CPEC: hardware to software

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Pakistan CPEC LCCI PRICES
The writer is a senior economist. He can be contacted at pervez.tahir@tribune.com.pk
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During the elections campaign, the PTI’s platform focused on human development against the PML-N’s preference for large infrastructure projects. After the party’s success, it is only natural to expect a policy shift from the hardware to the software of development. Pakistan’s notorious deficit in human development demands it. The understanding reached with China during the recent visit of the PTI government leadership is to start CPEC phase two as a human development endeavour. According to the joint communique, the “two sides reaffirmed their complete consensus on the future trajectory of the CPEC, timely completion of its on-going projects and joint efforts for realisation of its full potential with a focus on social development.” Towards this end, a working group on socio-economic development has been set up. Under social sector cooperation, the Chinese assistance is to be directed towards education, health, poverty alleviation, safe drinking water and vocational training.

Also Read: CPEC shifts gears

Let us remember that the PTI’s campaign also highlighted the rising burden of debt. In the government, it has directed an audit of where has all the debt gone. In this background, the request for assistance in areas with long-term social returns raises a question mark. In Pakistan’s experience, repayable financing of human development projects and programmes have added more to debt burden than to the social performance and outcomes. An Asian Development Bank report evaluated its assistance to the social sector during 1985–2004. A total of $1.9 billion were approved for 28 projects in education, health and population, water supply and sanitation, urban development and multisector projects. The performance of social sector was rated as poor. Only eight per cent of the projects assessed were rated as successful. A serious problem was the imbalance in favour of lending. A ‘whole of programme’ assessment for ADB’s social sector operations showed “a rating of 32%, with low to moderate scores the norm across most criteria,” besides low value for money. The World Bank made a similar assessment of its assistance for the period 1994–2003. There was some progress in school enrolment, literacy, immunisation, fertility and child mortality, but the country still lagged “behind its neighbours and countries of similar income levels.” With “high deficits and soaring debt, successive governments were hard pressed to fund social programmes.”

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As per the joint communique, “Pakistan expressed a desire to learn from the Chinese poverty alleviation model, which has lifted over 700 million people out of poverty over the last 40 years.” True, this Chinese achievement is unprecedented in the history of development. It was, however, not the result of donor funded social action programmes, poverty reduction credits, poverty reduction and growth facilities or social protection schemes like the Benazir Income Support Programme. It was rather a demonstration that high growth sustained over a long period does trickle down to the poor. During 1978-2017, China’s annual growth rate was 9.5 per cent, enlarging the economic pie 35 times. High growth reduced poverty, despite increasing inequality. Instead of the ‘poverty alleviation demonstration projects’ that Pakistan has sought from China, the need is for putting in place an indigenous framework for high growth. Borrowing for hardware made sense, as it eventually pays for itself. The PTI says as much when it talks about the construction of Mangla Dam and Tarbela Dam in the 1960s. Borrowing for human development is contrary to its stand on debt. Creating 10 million jobs means 10 million families out of poverty. It is possible to achieve the required growth through a sensible programme of five million houses, together with Chinese cooperation in industry and agriculture.

Published in The Express Tribune, November 9th, 2018.

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