Re: World Bank: Pakistan Risks Crisis
sigh 5 years onwards, people still do not under the very basic of economics. Lets recap some simple aspects. Firstly yes our economy has grown tremendously. But in what sectors? Agriculture. Why? Bumper crops. Not innovation. Not diversification. Its just overproduction. Nothing more.
Now the areas in which 90% of the world uses for export and growth is the industrial and services sectors. In Pakistan those are the most heavily taxed sectors are in no way internationally competitive due to such a high tax rate on their products and the raw materials on the products. That is the first aspect of mismanagement. In the past 9 years, Musharraf has not increased the industrial capacity, nor the technological backbone of our industrial sector. Nor has our services sector been given any aid in promoting services internationally.
The only sector that benefits from this help is the Military-Industrial complex, because Musharraf pockets money from such endeavours.
Now back to our stellar growth rate. The growth is amazing yes. But who benefits? The top 5% of the Pakistani establishment. You see since Ayub Khan's time the average farmers income has not increased compared to the world Average. While in Europe, US, Australia and other Agriculture heavy countries, the farmer is by far the richest and most heavily supported segment of the economy, ours still work for the "same price as before" (This is of course not literal, consider it taken in real terms and not nominal terms).
While Agriculture has been our mainstay for export for the past 30 to 40 years. How do you explain that? Simple. No trickle down affect. Lets use a real life example with the Pakistani rupee as the currency. Currently 40 kgs of wheat goes for 1,200 rupees - internationally. The internal (domestic) price following the recent announcements is roughly 600 rupees. Half the international price.
What happens is the landlords - the 50 odd families that function as our "democratic leadership" buy the wheat at the local price and sell it internationally to make a hefty profit. This happens in all economies. It is not new. The difference is that the profit eventually trickles down to the farmer in the form of new machinery provided, innovative techniques and other aspects that make his job easier. In Pakistan that does not happen. Why? Because the landlord keeps the profit and makes the farmer work without any aid or innovation. That is why most people do not fall in to the trap of our stellar growth rate as the average person does not benefit.
India on the other hand got the growth rate/trickle down effect aspect down - for the most part. We need to follow a similar model. But that would require destroying the feudal land system and sending our agriculture sector to hell for a few years.
Now Saleem what is Pakistan's poverty line? Define it. Also what is the difference between the poverty line in 1999 and the one currently?