ISLAMABAD: The government’s influence on the economy has grown to 60% of gross domestic product (GDP) and the bureaucracy is facilitating ruling classes to further expand their hold, says Planning Commission Deputy Chairman Dr Nadeemul Haque.
“Public sector intervention stands at 60% of GDP and there are signs that the intervention is increasing further,” said Haque while delivering a Quaid-e-Azam memorial lecture titled “Why Pakistan does not grow”, organised by Pakistan Institute of Development Economics (PIDE) here on Thursday.
He said the bureaucracy always strikes back for obtaining perks, plots, projects, slots on boards of corporate giants, controlling all forms of distribution, market and cities.
According to statistics given by Haque, the government’s intervention in the agricultural sector has expanded to 43% of the sector. In manufacturing, the ratio remains at around 12%, in transport and communications 77.38%, electricity and gas 77.63%, wholesale and retail trade 7.9%, health and education 42.3%, public administration and defence 100%, finance and insurance 45.5%, construction 75%, ownership and dwellings 100% and mining and quarrying 79.6%.
Haque blamed the plot culture in bureaucracy for being the force behind policymaking and said bureaucrats, vying for perks, have an inbuilt desire to expand the role of the government.
“Land is the most expensive asset in Pakistan so the whole desire of the bureaucracy is to get prime land in major cities,” he added.
“The government is doing too much badly with its increasing role,” he said and argued that without giving major space to the private sector along with an improved regulatory regime the country could not make progress.
Comparing economic performances of Pakistan and India, Haque said New Delhi’s per capita income was 30% below that of Islamabad few decades ago, but now it has gone up by 30%.
“Pakistan’s economy recorded a boom-bust cycle as it grew at the rate of 4.9% on average from 1971 to 2009 because of low investment and savings ratio as the growth remained the lowest in the region while growth of India and China was 5.3% and 9.1% respectively on average,” he added.
However, he cautioned that politicians alone should not be blamed for the problems as “we all are responsible for the existing situation.”
Industrialists are vying for protective tariffs and not ready to compete with the rest of the world, he said, adding they in this modern world are operating through licences while feudal lords are interested in politics to protect their vested interests.
According to Haque, cities should be developed by ensuring deregulation as these are considered an engine of growth. Around 60% of population is urbanised so cities can become a source of achieving growth on a sustained basis, he pointed out.
Published in The Express Tribune, April 6th, 2012.
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Dr. Haque's assessment excludes the informal sector of the economy which accounts for as much 50% of the official GDP of Pakistan. Contrary to government statistics of a stagnant economy, packed shopping malls and waiting lines at restaurants tell a different story-- the story of growing discretionary incomes of Pakistani consumers today....almost all of it is private hands but facilitated by corrupt officials and politicians.
In my view, there are two major problems that arise from the underground economy. First, the massive tax evasion fosters Pakistan's dependence on foreign aid which comes with strings attached and infringes of national sovereignty. Second, the widespread theft of electricity is largely responsible for the huge circular debt and the ongoing power shortages that affect all aspects of life and scare away investors. The sooner the government and the people realize the severe downsides of the underground economy, the better it will be for Pakistan.
http://www.riazhaq.com/2012/04/pak-consumer-boom-fuels-underground.html
The major problem of the PAK economy has been identified.
The Planning Commission chairman is a technocrat but a part of the government, if he is so helpless in the face of the 'plot culture and the onslaught of the bureaucracy' he should resign and go back to the IMF, instead of enjoying the perks and privileges of a minister. What does the statement 'cities should be developed by ensuring deregulation' even mean??? What do the percentages imply, how is the government's intervention at 43% in agriculture? A much better job could have been done writing this article..
more government involvement in the economy means more corruption, more mishandling of the resources, bigger bureaucracy, less competition, erosion of the property rights, socialism, a slower GDP growth...and i can go on and on here. the government should cut spending, and let the private sector invest where they see fit. reduce the regulations on different sectors of the economy. respect the property rights of all individuals, and finally, do away with socialistic policies to get votes! it will never help..only free market, fiscal responsibility, and sound money (when the rupee will be backed by gold, not the dollar) will guarantee stable economic growth.