KARACHI, July 31: Violence is assuming new dimensions in an an economy in dire need of a sustainable investment-led growth. Despite high growth rates, the country has yet to emerge on the global map as a major destination for foreign investment. And the domestic private sector is focused on short-term capital spending.
A new feature of growing violence is that terrorists are attacking high profile and high value targets. On Friday, an attempt was made on the life of finance minister and prime minister-designate Shaukat Aziz. It followed similar attempts in recent days in which so many innocent lives were lost.
But Shaukat Aziz's case is different from other political VIPs. He is an icon of the market. Investors would naturally be more concerned about what happened to him on Friday than other political players. It would send one more wrong signal to the foreign investors.
What is happening in Makran and Wana and other parts of vast tribal territories of Balochistan and NWFP is enhancing security concerns with potential political and economic fallout. The current wave of violence is not a simple law and order problem but is basically an issue of weak governance and social inclusion.
Weak governance is the outcome of a dichotomy between constitutional writ on federal democracy and unitary system of government in practice. The unitary government negates representative democracy to federating units and the country, without which, a nation's people cannot improve their livelihood by themselves and according to their collective wisdom and vision. In unitary system, as practised now, political stability hinges on individuals rather than institutions. This is something the country could do without after 57 years of political independence.
Foreign investors prefer to invest in democracies where the rule of law, constitutional writ and sanctity of commercial contracts prevail.
Equally important is social inclusion and stability. The integration of the national market and its globalization, which is currently taking place, fails to address adequately diverse needs of households, districts and provinces. In the policy framework of one economic unit/national market, now being forged, prosperity is not equitably shared, resulting in what some economists say, North-South divide. Whereas billions of rupees are being spent on Gwadar port to facilitate trade with Central Asia, no serious effort is being made to conserve water in parts of Sindh and Balochistan where, according to SPDC, thousands of hectares of orchards have been desiccated and thousands of families have lost their jobs. In Loralai district, fruit production has fallen by 65 per cent during fiscals 1998-2004.
On the other hand, the share of the federal ministries and divisions in Public Sector Development Programme (PSDP) in fiscal 2005 has increased from 38 to 48 per cent whereas the provincial programme stands reduced from 29.4 per cent to 26.7 per cent. Development spending is getting more centralized. The collection and distribution of tax revenue is also over- centralized in disregard to the needs of the provinces arising out of the level of their economic development.
No doubt, the federal government has raised the limit of the provinces to approve development projects upto Rs1 billion, five times more than the existing level of Rs200 million, but the fiscal transfer from the Federal Divisible Pool to the provinces and districts is being done under the old formula. The federal government appropriates bulk of the resources while the new NFC Award has been on the official agenda for the past three years. It, however, goes to the credit of the Punjab government that it has raised project approval ceilings for district governments from existing Rs20 million to Rs200 million.
The disparities in incomes of households, districts and provinces mean social exclusion for so many people and political isolation for the national leadership. The best of policies cannot work in political isolation nor can law and order be enforced effectively.
What is needed is an economic model forged by democratic federalism that gravitates the deprived and the disposed towards itself (model) rather than towards mediaeval romanticism.
National leadership has to offer Islamic militants an alternative political deal. The people of Balochistan and NWFP need to be pulled out of the tribal culture through democratization of politics and modernization of provincial economies.