October 19, 2003

Extensive resource transfer from Sindh through a variety of sources has reached a point where revenue collection happens to be higher than allocations for development. Besides, the disproportionate non-Sindhi factor in terms of the provincial labour force results in net remittance outflow

THE concept of planned development was first introduced by the erstwhile Soviet Union in the first quarter of the 20th century. Many non-communist Third World countries also adopted the process and five-year plans became the guiding platforms for development.

While communist countries targeted growth in national income as well as in terms of poverty elimination, non-communist countries targeted it in national income with the assumption that the benefits of growth would trickle down to the poor and lead to elimination of poverty.

Capitalist institutions, a la the World Bank, also came on board and began to provide loans for projects enshrined in the development plans. However, half-a-century of experience showed that growth in national income does not necessarily trickle down to the poor.

As such, the focus has now shifted to a process of development planning centred directly upon poverty reduction. World Bank funding has now become contingent upon preparation of poverty reduction strategy papers, popularly referred to as PRSPs.

Pakistan has prepared its Interim PRSP and the provinces are in the process of doing so. Some thoughts on the PRSP for Sindh may, thus, be in order. Provincial PRSPs need to take into account the fact that the provinces are open economies within the country with respect to movement of capital as well as labour.

Provinces are also subject to the national macroeconomic and fiscal policies, particularly those related to stabilization measures, and to foreign trade policies. Subject to the above limitations, a pro-poor development planning process must begin by identifying the natural resources in the province, factors responsible for low productivity of these resources, physical, social and institutional constraints to development, factors responsible for low ‘trickle down’ of income generated from existing resources, and strategies and measures for dealing with each of the problems thus identified.

The most important resource of the province is its people. Sindh’s labour force size stands at eight million. Assuming that one direct job creates three additional jobs, about two million direct jobs need to be created in order to achieve full employment. And given the higher weight of financial and professional services sector in Karachi, Sindh requires a higher proportion of educated and skilled labour than do the other provinces.

The Karachi factor points to the fact that Sindh’s economy is heterogeneous in more than one ways. At one level, there is the sharp urban-rural divide. Sindh’s economy presents one picture with Karachi, and quite another if Karachi is excluded from the analysis. However, even urban Sindh has to be differentiated between Karachi and other smaller urban centres like Larkana, Badin, etc. Sindh, therefore, comprises Karachi, other urban areas, and rural areas.

At another level, Sindh can be divided into four economic zones: Karachi, irrigated belt along the Indus, arid belt on the right bank of the river Indus, and the desert belt in the east and southeast. A PRSP for Sindh must take into account this diversity and the multiple stratifications, and must comprise a set of sub-strategies fused into a provincial strategy.

The three most important natural resources of Sindh are the river Indus, the coast, and the energy resources. Besides, the metropolis of Karachi, endowed with assets comprising the port and an array of industrial, commercial and financial entities, should count as a resource in its own right.

The river Indus is the lifeline for agriculture, which accounts for a good proportion of Sindh’s gross provincial product (provincial equivalent of national GDP). Sugarcane, rice and cotton are major cash crops, which serve as inputs to Sindh’s and Pakistan’s manufacturing and export sectors.

The coast hosts two deep-sea ports, with the entire country and Afghanistan as their hinterland, and two fish harbours. The coast also offers as yet unexploited potential for beach resorts, ocean-parks, floating restaurants, water-sports, cruises, etc.

Sindh is the energy powerhouse of the country, with the largest reserves of oil, gas and coal. Karachi is an economic dynamo that generates more than one-sixth of the country’s gross domestic product and more than half the country’s revenues. That the province is afflicted with abject poverty, despite an array of natural resources, can only be attributed to politico-institutional distortions.

Sindh’s development is constrained largely by one macroeconomic, two physical, one human resource, and one institutional factor. The macroeconomic factor relates to the generation and distribution of gross provincial output. The physical factors include water and infrastructure, the human resource factor relates to education, and the institutional factor to the feudal organization of Sindh’s rural society.

These constraints are formidable and the first phase of Sindh’s PRSP must concentrate on overcoming them. Any attempt to launch a development or a direct poverty reduction programme without first addressing the constraints will be doomed to failure.

The macroeconomic problem occurs on account of extensive resource transfers from Sindh through a variety of sources. Partly, this is on account of the federal fiscal structure; whereby, revenue collections in Sindh are higher than allocations for development as well as recurrent expenditure.

And, partly, this is on account of the large share of non-Sindh government and private employment in Sindh’s labour force, resulting in net remittance outflow. Thus, while Sindh’s gross provincial product is higher in terms of ‘income originating’, it is lower in terms of ‘income accruing’. This phenomenon impinges on provincial income, and, consequently, on household incomes.

Water presents problems on two fronts. One, it is short in supply, given that Sindh is the lower riparian of the Indus river system and there is significant diversion of water in the upper reaches of the river. Shortage of water at critical moments impacts adversely on output as well as productivity.

Two, Sindh suffers from poor drainage, with the result that the application of water results in waterlogging and salinity, which degrades cultivable land and reduces productivity. Sindh’s infrastructure is crumbling and this is true in urban as well as rural areas. This is manifested by the state of roads in the cities, one-and-a-half-lane pot-holed highways connecting district towns, and the virtual absence of usable farm-to-market roads. The province has historically suffered from under-investment in infrastructure development, including in terms of replacement investment. Maintenance standards too have been poorer than in other provinces.

The state of education is pathetic. Apart from exceptionally poor literacy and enrolment indicators outside of Karachi, the dismal quality of education — including at the level of public universities — explains Sindh’s inability to exploit its natural resources.

Institutionally, the feudal system — manifested by highly unequal land distribution in rural areas — results in the rural aristocracy monopolizing the gains from increments in provincial income, leaving the poor trapped in poverty. Feudalism is an archaic form of social organization of production, with elements of it rooted in 11th century values. Perpetuation of the outmoded system, along with deficient educational standards, will ensure that rural Sindh is doomed to a low-level existence, exposed to control and exploitation by superior forces from within and outside the country.

Given the above situation, reforms and financial and institutional investments are needed in almost all sectors and areas. However, resource constraints require that areas of intervention be prioritized on the basis of maximum catalytic impact.

And, as stated earlier, medium-term efforts must be concentrated on overcoming the constraints to development. In this context, the PRSP for Sindh must concentrate on the following five core areas of intervention: land reforms, water, roads, urban development, and education. Specific medium-term development plans for each of these areas must be drawn up, with estimates of required financial allocations.

One, feudalism must be abolished, with land reforms approached from a new perspective. Instead of focusing on limits to land ownership, the government should take upon itself the responsibility of providing on ownership basis and free of cost, say, 100 square yards of land to all adult men and women residing permanently in rural areas.

This will enable them to house livestock, engage in vegetable gardening or grow fodder and accrue income therefrom. Ownership of land for residence and for housing livestock must prove to be a powerful instrument of economic security for the rural poor, and improve rural income distribution.

Two, water resources must be harnessed. Water availability is a function of political negotiations. However, water use efficiency can be improved by lining of all water channels. Furthermore, flood irrigation needs to be gradually replaced by economical forms of drip irrigation. This will allow efficient use of scarce irrigation water and substantially reduce waterlogging and salinity, thereby enhancing the productivity of cultivable land. High water-intensive crops must be phased out in favour of less water-intensive, high value-added crops.

Three, the rural road network must be expanded and improved. A divided two-lane asphalt road network must connect all the district towns with the major cities and with each other. A network of durable farm-to-market roads must also be built.

Four, urban development must be concentrated in growth nodes. Urban centres play a significant role in enhancing productivity and incomes across all sectors, including agricultural sectors. Sindh has three major urban centres, Karachi, Hyderabad and Sukkur. Karachi is a metropolitan centre and has the potential to emerge as a regional hub, rivalling Dubai. Achieving this status will require upgrading the quality of civic infrastructure and services to international standards.

Hyderabad and Sukkur must also be raised to metropolitan status, with the merger of adjoining urban areas from within the radius of, say, 25-30 kilometres. Thus, Tando Jam, Jamshoro, Kotri, etc., can form part of Hyderabad metropolitan area, and Khairpur, Rohri, Shikarpur, etc., can form part of the Sukkur metropolitan area. The advantage of creating urban agglomerations is that investments on civic infrastructure and services can be concentrated to achieve economies of scale. The development of Hyderabad and Sukkur as metropolitan centres will also ensure a more regionally balanced development process in the province.

Five, medium-term efforts with respect to education must be concentrated on primary education. A multi-pronged approach is necessary. A separate salary structure must be created for teachers and administrators. While the salary structure for the administrative cadres can remain constant, the salary structure for teachers must accord primary teachers Grade-17 instead of Grade-7 which is the case at present.

Centralized recruitment, posting and transfers of teachers must be terminated and headmasters/mistresses must be empowered to hire and fire teachers, subject to specified rules. They must, however, be fully accountable for the functioning of their schools and the performance of their students.

The provincial government must institute special grants for district governments linked to enrolment and performance in examinations in schools in their jurisdictions. This will require instituting a common system of examinations for the entire province as well as a system of linking student performance to incentives for teachers.

The above measures, if implemented earnestly, will provide significant levels of employment, and, to that extent, serve to alleviate poverty. They will also serve to relax the constraints to development and provide the basis for the growth and modernization of Sindh’s economy in the longer term.

However, a binding requirement for any of these things to happen is the political will to eliminate poverty and to build a modern society and economy in Sindh. That will has been lacking for the last half-a-century and it is a moot point whether or not it exists now.

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