The World Bank's mes­sage

The Pak Banker - - 4EDITORIAL - Dr Hafiz A Pasha

DUR­ING her re­cent visit to Pak­istan, the man­ag­ing di­rec­tor (MD) of the World Bank, Mulyani In­drawati, pub­lished an ar­ti­cle in this news­pa­per ti­tled "How Pak­istan can re­alise its po­ten­tial". Her ba­sic mes­sage is that Pak­istan "can and should do much bet­ter", given its many as­sets. She high­lights the coun­try's vast wa­ter and river en­dow­ment, its coast­line and cities and its nat­u­ral re­sources.

Un­for­tu­nately, we have not done much with these as­sets. Pak­istan is al­ready a wa­ter-stressed coun­try, with the prospect of wa­ter short­age in com­ing years. The World Bank must be thanked for its ex­tremely pos­i­tive role in the early fi­nal­i­sa­tion of the In­dus Wa­ter Treaty. There­after, we have built only two ma­jor dams, the last in the early 1980s. One of the world's finest ir­ri­ga­tion sys­tems is run down and with ex­tremely low wa­ter prices, there is mas­sive wastage of scarce wa­ter.

Energy re­sources, be­sides hy­dro­elec­tric­ity, are lim­ited. Gas re­serves are get­ting de­pleted rapidly. The oil ex­tracted do­mes­ti­cally meets only one-fifth of the re­quire­ments. Pak­istan does have a rel­a­tively high rate of ur­ban­i­sa­tion. How­ever, the pri­mate city and eco­nomic hub, Karachi, has suf­fered large-scale vi­o­lence and break­down of law and or­der. Clearly, we have not utilised our as­sets well, in­clud­ing that of a young and grow­ing labour force. Only onethird of the po­ten­tial en­trants into the labour force found jobs last year.

Ms In­drawati also high­lights three up­sides of Pak­istan: a grow­ing mid­dle class, a lively in­for­mal econ­omy and a strong in­flux of re­mit­tances. But she has prob­a­bly not been in­formed that the mid­dle class of Pak­istan, which was grow­ing rapidly a decade ago, has now started shrink­ing due to high un­em­ploy­ment rates of ed­u­cated work­ers and rapid in­creases in the cost of liv­ing, es­pe­cially of hous­ing and util­i­ties. The in­for­mal econ­omy has lost its dy­namism in the pres­ence of slow growth. In 2013-14, the em­ploy­ment in the in­for­mal sec­tor in­creased by only one per cent, as com­pared to the an­nual five per cent less than a decade ago. For­tu­nately, a ma­jor sus­tain­ing force has been the rapid growth of home re­mit­tances, which have now ap­proached two-thirds of mer­chan­dise ex­ports.

Ms In­drawati does not iden­tify the usu­ally men­tioned fac­tors like ter­ror­ism, large-scale power out­ages and law and or­der as lim­it­ing the re­al­i­sa­tion of our po­ten­tial. In­stead, she fo­cuses, first, on im­prove­ment of ed­u­ca­tion and greater gen­der equal­ity and, sec­ond, on the need for Pak­istan to in­te­grate more, glob­ally and re­gion­ally.

We must ap­pre­ci­ate her em­pha­sis on so­cial and hu­man de­vel­op­ment. She laments the low net pri­mary en­rol­ment rate of only 57 per cent and the fe­male par­tic­i­pa­tion rate of only 25 per cent. She may not know that re­cent trends are even more wor­ry­ing. These in­clude a de­cline in the lit­er­acy rate, stag­nant en­rol­ment rates, fall in cov­er­age of the im­mu­ni­sa­tion pro­gramme and in ac­cess of house­holds to im­proved wa­ter source. In so­cial in­di­ca­tors, we are well on our way to be­com­ing a least de­vel­oped coun­try rather than a mid­dle in­come coun­try.

The ques­tion is can the World Bank re­main only a pas­sive by-stander to the fal­ter­ing de­vel­op­ment process in Pak­istan? The Bank has, in fact, been a key de­vel­op­ment part­ner and the largest mul­ti­lat­eral de­vel­op­ment agency op­er­at­ing in Pak­istan. Cur­rently, the out­stand­ing debt of the coun­try to the Bank stands at over $12.5 bil­lion. The cur­rent port­fo­lio of ac­tive projects and pro­grammes rep­re­sents a com­mit­ment of over $5 bil­lion.

Do the on­go­ing in­ter­ven­tions by the World Bank re­flect Ms In­drawati's pri­or­i­ties? The an­swer is 'no'. Projects and pro­grammes of the Bank in the so­cial sec­tors, es­pe­cially ed­u­ca­tion, add up to less than one-fourth of the to­tal port­fo­lio. In the early 1990s, the Bank did make a ma­jor foray into so­cial de­vel­op­ment with the So­cial Ac­tion Pro­gramme (SAP). But it re­treated in the face of lim­i­ta­tions in im­ple­men­ta­tion ca­pac­ity with the pro­vin­cial line de­part­ments and the is­sue of fi­nan­cial sus­tain­abil­ity of re­cur­ring ex­pen­di­tures.

The only ma­jor en­gage­ment of the Bank in the area of gen­der equal­ity is the Be­nazir In­come Sup­port Pro­gramme. But this pro­gramme re­mains lim­ited in size and cov­ers less than half the women in poor house­holds. Per­haps, fol­low­ing the MD's visit, the Bank will put in more soft funds to up­scale the pro­gramme and help in con­vert­ing it into a con­di­tional cash trans­fer by adding an amount in the monthly sup­port for send­ing the girl child to school. De­spite Ms In­drawati hav­ing made only a pass­ing men­tion of the power sec­tor, the sec­tor rep­re­sents the ma­jor area of en­gage­ment of the Bank, with over 40 per cent al­lo­cated to on­go­ing pro­grammes/projects. In fact, since the mid-1990s, the Bank has played a key role in the de­vel­op­ment of the power sec­tor. It has pro­moted mea­sures like un­bundling, cor­po­rati­sa­tion and pri­vati­sa­tion. Clearly, it should be will­ing to share some re­spon­si­bil­ity for the high lev­els of out­ages, losses and cir­cu­lar debt in the sec­tor to­day.

The sec­ond el­e­ment of the strat­egy for re­al­is­ing Pak­istan's po­ten­tial that Ms In­drawati rec­om­mends is greater re­gional and global in­te­gra­tion. She will, no doubt, be pleased to see that China has al­ready emerged as our largest trad­ing part­ner, es­pe­cially af­ter the sign­ing of the free trade agree­ment with it. Pak­istan has tran­sited from a pos­i­tive to a neg­a­tive list in its trade with In­dia. Over 90 per cent of In­dian ex­ports now have ac­cess to the Pak­istani mar­ket. To­day, In­dia ex­ports four times as much as it im­ports from Pak­istan. There is a need for some rec­i­proc­ity from In­dia in terms of soft­en­ing some non-tar­iff bar­ri­ers and re­duc­ing tar­iffs on agri­cul­tural and textile im­ports. Pak­istan is also an ac­tive par­tic­i­pant in Safta. Ms In­drawti has sup­ported energy trade. Per­haps, now the Bank will con­sider sup­port­ing the Pak­istan part of the Pak­istan-Iran pipeline.

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