Govt vision of economic prosperity and development spending
Due to various factors outlays have remained below the required level to ensure a sustained upward growth trajectory
The writer is the Deputy Secretary Press at the Prime Minister’s Office
Development spending across the globe has emerged as a strong tool for promoting socio-economic development and sustained economic growth. As both advanced and emerging market economies face lower growth rates, policymakers have had to think for out-of-the-box solutions to bridge the funding gaps in an effort to stimulate economic growth and create greater job opportunities for the youth. Pakistan, of course, is no exception. Due to various economic factors and financial constraints, including financial mismanagement in the past, flight of capital, de-industrialisation and a perpetual imbalance in trade, public sector development programme outlays have remained far below the required level to ensure a sustained upward economic growth trajectory.
According to the projections by the Ministry of Planning, the development spending of Rs1,608 billion with GDP growth rate of 3.3% could be taken up to 6.7% in FY2022-23 with Rs2,738 billion in development spending. According to an estimate by the State Bank of Pakistan (SBP), Pakistan needs to achieve a growth rate of more than 6.6% to accommodate around 1.3 million new job seekers every year.
Several emerging market economies faced a similar situation as that of Pakistan where all the demands for development financing and investment could not be met through scarce public finances. The idea of public-private partnership took centre-stage and countries invested millions of dollars out of the public sector to have better infrastructure that led to higher job creation and sustained economic growth rates. Turkey is one such example that invested $138 billion other than the government funding during 2013-18, in critical areas like infrastructure projects, transport, energy and healthcare to attain a sustained economic growth of over 6% during these years.
In this context, the Prime Minister’s Office contextualised the idea of PSDP Plus — an umbrella project worth approximately Rs5.5 trillion, identifying 53 projects to be implemented during the next three years. The PSDP+ plan includes projects in shipping and maritime, aviation, logistics, IT, infrastructure, social sector, energy, real estate and tourism sector. Various projects included in this roadmap either need no investment or just little financing from the government.
The PSDP+ plan was presented on November 27, 2019, and invited the concerned ministries to consider and identify other potential areas where mere facilitation by the government and amendments in the existing rules and regulations could lead to the creation of a robust public-private partnership for enhancing development activities. The PSDP+ projects will be implemented throughout Pakistan and are divided into two broad categories.
Firstly, there are 29 projects in 11 sectors with zero government investment that are expected to inject a direct investment of Rs3.1 trillion into the economy. Furthermore, it is estimated that this investment will fetch Rs1.1 trillion per annum in the form of non-tax revenue and Rs91 billion per annum in the form of tax revenue.
The second category pertains to projects with limited government investment in the form of Viability Gap Funding (VGF). There are 24 projects in seven sectors that are expected to fetch Rs2.3 trillion in the form of direct investment and an estimated Rs12 billion per annum in the form of taxes. Through multiplier-accelerator effects, these projects can provide a much-needed boost to the economy without putting any kind of internal or external borrowing pressure on Pakistan’s public kitty.
The main projects identified under the PSDP+ plan include the establishment of the Ship Refueling Facility at Gwadar, granting licence to operate floating hotels and restaurants, and operating cruises and developing resorts at different coastal areas of Balochistan. The operation of the Air Safari Service, Airport Operator Concession for main airports like Karachi, Lahore and Islamabad, granting of special licences for tourist airlines and allowing landing strips at key tourist destinations have been identified as potential areas under the PSDP+. The installation of the fiber optic network, introduction of 5-G services, allowing the private sector to operate rail services and develop new infrastructure, and development of resorts in Takht-e-Sulaiman in DI Khan on government land, and at Garam Chashma (Chitral), Sheikh Badin DI Khan, Chapri, Shalozan (Kurrum), Takht-Bahi, Moola Village (Khuzdar) and Khewra (Jhehlum) are also part of the plan. The plan’s projects also include setting up waste-to-energy plant or waste-to-urea plants in Karachi, Lahore and Peshawar. In the domain of infrastructure development, some of the projects include construction of the Sukkur-Hyderabad Motorway which can be developed in PPP on BOT basis. The grant of operating concessions of N-5 (1021) Karachi-Torkam GT Road is expected to increase NHA’s revenue significantly. Construction of Tarnol, Fateh Jang, Talagang, Mianwali, Muzaffargarh highway stretching over 527 kilometres is another important project that will be the shortest route connecting Karachi with Peshawar.
The PSDP+ project also includes optimum utilisation of state lands to serve as a catalyst for boosting economic activity through promoting entrepreneurship and undertaking profitable business ventures. In the energy sector a proposal has been made to allow captive power generation on renewable energy for industry, industrial estates and special economic zones and its transmission through wheeling arrangements. The identified projects also include generating hydel power to be used for industrial zones in areas with hydel projects.
Similarly, a range of projects have been identified in the railway, mineral and mining, transport, agriculture and other sectors of the economy where limited government financing could help in the implementation of critically important projects.
With greater ease of doing business, pro-business policies and the government’s commitment to facilitate the business community in every possible manner, there is a huge potential for the private sector to capitalise on the existing opportunities. Public-private partnership in the implementation of critical projects will not only provide a boost to the economy but would help the private sector to realise its potential in a vibrant market of over 216 million people.
Published in The Express Tribune, December 19th, 2019.
According to the projections by the Ministry of Planning, the development spending of Rs1,608 billion with GDP growth rate of 3.3% could be taken up to 6.7% in FY2022-23 with Rs2,738 billion in development spending. According to an estimate by the State Bank of Pakistan (SBP), Pakistan needs to achieve a growth rate of more than 6.6% to accommodate around 1.3 million new job seekers every year.
Several emerging market economies faced a similar situation as that of Pakistan where all the demands for development financing and investment could not be met through scarce public finances. The idea of public-private partnership took centre-stage and countries invested millions of dollars out of the public sector to have better infrastructure that led to higher job creation and sustained economic growth rates. Turkey is one such example that invested $138 billion other than the government funding during 2013-18, in critical areas like infrastructure projects, transport, energy and healthcare to attain a sustained economic growth of over 6% during these years.
In this context, the Prime Minister’s Office contextualised the idea of PSDP Plus — an umbrella project worth approximately Rs5.5 trillion, identifying 53 projects to be implemented during the next three years. The PSDP+ plan includes projects in shipping and maritime, aviation, logistics, IT, infrastructure, social sector, energy, real estate and tourism sector. Various projects included in this roadmap either need no investment or just little financing from the government.
The PSDP+ plan was presented on November 27, 2019, and invited the concerned ministries to consider and identify other potential areas where mere facilitation by the government and amendments in the existing rules and regulations could lead to the creation of a robust public-private partnership for enhancing development activities. The PSDP+ projects will be implemented throughout Pakistan and are divided into two broad categories.
Firstly, there are 29 projects in 11 sectors with zero government investment that are expected to inject a direct investment of Rs3.1 trillion into the economy. Furthermore, it is estimated that this investment will fetch Rs1.1 trillion per annum in the form of non-tax revenue and Rs91 billion per annum in the form of tax revenue.
The second category pertains to projects with limited government investment in the form of Viability Gap Funding (VGF). There are 24 projects in seven sectors that are expected to fetch Rs2.3 trillion in the form of direct investment and an estimated Rs12 billion per annum in the form of taxes. Through multiplier-accelerator effects, these projects can provide a much-needed boost to the economy without putting any kind of internal or external borrowing pressure on Pakistan’s public kitty.
The main projects identified under the PSDP+ plan include the establishment of the Ship Refueling Facility at Gwadar, granting licence to operate floating hotels and restaurants, and operating cruises and developing resorts at different coastal areas of Balochistan. The operation of the Air Safari Service, Airport Operator Concession for main airports like Karachi, Lahore and Islamabad, granting of special licences for tourist airlines and allowing landing strips at key tourist destinations have been identified as potential areas under the PSDP+. The installation of the fiber optic network, introduction of 5-G services, allowing the private sector to operate rail services and develop new infrastructure, and development of resorts in Takht-e-Sulaiman in DI Khan on government land, and at Garam Chashma (Chitral), Sheikh Badin DI Khan, Chapri, Shalozan (Kurrum), Takht-Bahi, Moola Village (Khuzdar) and Khewra (Jhehlum) are also part of the plan. The plan’s projects also include setting up waste-to-energy plant or waste-to-urea plants in Karachi, Lahore and Peshawar. In the domain of infrastructure development, some of the projects include construction of the Sukkur-Hyderabad Motorway which can be developed in PPP on BOT basis. The grant of operating concessions of N-5 (1021) Karachi-Torkam GT Road is expected to increase NHA’s revenue significantly. Construction of Tarnol, Fateh Jang, Talagang, Mianwali, Muzaffargarh highway stretching over 527 kilometres is another important project that will be the shortest route connecting Karachi with Peshawar.
The PSDP+ project also includes optimum utilisation of state lands to serve as a catalyst for boosting economic activity through promoting entrepreneurship and undertaking profitable business ventures. In the energy sector a proposal has been made to allow captive power generation on renewable energy for industry, industrial estates and special economic zones and its transmission through wheeling arrangements. The identified projects also include generating hydel power to be used for industrial zones in areas with hydel projects.
Similarly, a range of projects have been identified in the railway, mineral and mining, transport, agriculture and other sectors of the economy where limited government financing could help in the implementation of critically important projects.
With greater ease of doing business, pro-business policies and the government’s commitment to facilitate the business community in every possible manner, there is a huge potential for the private sector to capitalise on the existing opportunities. Public-private partnership in the implementation of critical projects will not only provide a boost to the economy but would help the private sector to realise its potential in a vibrant market of over 216 million people.
Published in The Express Tribune, December 19th, 2019.