While the National Finance Commission (NFC) is struggling to update its tax revenue sharing formula, a strong plea for an equitable distribution of development funds among provinces and the federation is being made outside the NFC ambit in Sindh.
The Public Sector Development Programme (PSDP)/ development budget is beyond to the NFC mandate. The NFC awards take care of consolidated non-development budget. There is no constitutional or political forum to distribute the overall development budget on the basis of legitimate provincial claims.
To pick up one example, Sindh gets far less for development funds than it's proportionate share under the controversial NFC formula. Many federal projects intrude in the provincial jurisdiction in areas like health and education. The Parliament has no say in it.
Foreign funded federal projects are managed by the central government and are monitored by the donor agencies. In the absence of any national forum to distribute development budget, the issue has been raised by independent economists, retired planning officials, academicians and university researchers in seminars with focus on fiscal federalism as the core issue. There is some feeble effort within the provincial governments to strike a better deal.
No doubt, the developmental process starts with the National Plan Coordinating Committee (NPCC) which sets the PSDP size and the priorities for the federal development spending, according to a retired planning official, normally means 70-75pc of resources, if not more. The residue is passed on to the provinces.
In actual practice, the NPCC is stated to be just a forum for debate. The size of PSDP, priorities and projects come from the Ministry of Finance (MoF) and the donors' choices and contributions.
The major priorities may be set by the Planning Commission (PC) but the final say is that of MoF, executed through erratic financial releases, on a case by case basis. The overall development budget is over-stated and funds are released when they become available. Quite often, the PC guidelines are flouted.
The Constitution provides for federal, provincial and concurrent lists but the decision-making on development outlay is the exclusive preserve of the federal government. Even in the provincial governments, the control lies with the Federal Ministry of Finance.
Mega projects for the exclusive benefit of one province are initiated by the over-centralized authority. There is no system, procedure or definition of a project funded by the federation in any province.
Normally, projects for exclusive benefit of a single province should be undertaken by the relevant federating unit and Islamabad should focus on projects of common concern to all the four provinces.
This, however, requires fiscal devolution from the federal to the provincial level for which there is so much reluctance in Islamabad. From Rs90 billion in 2002-2003, the federal development budget was enhanced to Rs113 billion in the current fiscal.
The corresponding share of provinces went up from Rs44 billion to Rs47 billion. But, the ratio of the provinces in the overall development outlay declined approximately from 33 to 30 per cent.
To quote from a presentation at a recent seminar by Ghullam Hussein Khaskhelly and Ambreen Zeb Khaskhelly, the development expenditure of Sindh estimated at Rs8.9 billion for fiscal 2004 was a mere 18.9 per cent of all provincial government's share and 5.56 per cent of the total PSDP outlay. Sindh is denied a share even in the ratio of its population.
Ten per cent of the overall provincial development budget is set aside for NWFP and Balochistan to be shared equally by the two provinces. Public corporations like Wapda or the National Highway Authority (NHA) are funded and run by the federation.
The NHA has no representative from Sindh on its management board nor is any project being currently executed by it in the province. Major highways in Sindh are in depleted condition needing repairs or those which have to be made dual carriage for handling growing traffic, have not been included in NHA programme.
Wapda has spent Rs2.50 billion on Kalabagh dam feasibility study and spent Rs1.75 billion on Thal Canal despite Sindh's opposition to the two projects, say sources close to provincial planning department. Federally-run Wapda and the KESC are heavily subsidized by the federal government.
Owing to what is described as whimsical ways of distribution of development budget, Sindh is the worst sufferer as indicated by a study in 2000 carried out for the Asian Development Bank on poverty. The level of poverty in Balochistan is 54, Sindh 53, NWFP 24 and Punjab 29 per cent, says Sikander Brohi, co-ordinator, SZABIST.
Similarly, sources in the Planning Department complain that several projects are awaiting approval of the Planning Commission for past two years. These include schemes for repairs of Sukkur Barrage and upgrading of water supply canal from Kinjhar Lake to Karachi city.
The provinces have to get Planning Commission approval of projects worth more than Rs200 million. A request by Punjab government to raise this ceiling for approval, is reported to have been turned down by the finance ministry.
In a federal system, say independent economists, the provinces enjoy autonomy and have their own financial powers and control over their expenditures.
These include borrowing powers. Fiscal autonomy speeds up decision-making and improves efficiency, now clogged by erratic cash flows under the present system. Planning officials complain that neither fiscal federalism nor development has been taken seriously.
Others say the situation has worsened over the last decade or so as market fundamentalism gained ascendancy and financial sector reforms got underway. Development spending fluctuated from year to year with a marked general declining trend over the decade as governmental focus shifted to containing budget deficits and globalization of the financial system.
But, after a decade of globalization, "defined by the North (big powers) and driven by the market," the developing countries are pressing for " an alternative human- and development-centred paradigm" to create a new world order based on equity and human dignity.
A strong plea in this policy direction has recently been made by Centre for South, a Geneva-based inter-governmental body of developing states in its Jordan Valley Declaration. The statement was endorsed by Prince El Hassan bin Talal, a member of the centre's board.
In the absence of "people-centred" and " development-centred" macro-economic policies, the outcome has been massive global poverty and unemployment, marked by setbacks and failures in critical development indicators as health, education, food security and sustainable development.
The North-led globalization has also led to fragmentation, fractures and conflicts in the global community and has wrecked many countries, says the Jordan declaration.
With fiscal stability, economic managers in Pakistan are targeting a growth rate of six per cent to reduce poverty. But, a high growth rate is neither sustainable without much improved social indicators nor would it necessarily lead to reduction in poverty unless the source of growth is labour-intensive.
Economic growth may pick up with increased productivity by induction of sophisticated technology but with fewer jobs. Both the national and international agenda must focus on people- centred development. And the best way to do it in Pakistan is through genuine fiscal federalism.