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May 23, 2019

Let the private sector spearhead economic turnaround

Business

May 23, 2019

LAHORE: The growth strategy of Punjab for the next year relies more on private sector to supplement the resource gap but it would be in conflict with its stated policy of managing higher growth in South Punjab.

Punjab Finance Minister Makhdom Hashim Jawan Bakht has said that in the next budget South Punjab would get a share in development higher than the one based on population. Bakht stressed it was being done to narrow the gap between the highly developed regions of the province and South Punjab.

He also said this time around it would be ensured that the entire allocated amount for the region was fully utilised. One must appreciate this noble attention.

However the economic performance of the province as a whole was very disappointing in the current fiscal year and every region of the province has suffered.

The minister said a decline in provincial revenues was mainly due to the removal of taxes on mobile top-ups, which had been restored recently. But when we see at the revenue growth of Sindh government that also faced similar handicap, this argument looks weak.

Sindh is the only province in the country where provincial revenues have grown. In fact, the same Sindh government that performed much worse in its earlier tenure managed to maintained revenue growth in the region.

Another parameter that depicts better growth in Sindh is the huge increase in cement consumption in the province that showed a growth of over 17 percent in first ten months. This hints at robust construction activities in the province.

In contrast the consumption of cement in Punjab has declined 15 percent that means a slowdown in construction activities. Construction industry triggers growth in 42 allied industries that registered negative growth in Punjab and positive in Sindh.

Perhaps the below par economic performance of the province that was instrumental in the induction of economic wizard Dr Salman Shah as advisor on finance to Punjab chief minister. He is coming up with a new growth strategy based on public-private partnership.

The basic theme of the strategy is that there are many infrastructure projects that need to be

built in the province but the government lacks funds to finance them. The idea is to get these projects completed with the cooperation of the private sector.

The private sector for instance could be first asked to built a state-of-the-art hospital for the public and then tasked to provide health services through that hospital. The finances for running the hospital would be provided by the government. The service charges would be enough to cover the investment of the builder. This is known as public-private partnership model.

Contracts of some projects like roads and bridges would be awarded on build-own-transfer basis. Under this mode the builder would be authorised to collect toll from traffic using the road and bridges for an agreed period at which the entire investment would be recovered at decent profit.

Punjab government has identified projects worth Rs300 billion under public-private partnership and build-own-transfer mode that would be offered to the private sector. The details of the projects have not been revealed as yet. However these projects would be spread all over the province more so in underdeveloped regions to upgrade them.

However, practically speaking no private sector investor would invest in public-private partnership or build-own-transfer mode in Rajanpur, Layyah or DG Khan but they would be more interested in projects that are near Lahore, Faisalabad, Gujranwala, Gujrat, Rawalpindi, or Sialkot. All these cities are in central Punjab.

Would the Pakistan Tehreek-e-Insaf government tolerate further development in these cities? In every growth strategy the governments look at the economic advantage of the province and the regional narrative takes backseat.

We need infrastructure and private investment to grow at fast pace.

The investment would come in places where infrastructure and facilities are already in good shape. To take investment to the South this government would first have to build comparable infrastructure or slowly upgrade the region by emphasising more on human development in skills and education.

This will take at least a decade of dedicated efforts. In the meantime do not starve the comparably better developed regions of funds to maintain and further upgrade the infrastructure to keep growth momentum intact.

Punjab rulers must realize that 80 percent of the global wealth is created in mega cities and urban centers.

The public-private partnership mode infrastructure growth will almost exclusively be in the cities of Punjab.

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