Beyond PRSPs: National and Provincial Growth Strategies

PRSPs are overarching policy documents which cut across a range of mandates including but not limited to purely economic priorities. Key pillars of PRSP in Pakistan focused on macroeconomic stability, private sector development, human resource development, financial sector and SME related reforms, infrastructure development, devolution, and social safety nets. The PRSP is still being used in the Finance Division for monitoring of poverty-related expenditures. In an evaluation of PRSP-II following shortcomings have been identified: [1]

•  Parliament was never fully engaged by the government for consultation and input on PRSPs. There is no reference to the effect of the approval of the PRSP in the parliamentary debates.
• PRSP-I and II do not define any distribution mechanisms for growth. In fact the term land reforms (which is at the core of asset redistribution) finds no mention in these documents.
• Education and health related expenditures under PRSP had met a resource constraint (and cuts) starting 2009. PRSP had also ignored the important problem of health financing for poor.
• Local governments had no role in the delivery and management of health and education sector programs.
• No specific actions were envisaged towards legal and judicial reforms in the country.
• The post-18^th Amendment milieu will require a different socio-economic planning, implementation, monitoring and evaluation regime – which is currently not envisaged under PRSP.

The proposed growth strategy being formulated in Planning Commission takes stock of the shortcomings of Medium Term Development Framework 2005 – 10, PRSP-I & II, and prioritizes governance and institutional reform as a key pre-requisite before any other sectoral action plan is put forward by the government. The draft strategy recognizes that under the prevalent resource constraint, the aid – led public investment model of growth cannot continue any further. The starting point has to be capitalization of idle capacity in the public and private sector. In the former priority may be attached to be: 

a) restructuring loss generating public sector enterprises, 

b) elimination of untargeted subsidies, and 

c) rationalization of public investments. 

The second pillar of proposed growth strategy then focuses on governance for markets i.e. fostering competition across goods and factor markets, lowering barriers to entry and exit (particularly for small entrepreneurs), and exit of government from agricultural markets. The third pillar is about governance for inclusive cities i.e. revisiting zoning and building regulations, land market reforms, and property rights. The fourth pillar proposes governance for improved connectivity i.e. partial privatization of railways in order to revive the freight sector, revisit market dominance of public sector in road and aviation sector, and incentivizing use of ICT services across the board. Finally the last pillar – youth and community engagement ensures that this growth strategy evolves and remains inclusive overtime.

In order to account for 18^th Amendment, Planning Commission sees a new role for itself where it will continuously work with line ministries and provinces in order to have action-oriented tasks sequenced and prioritized. It is envisaged that in order to building strong consensus before moving towards concrete actions following will be the sequence of development planning documentation:

a.    Growth strategy document [Conceptual framework of a new strategy – May 2011]

b.   10^th Five Year Plan [Sectoral plans in collaboration with line ministries – June 2011]

c.    Provincial growth strategies [In collaboration with all provinces]

d.   Urban development strategies [For all cities having population 1 million and above]

  

---

[1] SDPD (2009) Poverty Reduction Strategy Papers in Pakistan: An Evaluation. Strenghtening Democracy through Parliamentary Development. http://sdpd.org.pk/

It's none of your business

They are capable of resuscitating a dying economy and of making third world countries first world powers. They can develop cities and rural areas, put an end to wars, and make societies and communities stronger. These are businesses. They come in all shapes, sizes and legal status and are the backbone of any economy. Sony, Toyota and Honda put Japan on the map while it is a common saying that no two countries with a McDonald’s have fought a war with each other since they each got McDonald’s. So if any country wants to do well locally and globally, businesses should be allowed to grow and to establish their own niche. For Pakistan, flourishing and well-established markets seem to be the only hope for the country stuck within an ever-expanding web of problems.

While Pakistan is not as bad as it seems when it comes to establishing businesses, it has not been as great as it can be. Doing Business 2011 ranks Pakistan at 83 among the 183 countries of the world, the highest among the South Asian countries. The question then becomes that despite the relatively better ranking in South Asia, why is Pakistan still not able to develop or grow like some of the lower ranked countries in the region? The answer is that while Pakistan is doing comparatively well for businesses, but given its current geo-political situation it hasn’t done well enough. Pakistan needs to step up its game to catch up with other countries in growth and development.

But to do this, Pakistan has to look towards the problems faced by local businesses. These are pretty standard revolving mostly around lengthy administrative procedures peppered with a heavy dose of corruption. While the Securities and Exchange Commission has set up a relatively fast system of e-Services to help businesses register, the other procedures takes the average time of setting up new businesses to 21 days. This compares poorly with Singapore where businesses take 3 days to set up. Similarly, registration of property involves only six procedures, but somehow takes 50 days due to the complicated execution and registration process for the deed. Bribes are also an additional cost with businesses having to pay approximately Rs 75,000 to acquire land and an average of Rs 25,432 to avoid tax auditing. In addition, while businesses in Pakistan pay the least taxes (as a percentage of their profits), due to extensive administrative barriers, they take 560 hours to file them, almost double the Indian average of 258 hours. With the notorious backlog of cases in Pakistani courts it is not surprising that contract enforcement in Pakistan takes 976 days while in Vietnam it only takes 295 days.

While dealing with corruption seems to be a hopeless case, Pakistan can emulate others in improving administration by setting up internet kiosks for businesses to register (like India); gathering support for tax-simplification programs through partnership with the press (like Yemen) and introducing time limits for legal commercial cases (like Algeria).

But Pakistan doesn’t even need to look too far to adopt better business practices. Doing Business 2010 reports that while Pakistan does relatively okay overall, some parts of it do better than others. While countrywide it takes an average of 21 days just to set up a business, a business in Islamabad can do so in 16. Similarly, in dealing with construction permits, registration of property, trading and enforcing contracts, Multan, Faisalabad, Karachi and Sukkur are the best in terms of either fewer days or fewer procedures. If the best practices of all the cities were used in all the major cities, back-of-the-envelope calculations show that an average businessman can save over $1,500. If one city in Pakistan can do it, it should not be difficult for the others to follow suit.

It seems that a little less (and smarter) regulation is what Pakistan needs right now, especially in case of businesses and markets. To boost our local markets and become competitive internationally, the government needs to let the markets function freely on their own. That is why the Planning Commission’s New Development Approach (NDA) is trying to better markets by implementing a policy of less regulation. Maybe it is time to try a new approach; maybe it is time to let Pakistani businesses take the helm and hopefully give the nation more development, a better future and its citizens something to smile about.

http://tribune.com.pk/story/115070/economic-backbone-its-none-of-your-business/

Published in The Express Tribune, February 7^th, 2011.