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BW Businessworld

Low-Hanging Fruit

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South Asians like to waste paper, so they abhor calendar years. India runs its financial year from April to March, so that it can write it as 2010-11. Pakistan follows the same principle, but cannot be seen to follow India. So it runs its financial year from July to June. Pakistan initially chose this financial year because in its first years, it expected to receive large amounts out of the Indian budget — things like a share of sterling reserves and so on. Maybe it is still waiting for the tribute to come.

Pakistan published no official assessments of its economy last year. The Central Bank of Pakistan used to make a good economic survey, but has not put out any in the past two years. But unexpectedly, the finance ministry has just brought out a survey, written by Economic Advisor Ejaz Wasli and his team. It is a remarkably detailed document.

In 2004-05, Pakistan's economy saw stellar growth of 9 per cent. Since then it has taken a more or less steadily downward course; its growth in the just ended 2010-11 is expected to be 2.4 per cent. It has grown more slowly than every other South Asian country in the past four years. That is perhaps an unfair comparison, for South Asia is one of the world's faster-growing regions. But out of the 28 countries and regions that the Economic Survey compares Pakistan to, it has done better than only Iran, which has hardly grown.

The one sector of its economy which did comparatively well was animal raising. Its share in agricultural production in 1990-91 was 38 per cent; by 2010-11 it had gone up to 55 per cent. As Pakistanis got richer, they ate more and more meat. And then, animals do not need much work. They can be sent off with a child to forage; they will find something to eat. And they also give milk. India produced 112 million tonnes of milk last year; Pakistan, with a sixth of its population, produced 46 million tonnes — so much that it could not even drink all the milk. Humans consumed only 37 million tonnes. The rest did not go to the animals' suckling children because the survey has already deducted 5 per cent for calves. Nor can it have been wasted, for 15 per cent has been deducted for loss in transportation. If there was ever a land where rivers of milk flowed, it is this one.

But there was a sector of the economy that performed even better than cattle in the past year: government. In an economy that shrank, it grew 13 per cent, thanks to an increase in pay. The recent budget has increased government salaries by 15 per cent. Now a judge of the Supreme Court will get Rs 368,000 in salary, plus a judicial allowance of Rs 170,000 and a rent allowance of Rs 68,000 — totalling Rs 606,000 a month. Even after allowing for the fact that the purchasing power of the Pakistani Rupee is about a half of the Indian, it is not a bad salary. The salary revision caused much unhappiness; everyone thought that someone else had got a bigger increase. Instead of lobbying to be sent to the Fund and the Bank, Indian bureaucrats should angle for secondments to the government of Pakistan.

India increases the pay of its bureaucrats and the margins to its shopkeepers and calls it growth of services. As its government salaries show, Pakistan is also learning the trick. But not so fast; its material sectors are still more important than services. Agriculture accounts for almost a half of its GDP, and industry for a quarter. The two are interrelated: agriculture grows cotton, and cotton textiles are Pakistan's major industry.

Pakistan exports about $7 billion worth of yarn and cloth and $3 billion worth of garments — almost 2 per cent of world textile production, which is about $500-600 billion a year. Floods in Pakistan and China last year caused a world shortage of cotton and the prices shot up. That was wonderful for Pakistan's textile industry; its exports in 2010-11 increased 20-30 per cent from their usual level of $10 billion, without any increase in volume. Since textiles account for more than a half of total exports, the extra earnings are substantial. Because of its nurturing by the Pakistan army, the country is a highly competitive exporter of tents and canvas.

Pakistan needs to increase exports; next door to it is an enormous market that it refuses to exploit. For a while it exported fruit and vegetables to north India. Today India would be happy to buy the milk that Pakistan finds no use for. Its leather industry, which has been importing leather from Brazil, would be prepared to buy it from Pakistan, a much closer source. Altogether, there are many trade opportunities next door that Pakistan can exploit.

(This story was published in Businessworld Issue Dated 25-07-2011)

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magazine growth bw opinion gdp pakistan magazine 25 july 2011