Posts Tagged ‘Middle East’

Anchoring Khyber-Pakhtunkhwa Province

July 1, 2013

By Anjum Altaf

I learnt there is just one flight per week from Lahore to Peshawar and it returns three days later. This prompted an investigation of how the city is connected to the outside. Here is some quick information on the flights per week to Peshawar and their origins: None from Central Asia; 1 from East Asia; 1 from Afghanistan; 1 from the Punjab; 2 from Balochistan; 4 from within KPK; 4 from Islamabad; 10 from Sindh; and 56 from the Middle East.

While KPK is part of Pakistan, it seems reasonable to infer that its economic engine is in the Middle East.

One might post oneself outside Peshawar airport to determine the nature of the economic engine. I doubt one would see investors armed with briefcases and laptops. Much more likely that the vast majority would comprise migrant workers returning home for a break with the type of consumer goods unskilled and semi-skilled migrant workers come back with.

This would confirm that KPK is a manpower exporting economy. It does not generate enough jobs to employ its labor force; nor does the rest of Pakistan put together. The type of work for which the human capital of KPK has been equipped by its governments is to be found in sufficient numbers in Karachi and, at a living wage, mostly in the Middle East.

This is not an outcome of the recent unrest in the province. It has been so for a long time. I wrote a paper in 1992 – The Spatial Pattern of International Labour Flows from and to Pakistan – which showed that the NWFP (as it was then called) was the province with the highest relative outmigration from Pakistan (about three times the national average) and the lowest return migration to Pakistan (about half the national average). There was little for people to do in the province and little for them to come back to.

Within NWFP, Peshawar district had the highest relative outmigration (over six times the national average) and the lowest return migration (about a fifth of the national average) suggesting that better prepared workers were even more likely to leave the province and even less likely to return. Clearly the prospects for socioeconomic development would be dented if those most likely to contribute were left with no alternative but to exit.

It might be argued that there is nothing really problematic with the above scenario – we are part of a global economy and labor moves to where the jobs are. There are many sociological and political reasons to argue the contrary. Think of the inner cities in the US that were reduced to pockets of poverty after the flight of the affluent to the suburbs. The pathologies that arise from such phenomena are a source of concern to social scientists. One could surmise that the rise of social and religious conservatism in KPK is an outcome of its manpower-exporting economy, anchored in the Middle East, which transforms laborers into small-property owners imbued with the values of its host society (1).

For an economist, the aspect of interest is not that labor moves to where the jobs are but why jobs are not in KPK. Is it a desert capable of growing or producing nothing? Since few would subscribe to that judgment a search is needed for a plausible explanation.

The corollary to the above is that there has been very little investment in KPK from the Punjab, a neighboring province, or from Karachi, despite the fact that the province is rich in energy potential and many kinds of natural resources. At the very least one might have expected over the many preceding decades some relocation of industry attracted by lower  land and labor costs in KPK. An examination of the reasons for the absence might be a good place to start in designing a new development strategy for the province.

A thought experiment might trigger some ideas. Imagine KPK as an independent country no longer eligible for allocations from a federal budget. What might it do to generate its own revenues and how might it go about attracting foreign direct investment from its neighboring countries?

One could add an analogy to the thought experiment. There was a time when Mexico was exporting its labor across the border to the US for agricultural work. The shock of suspension of the arrangement in 1965 was the catalyst for a border industrialization program designed to provide alternative employment. By the end of the century, almost 4000 factories financed by US investment were generating 25 percent of Mexico’s GDP, almost 50 percent of its exports, and about 10 percent of its formal employment.

The analogy might seem far-fetched but is suggestive of a vision to develop the province. Central to the vision is identifying the type of industry compatible with KPKs natural resource endowments, the type of infrastructure and skills required to operate the industries, the type of incentives needed to attract back skilled labor, and the downstream industries that would cater to the consumption needs of workers with rising incomes to keep money circulating in the domestic economy (2).

In thinking of a border industrialization program it might be useful to re-examine the experience of the Hattar Industrial Estate presumably located on the Punjab-NWFP border to attract capital investment. By all accounts it has not been a success – a recent report indicated that abandoned and sick industrial units exceeded in number those that were operational and under construction. The reasons remain to be fully examined.

Khyber-Pakhtunkhwa is a rich province poorly served by its governments. Its citizens deserve better. They are too desperate to leave and too much in debt to find the time or energy to protest but such good fortune may not last forever.

Anjum Altaf is Dean of the School of Humanities, Social Sciences and Law at the Lahore University of Management Sciences. This op-ed appeared in Dawn on June 30, 2013 and is reproduced here with permission of the author.

(1) This is an involved argument that is developed more fully in a note, The Political Implications of Migration from Pakistan, which was published here and reproduced on this blog here.

(2) In connection with attracting migrants back, see Return Migration in a Lifetime Setting: An Exploratory Study of Pakistani Migrants in Saudi Arabia. At the time of the study, wage differentials between Saudi Arabia and Pakistan needed to be of the order of 7:1 to attract migrants. However psychic costs for the migrants were very high. They were willing to return at a wage ratio of 3:1.

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