Strategy for the Future: Pakistan

That the poverty and employment are intimately related suggests that macroeconomic policies need to be so designed that maximum productive employment opportunities are generated. An employment strategy has four major ingredients:

1. promotion of labour intensive technology by pursuing export development strategy;
2. retraining of the workers for the jobs to be generated under the social action programme;
3. all such subsidies which cheapen the capital may be withdrawn. In particular, the subsidy on mechanization and fiscal incentives such as tax holidays to the industries be withdrawn; and
4. the small-scale activities should be promoted by removing the constraints on these which among others would include the credit availability, improvement in skills, removal of differentials of import duty between the large and small units and helping the small firms by way of generating demand for them.

Tariff rationalisation is expected to remove anti-export bias, but it will not be sufficient to reorient the economy to export markets. Since export-oriented industries are scale-neutral, the small firms can successfully compete with large firms. However, the small producers may not have sufficient information on the demand, design and pattern in the export market. Such a dissemination centre is, therefore, basic to employment promotion policy.

The problem of educated youth has grown worse in the recent years especially after the privatisation. This group has always been looking for “soft jobs” in the public sector and the ban on employment in private sector and privatisation of public enterprises have led to shrinking of employment opportunities for them. Since various skills are scarce, retraining of these workers can increase their employability. In particular, Social Action Programme can provide lot of white-collar jobs. Similarly, critical shortages have been observed in paramedical staff, medical technologists and middlemen technicians and training in these can help in alleviating their problems.

Alleviating the constraints on informal sector enterprises can generate more jobs. Credit is the main constraint in expansion of these enterprises. However, instead of subsidising the credit, the availability of credit needs to be ensured. The establishment of trade-specific organisations would also help small enterprises. With a view to improving the skills of the producers mobile training facilities coupled with credit without collateral would be quite useful. The policies to promote small enterprises and rural industries need to be matched by effective measures such as developing the package to tackle gaps relating to market identification, quality control, linkage as well as training and technology. The provincial small-scale industries corporation needs to identify viable projects and standardise demand for exports to help small industrialists.

Pakistan is pursuing a policy of mechanisation to improve agricultural productivity notwithstanding the fact that it may displace labour with consequent implications for both the unemployment and poverty. On the other hand, if biotechnology is encouraged, it will generate more output and employment and would help in eradicating poverty.

Increase in employment opportunities would also tend to increase the wage rate and as such functional income distribution would improve with positive implications for poverty. On the other hand, the structural adjustment programme should aim at a tax reform which is conducive to the poorer sections of the society. Finally, zakah, ushr and Baitul Maal need to be made more effective. If transparent methods are employed to select the recipients then the revenues from zakah may also increase.

Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.