Infrastructure Development: Remedy for Pakistan’s economic demise. By By Farzana Shah


"The new strategy for economic growth in poor countries should not, as today, focus on increasing exports and liberalizing international trade, but should foster internal demand through job creation and pay raises resulting from a social bottom line." –from Global Development, by Frans Doorman, 1998
Pakistan currently is facing a calamitous economic situation since last two decades and has tried everything from nationalization to privatization to bring some sort of stability in macroeconomics. After all these treatment country is once again in IMF emergency unit and already has received first dose of aid and is on its way to have another one in coming months.
Apart from political instability, regional tensions and mismanagement there is an even bigger fault line exists within planning division in Islamabad about coming up with ideas how to counter emerging economic challenges as a result of growing population, trade competition in the region, depleting currency due to excessive borrowings etc.
Investment in infrastructure development has proven to be a successful model for reviving economies in the world. Pakistan could not sustain its growth over the time due to lack of supporting infrastructure. There is a need to understand what impact a poor infrastructure has already made on economy and national growth and its sustainability before devising any strategy on how to harness infrastructure development for converting local needs into demands so that a sustained growth engine can be ignited.
Poor infrastructure: Reason behind unsustainable growth in Pakistan
Throughout its history Pakistan made progress in junks. During last three decades GDP –measure of value of goods and services out put in a country –growth has shown an arbitrary pattern in Pakistan. Flimsy economic conditions, poor planning and mismanagement are biggest challenges for sustaining growth in Pakistan.
To absorb, support and sustain increase in growth needs massive supporting infrastructure something Pakistan failed to have in place despite massive five years plans for this purpose.
Over the years successive governments in Islamabad failed to realise the impact of increased growth on existing infrastructure hence it never got upgraded in time. Resultantly the country, after enjoying one good year in economic growth, usually has seen a sharp decline in subsequent years. This effervescent pattern of growth is still prevailing mainly due to short sightedness of planners in Islamabad.
A good year in between low growth periods often came due to sudden and favorable climatic changes which resulted in good agriculture growth other than that there was least on planning side which could add to this growth before or after that one good year. One such example is 2003-04 when the country saw massive boost in GDP growth around 8% but after that it started to decline sharply and in 2008 reached at around 2.5% -against a provisioned growth rate of 8% for this year according to five-year plan for 2005-2010 [4] -as there is not enough energy, transport and water infrastructure in place to sustain a growth rate of 7-8 percent annually for nation to meet MDGs (Millennium Development Goals) and future socioeconomic development.
Development of new infrastructure has a more tragic tale. Political incentives have remained prime driver behind most of infrastructure projects. In early 1990s a plan for connecting Pakistan with landlocked countries of Central Asia though motorway was initiated but later it was proved that this project was politically motivated. The idea was very plausible to make Pakistan a gateway for these landlocked countries to Arabian Sea through ports of Karachi and Gawadar but the whole project was ruined as it was initiated between two cities of Lahore and Islamabad both of these were not industrial centers at that time but was very much in political influence of government in Islamabad.
Massive input into this project never gave stipulated ROI (Return on Investment) and after 18 years Pakistan is still unable to connect its own port of Gawadar with its own industrial cities like Lahore, Faisalabad, Sialkot etc. This port is just connected to another port in the East, Karachi, but has no road or rail linkages towards North where most of industrial estates are working and all of them are only connected to Karachi port. This is again affecting investment made in Gawadar port as there no major trading activities are taking place.
Development of infrastructure was not sustained in energy, water, irrigation, engineering sectors albeit communication and IT infrastructure experienced steady growth during last five years but these two sectors cannot meet the challenge of overall sustained growth as both have massive foreign input both finically and technically.

Impact of Infrastructure inadequacy on development
Pakistan is an agriculture based country and more than half of the country’s population is associated with agriculture. Pakistan has world’s largest canal system but due to lack of adopting new management practices and failure to incorporating latest technology into this system has resulted in poor growth of crops.
Ignoring energy and water infrastructure have affected FDI (foreign direct investment) as well as Uncertainty Avoidance Index (UAI) – measure of tolerance and ability of avoiding uncertain situation on the face of crisis in the country-has reduced to alarming level during last two years. Not only international but local investors are also keeping their fingers crossed as situation regarding availability of basic facilities is getting worse and no light at the end of tunnel is in sight. Energy short fall in Pakistan has reached up to 4000 MW and industrial cities like Karachi, Lahore and Faisalabad are among most affected cities. Instead of creating new jobs this shortfall of energy has forced to shutdown many industrial units leaving thousands unemployed.
In social sector growth of education and health infrastructure not only reflects in overall development of a country but also contribute heavily to sustaining that growth. In Pakistan, due to lack of interest, limited resources and other problems both health and education sector infrastructure could not be developed. Urban centers in Pakistan are expanding by every passing day but health and education infrastructure remains largely the same.
Rural area health and education infrastructure is in more cumbersome situation. Deficiency in health, education and in some areas sanitation facilities are pushing young people into activates like militancy and street crimes. Some parts of rural population, due to lack of facilities and opportunities, are pouring into cities which is adding to management problems in cities for example Lahore and Karachi, two major cities, are experiencing a rapid growth in population due to migration of semi-skilled and non-skilled peoples into these cities which is adding to unemployment in cites and also adding pressure on existing infrastructure like transportation system. Inadequacies in health infrastructure are resulting in spread of communicable and non-communicable diseases.
Way out for Pakistan: Investment in Infrastructure Development
Before suggesting infrastructure development as a way forward for future sustained growth it is very important to understand the place of infrastructure in overall growth cycle and why it is critical for sustaining growth with no or minimal foreign leverage. Pakistan is ideally located on map where it can use its infrastructure for its own growth as well it can help other countries in region and in its adjacency.

Why Infrastructure Development?

Notion of sustainable growth is tightly bound with local demands and means to fulfill these demands without borrowing foreign financial input. This is something every intimidating endeavor due to fragile economic conditions.
In such a condition, best strategy is to convert needs of local population into demands and fulfill them with local resources. Every country grows at a certain pace according to its resources and most of the time it becomes impossible for a developing country to keep on growing without borrowing money from an external source, so there must be an engine which can push the idea of supplying local demands through local means. In Pakistan infrastructure can help to meet much of local demands like energy, clean drinking water, sanitation facilities, transportation system and can create many job opportunities at the same time. Apart from that it generates demand for more raw material which in return makes more income for these local businesses.
Infrastructure development also improves local conditions for foreign investment into other areas like industry and trade.
Regional Infrastructure and Pakistan
·Poverty alleviation from the country and region

Millennium Development Goals (MDGs) have been accepted as a framework for measuring development progress in countries in the world. Role of infrastructure is imperative in achieving these goals set by UN.
Infrastructure improvement will allow Pakistan to get closer to its Millennium Development Goals (MDGs) set for 2015 in terms of water supplies, sanitation, health and education. Apart from that Pakistan is lacking behind in social development due to poor infrastructure.

According to a report published by World Bank “contributions infrastructure makes to the achievement of the MDGs, both directly (such as reducing the proportion of people without reliable access to safe drinking water and basic sanitation, or making housing and shelter more accessible) and indirectly, by supporting MDGs related to human development (e.g. education, of health, empowerment women) [3].
Infrastructure is essential in agriculture for region and for Pakistan in particular. Majority of Pakistanis are directly linked with agriculture and related businesses and it is also true for India and Bangladesh, two major countries in the region.
Having a reliable agriculture infrastructure will enable each country to increase its land under cultivation to fulfill needs for masses.
Solution for Energy, Water and Food Crisis in Asia

Asia and South East Asia in particular is facing a severe deficit of food and water for its ever-growing population and also of energy to maintain the rate of growth which countries in the region have gained. One of the major hurdles in provision of these basic commodities at doorstep of more than one billion people of the region is non-availability of enabling infrastructure.
On 24th June 2009 Asian Development Bank (ADB) President Haruhiko Kuroda clearly warned that to maintain strong growth, investment must not be allowed to be decreased on projects planned for supply of water. Economic growth, population expansion and the influx of people into cities have sharply raised the region's water requirements while increasing pollution risks. ADB President sighted reduction in infrastructure investment as a threat to poverty alleviation and economic growth.[1]
Pakistan is facing worse kind of water shortage for its cultivated lands. Along with other politically affected regional hazards, lack of modern irrigation infrastructure is a major setback for sustained agricultural growth. There is a great deal of investment required to overhaul and upgrade its canal system and also watering system as well. Currently watering crop fields is carried out with flood irrigation system this is obsolete system and cause waste of water resource. It is needed to be replaced as soon as with splinter system and canal network must be brick lined.
Regional Infrastructure may not solve water problem at regional level but it will help settle many disputes in countries at national level.
Situation of energy and food supplies will also improve not only in Pakistan but its neighboring countries as well.
Gas pipelines from Middle East and Central Asia can be connected to India through Pakistan. Similarly communication networks can be established connecting regional countries to provide robust and cheap communication networks.

Social Stability

Regional infrastructure will provide sufficient growth to tourism, transport industries in the region it will help bring people of diverse views and beliefs together. There is a great deal of history embedded into places in Pakistan and South East Asia which is still unreachable for global tourists.
For example Pakistan has world’s three largest and highest mountain ranges, world’s 9th largest desert, world’s largest salt mine and lots of other places which still need to be developed to attract foreign tourists. Developing infrastructure for these sites will generate job opportunities for local people and once these are developed will further provide opportunities for locals and foreign entrepreneurs to establish business there like hotels and restaurants.
Other than job opportunities built, infrastructure will also help to raise standard of living of local residents hence helping in reduction of poverty from the region.

·Common security for region
Security is currently biggest concern in the entire South East Asia. Security concerns among nations in the region have grown since the start of GWoT (Global War on Terror). Apart from that many nations have excruciatingly disturbing history between them since decades and have gone into wars with each other over various disputes. Countries like India, Pakistan and Sri Lanka are facing internal and external security threats.

Regional infrastructure can greatly reduce tension among nations in the region. Idea of common interests and more sense of security can only be prevailed with increased interdependency. It becomes more important for regional peace to have common interests among nuclear rivals in region i.e. India and Pakistan.

Access to new markets

Search for markets for local goods and products always remained a big challenge for all developing nations in the world and this is particularly true when it comes to South East Asia. With developing industries locally countries in the region have a tough challenge to compete not only with each other but with all multinationals that already have affirmed themselves in businesses in the region.
A proper legal framework and infrastructure will enable regional vendors to expand their businesses beyond their borders and also connect to other regions as well. Pakistan can provide routes to Central Asia, China, Middle East through its Western borders to its own and the vendors in its East i.e. in India, Bangladesh etc.
This will provide excellent opportunities to local industries in the region to grow and hence provide more jobs and contribute more in growth.

·Immediate disaster recovery
Better communication systems and transportation system beyond the national borders will ensure prompt actions in an event of natural calamity. Damage in catastrophes like tsunami in India Ocean (Dec, 2006), earth quick in Pakistan (Oct, 2005), ALIA torpedoes storm in India and Bangladesh (2009) and due to lots of floods etc can be minimized with help of a collaborative rescue infrastructure under one common framework.
After 2006 tsunami a great deal of common weather radar system, floods warning system and rescue plan was sighted as urgent necessaries for a regional natural disaster management system and this need is still valid. A collaborative infrastructure would be beneficial to more than one billion people in a region which is known for its extreme weather conditions and sudden changes in its climate.
Will Infrastructure alone solve all problems?
There is need for taking more measures in countries which are more challenging to sustain than attain and economic growth is at top of that list of those challenges. To sustain growth through infrastructure will only possible if all the related and enabling technologies, skills, resource management, capacity planning is done properly. These are major factors that have direct affect on any infrastructure so the task most essential is to produce all these enabling entities with proper quantity, quality and more importantly at proper time to sustain a healthy rate of infrastructure development. Sooner it is done better it will be for both Pakistan and the region as well.
·Higher Education & Research and Development
More spending is required on R&D. University research must be linked to local industrial needs and must follow international standard. It was only after 2002-03, Islamabad realised the role of specialised workforce and enhancing already employed workers so HEC (Higher Education Commission) was formed to bridge the gap between demand and supply of skilled professionals.
Although following a correct direction, HEC still is facing many problems of management and finances. Last year budget of HEC was cut sufficiently due to economic strains in Pakistan and it affected many programs being run by HEC for rapid development of pool of professionals.
Only education can produce human capital and new technologies to further contribute in development of every kind of infrastructure from basic facilities like electricity, energy, communication, healthcare to national level projects like dams, canal systems, emergency response centers etc.
·Human Resource Management
Infrastructure is one of those areas which are affected by shoddily management in Pakistan and one of core reasons is human resource management. Meager human resource planning and failure to build capacity for skilled human resource pool has remained core reason for lack of sustained growth in Pakistan since its creation.
There is a greater need now to invest more in institutions and faculties responsible for building and enhancing capacity of human resource. These includes universities, role oriented institutes, training facilities etc. both under public and private sector so that a sturdy growth rate can be sustained not only in infrastructure but also other areas of the state.
·Planning Perusal
As mentioned earlier planning is weakest phase of any project in Pakistan. According to World Economic Forum Survey (2006-07), Pakistan is ranked 67th in 125 countries which were evaluated in survey.[2] This clearly depicts the need for not only building new infrastructure but also to maintain existing ones as well.
Islamabad over the years failed to properly prioritise its infrastructure projects. If Pakistan had built its road links prior to investment in Gwardar port it would have earned some return on investment on road infrastructure by the time the port got completed.
This poor planning is hurting Pakistan twice; First over the year Pakistan was not able to allocate proper funding to infrastructure which is required for sustained development on the other hand due to lack of capacity the allocated fund could not be spent in one fiscal year. In 2008, only $2.3 billions were allocated as against the required $24 billions and even that amount wasn’t utilised completely.
Planning division needs some effective reforms to plug all above mentioned loopholes.
·Encourage private sector
Infrastructure projects are expensive undertaking on public side alone. In Pakistan, governments failed to fully exploit the talent and potential of private sector in infrastructure development. A public-private partnership (PPP) paradigm can enhance the pace of project execution. Private investment in infrastructure projects has declined in Pakistan over the years. Independent Power Plants ( IPPs), established in 1990s, was last major infrastructure project completed in Pakistan following BOT (Build-Operate-Transfer) paradigm.
No concrete BOT regularity body and legal framework is in place for specific infrastructure due to which array of projects were not being commenced like Light Rail Transit System in Lahore and Rawalpindi (Punjab), Naran Saiful Malook CableCar Project (NWFP), Electromagnetic Train Project in Karachi (Sindh) etc [5]. All these projects were envisioned to be completed following BOT but absence of any policy framework for BOT kept private sector aside.
There are other models as well which can work in Pakistan in infrastructure development like BOO (Build-operate-Own) and BLT (Build-Lease-Transfer) etc. These frameworks along with BOT have some inherent complexities involved in their implementation like its lengthy obligations and multi-party involvement in projects [6]. Apart from legal and regulatory frameworks an economic framework must be proposed as well by the government in collaboration with private sectors so that an overall conducive environment can be established to attract private sector in infrastructure development.

Importance of infrastructure is imperative for a sustained growth in Pakistan. There are challenges in the way but equal opportunities are also there. Pakistan can bring itself out of foreign financial leverages through using its ideal geographic location. Infrastructure is one weak link in this route of prosperity for nation of 170 million. Both government and private sectors will have to join hands in this effort. Government holds the key to formulate policies so that it can provide a conducive environment to private sector to invest more in infrastructure development of the country.
Pakistan will have to seek larger role in regional trade and cross border infrastructure (CBI) which can provide an excellent way forward. Apart from financial benefits regional infrastructure can help Pakistan to solve many political and regional problems peacefully through increased interdependency on countries through its land. If infrastructure development schemes of President Roosevelt can bring an end to “the great depression” of 1930 there is no way same cannot be reciprocated in Pakistan in dire economic situations the country is going through since last two decades.


[1] ADB chief urges investments in water infrastructure, 24-06-09

[2] Pakistan ranked 67th in basic infrastructure category: World Bank report, January 23 2008, Khalid Abbas Saif

[3] Development Committee (Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund On the Transfer of Real Resources to Developing Countries), December 12, 2005

[4] PSDP document, 2009-10, P.1, Ministry of Finance, Government of Pakistan

[5] The Trend of Build Operate and Transfer (BOT) Projects in Pakistan,2008, Ammad Hassan Khan, Misbah Jamil, Mudassar Sattar

[6] BOT Contracts: Applicability in Pakistan for Infrastructure development by S. Mubin and A. Ghaffar

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