By Sajid Chaudhry

ISLAMABAD: The Panel of Economists in its final report suggested the government a cumulative investment of Rs 3.4 trillion during the next five years (2010-15) to keep average growth rate at 5 percent.

According to the report, Pakistan was confronting multiple challenges on security, political and economic fronts. Therefore, the panel suggested that the 10th Plan, from 2010-11 to 2014-15, should not target like previous plans for high growth rates of gross domestic product of 7 to 8 percent. Instead, a realistic strategy was proposed, which was based initially on the removal of physical constraints to growth and an improvement in the investment climate within the next two years.

The report said emphasis was needed that even with an average growth rate of GDP of about 5 percent, significant poverty reduction could be achieved provided the planners follow a strong inclusive growth strategy.

This would involve focus on rural development, removal of infrastructure bottlenecks, balanced regional development especially growth and development in Balochistan, Khyber-Pakhtoonkhwa and FATA, employment generation, enhanced social protection and investing in the people.

A two-fold approach was recommended to address the slow growth strategy of the country. The report proposed to shift emphasis on sectors, which have the capacity to enhance the employment generating ability of the economy and on the other side to focus on relaxing the growth constraints by enhancing competitiveness and encouraging savings.

The report recommended interventions in agriculture and livestock, which provide direct employment to 44 percent, housing and domestic commerce and for promotion of SMEs clusters.

For the agriculture sector it recommended an early introduction of Bt cotton, greater reliance on technology for delivering extension services and improved marketing laws to benefit both farmers and consumers. The primary focus of to improve housing and commerce, the report recommended rationalisation of stamp duties and development and commercialisation charges, reforms in zoning and building regulations and property taxation of rented properties, revisions in rent control legislation, especially its pro-tenant bias, better contract enforcement and secure land titling systems.

The strengthening and creation of SME clusters require facilitation of market research to assist innovation, better public information and knowledge of buyer needs, markets and production mechanisms, export processing zones (EPZ) with decent quality physical infrastructure and proper bonded warehousing capability, improvement in the legal environment for protecting foreign patent holders, promotion of entrepreneurship in new ventures and public-private partnerships in setting up common facility centres that would provide access to technology, machining facilities and market related information and other common services.

To ease the constraints to growth, especially the financing of the current account deficit, and to enhance the efficiency and competitiveness of the Pakistani economy in general and the heavily protected industrial sector in particular requires continuous and sustainable improvements in total factor productivity and a variety of policy, procedural, institutional, regulatory and legal reforms.

Policy suggestions include interventions like reduction in the anti-export bias via an undervalued exchange rate regime, ensuring availability of imported raw materials to exporters at world prices and increasing market access for Pakistani products, particularly in EU markets. Other initiatives to support exports would include development of skills to assist upgrading of industry to enable export of value-added products.

To a higher sustainable growth rate it was necessary to tackle the lack of domestic savings. For this purpose, the panel proposed improving financial intermediation by ensuring real and increased returns on financial savings, development of long-term saving vehicles like pension schemes and life insurance, examining the possibility of new instruments and institutions like portable and mandatory savings and pension schemes, housing societies and credit unions.

The economic strategy required a national campaign to empower the poor at the level of village, union council, tehsil and district. The idea was to facilitate the growth of autonomous community organisations of the poor at the village level to be able to break out of the poverty through government line departments, autonomous institutions, private sector firms, NGOs and donors and access credit for micro enterprise projects through apex organisations such as the PPAF, Khushali Bank, Small Business Finance Corporation and commercial banks.

Conflict in NWFP, FATA and Balochistan has severely challenged the ability of the state as well as the legitimacy of the idea of a functioning state in Pakistan. Social protection must be part of the strategy to reclaim the space and legitimacy for the state in Pakistan, through protection to the basic entitlements of people in the conflict-affected areas.

Besides the conflict areas there were other regions that suffered extreme deprivation through decades of neglect and would be potential breeding grounds of alienation and conflict. In the high population provinces of Punjab and Sindh there are deep pockets of deprivation (southern Punjab, and rural Sindh) where alienation from the state and its institutions could be used to launch further security challenges.