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STRENGTHENING DEMOCRACY
THROUGH
INCLUSIVE GROWTH
By
Dr. Akmal Hussain
Distinguished Professor of Economics,
Beaconhouse National University, and
Member, Governing Board,
South Asia Centre for Policy Studies (SACEPS)
Presentation at the SACEPS/RIS World Conference on
Recreating South Asia: Democracy, Social Justice and Sustainable Development,
New Delhi
24-26 February 2011
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STRUCTURAL CONSTRAINTS
TO GROWTH
1.
Economic Growth in Pakistan has not been
sustainable because of structural constraints, the most
important being:
a) The savings rate is less than 12 percent of GDP
which is half of what is required to sustain GDP
growth rate of 6 percent.
b) With the narrow export base concentrated in low
value added textiles, export growth is insufficient to
finance the foreign exchange requirements of a high
GDP growth.
2. Consequently, the GDP growth has a stop-go pattern,
whereby growth occurs only during periods when large
foreign aid inflows are available.
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INEQUALITY AND POVERTY
A highly unequal distribution of productive
assets and extremely low levels of
education and training, have resulted in:
1. Growing income inequality.
2. A constrained capacity of growth for
poverty reduction.
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PARADIGM SHIFT FOR
INCLUSIVE GROWTH
1. If growth is to be sustained and
poverty overcome quickly a paradigm
shift is required in our understanding
of both the determinants of growth and
the nature of poverty.
2. Sustained growth with rapid poverty
reduction requires establishing the
institutional structure for INCLUSIVE
GROWTH.
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POVERTY, INSTITUTIONS AND
POWER
1.
The existing institutional structure systematically
excludes the majority of the people from the process of
investment and high wage employment.
2.
The poor are locked into a nexus of power within the
existing institutional structure which gives them
insufficient access to productive assets, health, skill
development and education.
3.
The poor face markets, state institutions and local
power structures, which discriminate against access of
the poor over productive assets, financial resources,
public services and governance decisions which affect
their immediate existence.
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ACHIEVING HIGHER AND SUSTAINED
GROWTH THROUGH EQUITY
1. A new approach to Inclusive Growth
requires establishing an institutional
framework for the provision of productive
assets to the poor as well as the capacity
to utilize these efficiently.
2. The poor by being enabled to engage in
the process of investment, innovation and
productivity increase could become the
subjects of a higher and more equitable
growth process.
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FOUR DIMENSIONS OF
INCLUSIVE GROWTH
1.
A process of localized capital accumulation through
Participatory Development.
2.
A small and medium farmer strategy for accelerated
agriculture growth through the provision of land
ownership rights to the landless and institutional
arrangements for yield increases.
3.
Accelerated growth of small and medium scale industrial
enterprises through an institutional framework for
increasing the production and export of high value added
products in the light engineering and automotive sectors.
4.
An institutional framework for providing productive
assets to the poor through equity stakes in large
corporations owned by the poor and managed by
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professionals.
THE NATURE OF PARTICIPATORY
DEVELOPMENT
Participatory Development in its broadest
sense is a process which involves the
participation
of
the
poor
at
the
village/mohalla levels to build their human,
natural and economic resource base for
breaking out of the poverty nexus. It
specifically aims at achieving a localized
capital accumulation process based on the
progressive development of group identity,
skill development, and local resource
generation.
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A SMALL FARMER GROWTH STRATEGY
1.
State land for the landless: Transfer existing 2.6 million
acres of state owned land to landless tenants in 5 acre
packages, together with an institutional framework for
providing them access over credit, high quality seeds,
fertilizers, water and extension services.
This would provide land ownership to 520,000 tenants, i.e. 58
percent of the existing tenant farmers. This would give them
both the incentive and ability to raise yields per acre.
2.
Create a US $ 3.62 billion tenant farmer credit fund to provide
the remaining 42 percent (377,000 households) of the
remaining tenant farmers to buy land at the current market
rates.
3.
Establish a Small Farmer Development Corporation (SFDC)
with equity stakes for small farmers and managed by
professionals. It would provide small farmers with technical
support services, credit and equitable access over markets for
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inputs and outputs.
INSTITUTIONAL FRAMEWORK FOR RAPID
GROWTH OF SMALL SCALE INDUSTRIES
Establish Common Facilities Centres (CFCs)
through public private partnership to enable
small scale industries to produce high value
added components in the light engineering and
automotive fields. These CFCs would have the
following functions:





Marketing
Monitoring and Quality Control
Skill Training and Product Development
Forging and Heat Treatment Facilities
Credit
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INCLUSIVE GROWTH THROUGH LARGE CORPORATIONS
OWNED BY THE POOR AND MANAGED BY
PROFESSIONALS
1. Establish
Pakistan
acquired
would be
milk and
market.
through public private partnership the
Dairy Corporation (PDC) whose equity is
by poor peasants through credit. The aim
to buy milk from poor peasants and produce
milk products for the domestic and export
2. Pakistan is the fifth largest producer of milk in the world,
with annual production of 177 billion rupees worth of
milk, thereby making milk the largest agriculture product.
Evidence shows that the output of milk can be doubled
within two years through better feeding, and animal
husbandry. If this additional output can be exported by
the PDC it could fetch over US $ 4 billion annually. This
would simultaneously solve Pakistan’s Balance of
Payments problem and increase the incomes of the
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poorest sections of rural society.
CONCLUSION
The
proposed
institutional
structure for inclusive growth
would enable growth for the people
and by the people. It would
therefore strengthen democracy
and become vital element in the
war against extremism.
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