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Tuesday, October 20, 2009

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Distortion of facts
Dr Ashfaque H Khan Acknowledging the good work of others is a rare occurrence in Pakistan. It is also a common practice that whenever a change in government takes place, some professionals or so-called "experts" would criticise and demean the good work of the out-going regime, hoping to get a high-profile job in the new setup. Such people can be acceptable to the new regime, only if they paint a horrible picture of the economy and also belittle the success stories of the out-going leadership even if it stares them in the face. In doing so, they misguide the government, which, in turn, continues to drive its car by looking at the back mirror with slogans such as "we inherited this mess". Such attitude paints a picture of a government that is not working and is creating risks rather than reducing them. Yearning to become acceptable to the new regime, the so-called "experts" would not hesitate to distort the facts and embarrass the government. This includes the poverty estimates that have already been highlighted in this newspaper. Despite every effort made by the World Bank and the Poverty Centre, the Planning Commission has refused to release the numbers for 200708. This article highlights yet another deliberate attempt by the 'experts' to distort the facts. It is well-known that Pakistan's economy experienced the longest spell of growth during the years 2000-07. Economic growth averaged 5.6 per cent per annum during this period and almost seven per cent in 2002-07. A combination of generally sound economic policies, structural reforms and a benign international economic environment were mainly responsible for this robust economic growth. With a view to positioning themselves after the change in government, the experts, while accepting the growth number grudgingly, were not willing to give credit to the policies. On the contrary, they raised the following questions: (i) the strong economic growth was based on flawed policies; (ii) the growth, in fact, was a service-led; (iii) both industry and agriculture were ignored; (iv) the country's industrial base was destroyed and as such, it performed poorly; and (v) the new regime would pursue a production-led growth strategy. Such a stance was contrary to the facts and was nothing but downplaying the achievements of others. What are the real facts? How did the industry perform during the period? Is the present government pursuing a production-led growth? The performance of large-scale manufacturing during 2000-07 has been unparalleled in the country's history. Large-scale manufacturing grew at an average rate of 11 per cent per annum during the period with growth reaching as high as 18.1 per cent in 2003-04 and 19.9 per cent in 2004-05. When viewed against an average growth rate of 9.9 per cent in the 60s, 5.5 per cent in the 70s, 8.2 per cent in the 80s and 3.6 per cent in the 90s, only the insane with political motives would argue that industry was ignored during 2000-07. As a result of sustained growth in large-scale manufacturing, its share in the commodityproducing sector (agriculture and industry) increased from 19.3 per cent in 1999-2000 to almost 28 per cent in 2006-07 an increase of 8.7 percentage points in eight years. Similarly, its contribution to GDP increased from 9.5 per cent to 13.4 per cent an increase of almost four percentage points in the same period. These can also be judged by the fact that while the services sector grew at an average rate of 5.8 per cent per annum, industry in general and large-scale manufacturing in particular registered average growth rates of 7.5 per cent and 11 per cent respectively during the period.

Agriculture, on the other hand, grew at an average rate of three per cent per annum during the period more or less in line with historical growth rate for the sector. Should the so-called experts still claim that economic growth during 2000-07 has been a service-led growth? Is this government pursuing a production-led growth, with large-scale manufacturing registering a negative growth of 8.2 per cent, overall industrial growth contracting by 3.6 per cent and commodity-producing sector (agriculture and industry) remaining flat in 2008-09? What service to the nation have these experts done by misguiding the political leadership? Structural transformation is an integral part of economic development. A rural/agrarian economy transforms into a modern/industrial society with the passage of time. Accordingly, the share of agriculture in GDP declines while those of manufacturing and services increase. During eight years (2000-07), the share of agriculture declined from 25.9 per cent to 21.9 per cent (a decline of four percentage points). This decline in agricultural share was compensated by a three and one percentage point increase in the shares of industry and services, respectively. The performance of industry in general and large-scale manufacturing in particular during 2000-07 was the result of a variety of factors, including consistency in policies, existence of strong domestic and external demand, stable exchange rate, low inflation, on-going structural reforms, relatively stable political and security environment, frequent interaction of the government and private sector, resolution of their problems in a relatively shorter period of time, and overall conducive business environment. As a result, the capacity of many key industries increased during the period. If flawed policies can provide such impressive results, let us follow the same now. Facts speak for themselves. As professionals, we should not distort them and misguide the political leadership.

The writer is dean and professor at NUST Business School in Islamabad. Email: ahkhan@nims.edu.pk

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