KARACHI Major political parties feel that enhanced public development spending is necessary to create employment, promote investment, curtail power deficit and for realisation of the agriculture potential. They advocated cut in interest rate to encourage investment to put the economy back on the track of healthy growth.

Some leaders felt that positive sentiments generated after March 16 dissipated to some extent because of escalation in the wave of terrorist attacks. They said that the political will to collectively deal with the economic and security challenges was there. They expressed determination to spare no effort to bring about permanent peace and set the economic engine in full motion. Sartaj Aziz, former finance minister of PML (N) government in answers e-mailed in response to Dawn`s queries observed that the political truce between the PPP and PML-N, after the restoration of the judges on March 16, led to a steady surge in the KSE 100-share index, which went up by 33 per cent in three weeks, from 5,750 points on March 13 to 7,617.96, on April 10.

Unfortunately, he maintained, the `feel-good factor`, created by these positive political signals had been overshadowed by the spate of suicide attacks in different parts of the country.

Mr Aziz was of the view that the key factor for the revival of economic growth in the coming months would be the interest rate which, in turn, was dependent on the prevailing rate of inflation. He recalled that under the IMF agreement, the interest rate was revised from 13 to 15 per cent in November 2008 on the understanding that it can be brought down once the rate of inflation starts declining from the level of 25 per cent.

Since then the inflation rate has come down to 18-19 per cent and is expected to decline further by June 2009, but it is absolutely critical to reduce the interest rate by at least three per cent before June 2009 to initiate the process of economic recovery.

He feels that the real crisis, at present, is however in the manufacturing sector where due to massive load-shedding, high interest rate and declining exports the growth rate, in large-scale manufacturing, for the first eight months (July-Feb) of this fiscal year has been minus six per cent for the first time in the history of Pakistan.

He suggests that apart from the interest rate cut and energy supply to manufacturing sector industry-specific incentives be provided as a part of the upcoming budget. The construction sector was partly affected by the sharp reduction in public sector development programme where the rate of implementation would be less than 50 per cent of Rs520 billion budgeted amount.

He thinks with substantial inflows of foreign assistance next year, it will be possible to accelerate the size and implementation of the development programme.

Agricultural sector, he said, still has considerable potential to bridge the yield gap and diversify the farm sector towards high value crops provided vigorous action is taken to tackle the chronic institutional weaknesses, especially in the seed and fertiliser sub-sectors and also by expanding Research and Development investment in agriculture.

About Benazir Income Support Programme (BISP), the PML-N leader said that income support programmes were never a substitute for poverty reduction strategies, which require faster growth in sectors that directly affect the employment and income of the poor and improved access of the rural poor to basic and technical education.

He added that, however, safety nets or income support programmes were necessary to provide relief from high food inflation. For handling unemployment, Mr Aziz said the growing rate of joblessness was partly the result of a slower GDP growth (2 to 2.5 per cent), negative growth in the manufacturing sector and reduction in the PSDP. “All these three factors have to be tackled effectively to reduce unemployment and under-employment in the coming year.”

The newly-elected Amir Jamaat Islami Pakistan Syed Munawar Hassan thinks the flagging economy may be revived by setting the industry into motion as begging bowl or borrowing from friends and international agencies like IMF, is not a long-lasting solution.

He urged the government to reinforce trust of the people in the country`s economy, especially by bringing back their foreign assets and investment from abroad. “This will be a source of encouragement for overseas Pakistanis who have invested abroad and now look scared in the aftermath of recession in the global economy.”

The Jamaat head said energy or power was the lifeline for the smooth functioning of manufacturing, construction and agriculture sectors, and the rulers instead of making tall claims of overpowering the “menace” of load-shedding should adopt concrete measures to ensure the power to units of growth.

Mr Munawar was of the view that no economy could flourish in an unstable environment, especially foreign investment cannot gain ground in any country which remains unstable for one reason or the other. “Investors want protection of their money and property. This secret has earned the UAE, coupled with other European countries, huge investment because local and foreign investors feel themselves and their money secured.”

About direct dole outs to the poor, he said this kind of strategy could serve as stop-gap arrangement, but the secret of success of economy was in the circulation of money, and not its concentration in few hands. The idea of helping the needy should be based on their [poor] permanent revival and self-sufficiency.

Responding to an observation that retrenchment of workforce by companies to cut their losses has pushed up the rate of unemployment, Mr Munawar said indeed, this was a very painful reality. “No doubt, creation of new job market is the answer to this rising “firing spree,” which has been given the name of “readjustment” to cut the losses”.

“It is an open secret that certain companies are offering lofty and lucrative packages to some of their executives but they induct the other vital workforce on meagre salaries.”

Acting President Awami National Party (ANP) Haji Mohammad Adeel says public goodwill can be used for the revival of the economy only if the emphasis is shifted from the public sector development towards a market approach and the private sector is involved in the overall process of economic development of the country.

He said the government should improve the law and order conditions, especially in the province of `Pakhtunkhwa` and Fata. Besides, the concept of proposed Reconstruction Opportunity Zones (ROZs) should be encouraged and implemented through provincial governments.

The ANP leader was for major reforms to develop forestry in addition to provincialise excise duty on tobacco.

Mr Adeel also voices for provincial autonomy to improve the economic conditions and bring about reduction in poverty. “Resources and their income should be in control of the provinces so that they can provide meaningful employment to the people and develop large, medium and small-scale industries.”

Turning to unemployment he said it could be reduced by using manpower in the development of the infrastructure, public buildings, schools, hostels, and roads, etc. He also called for reduction in unnecessary defence expenses to the level which do not jeopardise the economic and social welfare of the people.

Senior Vice-President National Party of Pakistan (NPP) Mir Hasil Bizenjo thinks unless the huge non-development expenditures on defence, debt servicing and government spending are minimised and the resources put to productive use, the government cannot make room for the economy to settle down. After huge non-development expenditures, the government has very little to spend on education, health and industrial sectors, hence the economy has been shrinking instead of growing, he remarked.

Mr Hasil said that the main hindrance in industrial growth was the shortage of power. The major source of electricity production is based on hydel resources, which have been used without proper planning and consequently the power supply-demand gap over the years widens sharply and the entire industry is experiencing slow or low production, while many units are on the verge of collapse.

He suggested construction of more dams to increase water reserves for both irrigation and power production purposes. However, he said the government should take immediate steps to make huge coal reserves available for power production to ensure uninterrupted supply to the manufacturing sector.

He said that the government should on urgent basis start promoting agriculture sector by offering fertilisers and other inputs at cheap rates, encouraging usage of latest and modern techniques and technologies to increase crop yields and efficiency. He was of the view that the government was not taking any steps to check the continuous depreciation of the rupee and lacking measures to attract foreign direct investment.

Answering a question about the government`s dole out programme, he said people need liveable incomes and wages should be high enough to afford housing, food, clothing and medical and those who are not able to work should be provided with sustenance income.

Mr Hasil asked the government to launch mega projects to reduce unemployment, reduce taxes and levies and build tax-free zones to attract new productive investment to create new opportunities of employment.

Muttahida Qaumi Movement (MQM) senior leadership were sent queries by e-mails, fax and were contacted on phones, but till filing of this report they failed to respond.

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