The Planning Commission, in collaboration with the UNDP, held an international conference on Framework for Economic Growth on July 13-14 in Islamabad. The purpose of the conference was to interact with key stakeholders before preparing the implementation plan for a new growth strategy. The conference was very well-attended and the quality of participants was impressive. Although the idea was to have a highly interactive session with the audience, it was nevertheless a normal conference with speakers presenting their papers, selected discussants sharing their views and a few of the participants asking questions.
The Planning Commission also released a document during the conference titled “Framework for Economic Growth: Pakistan.” This document highlights the weaknesses of the “old” growth theory which rested on public-sector investment and arbitrary incentives – subsidies and protection. That theory, pursued in Pakistan for over five decades, produced a volatile but declining trend in growth, in comparison with other regional economies. The “old” growth theory failed to generate higher economic growth on a sustained basis.
The framework for economic growth is a “new” approach to accelerating economic growth on a sustained basis. This approach places greater emphasis on the “software” of growth; that is, improving economic governance, strengthening institutions, providing incentives and developing human resources. This will create an environment in which the “hardware” of growth – physical infrastructure – can be strengthened to enhance productivity at all levels.
The key pillar of the “new” growth strategy includes enhancing the role of the private sector, entrepreneurship and innovation as major drivers of growth, enhancing productivity, improving the quality of governance through civil-service reform, making cities hubs of economic activities by relaxing zoning and building regulations, minimising the role of the government in the economy and restricting it to improving regulation and policy environment. In other words, the “new” growth strategy anchored in sound microeconomic foundation is more likely to increase the productivity of investment that is so critical in accelerating and sustaining economic growth.
Could anybody disagree with the “new” strategy? The answer is obviously no. However, I would disagree with its “newness.” The strategy, as propounded in the document, is not new. As I have argued in the past (April 5), there is nothing “new” in this strategy. Almost all the key pillars of the “new” strategy have been discussed in the Poverty Reduction Strategy Paper-II (PRSP-II), a document of the ministry of finance, presented to the Pakistan Development Forum meeting held in Islamabad in April 2007.
The second generation poverty reduction strategy was built around a set of seven pillars. Private sector development and enhancing the role of private sector in sustaining higher economic growth was one of the seven pillars. Lowering the barriers to development of SMEs (for inclusive growth), removing irritants and impediments to private sector growth, consistency and continuity of economic policies, and developing a modern banking and financial system with a view to providing a wide range of financial services formed the salient features of the private-sector development strategy.
Other pillars of the strategy included the role of mega-cities in promoting growth, development of rural infrastructure and markets for growth and poverty reduction, enhancing competitiveness and productivity through investing in tertiary education, vocational and technical training and development of a knowledge economy through a fully developed ICT (information and communications technology) infrastructure. It also included investing in people; that is, human resource development, further development of financial markets and institutions, effective governance and management through strengthening institutions, that is, reforms in judiciary, police, civil service, pension, restructuring of the Federal Bureau of Statistics to make it an autonomous institution and transforming the Monopoly Control Authority into the Competition Commission of Pakistan.
The other strategy included strengthening and expanding the country’s physical infrastructure, which the “new” framework calls “hardware” of growth. Finally, targeting the poor and vulnerable through social safety nets formed another pillar of PRSP-II strategy.
Is there any difference between the PRSP-II strategy and the “new” growth framework? Should we still call it a “new” strategy? The deputy chairman of the Planning Commission ought to accept the fact and not insist on calling his strategy a “new” framework. The problem is that he has lived outside Pakistan for decades and as such is oblivious to such developments. His staff privately agrees that this is not a new strategy but organisational discipline prevents them in accepting the facts publicly.
If a document is prepared and if it makes sense, there is nothing wrong in taking it further by adjusting to the new developments. But claiming that his strategy is “new” and that nothing has worked in Pakistan over the last sixty years by following the so-called “old” growth model is nothing short of self-aggrandisement, intellectual piracy and misleading the people of Pakistan.
The deputy chairman should read the PRSP-II document carefully and refrain from using the word “new” in relation to the growth framework. At the same time, his friends in Washington should themselves read the document before making any judgment about the so-called “new” growth strategy, as should the UNDP and other donors.
I am fully in agreement with the strategy as propounded in the Framework for Economic Growth. This is a fine strategy and must be implemented by the government. I am obviously in disagreement with its newness and would urge the deputy chairman not to discuss the strategy in terms of “old” versus “new.” I am deeply disappointed by the finance minister and my former colleagues in the ministry for not protecting the copyright of their own document.
Copyright by Thenews