FOR 58 years, Pakistan has remained a developing country, which reflects on the profile of state governance all these years. The development backlog owes itself to short-sighted planning, corruption and resource waste, that can’t be remedied by one, two or three budgets.

Unless budget proposals are prepared by those with in-depth knowledge of critical gaps in physical and social infrastructure and the vision to prioritise filling those gaps that will yield optimum direct and indirect returns in several spheres, the backlog will continue.

A former federal minister believes treating outlay on infrastructure maintenance, as revenue expenditure, to be an error. Treated as such, and faulted by misguided observers, this outlay never sufficed to maintain the existing assets, which hastened infrastructure decay and diversion of large parts of development outlay to re-building rather than building new assets.

However, the big failure was our inability to visualise the totality of benefits or negative effects of development; it led to consistent misallocation of funds while the country experienced abnormal population growth.

An example thereof is the countless flyovers built in big cities instead of overhead rail networks. This will now pre-empt installing this cheap and less polluting mass transit system. This short-term approach induced people to buy cars, enriched auto assemblers, financial institutions and oil companies, and increased oil consumption that is escalating the BoP deficit.

Rumour (denied thus far by CBR) has it that import duty on used cars may be cut by 25 per cent. We compound problems by the way we go about resolving them. Undoubtedly, a lot needs to be built but if project execution impedes the on-going commercial activity (and revenue generation), it saps the economy’s productivity undermining its ability to fund development from internally generated sources. The state of Karachi’s under-repair road network portrays such an unimaginative approach to development.

Paying off the IMF has been the PM’s oft-repeated success. However, we are now close to the point Pakistan will again seek IMF support, courtesy the ingenuity of our policy-makers, who believe living only in today. It is time they stop feeling sorry about observers (including eminent speakers at the Pakistan Development Forum) whom they consider clueless, and make amends for all that has gone wrong during the past three years.

Dissent with the policy of low allocation for development, was brushed aside on the logic that, with bureaucracy incapable of spending development funds, increasing this outlay was pointless. Yet, critics be praised because, from its 02-03 level (Rs132 billion), the allocation rose to Rs271 billion in 04-05, but wasn’t enough keeping in view the backlog that continues to accumulate. It now seems that, on a yearly basis, even twice as much will not be enough.

To improve the physical infrastructure at the macro level, the outlay now has to be huge for: (a) exploring and tapping domestic energy resources, (b) doubling power generation capability, (c) drastically reducing transmission losses, (d) building water reservoirs (no matter what the profile of opposition), (e) expanding rail-road access of crop-producing areas to market centres, (f) laying oil and gas pipelines to energy-rich ECO states, and (h) providing these countries rail-road access to Pakistan’s seaports.

No less important is improvement at the micro level – roads, power, gas and sewerage lines in towns and cities, and radical improvement in the capacity of state-run hospitals, schools, colleges and universities to deliver, if the impact of growth is to filter down. In this context, besides professionalism, the key issue is providing the institutions requisite physical and technological backup, which requires capital outlay.

The resource gap can’t be filled without the state taking courageous steps to collect its fair share in the earnings of individuals and business. Since 2003, observers have pointed to loss of the opportunity created by post-9/11 inflows because the state quietly allowed the drift of bulk of these inflows into unproductive imports, and virtually untaxed speculative activities.

Not surprisingly therefore, at the PDF, visiting speakers pointed to the failure in making optimal use of these inflows, and the unaddressed inequities in taxation.

There is a resource gap but not as acute as it is made out to be. The real problem is that we still don’t judiciously tax agricultural and non-corporate sectors, more importantly, capital gains that enrich the speculators. This reflects poorly on CBR but more so, on the government because it guides CBR in setting taxation priorities. This conscious neglect is defeating the pursuit of the all-important objective of fairly re-distributing wealth.

Backing off from taxing these sectors in the face of resistance, sets bad precedents. This attitude conveys a reckless commitment to private sector growth at any cost because this sector can get away with anything; it happened too often, though each time it provided an opportunity to firmly establish the government’s legitimate writ. Tragically, in spite thereof, few except our policy-makers believe that the much sought after ‘economic growth’ filters down to the country’s enormous population of the underprivileged.

Building water reservoirs should be our first priority, irrespective of the wild estimates ($25 billion) of its cost. This is a matter of life and death because on this depends self-sufficiency in food. Should we fail to develop the reservoirs quickly enough food imports will expand the BoP deficit.

While we continue to quarrel over construction of big dams, we must not overlook constructing smaller ones that could keep many crop growing areas served with both water and electricity. A positive development is the PM’s belated go ahead for installing the drip irrigation system.

The second priority should be a two-fold increase in power generation. In the short-term, the government must invest in wind energy technology that takes far less time to install compared to hydro or nuclear technology. Once installed, it provides energy without any other inputs except those for maintenance of the windmills and transmission lines. For a start, the over 300-mile long Sindh-Balochistan shoreline is the ideal location for installing this technology.

Alongside this, private sector should be encouraged to acquire the more expensive solar energy, to supplement our escalating needs. In the same context, one field in which public-private would be productive is oil and gas exploration. Until we make a massive switch to other energy sources (a far cry), the sensible alternative is to increase reliance on domestic sources, which would now be definitely cheaper than imports, given the astronomical rise in oil prices.

The experiment of diluting state role by promoting private sector domination of education and health seems a failure going by the incidents of indiscretion and mismanagement in private education and health institutions. Scores of un-affiliated colleges and institutions (pinpointed by the President) are wasting the time of the nation’s youth by equipping students with practically nothing in terms of skills.

Tragically, these institutions extract huge tuition fees from their students. These institutions thrive on the collapsing physical infrastructure, and falling educational standard of state-run institutions. This scenario must be reversed by revitalizing the existing state-run educational institutions, setting up more, and funding them adequately to ensure that they impart education and vocational skills that have practical utility in the employment market.

The government must invest in facilities that ensure simultaneous imparting of education and vocational skills from class VIII onwards so that boys and girls who study only up to class X go out into the market with skills that facilitate their swift absorption in the economic activity. This is one way of containing the number of educated unemployed, who may otherwise drift towards crime. Leaving it to the private sector would keep it expensive and restrict its reach to the big cities.

What all this implies is that development priorities should address both macro and micro issues, neither at the cost of the other. Second, government must assign infrastructure maintenance the same priority as development by making it a part of the development budget.

Third, a strategy to avoid waste, and to judiciously tax the sectors referred to earlier must be adopted immediately to raise resources for development, and make it higher proportion of the GDP.

Unless this happens the backlog of critical gaps in infrastructure (that expand year after year with population growth), won’t be plugged. To begin with, it requires generous allocation of funds for development followed closely by the imperative of prioritizing sectors and projects therein, whose importance is dictated by sheer logic though not by shady consensus.

Finally, every Rupee should be spent in a manner that yields the optimal combination of nominal and economic returns.

Private-public participation in development needs careful examination because of the fundamental difference in the objectives of the state and the private sector. The state should exclusively fund projects that will serve the low-income groups, so that their usage charge doesn’t include a ‘profit’ element. This principle should guide the policy on resource mobilization if we genuinely want growth to filter down, and contain poverty. In spite of all the claims about its decline, poverty is rising and could destabilise the entire social structure not too distant future.