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Managing education and energy needs will improve economy

Education

With the 10th largest labor force in the world, Pakistan has important strategic endowments and development potential. One of Pakistan’s key strengths is the demographic bulge especially growing proportion of young adults. Pakistan has capacity to send across large number of young unskilled/semi-skilled people. Having over 30 million plus population in the age group of 25-35, Pakistan can put this valuable asset by imparting training in different technical fields to respond market needs abroad.

Pakistan is currently passing through a demographic transition which has resulted in a ‘youth bulge’ (63% of our population comprising of youth, 69 million aged below 15) and an increase in the working-age population as a share of the total population. To reap the ‘demographic dividend’ of this change, the economy needs to provide education and create productive and remunerative employment for young workforce entrants. Foreign entrants such as Uber & Careem, through their entry, have acknowledged the economic potential of a nation with young population. Moreover, innovation through digitization and entrepreneurship are playing their part in human capital development.

In 2015, the net enrolment at the primary level was 73 percent as against 99 percent for India and 96 percent for Bangladesh. The adult literacy ratio in India and Bangladesh in 2015 was 72.2 percent and 61.5 percent respectively as against 56.4 percent in Pakistan. The neglect of basic education will continue to have consequences for Pakistan’s growth and political stability for the next several decades. Even though the literacy rate has nearly trebled in the last 55 years from some 20 to 57 percent, the number of illiterate persons (10 years or older) also trebled to about 50 million over the same period. The mass of illiterate people threatens to become a major long-term drag on national productivity.

The public allocations for education at 2 percent of GDP are woefully inadequate and need to be increased. However, the management of public education is an even bigger problem as the decline in the quality of public education is increasingly forcing parents to opt for the private sector. The problem of poor governance in the education and health sectors cannot be resolved without major devolution of authority to the local governments.

By spending less on education, we are losing on two counts. On one hand, our semi-skilled labor force could not fetch the much-needed foreign exchange for the country, while on the other hand, those wishing to pursue their dreams over here are constrained by illiteracy. It is important that the Federal Government increases education budget to 4 percent of GDP only then provinces will be able to increase their allocations, as promise of increasing education budget to 4 percent of GDP was made by the government. While the government has tried to balance developmental and education expenses yet the promise of making education an important component of government priorities should have been kept in mind when allocating finances during the budgetary allocations for 2018-19, which could still be done by the incumbent government if they bring in revisions and amendments in the finance bill.

 

Energy

For years, the matter of balancing Pakistan’s supply against the demand for electricity has remained a largely unresolved matter. Pakistan faces a significant challenge in revamping its network responsible for the supply of electricity. Due to an unrealistic power tariff, high inefficiencies, low payment recovery and the inability of the government to manage its subsidies mechanism that lead to a serious ‘circular debt’ issue which is becoming a barrier for future energy sector investment.

The economy is badly affected by electricity crisis with loss of huge capital. The solution to the current crisis lies in energy conservation at all level in the country. The use of alternate energy such as wind and solar power could be utilized to immediately reduce the shortages, while electricity projects from coal and large dam could provide a long-term solution to the electricity shortage. New investment in the field of oil and gas exploration will have to be attracted by offering incentives to the local and foreign investors. These incentives should be well thought out and based on a win-win theory. We have sufficient gas reserves which, if properly exploited, can give our economy a real break.

Despite increasing local production and imports of oil and LNG, Pakistan does not have a sufficient supply of energy to meets its demand. The shortfall currently runs at about 2 Billion Cubic Feet per day. Pakistan imports 65 percent of its need. Industry sources believe this deficit will remain for the next 5-10 years. Oil and gas, both locally produced and imported, make up 75 percent of Pakistan’s energy mix. Maintaining and expanding this sector is strategically important for Pakistan’s economic growth.

Based on the micro and macro-economic indicators, political stability and increases in foreign investment in Pakistan – a market of nearly 207 million people – the economy is predicted to further stabilize if the government addresses fiscal and external sector vulnerabilities that have reappeared with the wider current account deficit, falling foreign exchange reserves, rising debt obligations, and consequently greater external financing needs.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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