About a month ago, a Chinese economist and former World Bank staffer gave a talk in the Planning Commission in Islamabad, and made an interesting statement. He said that Pakistan needs to move away from agriculture, and change the structure of its economy such that manufacturing constitutes a higher proportion of GDP. This, according to him, could potentially double the GDP growth rate to 10%. He also pointed out that as Chinese industry moves into high value-added sectors, a number of sectors are being declared sunset industries, and they will move overseas, creating opportunities for developing countries who want to industrialize along labour-intensive lines.
As of the last fiscal year, agriculture contributed almost a quarter of Pakistan’s GDP, while industry (including manufacturing, mining, energy distribution, construction and slaughtering) contributed just 18 percent. Within agriculture, official statistics show that livestock contributes more than half of value added. The crop sector has been in decline for a while, and the growth of major crops, in particular, has been negative for a couple of years, not least due to poor weather conditions. The fall in international commodity prices has not helped.
Although the attractive support prices in place for wheat and sugarcane have boosted the production of these commodities, and ensured that Pakistan is self-sufficient in these staples, surplus stocks rot in mildewy storage. Export of these commodities is not profitable because international prices are depressed. The cotton crop, on the other hand, has suffered one shock after the other (pest attacks, excessive rains) and production fell by almost 30 percent in the last fiscal year. In effect, we are self sufficient in our staple diet, but we are not earning anything from agriculture.
Reliance on a sector which is so subject to the vagaries of nature, and to volatility in international markets, is fraught with risks. Furthermore, although agriculture is said to employ more than 40 percent of the population, much of this population is underemployed. It is mainly women who tend livestock on small farms, and their work is not even counted in employment statistics. Those who are counted on the official books are mainly men working in crop agriculture—and more than half of them are likely to be unemployed for about half the year on average.
In short, agricultural productivity is low, the potential of the sector to earn foreign exchange is in decline, and it doesn’t really generate employment. Moving into more productive sectors should be a no brainer. So why isn’t it happening?
There are any number of theories on why some countries don’t industrialize but two major barriers are financing and issues with labour. Industry requires investment, which has to come either from the public or private sector. Traditionally, public-sector investment leads the way and the private follows. In Pakistan, a major public sector investment experiment failed miserably in the 1970s, and the private sector has been cautious. Politics and a poor security environment have something to do with this, as does the fact that private investors in Pakistan do not face a level playing field. There are entrenched interests in manufacturing and mining in the country who can work the policymakers to make sure that certain players and some sectors get preferential treatment. Most successful industries in the country are family owned, and many do not access capital markets in any significant way.
And then there is the skill gap. Industry needs to employ a productive labour force, and the higher you go in the value-added stakes, the more advanced the skill requirements. Not only is Pakistan’s labour force ill-equipped for employment in relatively sophisticated sectors, but there is a larger problem of trainability. While industrialists here have accepted that they will not be able to pick up skilled labour in the market, many of them decry the fact that even the ustad-shagird system has broken down, with graduates of vocational schools not emerging with the skills they should have but still refusing to work as apprentices.
As Pakistan starts to look more and more towards China in the economic spheres, we fail to realize that China’s history has had a lot to do with its status as a fast-growing economy. Sadly, it was a totalitarian state that forced half the labour force into higher education and jobs (who can forget Mao’s words that, “Women hold up half the sky”), introduced compulsory education for a minimum of nine years and imposed criminal penalties for those in contravention, and introduced the famous “barefoot doctors,” who provided primary health care in the remotest of settlements at rudimentary compensation.
While acknowledging that we as a society cherish our democratic ideals and have never accepted prescriptive regimes, we must also admit that our state not only demonstrates a complete inability to guarantee fundamental rights, but has utterly failed to ensure provision of basic services to the majority of its population. Looking to emulate China is all very well, but this is a country where health authorities cannot convince significant numbers of people to allow their children to be vaccinated against polio, and cannot ensure that every major settlement has a functioning primary school. There are parts of Pakistan where female literacy is less than two percent, and attempts to ban child marriage have certain legislators rising up in arms. And the state, which successfully developed nuclear weapons against all odds, cowers before these forces.
The Chinese economist was not talking dilating on rocket science when he said that Pakistan must move beyond agriculture. But successive Pakistani governments need to do a lot more to unleash the potential of the people of this country. Until that happens, we will remain dependent on unpredictable weather.
The writer is an independent researcher based in Islamabad
As of the last fiscal year, agriculture contributed almost a quarter of Pakistan’s GDP, while industry (including manufacturing, mining, energy distribution, construction and slaughtering) contributed just 18 percent. Within agriculture, official statistics show that livestock contributes more than half of value added. The crop sector has been in decline for a while, and the growth of major crops, in particular, has been negative for a couple of years, not least due to poor weather conditions. The fall in international commodity prices has not helped.
Although the attractive support prices in place for wheat and sugarcane have boosted the production of these commodities, and ensured that Pakistan is self-sufficient in these staples, surplus stocks rot in mildewy storage. Export of these commodities is not profitable because international prices are depressed. The cotton crop, on the other hand, has suffered one shock after the other (pest attacks, excessive rains) and production fell by almost 30 percent in the last fiscal year. In effect, we are self sufficient in our staple diet, but we are not earning anything from agriculture.
As Chinese industry moves into high value-added sectors, a number of sectors are being declared sunset industries, and they will move overseas, creating opportunities for developing countries who want to industrialize along labour-intensive lines
Reliance on a sector which is so subject to the vagaries of nature, and to volatility in international markets, is fraught with risks. Furthermore, although agriculture is said to employ more than 40 percent of the population, much of this population is underemployed. It is mainly women who tend livestock on small farms, and their work is not even counted in employment statistics. Those who are counted on the official books are mainly men working in crop agriculture—and more than half of them are likely to be unemployed for about half the year on average.
In short, agricultural productivity is low, the potential of the sector to earn foreign exchange is in decline, and it doesn’t really generate employment. Moving into more productive sectors should be a no brainer. So why isn’t it happening?
There are any number of theories on why some countries don’t industrialize but two major barriers are financing and issues with labour. Industry requires investment, which has to come either from the public or private sector. Traditionally, public-sector investment leads the way and the private follows. In Pakistan, a major public sector investment experiment failed miserably in the 1970s, and the private sector has been cautious. Politics and a poor security environment have something to do with this, as does the fact that private investors in Pakistan do not face a level playing field. There are entrenched interests in manufacturing and mining in the country who can work the policymakers to make sure that certain players and some sectors get preferential treatment. Most successful industries in the country are family owned, and many do not access capital markets in any significant way.
And then there is the skill gap. Industry needs to employ a productive labour force, and the higher you go in the value-added stakes, the more advanced the skill requirements. Not only is Pakistan’s labour force ill-equipped for employment in relatively sophisticated sectors, but there is a larger problem of trainability. While industrialists here have accepted that they will not be able to pick up skilled labour in the market, many of them decry the fact that even the ustad-shagird system has broken down, with graduates of vocational schools not emerging with the skills they should have but still refusing to work as apprentices.
As Pakistan starts to look more and more towards China in the economic spheres, we fail to realize that China’s history has had a lot to do with its status as a fast-growing economy. Sadly, it was a totalitarian state that forced half the labour force into higher education and jobs (who can forget Mao’s words that, “Women hold up half the sky”), introduced compulsory education for a minimum of nine years and imposed criminal penalties for those in contravention, and introduced the famous “barefoot doctors,” who provided primary health care in the remotest of settlements at rudimentary compensation.
While acknowledging that we as a society cherish our democratic ideals and have never accepted prescriptive regimes, we must also admit that our state not only demonstrates a complete inability to guarantee fundamental rights, but has utterly failed to ensure provision of basic services to the majority of its population. Looking to emulate China is all very well, but this is a country where health authorities cannot convince significant numbers of people to allow their children to be vaccinated against polio, and cannot ensure that every major settlement has a functioning primary school. There are parts of Pakistan where female literacy is less than two percent, and attempts to ban child marriage have certain legislators rising up in arms. And the state, which successfully developed nuclear weapons against all odds, cowers before these forces.
The Chinese economist was not talking dilating on rocket science when he said that Pakistan must move beyond agriculture. But successive Pakistani governments need to do a lot more to unleash the potential of the people of this country. Until that happens, we will remain dependent on unpredictable weather.
The writer is an independent researcher based in Islamabad