Basking in the glory – reflected or otherwise – the economic managers may afford to ignore it for the time being, but in the long run they, and the nation, may regret wasting a huge chunk of this bonanza due to shortsightedness in broad policy terms. The drain on the national economy, mind you, is to the tune of as much as six per cent of the GDP, and, worse still, it is a loss that is avoidable with a little bit of policy adjustment and fine-tuning.
The Strategic Country Environmental Assessment report that has been recently released by the World Bank is a timely reminder for our policymakers that, one, economic progress is not necessarily synonymous with development; and, two, that lack of development is a direct drain on economic progress.
Pakistan is the most urbanised country in South Asia, according to the report, with a booming economy. Economic reforms have paid their dividend and the country has achieved record growth rates, buoyant levels of investment and sustainable fiscal balances. Long term growth rates too have been reasonable, averaging 2.6 per cent since 1960, exceeding most other countries in the region.
Even in recent time, Pakistan has achieved impressive macroeconomic results, “with ambitious reforms resulting in an acceleration of growth from 3.3 per cent in 1997-2002 to over 6.5 per cent during 2002-2005”. However, despite these historical and recent achievements, social and natural resource indicators continue to demonstrate the daunting development challenges facing the country, and in particular the importance of strengthening environmental management to reduce risks to health and natural resource productivity, and to sustain economic progress. The burden, says the report, is threatening to undermine growth prospects.
Using conservative estimates in the absence of reliable official data, the World Bank report has put the mean annual cost of environmental degradation as approximately six per cent of the GDP, or Rs366 billion per year. In simple terms, it is a loss of a little over a billion per day! The figure incidentally is of a magnitude similar to the recent growth performance recorded by the official economy. As such, the two all but negate each other, with the result that despite record GDP growth rates, a number of development indicators continue to show limited improvement at best, and negative growth at worst.
The report has identified seven key areas that are contributing to the economic drain. The highest cost is from inadequate water supply, sanitation and hygiene, followed by agricultural soil degradation, indoor air pollution, urban air pollution, lead exposure, rangeland degradation and deforestation.
The most significant causes of environmental damage identified and estimated are: illness and premature mortality caused by air pollution (indoor and outdoor) – almost 50 per cent of the total damage; diarrhoeal diseases and typhoid due to inadequate water supply, sanitation and hygiene – about 30 per cent of the total; and reduced agricultural productivity due to soil degradation – about 20 per cent of the total.
That is not all though. The litany of woes is much lengthier. For instance, with more than one-third of the Pakistani population living in towns and cities, exposure of the workforce to urban and industrial pollution is a rapidly growing concern. Overall, environmental health risks are estimated to contribute more than 20 per cent of the total burden of disease. At about 25 per cent, the contribution of agriculture to the national GDP is close to the regional average, but the sustainability of this production is subject to greater environmental threats than in other South Asian countries. The irrigated share of crop land – 80 per cent – is almost twice the regional average, but nearly 40 per cent of this area is waterlogged, and 14 per cent is saline. Forest and rangeland production is also at risk, with rates of deforestation about ten times the regional average, and rangeland productivity estimated to be only one-third of its potential, with up to 80 per cent of rangeland degraded.
While reminding that the estimates represent the lower bounds of damage, the report stresses that there could have been several other areas doing similar or more damage – most notably fisheries and coastal zone degradation – but they have not been included because there is no adequate data on such sectors.
The magnitude of these costs certainly indicates that environmental decay has become a serious development concern. Furthermore, accelerated growth and urbanisation present additional environmental challenges. “Capturing the development dividend of growth calls for complementary policies that address environmental issues while facilitating development,” says the report.
The consequences of not adjusting the policy focus, says the report, may seriously threaten the country’s poverty reduction efforts and long-term economic growth. The limits of resource-intensive development suggest that when the costs of natural resource depletion, pollution and consumption of fixed capital are factored in, gross national savings are cut by half.
It is interesting that while the linkages between environment and poverty through the impact of environmental degradation on livelihoods, health and vulnerability are explicitly recognised in the Poverty Reduction Strategy Paper (PRSP), which was presented in December 2003, not much has been done in this regard in practical terms. The legislative framework for environmental management is largely in place, and many aspects of the reform agenda can have positive environmental outcomes, but action on the ground, as happens often, leaves a lot to be desired.
Taking a historical view of the issues involved, the report concedes that since economic growth is the main vehicle for promoting development and reducing poverty in a sustainable way, it could, therefore, be argued that environmental degradation is the inevitable price to pay for economic success. This is typically justified in terms of an empirical regularity termed the Environmental Kuznets Curve that shows that as countries develop, pollution intensity increases at first and then declines. This may well be the case with Pakistan, but the concession made by the World Bank report does come with a warning: “It would be misleading to assume that this empirical finding implies that environmental neglect is an economically prudent development strategy. In many cases prevention or mitigation of damage may be more cost effective than neglect. In the short run environmental interventions may lower profits or utilise scarce public funds, but these costs need to be compared to the associated benefits.”
In terms of suggesting a possible remedy to the relative inactivity on the part of the executing agencies despite the presence of relevant legislation, the report favours the institution of performance-based grants under the National Finance Commission instead of direct intervention by the federal government to ensure the implementation of national policies. The carrot of incentives and the stick of accountability may do the trick.
