At a pre-budget seminar in Lahore on 26th May on "Has the time come for redistribution of gains in economy?" the Governor of the State Bank spelt out a host of possible measures to accelerate growth and facilitate trickling down of macro-economic improvement to micro level for poverty alleviation.
The list of his recommendations covered infrastructure, agriculture, land reform, education, building of social capital, bureaucracy, devolution of power, judicial force, security and urban management.
According to him, the government cannot take the risk of relying on the private sector for the development of country's infrastructure. Experience of involving the private sector in this effort has not been good, especially in the power sector, which resulted in the jump of electricity charges from Rs 2.5 to Rs 6.0 per unit.
However, it could play a useful role in sectors like power and gas distribution, civil aviation, education, etc. Overall, it must be realised that without the expansion of infrastructure, development would be choked. Therefore, the government should make maximum allocation for infrastructure in PSDP in the coming budget.
The SBP Governor lamented that agriculture yield per acre was low due to high input costs and lack of research and technical expertise.
He was against land reforms in the country at present because of decrease in large land-holdings over time. Education was the fundamental responsibility of the government but it was gradually pulling out of this sector and relying on the private sector.
Although a large number of graduates were produced every year, our education system was not producing skilled manpower direly needed by the country.
He favoured the idea of community involvement in education. As regards social capital, he was sorry to note that different segments of society were experiencing poor relationships, such as intra-provincial, intra-district, province-district, bureaucracy-private sector, etc.
The country was running on old "bureaucracy system" which did not cater for the present day requirements. Bureaucrats were just moving files from top to bottom and vice versa while they lack policy and decision making skills.
Communities should be aware of their needs and empowered with decision making.
Ishrat also felt that private sector was not performing well because of lack of proper platform for arbitration, mediation and alternative dispute resolution.
Investors in particular were reluctant to invest in real estate, fearing illegal occupation of their property. The worsening law and order situation was also communicating a negative image of the country and this needed to be improved.
Besides, urban management was poor and our cities were overburdened with rural migrants.
The government needs to release land for this segment of population, which is moving from rural to urban localities. Although the role of philanthropists was impressive, it needed to be strengthened and streamlined for betterment of society and uplift of urban areas.
The Governor's list of measures to formulate an economic development strategy so as to share economic gains with the down-trodden and general masses, in our view, is quite exhaustive as well as impressive and there could be hardly any dispute about their relevance to our situation.
For instance, the emphasis on building necessary infrastructure for accelerating development and alleviating poverty is very crucial given the fact that this sector has been ignored for too long and any further delay in its upgrading could be simply devastating for the economy.
Everybody in the government seems to have realised the urgency to rectify the situation and that is why the Finance Minister is also now repeatedly talking about the need to upgrade infrastructure with higher allocation of funds for this purpose in the budget.
The weaknesses pointed out by the governor in most of the other areas are also very pertinent and need to be addressed at the appropriate forums. Another appreciable aspect of his observations is calling a spade a spade. His comments on bureaucracy could displease many high-level government functionaries but he has spoken his mind.
The grant of autonomy to the State Bank obviously could some time pitch the Governor against the government hierarchy.
However, it needs to be pointed out that implementation of the governor's proposals is an enormous task. For example, he wants the expenditures on PSDP sharply increased for the development of infrastructure, more government involvement in the education sector and preparation of residential plots to accommodate migrants from rural to urban areas.
The cost of these proposals has not been specified but it is quite clear that the country would most likely not be able to implement most of them because of paucity of human and financial resources. Nobody would be more aware than the Governor about the limitations of the country to undertake such a big effort and the need to be more realistic when making proposals involving huge outlays.
It is well known that IPPs were ushered in power generation because of lack of resources at the disposal of the government. The problem of higher unit price arose because of incompetence of the government to negotiate the tariff structure judiciously and in a transparent manner.
In our view, the approach at that time was right, but the country had to pay dearly due to its faulty implementation. We are also not certain about the appropriateness of his proposals regarding philanthropists. It is good to see that he has recognised the extraordinary job they are presently doing in society but to suggest that their resources should be channelised and diverted to social infrastructure development is unwarranted.
They are already doing a superb job in alleviating misery on a voluntary basis in various fields like distributing food to the hungry, medicines to the sick, and providing shelter and schooling to the needy which are no less important than infrastructure development.
Government's interference in any way to rechannelise their energy and resources could dishearten the highly motivated people associated with this activity and deprive the poor people of the succour they are getting from this source.
In order to keep the spirits of philanthropists alive, they need to be saved from the "magic touch" of the government.
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