FACTORS AFFECTING ECONOMIC STABILITY

ECONOMIC MANAGERS ARE AWARE OF PROBLEMS AS WELL AS THE SOLUTIONS BUT APPROPRIATE POLICIES ARE NOT BEING IMPLEMENTED

SHABBIR H. KAZMI
(feedback@pgeconomist.com)

Sep 17 - 23, 20
12

Many economic analysts often try to explore factors responsible for prevailing unstable economic outlook. However, at times they are not able to separate internal and external factors. Some cynics go to the extent of saying that some of the factors often termed internal are the result of subservient governments, including the present regime. Be it negotiating an assistance program with the International Monetary Fund (IMF) or coming up with an energy policy, the successive governments have been following the 'dictates' rather than preparing any home grown plan.

Everyone knows that hydel generation is far cheaper than thermal but over the last three decades only thermal power plants have been constructed in the country. This paradigm shift was driven due to the change in the policy of multilateral lenders when they decided to promote deregulation, liberalization and privatization policies. While no mega dam has been constructed after the completion of Tarbella Dam, nearly 10,000MW thermal generation capacity has been added in the country. During this period per barrel price of crude oil skyrocketed to US$147 from less than $10 and currently hovering around $100. Since the government has no option electricity has to be increased with regular intervals.

However, the most regrettable fact is that all the successive governments have failed improving cash flow of the distribution companies. It is highly deplorable that if distribution companies dispatch 100 units, they get the payment for 30 units only and remain goes to pilferage and unrecoverable receivables. All the successive governments have failed in resolving the issue but have been prompt in increasing the tariff in the name of recovery of full cost. During last financial year Pakistan managed to achieve paltry GDP growth and also missed the export target.

The situation would have been entirely different had the industries got uninterrupted supply of electricity at affordable cost and didn't have to face prolonged outages of gas. The worst sufferers have been textiles and clothing industry and fertilizer manufacturers. Poor capacity utilization of textiles and clothing industries on one hand added to the cost of production and on the other hand didn't allow the exporters to adhere to delivery commitments. Worst was the performance of urea manufacturers as they could produce around 4 million tons, against an installed capacity of nearly 7 million tons.

Similar is the case with sugar industry having an installed capacity of 9 million tons but actually producing around 4 million tons refined sugar. It is known to all that the industry is suffering due to acute shortage of sugarcane and absence of clear cut sugar export policy but hardly any effort is being made to remove the two impediments. On top of this export of millions on tons of molasses is allowed rather than facilitating its conversion into ethanol to be blended with motor gasoline. The government wants to discourage use of CNG in vehicles by closing the stations but making no effort to use of E-10. Interestingly, no additional gadgets have to be installed in the vehicles for using E-10.

This was just to mention a few key areas where failure to introduce appropriate policies is causing serious problems. It is often said that rift among the leading political parties does not allow introduction of appropriate policies. This can be termed the 'biggest lie' because all the leading parties are part of ruling junta. Leaders of PML-N consider their party and allied part of opposition but rule the biggest province of the country where 65% of total population of the country lives. On top of that one also fails to understand why these parties have failed in developing consensus on 'key national issues'.

There is a demand that electricity distribution companies should be given in the control of provincial government to overcome the looming energy crisis. All the political parties are aware of the fact that energy crisis is the outcome of blatant theft and nonpayment of bills. One of the solutions is that deduction should be made at source and amounts should be paid directly to the distribution companies. However, provincial governments have been opposing this, for the reasons best known to them.

As stated earlier apathy of the policy planners and economic managers is the biggest stumbling block. They are fully aware of the energy crisis, an outcome of not following good governance. They are also fully aware of the problems facing the agriculture sector. The sector suffers from two contentious problems: 1) low yield and 2) huge post production losses. Fixing attractive support price has helped in boosting production of wheat. However, persistent increase in support price of sugar has failed in boosting production of sugarcane.

Experts are of the opinion that while efforts should be made to improve yield of different crops, saving 40% of the output that goes stale can be beneficial for the growers as well as the country. Construction of modern storage houses and improving the supply chain can help in containing post harvest losses. The next step is to go for higher value addition.

This could be best understood by looking at milk production in the country and saving the milk from going stale. Pakistan is among the top five largest producers of milk but less than 5% is preserved in tetra packs. The sector also suffers because in Pakistan less than 2500 liters milk per animal is obtained against global average of 18,000 liters. This dismal output is often attributed to shortage of grazing field. One fails to understand that in a country that has world's largest man-made irrigation system; millions of acres could not be cultivated because of shortage of water. It looks totally absurd that thousands of acres of cultivable land in being rendered uncultivable due to water logging and salinity, but little efforts are being made to contain spillages and leakages.

On is forced to draw the conclusion that policy planners are following agenda of groups having vested interest, who don't want Pakistan to become economically robust. It also seems that the successive governments have remained subservient to foreign elements. This monotony has to be broken, that too at the earliest.