Sincronía Fall 2003

Public and private sector partnership in Pakistan

Farzana Panhwar

Pakistan’s population is increasing at rate of 2.9% per annum is expected to hit 150 million by year 200 AD.

Share of agriculture in Gross Development Product (GDP) has decreased from 35% to 26%, though there has been small increases in production per acre. This is mainly, due to low prices of certain essential food items like, grains, meat, fish edible oil and etc., fixed by the Government, to allow the urban blue-collared workers to get cheap food, and in turn accept low wage rates fixed by the Government and employed by the commerce, industry and government.

Incidence of poverty is more in rural areas (33.5%) than in urban (27%).

Since wage increase is in not proportion to annual inflation the poverty has increased in the past 4 years.

Poverty reduction programmes of Usher and Zakat have in general not benefited the poor. On the contrary they have helped religious elite and contributed towards religious fanaticism, superstition, ignorance and becoming content with poverty and corruption in the ranks.

In the past two decades there is no direct relation between economic growth and poverty reduction in Pakistan, showing that by economic growth, it is the rich, who have benefited.

The economic growth is last 15 years has been a low of 1.5%

Per capita income increase is 1.2% per year in last 15 year, and this has not helped in reduction of poverty.

Its per capita monthly income in 1995 was Rs.445 US$12.63.

Pakistan has low life expectancy, higher infant mortality, lower adult literacy than neighbouring India.

 

 

Migration.

In 1995 urban population was 35% and rural 65%, but migration from rural to urban areas continues and the figure in year 2000, urban population may be around 38-39%. By the year 2010 it is expected to be 50% and 65% by 2025.

Migration in Pakistan has been job oriented. Large number of people migrated from India between 1947-1960.

Economic difficulties in India and Bangladesh encouraged migration from both countries after 1970 and process continued in 1980s.

Migrations from India has nearly stopped in 1990s due to high incidence of unemployment in Pakistan.

The immigrants from India found government job lucrative, but their next generation from 1980 onwards entered into private companies occupying usually the white-collared jobs.

In 1950s and 60s there was migration of people from NWFP, where agricultural expansion is as lacking and surplus labour moved to Karachi as industrial and construction labour force. The migration continues to this day.

There was agricultural expansion in the Punjab due to land reclamation and new irrigation projects after 1960. These could absorb surplus rural population. Industry in Punjab could also absorb any surplus population from 1960-1970.

Migration of surplus population of Punjab to Karachi and other areas of Sindh started in 1970 and continues to this day.

In 1960-70, Sindh released some 5.5 million acres of new land in the Guddu, Sukkur and Kotri barrage areas and these could keep 5.5 million people in rural areas and so there was no migration from Sindh to big cities. By 1985 all new lands in Sindh were brought under cultivation and population became surplus, leading to migration towards industrial areas, towns and cities.

Migration leads to 2 million Pathans from NWFP, 1.5 million from the Punjab, and about half a million from Afghanistan and 3 millions from India in Karachi alone. The immigrants from the same areas to other parts of Sindh may be 50% of these figures.

 

Family sizes.

Joint family still persists in Pakistan. Until recently women did not leave house to work out-side and when they did, they could hardly meet personal expenses as they found employment only in low paid jobs. What ever she earned was contributed to family budget. In a joint family not even 50% adults have had jobs and the contribution of all wage earners kept the family going.

Some educated young couples separated from the family but usually when parents of both could support their families with-out them.

Joint family size usually was 6-9 persons and young couples ultimately produced 4-5 children, reaching the joint family size.

Due to large number of migration the urban cities get over-population and face a basic health problems of housing, electricity, safe drinking water, telephone and transportation. The Government alone can not help these immigrants due to lack of resources men power and brain power. In order to handle such situation we have to develop public and private sector partnerships, which not only invests but also produce competition which results inot lower prices and better service facilities. The recent partnership examples are: in air-lines services, telephone (cellular) and television and private electrical hydropower generation organisations.

Ethnic groups.

Pakistan is an old country in which for centuries large percentage of population had never travelled beyond 10 miles radius except the nomadic animal gazers, who traversed the waste land areas from very long distances, in search of animal feed and forage. They thus developed small cultures within the small localities. In Pakistan there are district cultural entities or groups which could be divided in some 20 groups, but yet their close affinities has reduced them to 6 major groups namely; Pathan from NWFP and northern Baluchistan, Punjabis from the northern Punjab, Seraiki from the southern Punajb, Baluchis from Baluchistan, Sindhi from Sindh and Urdu speaking immigrants from India to big cities in Sindh. The last group is mostly from Uttar Paradesh, Bihar and Hyderabad Deccan from India and they had immigrated from Central Asia and Iran to India between 13^th and 17^th centuries. Connecting them-selves with the ruling elite they formed a distinct cultural group and some kind of homogeneity. Included in the Indian immigrants are people from Gujarat, Kutch and Kathiawar, whose mother tongue is Gujarati and who formed business and industrial class. Most of them had the immigrated from Sindh to these area in mid 16^th centuries and culturally and anthropologically they have affinities with Sindhis, though being monied class they have drifted from main stream of Sindhi culture.

The various ethnic and cultural classes, their food habits and dresses and way of living is different from each other. This is a big challenge for a Government because certain type of oil seeds, pulses, herbs, nuts, medicinal plants etc., which are part of daily life of these peoples are not grown in Pakistan Government has to import these items from abroad. At the same time Pakistan basic staples food are wheat, rice, militate and sorghum. Their production is not enough to meet requirements of all the citizens. This has put more pressure on Government to import these items. At the same Pakistan production of cotton high but due to export quota, cloth becomes surplus. The Government alone can not handle these challenges unless they have private partners. In Pakistan lot of private industries came up to provide better services at low prices but collapse of stock market in 1995 reversed industrial production, exports and increased imports.

Micro-environment of companies in Pakistan.

Pakistan lacked industry and therefore industrial base was created by the Government artificially by encouraging certain business-men to set-up commercial and industrial enterprises. This resulted into:

Monopolies on industrial production.

Government allowing local industry ex-factory prices, at 15% above the imported F.O.R prices.

Import of machinery for industry without taxes.

Allowing Tax holiday for 5-8 years.

Allowing loans to the extent of 75%, if party contributed 25% in for of assets of cash.

The banks advanced loan to the government favourites.

Industrialists made so much profit that within 3-5 years, they could set-up another industry from the profits.

Some private banks started by the rich industrialists, established branches all over the country. These banks advanced loans to them for new industries. Such facilities were not extended to every one, as it needed government support to sanction any industry.

By 1970 so much wealth accumulated within a few families, that they were counted as 22, who owned most of the wealth in Pakistan.

There were no financial problems to rich until 1973. The government then nationalised all the banks breaking monopoly of 22 families and allowed industries to be opened by any one.

However corruption in government was so much that only rich took advantage by bribing politicians and officers.

In Pakistan very little amount in spent on Research and Development and technologies are copied from abroad.

The only source of research to manufacturers were the market intermediaries, who watched the products of the competitors and reported to the companies, about needs for improvement, reduction in prices, changes in designs and other factors which involved market acceptability.

Purchasing.

In general purchasing is done at most competitive rates and most of the time without any care for quality. Though they could make sales within the country, but lost in the international market.

Manufacturing.

The manufacturing methods of the whole industry are out-dated and labour intensive.

This system is very efficient because of large number of agents, sub-agents and their employees, in the market chain. The competition between them is so great that each works hard and distribution is fast, if there is demand for particular types of goods.

Market Survey Agencies.

The market agents work as market researchers.

There are a few market consulting firms and most of the time they are not utilised.

Financial intermediaries are banks, insurance companies etc. The banks usually favour the very rich and therefore large manufacturers do not find difficulties but small ones get squeezed tight.

Over the years there has developed competition due to lack of diversity in the industry and too many parties manufacturing the same items. There also is lack of trained manpower and lack of advanced technology for setting-up new and diversified industries to reduce unhealthy competition on a few items.

This is resulted into; competitive prices to the consumer, though there is a continuous quality deterioration.

The publics part of the companies is very poor for the above reasons.

Industrial and commercial concern are able to manage funds from banks whereas small parties usually face difficulties.

Media usually play very little role, except advertisements in a news papers, television and radio. Some journals publish articles on various fashions, housing, clothing, furniture, furnishing, electronic goods etc., and they induce people to buy. Business concerns usually advertise and besides newspapers, T.V., seems to be most effective.

The government public and citizen action publics and as well as other from of local, general and internal publics count little in Pakistan.

 

Demographic forces have already been discussed in demographic environment of Pakistan. It shows that there are only two classes of people; the labour class and elite rich class. The middle class is gradually being pushed down to labour class and percentage of white collared workers is reducing. The capacity to buy is reducing. Lack of education is also increasing the blue-collared workers and reducing white collared ones. Ethnic groups still maintain their respected cultures and try to live the life, as in back home. Their buying patterns are similar as in back home. There is a gradual change due to contacts with other ethnic groups. The upper middle class or the lower upper class is getting-out from ethnic culture and therefore their buying is different from their original ethnic groups. This class has evolved in to a separate urban class of their own and could be classified as ‘New Urban elite’.

Economic environment has been very poor. As the per capita income of majority of population is reducing, the buying power is limiting. To cater for their needs product-quality is being reduced year after year.

The income of salaried worker is reducing year after year, as the government does not raise the salaries as per annual inflation. The prices of various commodities had been rising at the rate of 2% per annum compounded for the last 3 years, but the wage increase is nominal. Added to that there is unemployment and therefore lack of income and purchasing power.

The consumer had to limit themselves to the cheapest products, and cheapest food. This resulted in to reduction in sales of manufactured goods and manufacturers not making enough sales leading to lower production and consequently reducing number of working shifts in the factories and retrenchment in the companies. This in turn reduced the purchasing power of people as a whole and closure of more and more factories.

Natural Environments.

The major raw material requirement is oil, which is in short supply in Pakistan. There is a huge deposits of coal but they are not developed. Many varieties of minerals are available, but they are not being mined or processed locally and export market is un-explored. There are pressures which have load to use of more oil, rather than coal and railways as a means of transport have been totally destroyed. Natural gas is available and more fields are being discovered but the government policies of supplying gas at very low price to the industry, has lead to waste of gas in boilers and in thermal units of very poor efficiency. Raising the prices of gas will trigger improvement in respective machinery and manufacturers to increase thermal efficiencies. The cost of energy so far charged was low and increasing of prices of electricity has raised up-roar among the consumers. Again it is true that electric power generation and transmission has power efficiency due to thefts.

Government intervention in natural resource management from production to end use is very poor. Pakistan’s production of CO2 per capita is 0.6 tons against nearly 10 tons in Europe and 19.0 tons in USA. The burden of environment protection does not lie with Pakistan as with the developed countries. However government have done very little in developing other natural resources.

Pakistan industry in general is at the pre-World-War-II technological level and this is the main cause of the failure of economy.

All developing countries copy the developed countries and only developed countries spend on R&D. Pakistan copies developed countries, but at least some amount of R&D and technology is needed to copy, which is lacking and therefore t5here are failures and drawback in manufactured goods and non acceptability in international markets.

Continuous minor improvement.

There have to be continuous minor improvements at manufacturing level. This in general is lacking in Pakistan.

Political Environment.

Political environments in Pakistan are burdened with corruption at the government level; "Pakistan being the third most corrupt country of the World".

The competition lacks, except in certain industries. The government creates monopolies.

There is very little protection from the government. For malpractices no action is taken by the police or respective agencies.

Environment protection measure are needed so that effluent from the industries are not discharged directly to the rivers, streams, and the sea.

The government has not enforced any regulations for the treatment of industrial effluents.

In big cities riksha, trucks and vehicle emit huge quantities of raw lubricant oils, diesel and petrol causing respiratory diseases, allergies and etc., but government has ignored to enforce standards.

 

Due to lack of education among the masses, there is persistence of cultural values, especially among the blue collared workers.

There has been shift in the cultural values in the educated middle and upper classes. The T.Vs and dish antenna have brought cultural changes in the labour class, though process is gradual, but the television past few years is bringing revolution among the poor even in remote areas. Contact with other people of the World and their ways of living has been changing people views of themselves, others organisations for which they work, society, nature and universal, in the middle class and again specially in those who understand English well. The upper middle class and upper class has already accepted shift in cultural values. The blue collared and poor are also being affected by this impact. This will create new market for the changing values.

Pakistan is in state of economic depression leading to more and more unemployment closure of manufacturing plants, lack of sales of processed goods, inadequate export, and lack of foreign exchange to import, all leading to lack of power to purchase.

This recession can easily be traced back to governments creating monopolies, favouritism, support prices, new industries, suppressing prices of food to reduce the wage rate, not fixing minimum wage rate as per annual inflation and finally creating very rich and eliminating middle class. This recession will lead to more and more unemployment, lack of sales, create a situation similar to post World War-II era, which created dictators, in many countries World over. Still it did not help the countries which had dictators and nor did it help countries which hated dictatorship. The World War-II avenged on all of them, who were responsible for post-war recession.

 

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