Pakistan should follow Denmark’s example
The Denmark example and experience shows that a country dependent on agriculture can achieve First World standard
The writer is a former caretaker finance minister and served as vice-president at the World Bank
Having watched several East Asian economies transform themselves from developing to developed nations, most economists termed the process miraculous. What these ‘miracle economies’ achieved was in about a generation. They used the access to Western markets to orient their manufacturing sectors for the production of cheap items of daily consumption. Major reforms in the system of international commerce had opened the markets in the United States and Europe for the manufactures from developing countries. The East Asian state played a major role in this process. It picked the winners for export, provided cheap credit to the manufacturers, and trained workers to mass-produce the products in demand in the West. This export-led model was carefully studied by development economists and was recommended for adoption by all less-developed economies. China followed the example of Japan, South Korea, Taiwan and Singapore, and saw even more impressive results. In a bit more than a quarter century between 1980 when the Supreme Leader Deng Xiaoping opened the country’s economy to 2007 when much of the world slipped into the Great Recession, the size of the Chinese economy increased 32-fold and income per head of the population increased 25 times. China is now the world’s second-largest economy after the United States. Most of the South Asian countries missed out the miracle economy approach to economic progress. India was an exception but in a limited way. It was able to build its information technology sector into a major export industry, doing a large amount of back-office work for American corporations, and legal and accounting firms. But Pakistan fell behind most of Asia with a significant decline in its export-to-GDP ratio. Given the serious shortage it now has of foreign exchange to pay for its increasing imports, it will need to build its export industry. This raises three questions: What lines of products should be the focus of the new government’s attention; which markets should Islamabad aim to reach; and, finally, what should be the role of the government? The new government should think outside the box, doing away with conventional way of developing a relatively backward economy. It should develop the large agriculture sector into a major producer of export products and high value-added export commodities. Instead of following the example of the Asian miracle economies, it should draw some lessons from the example of Denmark, a country that has built prosperity for its people by relying heavily on agriculture and livestock. The country has one of the highest per capita incomes in Europe, unparalleled income equality, high life expectancy and a state heavily involved in providing its people with social welfare. I will quote from a recent article by the Nobel Prize winning columnist Paul Krugman to indicate what I have in mind. “During the creation of the first global economy, the one made possible by railroads, steamships and telegraphs, the world bifurcated into industrial nations and agricultural and raw material producers who catered to them,” wrote Krugman. Some economists of the left gave names
to these two parts of the world. They called them the ‘centre’ and the ‘periphery’. Being from the left, they believed that the centre was taking advantage of the periphery by paying low prices for the produce of the latter. Denmark by location should have been a part of the centre but it took a different path. “Denmark became not a banana republic, but a butter republic. Steamships and steam-powered cream separators allowed Denmark to become a huge exporter of butter to the UK, leading in turn to impressive prosperity on the eve of World War I.” Denmark’s agriculture-based economy didn’t turn out to be a dead end. Instead it became the basis of impressive performance over the long run. It helped that the country came into the globalised world with a well-educated population. The Denmark example and experience shows that a country dependent on agriculture can achieve First World standard. In terms of the infrastructure that supports it, Pakistan has one of the world’s most impressive agriculture sector. It has, for instance, the world’s largest contiguous surface irrigation system with water available around the year to grow the products in high world demand. Instead of producing those, it uses irrigated land to grow low-value crops. I will spend a moment describing agriculture in Pakistan before suggesting what the new government can do with the sector. Currently agriculture in Pakistan accounts for about 21 per cent of the country’s national income and employs 43 per cent of the total workforce. More than three-fourths of women in the workforce are engaged in agriculture, mostly looking after animals. The economic importance of agriculture has declined since the country gained independence 71 years ago. Then its share was 53 per cent of gross income. The country ranks eighth in farm output; is the third-largest producer of chickpeas; the fourthlargest producer of milk, cotton and mangoes; the fifth-largest producer of sugar cane; the sixth- largest producer of kinnow and mandarin oranges; and the seventh-largest producer of wheat. Like Denmark, Pakistan could build its future on developing the livestock sector and aim its output at China. This has become possible because of the large investments Beijing is making in the ChinaPakistan Economic Corridor programme. CPEC will connect Pakistan with China’s west that is seeing a sharp increase in the size of the population. But the land is mostly arid in these areas; it cannot supply the food the increasing population needs. Much of that could come from Pakistan, travelling over the network of roads being built under CPEC. Pakistan’s national animal herd is made up of 24.2 million cattle, 26.3 million buffaloes, 24.9 million sheep, 56.7 million goats and 0.8 million camels. There are 530 million chickens in the country. This is a tremendous resource that can be used for changing the structure of the economy. I would urge the new policymakers to develop a 10-year programme aimed at developing the country’s agricultural system into a major supplier of food to western China.
Published in The Express Tribune, August 13th, 2018.
to these two parts of the world. They called them the ‘centre’ and the ‘periphery’. Being from the left, they believed that the centre was taking advantage of the periphery by paying low prices for the produce of the latter. Denmark by location should have been a part of the centre but it took a different path. “Denmark became not a banana republic, but a butter republic. Steamships and steam-powered cream separators allowed Denmark to become a huge exporter of butter to the UK, leading in turn to impressive prosperity on the eve of World War I.” Denmark’s agriculture-based economy didn’t turn out to be a dead end. Instead it became the basis of impressive performance over the long run. It helped that the country came into the globalised world with a well-educated population. The Denmark example and experience shows that a country dependent on agriculture can achieve First World standard. In terms of the infrastructure that supports it, Pakistan has one of the world’s most impressive agriculture sector. It has, for instance, the world’s largest contiguous surface irrigation system with water available around the year to grow the products in high world demand. Instead of producing those, it uses irrigated land to grow low-value crops. I will spend a moment describing agriculture in Pakistan before suggesting what the new government can do with the sector. Currently agriculture in Pakistan accounts for about 21 per cent of the country’s national income and employs 43 per cent of the total workforce. More than three-fourths of women in the workforce are engaged in agriculture, mostly looking after animals. The economic importance of agriculture has declined since the country gained independence 71 years ago. Then its share was 53 per cent of gross income. The country ranks eighth in farm output; is the third-largest producer of chickpeas; the fourthlargest producer of milk, cotton and mangoes; the fifth-largest producer of sugar cane; the sixth- largest producer of kinnow and mandarin oranges; and the seventh-largest producer of wheat. Like Denmark, Pakistan could build its future on developing the livestock sector and aim its output at China. This has become possible because of the large investments Beijing is making in the ChinaPakistan Economic Corridor programme. CPEC will connect Pakistan with China’s west that is seeing a sharp increase in the size of the population. But the land is mostly arid in these areas; it cannot supply the food the increasing population needs. Much of that could come from Pakistan, travelling over the network of roads being built under CPEC. Pakistan’s national animal herd is made up of 24.2 million cattle, 26.3 million buffaloes, 24.9 million sheep, 56.7 million goats and 0.8 million camels. There are 530 million chickens in the country. This is a tremendous resource that can be used for changing the structure of the economy. I would urge the new policymakers to develop a 10-year programme aimed at developing the country’s agricultural system into a major supplier of food to western China.
Published in The Express Tribune, August 13th, 2018.