Globalization and Pakistan's poor

A rosy vision for the poor

By Sultan Ahmed

WHILE millions of people in Pakistan are squeezed between the pressures of unemployment and high inflation, they are now sought to be cheered up through rosy visions of the future of the country -- with Vision 2030.

The vision is worth a long wait but if it comes true Pakistan will become the regional hub for not only trade and industry but also education and the arts. What more can one want for a country in which a third of the people are now living below the poverty line of a dollar a day? The vision prepared by the revitalised Planning Commission under Dr. Akram Sheikh seeks to make Pakistan by 2030, the 23rd economic power in the world from the present 39th. It will be a world, says the vision, in which Asia will be the engine of economic growth. And Pakistan can achieve this distinction on the basis of only six per cent sustained growth, if not more.

Vision 2030 is to be approved by the National Economic council on March 27 with Prime Minister Shaukat Aziz presiding. Asia will become the engine of economic growth in about twenty three years with China and India in the lead, closely followed by Pakistan. Asia will also be the centre of consumption because of its vastly improved incomes.

The planning commission is envisaging Pakistan to become the hub of education in the region at a time when girls schools are being forcibly closed down in the tribal areas and it will become a hub for the arts in a country where music shops and video stores are being shutdown in Peshawar and else where in the Frontier. It is a long way from here, but waiting for such lofty goals is not too hurting. In fact, that can be comforting to our young people in this electronic age but the people cannot forget that such visions by past regimes did not become a reality.

The vision talks of intensification of globalisation and rise in competition in the domestic market as well as abroad. We have even now enough competition, not designed to bring down prices but to raise them to the agony of the consumers. When we open up our market through the Free Trade Area Agreements we are seeking with big and small countries, there will be a flood of foreign goods in the country of which we already have a foretaste, to the ruin of a few industries.

The vision does not talk of where does the poverty alleviation figure in it as the population rises from 160 million to 230 million by 2030 and the jobs being lost to heavy imports which our producers may not be able to withstand. As for poverty reduction we have first to make a success of the UN millennium goals which call for reduction of poverty in Pakistan by one half by 2015.

While we have such rosy visions of the future, currently we are having several economic problems with other countries in the world. We are now taking a double hit from the European Union with its 27 member countries. The EC has stopped PIA planes other than Boeing 777 from flying to its member countries which restricts the national carrier to use only seven of its planes on the European route.

Secondly the EU has again banned the import of fish from Pakistan because of unhygienic conditions in the fish harbour with its disapproved 11 processing plants. The EU has given sufficient advanced warning in respect of these two restrictions but we did not take them seriously and did not take the necessary corrective steps. The EU ban on fish import from Pakistan which hits the poor fishermen very hard, has been a stop-go affair for long now and yet we did not take adequate precautionary measures following the EU warning.

Fish exporters had their problems with the Arab states like Kuwait and some other Gulf countries. They too stopped fish imports from Pakistan from time to time. But now a high powered committee has been set up to determine who is guilty of not making enough amends and carrying out the promised necessary correctives. Let us hope we do far better after the current enquiry. In a world of increasing competition in the area of trade we cannot afford to slacken our vigil and fail to carry out the necessary corrective measures we promised to the importers of Pakistani goods abroad. In the area of hygiene in respect of food items we cannot afford to be careless.

While we nourish rosy visions of the future and grandiose development goals the Economist intelligence unit of Britain says that by the end of 2007 the rupee will depreciate by 2.50 or four per cent in relation to the US dollar and by Rs130 to a dollar by the end of 2008. It forecasts that the rupee will gradually depreciate against the US dollar. The reason for the drop in the value of the rupee, which has a long history, is the sustained inflation and the rise in the money in circulation. Officially, inflation is 8.5 per cent instead of the projected 6.5 per cent for the current financial year. Money in circulation has been rising in spite of the tight monetary policy pursued by the State Bank of Pakistan. And this is due to the increase in home remittances, foreign direct investment, the rising business profits etc.

As the cost of production goes on rising and export prices increase, the money in circulation will rise regardless of the State Bank’s pursuit of a tight monetary policy and the rupee will get weakened even when the dollar is not getting strong against the strong international currencies. Import prices are also going up, iron and steel prices have hit their peak along with other metal prices. Prices of milk and vegetable oil have also risen high.

And now the imported phosphate and potassium fertilizer prices have shot up in the country. DAP prices have risen by 60 per cent and MAP prices by 66 per cent in spite of the official subsidy of Rs250 per bag.

The principal industry of Pakistan, the textile industry, continues to face severe export problems. Textile minister Mushtaq Ali Cheema says Pakistani textiles are not able to face competition abroad from China and India whose export products are 12 to 15 per cent cheaper than Pakistani exports.

The cost of production is high in Pakistan and the concessions given by India and China to their exporters are not available to Pakistani exporters. However, a second relief package is being readied by the government, but it is taking a long time to finalise the package.

Mr. Cheema says Pakistan is the fourth cotton producer in the world and the third largest cotton importer. We have imported three million bales of cotton this year which costs a great deal. We sell our cotton cheap because of its admixture and buy better quality cotton at a higher price. But some officials in the government are opposed to more concessions to the textile industry. They say the industry is always in distress and clamouring for more and more concessions.

The leather industry is in distress. About 56 leather garment units in the country are reported to have shut down for want of enough skins and their high prices. This is a high profit earning sector which must be encouraged and actively assisted. Even here we have lost our markets to China and India. Now complains are coming from the jute sector.

The World Bank has cautioned Pakistan that the neglect of the transport sector is costing the economy annually a loss of 220 billion rupees and making the exports more costly and less competitive. These are areas where a casual approach will not do. Meanwhile, the automobile assemblers of Pakistan propose to have their organisation to plead their case as their problems get more complex.

The National economic council meets this week to consider the problems of rising inflation, stagnant exports and increasing trade deficit and the soaring record current account deficit and with the exports getting sluggish and investment less, the imports are falling along with that, the customs duty, sales tax and withholding tax revenues are also dropping.

The revenue collection so far has been very comfortable and has exceeded the target, but as imports fall the customs revenues can get less but the economic growth rate which is projected to be seven per cent may rise to 7.5 per cent because of the distinct improvement in agricultural output. But the current account target, which is $6.3 billion, may be exceeded. In the first six months, the deficit is $4.4 billion which is a record figure. The wheat output is expected to exceed the target of 22 billion tones and the crops as a whole are expected to record a growth of four per cent.

The government is happy over the continued rise in home remittances which may rise above five billion dollars this year and the foreign direct investment of five to six billion dollars, inclusive of privatisation sale proceeds, of big ticket items like the PSO.

The World Bank has cautioned the government not to take the swelling current account deficit too lightly but make enough efforts to reduce it by increasing the exports.

Vision 2030 depends on several other earlier visions coming true. They include the building of the five large dams by 2016. The UN millennium goals of reducing poverty by a half by 2015 has to be made a reality and the programme to set up 50 public and private sector power plants has to be achieved and four per cent of the GDP to be spent on education in an effective way has to be made a reality. Public health has to be improved through adequate public spending and efficient use of the funds and the environment has to be well protected. If all this can be achieved Vision 2030 can become