According to renowned economist Paul Romer, charter cities can create positive externalities. On the other hand, there is a puzzle known as ‘ultimatum game’ in economics. The gist of the puzzle is that in some cases, people tend to think more about how the other would benefit rather than thinking about their own benefits in an exchange. This holds relevant in the political economy context of China-Pakistan Economic Corridor (CPEC).
Historically, Pakistan purchased Gawadar from Sultanate of Oman in 1958 for USD 3 million. Then, Gawadar became part of Pakistan. Through CPEC, the Federal Minister for Planning, Development and Reforms, Ahsan Iqbal had informed that $35 billion would be spent in the energy sector. Out of the $35bn, $11 billion would be spent in Sindh while $9 billion would be allocated to Balochistan.
Resource economics uses a term ‘Resource Curse’ which is the paradox in reality in which the natural resource rich countries usually lag in economic growth and development. Sub-Saharan Africa is a prime example of this phenomenon. In post-industrial modern knowledge based economies, human capital is considered as the biggest wealth.
It is interesting to note that in provincial budgets for 2016-17, Balochistan’s education budget is Rs 42.67 billion while Sindh’s educational budget is Rs 160.7 billion. Sindh’s population is four times as much as Balochistan. Interestingly, the per capita budget allocation in Balochistan for education comes to be slightly higher than for Sindh. Balochistan also gets 600 MS Leading to PhD scholarships from HEC exclusively under Aghaz-e-Haquq-e-Balochistan package.
There are still 1.7 million and 6.1 million children who are out of school in Balochistan and Sindh respectively. For Pakistan overall, the out of school children are estimated to be 25 million. There is dire need to set priorities and policies right. It is important that people also hold their local leadership accountable for what their elected leaders have delivered in their constituencies, especially after the devolution of powers with 18th constitutional amendment.
Under the seventh National Finance Commission (NFC) Award, Punjab gets 51.74 percent share from the divisible pool, while the share of Sindh is 24.55 percent. KP and Balochistan get a share of 14.62 percent and 9.09 percent respectively. Interestingly, the share of Punjab and Sindh is less than their contribution to the national economy in terms of GDP.
If we take the case of Balochistan, the total budget outlay for Balochistan for 2016-17 is planned at Rs 282 billion. These budget allocations do not come as free lunch. It is what we collect from a tiny minority of the two percent tax paying population. We collect it least from Balochistan, whose contribution is at around 1.5 percent of total taxes. The province’s contribution to GDP is around 3.7 percent. It is roughly equal to Rs 1000 billion. That makes its effective tax to GDP ratio to stand at 28.2 percent. Pakistan overall has never achieved such magnitude of tax to GDP ratio. It shows that to bring about meaningful development, availability of funds alone is not a sufficient condition for making progress in development.
Based on the current scenario, the contribution of gas production from Balochistan is less than 20 percent now while Sindh produces 70 percent gas for all of the country, according to Economic Survey of Pakistan 2014-15. Appreciably, Balochistan will now get Rs 74 billion per annum in royalty from the lease of Sui gas field after a new 10-year lease agreement with Pakistan Petroleum Limited (PPL). In addition to that, PPL will pay 10 percent bonus, continue to supply natural gas freely to Sui Town, give jobs to local people and provide health, education and other facilities.
With 18th amendment and subsequent generous packages for Balochistan along with revision of royalties and prospect of CPEC related development spending, things have started to move in positive directions at least when compared to the past. What we need to avoid is a situation where the demographic dividend gets frustrated and the precious budget outlays are persistently wasted in internal security by the state. That is where we all need to question the quality of spending from now onwards as much as focusing only upon the quantity of resources at our disposal.