"The new strategy for economic growth in poor countries should not, as today, focus on increasing exports and liberalizing international trade, but should foster internal demand through job creation and pay raises resulting from a social bottom line." from Global Development, by Frans Doorman, 1998Â
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BackgroundÂ
Pakistan currently is facing a calamitous economic situation since last two decades and has tried everything from nationalization to privatization to bring some sort of stability in macroeconomics. After all these treatment country is once again in IMF emergency unit and already has received first dose of aid and is on its way to have another one in coming months. Â
Apart from political instability, regional tensions and mismanagement there is an even bigger fault line exists within planning division in Islamabad about coming up with ideas how to counter emerging economic challenges as a result of growing population, trade competition in the region, depleting currency due to excessive borrowings etc. Â
Investment in infrastructure development has proven to be a successful model for reviving economies in the world. Pakistan could not sustain its growth over the time due to lack of supporting infrastructure. There is a need to understand what impact a poor infrastructure has already made on economy and national growth and its sustainability before devising any strategy on how to harness infrastructure development for converting local needs into demands so that a sustained growth engine can be ignited. Â
Poor infrastructure: Reason behind unsustainable growth in PakistanÂ
Throughout its history Pakistan made progress in junks. During last three decades GDP measure of value of goods and services out put in a country growth has shown an arbitrary pattern in Pakistan. Flimsy economic conditions, poor planning and mismanagement are biggest challenges for sustaining growth in Pakistan.Â
To absorb, support and sustain increase in growth needs massive supporting infrastructure something Pakistan failed to have in place despite massive five years plans for this purpose
Over the years successive governments in Islamabad failed to realise the impact of increased growth on existing infrastructure hence it never got upgraded in time. Resultantly the country, after enjoying one good year in economic growth, usually has seen a sharp decline in subsequent years. This effervescent pattern of growth is still prevailing mainly due to short sightedness of planners in Islamabad. Â
A good year in between low growth periods often came due to sudden and favorable climatic changes which resulted in good agriculture growth other than that there was least on planning side which could add to this growth before or after that one good year. One such example is 2003-04 when the country saw massive boost in GDP growth around 8% but after that it started to decline sharply and in 2008 reached at around 2.5% -against a provisioned growth rate of 8% for this year according to five-year plan for 2005-2010 [1] -as there is not enough energy, transport and water infrastructure in place to sustain a growth rate of 7-8 percent annually for nation to meet MDGs (Millennium Development Goals) and future socioeconomic development.Â
Development of new infrastructure has a more tragic tale. Political incentives have remained prime driver behind most of infrastructure projects. In early 1990s a plan for connecting Pakistan with landlocked countries of Central Asia though motorway was initiated but later it was proved that this project was politically motivated. The idea was very plausible to make Pakistan a gateway for these landlocked countries to Arabian Sea through ports of Karachi and Gawadar but the whole project was ruined as it was initiated between two cities of Lahore and Islamabad both of these were not industrial centers at that time but were very much under political influence from the government in Islamabad at that time.
Massive input into this project never gave stipulated ROI (Return on Investment) and after 18 years Pakistan is still unable to connect its own port of Gawadar with its own industrial cities like Lahore, Faisalabad, Sialkot etc. This port is just connected to another port in the East, Karachi, but has no road or rail linkages towards North where most of industrial estates are working and all of them are only connected to Karachi port. This is again affecting investment made in Gawadar port as there no major trading activities are taking place. Â
Development of infrastructure was not sustained in energy, water, irrigation, engineering sectors albeit communication and IT infrastructure experienced steady growth during last five years but these two sectors cannot meet the challenge of overall sustained growth as both have massive foreign input both finically and technically. Â
Impact of Infrastructure inadequacy on development
Pakistan is an agriculture based country and more than half of the country's population is associated with agriculture. Pakistan has world's largest canal system but due to lack of adopting new management practices and failure to incorporating latest technology into this system has resulted in poor growth of crops.
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