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Poverty alleviation through creation of job opportunities

Published on 7th July, Edition 27, 2014

 

It may be said that elected governments bother to introduce special schemes ensuring better job opportunities for educated youth and undertaking Benazir Income Support Program and the latest being Prime Minister Youth Business Loan scheme. However, all these may cater a few favorites or a limited segment of the society. The prime responsibility of the government is to create enabling environment that can usher new investment, creation of productive facilities, improve per capita income. It may be said that despite in power for more than one year PML-N has not been able to change the ground realities.

PML-N has been in power in Punjab even when PPP had formed coalition government at the federal level. Therefore, it may be said with all the certainties that it was and it is fully aware of the factors responsible for looming energy crisis in the country. However, it may be said that groups having vested interests have been misleading PML-N leadership and even a person like Senator Ishaq Dar, who is also Finance Minister, fall in the trap of these turn coats. While it may be true that soon coming into power PML-N government dished out about half a trillion rupees to clear circular debt, it is also true that no measures were taken to contain blatant theft of electricity and gas and improve recoveries.

One is astonished when Senator Dar talks about limited supply and nor recovering the full cost from the consumers. The fact is that the country has an installed capacity to produce nearly 30,000MW electricity and generation hovers around 15,000MW, meaning that there is ample generation capacity. Poor cash flow is because distribution could recover only 30% of the units billed. The average theft is around 40% and experts say one percent theft is equal to Rs1.5 billion. Let another point be kept in mind that this pilferage goes on with the connivance of staff of distribution companies. Facing the shortage, the government resorts to load shedding spread over 8 to 16 hours. If the outages are so long running the manufacturing facilities on standby generators erodes competitiveness of the manufacturers. According to certain estimates the average capacity utilization of local manufacturing units is around 50%. In such a prevailing scenario no entrepreneur would like to add new production facilities.

Economic wellbeing of people is dependent on two factors: 1) per capital income and 2) purchasing power. According to the official data per capita income of Pakistan is around paltry US$1,200. It is almost impossible to maintain a family of five people in this dismal low amount. A question arises, if per capita income is so low from where on the earth the elite gets money to construct villas and condominiums, buy luxury cars and send their children to schools charging fabulous fees? The reply is simple and known to all and sundry that massive corruption, non-disclosure of source of income and evasion of tax is responsible for poor getting poorer and rich getting richer. Added to these is offering of amnesty schemes to whiten the black money with regular intervals. Even if someone is rounded up, he/she is offered ‘bargain plea’ whereby part of the misappropriated is deposited in the national exchequer and bulk is retained by the accused.

 

A common complaint is that the telecom sector is highly taxed. On pre-paid and post paid bills subscribers have to pay more than 25% tax. The central bank, under its financial inclusion program, is promoting branchless and mobile phone banking. However, this tax is being attributed the biggest hurdle in the implementation of this program. It will be most appropriate if this tax rate is reduced to 10%. Thanks to PTCL that people are switching over to cellular phones from landlines, its subsidiary spends billions of rupees annually on advertising campaigns for promoting Ufone. While some people term cellular phone a curse, it is a major source of income for those selling cards and easy load. The growing use of internet and mobile banking is also easing pressure on bank branches.

It is encouraging that lending to farmers is on the rise but it is also observed that feudal lords are using this money for purchasing urban properties and expensive cars. The country has benefitted a little because production and yield of major crops has not increased in any significant manner. Focusing on cultivation of edible oil seeds can help in saving US$2 billion spent annually on the import of palm and other oils.

Sugarcane production in the country has remained stagnant for the last ten years mainly because the government has remained reluctant in allowing sugar export. Sugar industry is the driving engine of rural economy and making sugar mills robust can help in containing migration of people to urban areas from rural areas. Granting sugar mills IPP status can help in overcoming load shedding in rural areas.
Pakistan is among the top five largest producers of milk but less than 5% of total production is packed in tetra packs. Similarly, over 40% production of fruits goes stake before reaching the markets. It is encouraging that State Bank of Pakistan has embarked upon ‘warehouse receipt financing’ program. However, to make this program successful construction of modern storage facilities is a must. The central bank offers loans for the construction of warehouses on soft terms. It seems people are not fully aware of this facility and the central bank must undertake awareness programs.

Last but not the least, flow of FDI to Pakistan can’t be increased as long as local investors remain shy. Experts are of the opinion that the incumbent government should try to overcome ‘trust deficit’ which is a bigger threat as compared to budget deficit and current account deficit. Once trust deficit is overcome, the other two will be automatically taken care of.

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