Need for a new paradigm

April 27, 2010


PAKISTAN is an economic mess. It is well behind other large Asian countries. In 2010, the Chinese economy is likely to expand at the rate of 8.8 per cent and India's by 6.7 per cent. Both countries will improve on these rates in 2011.

The Chinese GDP is set to grow by at least 10 per cent; India's by 8.8 per cent. Both countries have achieved these extraordinary results by integrating, in different ways, parts of their economies with the global system. Even Bangladesh is doing better than Pakistan.

In Pakistan, the situation is very different. The GDP in 2009-10, by official estimates, increased by only two per cent. This increase in national output was slightly more than the increase in population which the government estimates at 1.8 per cent. This means that the incidence of poverty must have increased significantly. The country probably added another five million people to the pool of poverty, bringing its total to 65 million. This translates into 38 per cent of the population of 170 million.

In the current year the government says the GDP increase will be little higher, perhaps three per cent. This may just be enough to keep the total number of poor at 65 million. In the years ahead the rate of growth may begin to increase, bit by bit, reaching five per cent in five years. The rates of growth achieved by China and India are not on the cards for Pakistan. Even at five per cent a year of GDP, the poverty pool may begin to shrink a little but not very much.

These are national averages; the overall GDP growth is being helped by a more rapid increase in some sectors and geographical areas. Conversely there are parts of the country and some sectors of the economy that are performing below the average for the country. Among the better performing areas are perhaps Karachi, Lahore, Islamabad and central Punjab. Among the poorly performing regions are rural Sindh, southern Punjab and most of Balochistan and Khyber Pakhtunkhwa.

What these numbers paint for us is an exceptionally grim picture. It is the picture of a country that is unable to provide adequately for more than three-fourths of its population most of which — but not all of it — lives in backward areas. About 40 million out of 170 million people in Pakistan have succeeded in keeping their living standards from falling. Of these about 15 million have improved their economic situation in spite of the sluggish economy. If this is the right representation of the changes in the social and economic structure of the population, it appears that income distribution in the country must have widened considerably.

We can, in other words, look at Pakistan and its people in two different ways. Geographically there are three areas — backward, stable and relatively prosperous — in the country. Karachi, Lahore, Islamabad, Faisalabad and Hyderabad and the countryside in central Punjab fall in the category of relatively prosperous areas. Even in these there are pockets of extreme poverty.

The middle-sized cities of Punjab and lower Sindh can be regarded as economically stable. Most of the rest of the country can be considered as backward although even here there are pockets of prosperity. The other way of viewing the situation is to use some rough measure of income. Some 15 million can be considered rich; another 25 million as belonging to the upper middle class; another 65 million fall in the category of the lower middle class; the remaining 65 million are desperately poor.

Putting these two pictures together produces a canvas which begins to explain the persistence of militancy and insurgency against the established order in the country. We know from the profiles of the people — men, boys, women and girls — who were persuaded to wear suicide belts that they came from backward areas and belonged to the lower middle class. They were indoctrinated by those who have opted out of the state and challenged the governing order from outside the system.

Such people are prepared to use whichever instrument or method would do the most damage to the existing order, create the most noise, produce the greatest amount of publicity for their cause. Their cause is to produce a new political, economic and social order that is to their liking and the liking of those who have indoctrinated them.

How can this situation be addressed? The use of force is one part of the solution and it has begun to show some results in the areas of the country where it was applied. But the difficult part is the effort to bring the disaffected into the mainstream of economics and politics.

To achieve the latter result Pakistan must move towards a new development paradigm. The one that I have in mind has several elements of which the following four are particularly important. The first is improving the quality of governance. The second focuses effort on improving the country's resource situation. The third would provide the young with education and skills they can use to enter the economic and social mainstream. The fourth is to make Pakistan a functioning part of the global economic and political system. These four elements of the new development paradigm merit discussion.

There is some progress on the first — the need to improve the quality of governance and bring the state closer to the people. The 18th Amendment to the constitution has done more than go back to the original system. The 1973 Constitution provided the country with a federal system in which the provinces were to have considerable authority over economic issues. This was a promise that was to be fulfilled after a period of political maturation.

The subjects over which the provinces were to exercise total control were lumped together in the 'concurrent list' over which during the interim period both the central government and the provinces were to share responsibility. With the constitution amended a stage has been set for bringing about some improvement in Pakistan's miserable economic situation? I will take up this question next week.