PAKISTANS TRADE LIBERALIZATION EXPERIENCE

LESSONS AND WAY FORWARD

ISHRAT HUSAIN
Pakistan has been one of the fastest growing economies in Asia for last five years.
Economic growth rates have risen from 1.8 percent in 2000/01 to average 6! percent a
year. "or Pakistan these rates are not spectac#lar b#t a reversion to mean. $t may be
recalle% that the average ann#al growth rate of &'P over 60 year perio% of Pakistan has
been (.2 percent. )an#fact#ring sector o#tp#t growth was over 1( percent* e+ports have
%o#ble% in ,- %ollar terms in ( years an% an open tra%e regime has allowe% imports to
triple. .a+ reven#es have risen by 1/ percent a year re%#cing fiscal %eficit which #se% to
average ! percent a year in the 1000s to average / percent. E+ternal %ebt b#r%en has been
halve% from (21 of &'P to 261 &'P an% is pro2ecte% to be on a %eclining path. .he
co#ntry3s capacity to service its %ebt has consi%erably improve% as %ebt servicing ratio
which #se% to preempt almost 60 percent of p#blic reven#es is now %own to 28 percent.
Poverty inci%ence has fallen from 4/ percent to 2/ percent accor%ing to official estimates
while 20 percent accor%ing to the 5orl% 6ank. ,nemployment rate is %own to 6.(
percent from 8./ percent
Pakistan3s tra%e liberali7ation reforms have receive% accola%es from international
b#sinesses as well as m#ltilateral financial instit#tions. Accor%ing to a 5orl% 6ank st#%y
8Pakistan3s recent reforms have been s#bstantial. $ts tra%e regime is now one of the more
open in -o#th Asia. $t has the lowest applie% average tariff rates of the three large -o#th
Asian economies $n%ia* Pakistan an% 6angla%esh. Pakistan reache% this position by
re%#cing the n#mber of tariff ban% to 2( percent. ,nlike -ri 9anka an% 6angla%esh* an%
in%ee% most co#ntries aro#n% the worl%* Pakistan has not shie% away from opening its
agric#lt#re sector. $n a%%ition* the government eliminate% :#antitative restrictions*
reg#latory %#ties an% other para tariffs an% several other meas#res that restricte% tra%e in
the past. "inally* it re%#ce% the n#mber of stat#tory reg#latory or%ers ;-<=s> an% the
e+emptions grante% #n%er these or%ers. =r%inary c#stom %#ties are now the principal
instr#ment of tra%e policy. $mprovement in Pakistan3s incentive str#ct#re an% e+port
environment s#rely contrib#te% to its strong e+port performance in recent years.?
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.he spee% with which tra%e liberali7ation has taken place %#ring the last %eca%e is
impressive. )a+im#m tariff has been re%#ce% to 2( percent from 80 percent in 100( with
simple average applie% rate of 1( percent compare% to (1 percent in 100(. .he average
import weight tariff rate in 20060! was aro#n% 8 percent. .he n#mber of reg#latory
%#ties has %ecline% significantly. @irt#ally all tariffs ;00.41> are a%@alorem an% resolve
aro#n% only si+ slabs incl#%ing 7ero. 9ocal content re:#irements have been eliminate% in
all sectors an% policies have been bro#ght in compliance with .<$)- agreements.
-tate tra%ing has been restricte% to a few selecte% items only an% that too not on a
reg#lar basis or #n%er monopoly con%itions. All p#blic sector corporations engage% in
tra%ing activities have been %isban%e% e+cept one i.e. .ra%ing Aorporation of Pakistan
;.AP>. .AP intervenes selectively to cope with %omestic %eman%s of essential con%itions
as an% when e+plicitly %eci%e% by the Aabinet.
.he n#mber of concessionary notifications in tariffs ;-<=s> has been re%#ce%
s#bstantially. A#stoms clearance system an% international tra%e relate% proce%#res have
been streamline% to bring them at par with international best practices an% make them
complaint with international stan%ar%s an% conventions.
E+port facilitation are promotion have been the main foc#s of E+port policies an%
e+port s#bsi%es* relates an% ref#n%s have been gra%#ally phase% o#t or circ#late% in scope
an% coverage.
.he impact of these meas#res can been seen in %o#bling of Pakistan3s e+ports in
,- %ollar terms within a perio% of fire years an% the tripling of Pakistan3s merchan%ise
imports. $t wo#l% be fair to s#rmise that as a res#lt of tra%e policy reforms* anti e+port
bias in man#fact#ring* agric#lt#res an% for services has %ecline% s#bstantially. 6#t
relative to the co#ntries in East Asia Pakistan still has a long way to go.
A st#%y carrie% o#t by an in%epen%ent research instit#te B the -ocial Policy
'evelopment Aentre ;-P'A> #sing both partial e:#ilibri#m an% the general e:#ilibri#m
impact of tra%e liberali7ation an% the sim#lations for the f#t#re concl#%es that* contrary to
pop#lar beliefs an% perceptions* the process of tra%e liberali7ation in Pakistan %oes not
appear to have ha% a significant a%verse impact on poverty an% income ine:#ality. .he
res#lts of the st#%y in%icate that tra%e liberali7ation has* if anything* re%#ce% poverty an%
ine:#ality altho#gh only mo%estly so on balance. .he main channels of transmission
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lea%ing to this o#tcome are growth* pro%#ctivity* investment an% price stability. "oreign
%irect investment that has come into Pakistan %oes appear to increase income ine:#ality
as it is highly skill an% capital intensive an% %oes not #se m#ch of the ab#n%ant factor of
pro%#ction i.e labo#r. .his fin%ing that "'$ increase% income ine:#ality is also consistent
with a recent $)" st#%y on the impact of "'$ flows to %eveloping co#ntries. Also some
in%#stries %o seem to have s#ffere% from tra%e liberali7ation b#t s#ch restr#ct#rings in the
transition perio% are a nat#ral conse:#ence of tra%e liberali7ation. An interesting an%
highly #ni:#e insight gaine% from the st#%y is that tra%e liberali7ation has ha% some
a%2#stment costs associate% with it* in partic#lar costs relate% to fiscal a%2#stments. Ca%
the lower government reven#e collection arising from a re%#ction in import tariffs been
f#lly ne#trali7e% by other mo%es of %irect an% in%irect ta+ation an% %evelopment
e+pen%it#res not fallen the impact of tra%e liberali7ation on poverty an% income
ine:#ality wo#l% have been larger. .h#s* tra%e liberali7ation policies sho#l% only be
p#rs#e% in con2#nction with government reven#ene#tral policies.
Lessons from Pa!s"ans e#$er!en%e
. 5hat are the generali7e% lessons learnt from the e+perience of policy reform
implementation #n%ertaken in Pakistan in the c#rrent %eca%eD
. Altho#gh the conto#rs of these reforms were %rawn in 1001 the pace of
implementation picke% #p only after 1000. .his became possible beca#se the perio%
1000200! was characteri7e% by contin#ity of the political regime compare% to the perio%
100000 %#ring which governments were %ismisse% or replace% five times an% fresh
elections were hel% three times. Eone of the ma2or political parties %iffere% on the broa%
thr#st of the economic policies or reforms to be #n%ertaken b#t they remaine% mostly
preocc#pie% with the iss#es of gaining an% s#staining political power rather than
implementation of economic reforms. .he first lesson $ wo#l% vent#re to offer is that
%omestic political stability is an in%ispensable prere:#isite for contin#ity an% consistency
of economic policies an% s#staine% implementation of reforms. .he e+ternal shocks to
the economy were almost i%entical in their intensity an% penetration in the two perio%s.
6#t what %isting#ishe% the performance was the response capacity to meet those shocks.
Economic policy makers have to make to#gh choices an% tra%eoffs an% select
ingre%ients of %ifferent policy options to meet the ob2ectives they have set for the
economy. .hese policies affect the economy as a whole in a beneficial manner over time
b#t h#rt many gro#ps or in%ivi%#als in the process. "or e+ample* the ob2ective of
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aggregate &'P growth may be attaine% b#t the initial benefits of this growth may be
capt#re% by those who alrea%y own capital* lan% an% financial assets* those who r#n their
own b#sinesses or those who are alrea%y employe%. .h#s the conse:#ences of this policy
will affect vario#s segments an% classes of pop#lation in an #neven manner. $t is the
responsibility of the policy makers to inform the political lea%ership an% comm#nicate to
the p#blic at large as to what partic#lar mi+ of instr#ments they are planning to #se* what
will be the intensity* magnit#%e an% %#ration of this partic#lar mi+ an% what the
conse:#ences are likely to be. A neglect to comm#nicate creates its own moment#m of
#ncertainty that har%ly helps the reform process. The second lesson is that an effective
communication strategy to inform the general public about the rationale and the
consequences of the policies adopted is absolutely essential.
. Even if an effective comm#nication strategy is p#t in place* there is another reason
as to why the impact of apparently benign looking policy reforms is not felt by a large
n#mber of target pop#lation i.e %#e to lack of coor%ination among %ifferent
implementing agencies within the government. .he t#rf battles* the silolike vertical
%ecision making process* the concealing of vital information an% %ata from each other* the
sense of one#pmanship* an% the feigne% attempts to please the bosses at the e+pense of
other competing ministries are in fact kiss of %eath for both policy form#lation as well as
implementation. .he s#bse:#ent blame game an% passtheb#ck syn%rome for the fail#res
%#e to this lack of coor%ination an% internal inconsistencies are har%ly acceptable to the
p#blicatlarge or the political bosses themselves. Every ministry or organi7ation
responsible for the policies en%s #p appearing in a ba% light.
. $t is har%ly reali7e% by those engage% in these b#rea#cratic t#rf battles an% clash of
egoes that in act#al fact it is the policy mi+ rather than stan%alone* isolate% or
#ncoor%inate% policies that make the %ifference. .he right policy mi+ re:#ires timely
cooperation* synchroni7ation an% collaboration among vario#s ministries an% agencies .
Aonfrontational an% a%versarial attit#%es are co#nter pro%#ctive an% wo#l% invariably
res#lt in poor policy form#lation an% even greater %isasters %#ring policy implementation.
.he e+pecte% benefits of policy reforms are th#s %issipate% creating f#rther
%isenchantment an% %isill#sion in the co#ntry. The third lesson is that bureaucratic in
fighting among the government ministries and agencies and turf battles are inimical to
favorable outcomes of policy reforms as even well thought out and formulated policies
are implemented unevenly and in a haphazard manner. Coordination and harmony
among various implementing agencies in critical to success.
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. .he choice of the appropriate policy instr#ments wo#l% %iffer accor%ing to the
ob2ective assigne% by the politicians. $n a low inflationary low growth that characteri7e%
Pakistan in 10002002 perio% liberal monetary policy pro%#ce% the %esire% res#lts.
&rowth picke% #p* #n employment rate %roppe%* poverty began to %ecline b#t inflationary
press#res intensifie%. .he policy makers therefore ha% to change the gears an% p#rs#e a
contractionary monetary policy in the post 200/ perio%. .he conse:#ences of these
reforms an% the set of winners an% losers #n%er each of these two s#bperio%s of reforms
were %ifferent. $n the post 200/ era the fi+e% income gro#ps an% the poor s#ffere% m#ch
%#e to high inflation rates. As monetary policy was tightene%* nominal interest rates also
shot #p aro#sing the wrath of the b#siness comm#nity which was the main beneficiary of
the earlier liberal monetary policy regime. .his sim#ltaneo#s h#e an% cry by the losers
from both en%s of the spectr#m began to raise %o#bts abo#t the efficacy of reforms
themselves. <ising international oil* foo% an% commo%ity prices %i% not help the sit#ation
b#t in fact ma%e it worse. .he political fall o#t of s#ch h#e an% cry co#l% be potentially
%isastro#s for the s#stainability of reforms. 'ealing with the losers in a responsive
manner is critical at implementation stage. The fourth lesson is that policy objectives do
not remain static and as domestic and external conditions change the policy objectives
have to be modified. The losers under one set of policies can become the winners under a
different set but they remain muted. So there are no permanent winners or losers under
varying economic policy environment.
. $n Pakistan which is a "e%eration of fo#r provinces in which one province en2oys
absol#te ma2ority of the pop#lation the macro economic policy reforms s#ch as tra%e
liberali7ation* financial sector restr#ct#ring* e+change rate policy* ta+ation reforms can be
rea%ily carrie% o#t by the "e%eral &overnment. 6#t the secon% generation reforms where
state instit#tions are involve% in %elivering p#blic goo%s an% services cannot s#ccee%
#nless the provincial an% local governments are in synch with the "e%eral &overnment.
.here are many instances where the "e%eral &overnment has enco#rage% investment in
infrastr#ct#re or social sectors in the backwar% %istricts of the co#ntry b#t lack of
cooperation by the local government f#nctionaries has not allowe% s#ch investment to
materiali7e. 9aw an% or%er* sec#rity of property an% lives* enforcement of contracts*
labor laws* lan% allocation etc. are f#nctions that are absol#tely cr#cial for an investor to
%o b#siness s#ccessf#lly. 6#t all these f#nctions fall #n%er the p#rview of the Provincial
an% 9ocal governments an% the "e%eral &overnment cannot %o very m#ch e+cept
e+hortation. .he 'evol#tion <eforms of 2001 which transferre% some of the f#nctions
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from the provincial governments to 'istrict governments have met fierce resistance in
their act#al implementation by the politicians as well as the b#rea#crats. Aonsens#s
b#il%ing among all affecte% stakehol%ers* striking compromises an% safeg#ar%ing the
interests of all those a%versely affecte% by the reforms may slow %own the pace b#t wo#l%
lay the fo#n%ations for instit#tions that can %eliver the res#lts on a s#staine% basis. The
fifth lesson is that in the case of a Federation such as a!istan a centralized approach to
design and then push the reforms to the provinces and lower tiers of governments for
implementation does not wor! beyond the first generation of macro"economic policy
reforms. The benefits of the reforms will accrue only if proper institutions are involved at
all tiers in the formulation and implementation process.
Wa& for'ar( for ")e f*"*re
. Cow can Pakistan move ahea%D $ m#st a%mit that $ am * by no means* f#lly
satisfie% with the tra%e policy reforms as m#ch more nee%s to be %one to liberali7e
f#rther. .his can be %one by bringing %own ma+im#m tariff rate gra%#ally from 2(1 to
1(1* by re%#cing tariff %ispersion an% tariff escalation* by closing loopholes create% by
special e+emptions* Pakistan has ma%e a goo% start. 6#t other co#ntries have not stoo%
still. .ariffs in Pakistan* tho#gh lowere%* remain high relative to East Asia* 9atin America
an% EAA <egions. 8<emaining competitive in an integrate% worl% economy is a very
%ynamic process. $n the present worl% of globally fragmente% s#pply chains the
pro%#ction process is broken into %ifferent stages an% locate% in whichever co#ntry has
the greatest comparative a%vantage in that partic#lar activity?. .ariff %ispersion* tariff
peaks an% tariff escalation have to be rationali7e% so that Pakistan can participate in these
s#pply chains accor%ing to its comparative a%vantage. "'$ has sp#rre% e+ports an%
integration in many co#ntries b#t has bypasse% Pakistan3s man#fact#re% e+port
pro%#ction. $t appears the ret#rns on pro%#cing for %omestic markets remain relative
higher.
. $ m#st also #n%erscore that tra%e policy liberali7ation perse may not be s#fficient
an% that there are other complementary policies s#ch as improvement in the f#nctioning
of labor markets* in governance* availability of skille% an% technical manpower* reliable
an% well f#nctioning infrastr#ct#re facilities s#ch as power* gas etc. that nee% reforms*
investment an% instit#tion b#il%ing. .oo fre:#ent changes in tra%e policy may #n%ermine
b#siness comm#nity3s long term %ecision making calc#l#s. .herefore* while the roa%
map an% %irection may be set for long term the present rit#al of Ann#al .ra%e Policy
cycle can be easily %ispense% with.
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. Pakistan can benefit from greater tra%e an% economic interactions with its b#oyant
neighbo#rs Ahina an% $n%ia. Altho#gh Ahina an% Pakistan have entere% a "ree .ra%e
agreement the tra%ing relations between $n%ia an% Pakistan have s#ffere% a lot %#e to the
historical political tensions. Pakistan has not accor%e% )"E stat#s to $n%ia an% operates
on the basis of a positive list of goo%s an% commo%ities that can be %irectly tra%e%. .he
Pakistani a#thorities insist that nontariff barriers impose% by $n%ia in the name of phyto
sanitary* environmental* safety* technical health an% other stan%ar%s sho#l% be rela+e% an%
not applie% selectively to the %isa%vantage of Pakistani e+porters. .he more important
barriers that nee% to be %ismantle% have to %o with visa restrictions* tra%e facilitation*
banking services* c#stoms proce%#re harmoni7ation* telecomm#nications* tra%ing ro#tes*
transport links among the two co#ntries. .he %ismantling of these barriers will re%#ce the
inefficiencies in the movement of goo%s an% conse:#ently the transaction costs of %irect
tra%ing between the two co#ntries. 'espite the presence of high nontariff barriers in
$n%ia the gains from granting )"E stat#s to $n%ia are consi%erable. Pakistan will not
only be able to increase its e+ports by capt#ring share in a big market it stan%s to save
s#bstantially by s#bstit#ting some of its imports from the rest of the worl% with $n%ia.
. $n fact* a st#%y by -'P$ has %emonstrate% that the likelihoo% of %irecting he
informal tra%e taking place between $n%ia an% Pakistan to legal channels is low #n%er an
)"E regime as e+isting tariffs wo#l% more than offset the net transaction costs inc#rre%
on the informal tra%e ro#tes. $t wo#l% take a s#bstantial tariff re%#ction an% a lowering of
formal transaction costs to re%irect informal tra%e to the more %irect ro#tes.
. A st#%y by .ane2a estimate% that the informal tra%e between $n%ia an% Pakistan
was abo#t F 2 billion ann#ally in the early 2000s. 6y now this vol#me wo#l% have at
least %o#ble%. A -tate 6ank of Pakistan st#%y in 200( estimate% that on the basis of
e+isting pattern of Pakistan3s tra%e with the rest of the worl% an% price str#ct#res* the total
tra%e potential between Pakistan an% $n%ia co#l% be five times more than the act#al tra%e
that was taking place thro#gh formal channels. .he potential e+ports from Pakistan to
$n%ia co#l% rise to aro#n% F 2.( billion ;200/ constant prices> while the si7e of potential
imports from $n%ia was abo#t F 2.! billion. Allowing imports of items s#ch as a#to parts*
light engineering goo%s* transport e:#ipment* $... entertainment co#l% res#lt in savings in
Pakistan #pto F 000 million ann#ally.
. South Asia is the least integrated region in the world. Attempts
for promoting Regional trade through South Asia Preferential Trade
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AreaSAPTA! esta"lished in 1##5 and South Asia $ree Trade Area
SA$TA! that "e%ame operational sin%e &anuar' 2((6 ha)e not "orne
mu%h fruit. *nder these arrangements dire%t trade in produ%ts li+e
steel, aluminum, te-tile ma%hiner', %hemi%al produ%ts,
pharma%euti%als will "ene.t "oth /ndia and Pa+istan as it is di)erted
from third %ountries. Sri 0an+a %an gain "' pur%hasing %ement and
ship"uilding from Pa+istan and /ndia rather than South 1orea.
A%%ording to some studies, the %omplete elimination of tari2s under
SA$TA ma' in%rease the intra regional trade "' 1.6 times of the
e-isting le)el.
. Studies ha)e shown that SAPTA pro%ess has %ontri"uted )er'
little in stimulating intra regional trade as it did not result in deep tari2
%uts, the %o)erage of goods su"3e%t to preferential tari2s was not wide,
some a%ti)el' traded goods were left out from preferential tari2s and
non tari2 "arriers were not %onsidered for remo)al. As a result of this
slow progress man' %ountries ha)e resorted to "ilateral free trade
agreements.. /ndia4Sri 0an+a, /ndia45epal, Pa+istan4Sri 0an+a $ree 6
trade agreements ha)e "e%ome operational.
. The South Asia $or%e Trade Area SA$TA! has also not "een a"le
to ma+e mu%h headwa' so far. 7utside the 8$5 status issue for /ndia
"' Pa+istan and the Pa+istani representation a"out 5T9 "arriers
ere%ted "' /ndia, :ustoms %ooperation, Ar"itration 8e%hanism for
resolution of disputes, a)oidan%e of dou"le ta-ation, promotion and
prote%tion of in)estments are some of the an%illar' issues that are
holding up progress. ;espite redu%tion of a)erage tari2s, distortions
will pre)ail in the form of high tari2s in parti%ular produ%ts in some
%ountries. The list of produ%ts on negati)e list and la%+ of %larit' on the
remo)al of 5T9s pro)ides ammunition to the poli%' ma+ers to use them
as a tool for foot dragging. The argument that rigid fa%tor mar+ets in
SAAR: mem"er %ountries ma+e it di<%ult to restru%ture industries that
will "e hurt as a result of trade li"erali=ation does not hold mu%h
ground.. /f the %ountries are a"le to do so unilaterall' wh' should the'
see this as a pro"lem for li"erali=ation under SA$TA.
>
. / agree with the editors of the ?%onomi% and Politi%al wee+l'
when the' sa' @/t is for /ndia to ensure that smaller mem"ers of the
region ha)e a growing sta+e in regionalismA. This responsi"ilit' /ndia
has not ta+en seriousl'B
. 6#t there are many other aven#es of economic cooperation in the region besi%es
tra%e which can res#lt in winwin sit#ation. $n%ia3s growing global economic position
can have positive spill over effects for Pakistan* 6angla%esh* -ri 9anka* in areas s#ch as
$nformation technology enable% services;$.E-> an% 6#siness Process o#tso#rcing;6P=>*
investment *energy* an% irrigation water.
. /ndiaCs growing share in world /T?S49P7 ser)i%es mar+et,
Resear%h and ;e)elopment ser)i%es and other +nowledge "ased
ser)i%es su"4se%tors %an a%t as a magnet for other South Asia
%ountries. The large pool of ?nglish spea+ing, edu%ated. /T sa))' 'outh
a)aila"le in Pa+istan, Sri40an+a, 9angladesh %an supplement the /ndian
+nowledge wor+ers parti%ularl' at the lower end of the )alue %hain. The
shortages "eing felt "' /ndian %ompanies and the rising wages %an "e
o2set "' dipping into this large pool of emplo'a"le wor+ers. The /ndian
%ompanies %an train and mould them to suit their reDuirements and
%ontinue to o"tain more outsour%ing "usiness from the ad)an%ed
%ountries. The esta"lished "rand name, the mar+eting prowess and the
management s+ills in aggregation and integration a)aila"le in /ndia %an
"e "lended with the pool of trained wor+ers in other %ountries to %reate
a win4win situation. /ndian wor+ers %an mo)e to more high4end and
high4s+illed areas and )alue4added end of the produ%tion %'%le. The
standardi=ed information pro%essing pa%+ages, software platforms and
programs, %omputer aided training +its ha)e made this mo"ilit'
possi"le., Pa+istan has in)ested hea)il' in its tertiar' edu%ation in the
last si- to se)en 'ears and there has "een a manifold e-pansion in the
num"er of institutions whi%h %an suppl' the manpower reDuired "'
/T?S49P7 %ompanies in /ndia for augmenting their e-ports. A top Tata
%onsultan%' ser)i%es e-e%uti)e told me that he did not .nd mu%h of a
di2eren%e in the raw material of fresh /T graduates produ%ed in 0ahore
and 9angalore. All he wanted to do was to train these 'oung men and
women in the parti%ular mould of T:S s+ills and %ulture.
#
. A SAAR: /n)estment area %an pro)ide the ne-us "etween trade
and in)estment and attra%t foreign in)estors to ma+e lo%ation de%isions
within the region free from %ross4"order fri%tions. 0arge "ilateral trade
de.%its %an "e .nan%ed "' in)estment Eows on the %apital a%%ount. /n
the world where hori=ontal and )erti%al lin+ages in the produ%tion
pro%esses ha)e "e%ome important and the assem"l' of .nal produ%t
from %omponents and parts fa"ri%ated elsewhere are %ommon pla%e
South Asian industries will "e a"le to meet %ompetiti)e pressures if a
%ommon in)estment area is set up within the region.
. ?nerg' shortages in the two "ig %ountries of the region %o4e-ist
with a"undant supplies a)aila"le in other %ountries. 5epal, 9hutan and
9angladesh %an meet the energ' demands of /ndia at low %osts "ut
these pro3e%ts ha)e "een tal+ed a"out for long "ut no tangi"le progress
has "een made so far. /ndustrial and agri%ultural de)elopment in /ndia
and Pa+istan would "e stalled and e%onomi% growth rates slow down if
h'droele%tri%, natural gas, renewa"le energ' sour%es a)aila"le within
the region are not tapped. /ntegrated energ' mar+et within the region
with a networ+ of grids, pipelines, transmission lines will "e
e%onomi%all' feasi"le onl' if appropriate pri%ing, deli)er' and
institutional arrangements are put in pla%e. A "un%h of ine<%ient and
"an+rupt ele%tri%it' suppl' %ompanies or "oards owned and %ontrolled
"' the pu"li% se%tor selling "elow the mar+et %ost of generation,
transmission and distri"ution %annot ma+e su%h mar+et happen. The
sale of these pu"li% monopolies to pri)ate se%tor would "e e)en more
disastrous. 7nl' %ontesta"le mar+et and )igilant regulator' "od' %an
ma+e this happen.
. /ndia and Pa+istan rel' on irrigation. 9oth these %ountries as well
as /ndia and 9angladesh share %ommon ri)er s'stems. The /ndus 9asin
wor+s in the 1#6(s %reated an a%%epta"le di)ision of water rights
"etween /ndia and Pa+istan. 9ut the population pressures ha)e put
"oth %ountries in li+el' water stress %ategor'. ?<%ien%ies and eDuita"le
distri"ution of "ene.ts %an "e a%hie)ed if the irrigation s'stems
%ommanded "' %ommon ri)ers %an "e managed on a pan4territorial
1(
"asis. Fame pla'ing where"' dams, reser)oirs, storages, di)ersions are
mindlessl' put to sta+e the %laims "' one part' or the other is onl'
going to further mudd' the waters.
. To %on%lude, let me sa' that the thrust of poli%' reforms in
Pa+istan has "road politi%al support from all ma3or parties and these
are li+el' to %ontinue. The onl' di2eren%e would "e that these reforms
would "e a%%ompanied "' greater sensiti)it' and attention to the
issues of po)ert', emplo'ment and in%ome and regional ineDuities. As
the %redi"ilit' of /ndian poli%' reforms was enhan%ed when the 9&P
Fo)ernment %ontinued the poli%ies of :ongress after %oming to power
in the late 1##(s / am sanguine that the %hange in the go)ernment in
Pa+istan in 2((> will ha)e the same e2e%t on long term e%onomi%
prospe%ts.
11