http://www.thenews.com.pk/top_story_detail.asp?Id=694
Failure to build large dam costs $4bn per year
Salman Shah says construction of five reservoirs by 2015 can add 10-15pc to GDP
By our correspondent
LAHORE: Adviser to the Prime Minister on Finance, Dr Salman Shah, said on Sunday Pakistan was suffering a loss of $3 to 4 billion every year due to its failure to build a mega dam and the building of five big water reservoirs by 2015 could add 10-15 per cent to GDP.
Addressing a seminar “The Budget and Expectations of Masses,” organised by the Mir Khalil-ur-Rahman Memorial Society (MKRMS) in collaboration with the University of Central Punjab at a local hotel, Dr Salman said the prospect of cheap hydel power generation and greater availability of water had assumed immense potential for the countries like Pakistan. “It is like having huge deposits of petroleum but we cannot use it because of political differences,” he observed.
“Having a $120 billion national economy, every new mega dam will contribute to 2.5 per cent to GDP of the country every year,” he said, adding that the financial impact would be doubled if indirect benefits were also included.
Talking about the benefits of building large dams, he said rural areas of the country would get a boost after the construction of dams due to a raise in farmers’ income and greater benefits for labourers. He said the expansion of the cottage industry because of greater production of crops would be another benefit of cheap energy and provision of water.
“Mega dams are critical for us and evolving of a consensus is also important,” he said, adding that the industry across the country should jointly raise a voice in favour of dams. He said the LCCI management should contact other trade bodies to evolve a consensus on the important issue. “A push from the industry in the regard will help implement the decision about the construction of dams,” he added. About the sustainable growth rate, he said the average growth rate of seven per cent in the next 30 years would double the size of the national economy.
“The Pakistani economy will expand to the tune of $960 billion after 30 years, if we succeed in maintaining an average seven per cent growth rate,” he added.
He maintained that there would be a great positive impact on the lives of the people due to the sustained growth. He recalled that Pakistan’s growth rate had been around 6 per cent in the first four years of the present government while 8.4 per cent growth rate had been achieved in the last fiscal.
He said the government was aware of the menace of inflation and efforts were being made to check it. “A constant rise in the prices of petrol in the international market had adversely affected inflation in the country. However, inflation has been reduced to some extent in the present fiscal. The government has taken drastic steps for improving supply of various food items,” he added.
He said the government would have to take monetary steps if inflation continued to rise in days to come, as it could affect the growth of the economy. “Any dip in POL prices in the international market will be a ‘lucky break’ in this regard,” he remarked.
Earlier, responding to various charges by some speakers, including Ahsan Iqbal and Shamshad Ahmad Khan against the government fiscal policies, Dr Salman said the interest of the country should be given the foremost importance while highlighting any issue, referring to a recent report in which Pakistan was dubbed as a ‘failed state’.
He said the biggest drawback in the report was placing Pakistan ahead of Afghanistan, which totally lacked rule of law on its territory. He also gave a comparison of governments in Pakistan and Afghanistan, saying that the Afghan government had only generated Rs 2 billion revenue in a year while Pakistan had effective administration that was about to collect around Rs 800 billion in the current financial year.
He alleged that banking sector reforms of the past governments could not yield positive results as successive governments had to inject billions of rupees in financial institutions. He also claimed that loans had been given on telephone calls, adding the present government had eliminated all such practices. “I even cannot appoint an office boy in any bank,” he said.
He dispelled the impression that Pakistan had a bleak future. He claimed that the present government had succeeded on various fronts in order to make Pakistan an economically strong country. “Attracting financing from the capital market is not an easy task,” he said, adding positive economic indicators played vital role in this connection.
“Economic indicators show prosperity. The issuing of 10-year and 30-year bonds was another feather in the cap of the present government, which clearly indicated that international investors supported the constructive fiscal approach of Pakistan,” he added.
He said that international investors were more optimistic about a bright future of Pakistan as compared to some circles inside the country due to their political compulsions. Dr Shah said the Public Sector Development Programme (PSDP) had only been to the tune of Rs 80 billion during the previous government. “However, the amount on development has been increased to Rs 272 billion by the present government,” he claimed.
He said that lower revenue collection a major deficiency in the working of the previous governments. In contrast to it, he added, the present government was going to collect around Rs 800 billion revenue from various sources.
Similarly, he said, the public debt had also been curtailed to 50 per cent of GDP from 100 per cent. He maintained that a 2.5 per cent reduction in the public debt had been occurring every year, mainly due to the solid economic policies of the present government.
About the defence budget, he said the ratio of defence to GDP had been reduced from 6.5 per cent to 3.5 per cent.
He attributed hostile environment in the region one of the reasons behind the defence budget. He said privatisation and liberalisation had been efficiently employed by the Musharraf government that led to a greater role of the private sector in business activities.
“The private sector has been given loans worth Rs 450 billion while previous governments could only arrange borrowing of Rs 5 billion for the private sector,” he said.
Salman Shah said the second-generation reforms would further ease the business environment of the country in addition to amendments to civil service. He claimed the bureaucracy had no role in the affairs of the private sector.
He said the present government had given top priority to human resource management. “Greater amount is being spent for the promotion of higher education and technical and vocational training in the country,” he added. He said a national programme for technical and vocational training was on the card with the assistance of Japan. Besides, he added, the government was spending a huge amount on health and provision of basic amenities to the people.
About the rural economy, he said the emphasis was also being given to rural areas of the country and the government was mulling to further increase allocation for the Khushhal Pakistan programme. He said the government was giving subsidy on various agriculture inputs, including fertilisers. He added that ways and means to cut the tax rate and enhance its base were also being reviewed. He said the government was also taking various steps for reducing fiscal and trade deficit, adding the trade gap was largely due to import of heavy machinery.
Regarding poverty, he said the government would honour its commitment to curb poverty in the country by 2015 under the Millennium Development Goals. He said the Federal Bureau of Statistics had been revamped and it would be given autonomy soon. He informed the audience that the government was considering introducing self-assessment in various taxes, like the income tax.
Earlier, Sartaj Aziz said the price hike was one of the biggest issues confronting people these days. He stressed the need to take measures for monitory control. He said a wave of price hike was due to levy of direct and indirect taxes on food and edible oil.
He added the imposition of GST on agriculture inputs also added to the miseries of the masses. He demanded removal of 15 per cent GST on edible oil and agri inputs besides fertilisers, petrol and electricity in order to slash the production cost. He proposed removal of the tax on cement production, adding that the step would help a great deal in reducing the construction cost.
He estimated that a shortfall of Rs 40-50 billion would occur due to the withdrawal of GST that could be met through other means. He voiced concern over trade imbalance, saying that it would create problems for the government in the next fiscal. “Any increase in the rate of electricity, gas and credit in the upcoming budget will be detrimental to the local industry,” he opined.
About the agriculture sector, the PML-N leader claimed that a 100 per cent increase had been made in the prices of various agriculture inputs, including fertilizers, electricity and diesel. On the other hand, he added, only 30-40 per cent increase had been made in the price of various agriculture produces.
He alleged the distribution of resources was not even. He stressed the government should ensure fair distribution of future resources, including land and credit among the masses. He demanded complete autonomy to the Federal Bureau of Statistics. He said contradiction in various figures had marred the credibility of the present government.
Ahsan Iqbal of PML-N criticised the fiscal policies of the present government, saying that priority had been given to lure political support of various parties by offering various incentives to them. He said that a few figures could not guarantee the economic revival of a country. He said political stability was essential for smooth development of the country.
He said there had been some progress in the economy because of pouring in of dollars by the US. He blamed President Musharraf for compromising on the sovereignty of the country by playing a role in the so-called war on terrorism.
He alleged that a big GHQ was being built in the federal capital at a huge cost while the defence budget had also been increased substantially. He demanded the government present the defence budget in the parliament for an open debate.
He welcomed the government announcement for provision of electricity and clean water across the country by 2007, saying it was difficult to honor the commitment. “The claim is an eyewash as even people living in the federal capital are without drinking water,” he added.
Punjab Minister for Finance, Sardar Hasnain Bahadur Dreshak, Federation of Pakistan Chambers of Commerce and Industry President Chaudhry Muhammad Saeed, Lahore Chamber of Commerce and Industry President Mian Shafqat Ali, Cottage Industries Association chairman Ghulam Sarwar Malik, Nawaz Naseer Advocate, Dean Faculty of Economic Department, Dr Shahid Mehmood, Dean Faculty of Commerce, Prof Athar Azeem and MKRMS chairman Wasif Nagi also spoke on the occasion.