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Regional equalisation

Will the Punjab government be able to bring parity in the level of development across the province?

Regional equalisation

Researcher Ted R Miller in his article Variations between countries in values of statistical life (2000) suggests that the value of life in a county is typically equal to 120 times the per capita GDP of the country.This finding is based on 68 credible studies from 13 different countries.

This may be a hypothetical number, but it gives a strong message for policy makers and governments anywhere in the world. A key measure of regional income within a country is the level of total investments, both public and private. Many also argue, and correctly so, that private investments follow public investments. In other words, public investments act as a strong catalyst for private investments. This is because, higher public investments improve infrastructure, quality of human capital and brings prosperity — all the conditions conducive enough to attract private investments by promising profitability. These investments then create economic opportunities for all. Therefore, a balanced spending agenda by the government is a key instrument that can result in inclusive growth.

Unfortunately, the experience in the Punjab has been to the contrary. The ‘capital city centric’ approach of previous governments has resulted in stark disparities and varying levels of deprivation across the province. Just to understand the magnitude of these disparities, over the last four years 2014-18, if the government spent rupees 100 per capita per annum in Lahore on development, the second highest spending was only rupees 26 per capita per annum in Multan. Moreover, very quickly, the expenditure per capita per person falls down to under rupees 10, for at least 15 out of the 36 districts of Punjab. Regions such as Bahawalnagar, Layyah, Pakpatan are just getting rupees 5 per capita per annum for development. Does this suggest that the value of life for decision makers vary on where you are geographically located in the same province?

Using large dynamic cities as engines of growth is a well-used model by many developed and developing countries with reasonable success. However, in Punjab, as we have failed to diversify away from Lahore, the model has not worked and instead has created major urbanisation related issues for Lahore.

A strong tool to identify the level of deprivation is the multi-dimensional poverty index. Based on the data by the Punajb government presented on the completion of its hundred days, the districts of Mianwali, Bhakar, Layyah, Muzaffargarh, Dera Ghazi Khan, Rajanpur, Rahim Yar Khan, Bahawalpur, Lodhran and Bahawalnagar are ranked as the poorest districts in terms of education provision, healthcare, water and sanitation and economic opportunities. Rajanpur is the poorest with 65.8 percent households considered as poor, DG Khan the second poorest with 54.6 percent and Muzaffargarh the third poorest with 54.2 percent households living in poverty. The poor households drop to 11 percent in Lahore, suggesting the large deviation.

Moreover, if one digs a bit deeper in data, one finds that the nature of the poverty in these deprived districts also vary considerably. Historically, the main poverty bifurcation has been that of South and Central-North Punjab. However, this is not the case. There are districts in South which do well on health and water but poorly on education. Similarly, there are districts in central Punjab such as Hafizabad that does poorly on health, but better in other indicators. The issue of water quality in Khushab and Faisalabad make them the most deprived in terms of drinking water. In short, due to an unbalanced development approach and one that has been led by political expediency, rather than planned and targeted has resulted in sharp segmentation within Punjab and is a real cause of concern

The new government of Punjab intends to bring parity in the level of development across the province. This ‘regional equalisation’ approach of the government has been mentioned a number of time by Provincial Finance Minister Hashim Jawan Bakht, which is targeting to make a strong dent in addressing the equity issue and is likely to result is significant socio-economic boon. For example, the data for Punjab shows that a one percent reduction in the inequity ratio reduces multi-dimensional poverty by almost 0.4 percent. It is due to this strong potential impact that regional equalisation approach takes a corner stone in the upcoming Punjab Growth Strategy 2023. The Punjab Growth Strategy 2023, which is based upon strong evidence on the economy of the Punjab will be making strategic recommendations that builds in the equalisation approach.

Moreover, the leadership at the Planning & Development Department is also considering the design of a district development fund. The idea behind the fund is to reduce spending on non-performing projects and interventions and instead move towards a problem driven targeted approach. The fund will be designed to provide targeted funding in key problem domains in the poorest districts of Punjab. The key purposes of the fund will be to; (i) support districts in improving key SDG targets; (ii) Reduce the multi-dimensional poverty in deprived districts and; (iii) Make additional and targeted investments in poorest districts to improve service delivery and overall economic well-being.

Making problem driven targeted investments can result in significant returns. For example, the data on Punjab shows that increasing average education in the province by one year will reduce the multi-dimensional poverty by almost 5 percent. This is because education is the key contributor to human capital development along with health, nutrition and skills. Evidence shows that the investments in human capital offer the greatest returns. For example, in Punjab, a one-year increase in schooling of employed workers increases the large scale manufacturing value addition by almost 2 percent. These numbers present significant dividends and for this reason, the upcoming Punjab Growth Strategy 2023 emphasises significantly on the development of human capital in the province. However, in doing so, it does take a balance approach, where the quality of human capital is increased across rather than in selected districts.

Finally, the growth strategy and strong political support for regional equalisation is also being supported by the appropriate use of technology. Punjab has mapped its existing social, economic and hard infrastructure profile spatially. Using GIS technology, the government is fully equipped with detailed spatial structures of the Punjab. The growth strategy, equalisation drive and the future development planning will now integrate the use of spatial science, to enable government to spend every rupee where it offers the highest contribution towards improving the life of the citizens of Punjab!

UsmanKhan

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Usman Khan is Economics Faculty at LUMS and a development consultant on policy, innovation, planning and fiscal reforms.

One comment

  • This article is based on the research work done by PERI research team. The author have to acknowledge them and their support

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