Prime Minister Yousuf Raza Gilani, in his talks with visiting German Deputy Chancellor Dr Guido Westerwelle, has asked for Pakistan to have greater market access to EU, which will help it deny to extremists the space they need to exploit the economic difficulties of the people.
Gilani's remarks amount to an indirect admission of two things: that the roots of terrorism in Pakistan are embedded essentially in economic deprivation of the people in areas where it prevails, and secondly, there are people who are prone to fanning discontent or disaffection to fulfil their ulterior motives. Pakistan has consistently sought market share in advanced countries as a recompense for the sacrifices it has rendered in the fight against terrorism since 9/11.
Under the Bush Administration Pakistan had pushed for access to US market under the RoZs programme, though how far it was successful in deriving tangible benefit for the economy from the concession is debatable. Meanwhile, energy shortages in Pakistan, according to an ADB report, would render 0.4 million people jobless, cause financial loss of Rs 219 billion per annum, and a loss of Rs 75 billion in exports.
Pakistan's industrial performance that accounts for 18.5 percent of the GDP is going through a very bad patch because of crippling energy shortages. An important contributory factor has been a lopsided energy mix that accords precedence to oil and gas as raw material. This has not only hiked the cost of production; it has also sent inflation skyrocketing, which has in turn generated social unrest.
Successive governments have routinely taken the position that Pakistan needs trade, not aid, which is essentially a fallacious position Pakistan in fact needs both aid and enhanced foreign market access, to be able to derive benefit. Globalisation has played a critical role in reducing the world to a global village, thanks to satellite communication and supersonic travel. This has opened up an array of opportunities for promotion of trade, economic growth and poverty reduction, though countries possess varying capacities to avail themselves of these opportunities.
The capacity of individual countries to cash in on such openings also varies widely. Analysts maintain that the capacity to derive benefit from globalisation, trade liberalisation, in particular, demands a level of industrial and governance development which we have not yet attainted. Pakistan's major constraints include a crippling energy deficit, a weak infrastructure and a poor governance level.
A low level of skill development is yet another handicap that needs to be overcome through a cogent strategy. Production constraints have made us largely unable to meet delivery deadlines. Secondly, Pakistani exporters have come to rely mainly on low-end exports largely because of capacity constraints because of paucity of investment in modern machinery and infrastructure.
Many investors, despite binding contractual obligations, have failed to make the requisite amounts of investments. And existence of legal loopholes at times has served to scare away investors, which is great loss to the economy. Gilani's request to German Deputy Chancellor for greater market access can bear greater fruit when we have gained fast-track competitiveness in international market. It would require massive investment in infrastructure, machinery and high-tech training of the workforce.
Broadening the tax base, trimming government machinery and stamping out corruption in all departments can help the government generate sufficient resources to undertake such critical reforms. It is often maintained that a country's export performance is essentially reflective of its industrial performance. Pakistan's industrial performance is burdened by such handicaps as use of comparatively low technology and low value-added products. We can broaden our export base, through massive investment in high-tech machinery, infrastructure and human capital. Requesting for greater market access alone will not do. We have to develop competitiveness as well.