is negating the government's efforts to provide incentives to boost the construction industry.
Another major area also remains problematic, that of investment, which stubbornly refuses to pick up so far.
The constraints on attracting both domestic and foreign investment are by now well known. But the effect of investment being shy is that the poverty level has risen dramatically and continues to rise. It is a futile exercise, as Shaukat attempted in reply to a question, to scoff at the various figures for poverty doing the rounds by dismissing it as a "cottage industry".
This 'cottage industry' is very much a reality on the ground, even if it is not palpable in the comfortable corridors of power.
Whatever economic progress the country has made or makes in the future, if the great mass of people do not perceive that they have any stake in the growth of prosperity, there will be the danger of a social powder keg going off at any time. If history is any guide, the massive explosion of unrest that overtook the Ayub regime by surprise and finally led to the strongman's ouster after months of agitation, could potentially be reproduced by the lava bubbling under the surface. If the ghost of 1968 is to be finally laid to rest, certain areas require the government's immediate attention.
The government's pronouncements on poverty alleviation indicate that it sets store mainly by improvements in the agriculture sector, which remains the biggest economic activity in terms of labour participation.
However, the water infrastructure projects the government is banking on to bring about poverty alleviation in the rural areas are bogged down in controversy. Even the distribution of available water is the stuff of continuing disharmony in the federation.
While the necessity to remove these obstacles through consensus is imperative, the government must concentrate on the small and medium enterprises (SMEs) sector as promising the quickest job creation that will put bread in people's mouths. It is by now a truism that SMEs generate more jobs per rupee of investment than large scale enterprises. Along with the policy framework that needs to be launched on a war footing, SMEs require protection from the plethora of labour and other regulatory laws for manufacturing units.
The present threshold of 10 employees should therefore be raised to 100 for applicability of these laws to free small and medium units from the many government regulatory departments that become a nuisance and disincentive to any entrepreneur. Along with this freeing up and financial support to the sector, its technically skilled workforce needs can only be met by creating more vocational training institutions.
The present institutions of this nature are making little contribution, and new ones are not being set up in conformity with the scale of the task. Private sector involvement in education may be a good thing given the constraints of the state in delivering education for all, but the private sector has yet to enter the field of vocational training, which may prove in the long run to be as important, if not more, as universal literacy.