The Punjab story

It is important since it provides a menu of options for the policymakers to rescue the Pakistani economy.


Shahid Javed Burki May 06, 2012

It will take more than one short article to tell what the Lahore-based Institute of Public Policy (IPP), Beaconhouse National University, calls the “Punjab story”. This is the subtitle of the institute’s fifth annual report launched on May 2, in Lahore. As has been the practice in the past five years since the institution’s founding in the fall of 2006, the annual reports come in two parts. The first deals with the state of the economy at the time of the writing of a particular year’s report. In each year, since the first report was published in the spring of 2008, the mood of the authors has become progressively more sombre and their predictions for the future of the economy increasingly dire. This year, they have concluded that the economy may be heading towards another major crisis unless remedial action is taken by those who currently hold the reins of power in Islamabad and the four provincial capitals.

The other important recent development in Pakistan is the devolution of considerably greater executive authority to the provinces. This happened as a result of the passage of the Eighteenth Amendment to the Constitution in 2010, which was preceded by the announcement of the Seventh Award by the National Finance Commission (NFS) in late 2009. The NFS has significantly increased the flow of resources from the centre to the provinces. The Eighteenth Amendment has greatly expanded the scope of provincial operations, making it possible for them to do what could not be done under the previous constitutional dispensation.

It is for this reason that we in the IPP thought that it would make a good deal of sense to start writing the provincial development stories. In the report for 2012, we tell the Punjab story which will be followed in the coming years by the stories of other provinces. It made sense to start with Punjab. It is the largest province in the federation in terms of the share in population as well as in the national product. It is also the most important gateway to India as the trade between the two long-feuding nations is revived after a lapse of almost six decades.

A trip to the Wagah border is a good indication of the interest the city’s citizens have in the opportunities that will become available once trade begins to flow without many hindrances. Every late afternoon, thousands of Lahore’s citizens take the trip to the border with India to watch the elaborately choreographed ‘changing of guards’ ceremony.

That this show will become a part of the history is shown by the massive infrastructural development at a stone’s throw from the old border. A new gateway has been constructed there to facilitate trade between both countries. As we drove to the old border to watch the change of guard ceremony, we saw scores of trucks laden with Pakistani gypsum to be taken across the border to feed India’s growing appetite for cement. We were told that a convoy of trucks was also waiting on the Indian side bringing in fresh agricultural produce to Pakistan. The composition of this trade will change enormously as the current restrictions on trade are removed. This will happen as the two countries continue to press for the normalisation of economic and trade relations among them.

Punjab is the province that is likely to be affected the most by this development. This development along with the process of devolution of economic authority to the provinces is the reason why the IPP decided to focus our attention on provincial development. The Punjab story is also important since it provides a menu of options for the policymakers to take full advantage of provincial dynamics to rescue the Pakistani economy from the current slump and hence, it is the focus of the IPP’s 2012 report. What the story is, will be the subject for the next few columns in this space.

Published in The Express Tribune, May 7th, 2012.

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COMMENTS (11)

geeko | 8 years ago | Reply | Recommend

@Maria: There's a bit more in Punjab than Lahore I think.

Meekal Ahmed | 8 years ago | Reply | Recommend

In telling your story, I hope you will focus on a province, the richest of all, that has a budget deficit and an over-draft with the central bank and which has not raised a penny in additional taxes and keeps wanting to spend more in wasteful ways.

I hope you will also focus on the fact that fiscal devolution while a nice-sounding word, has been the death-knell of any hope of fiscal discipline in Pakistan.No matter what is agreed in the NEC, the provinces do exactly as they please because there are no binding agreements and no agreed path of fiscal consolidation.

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