Pakistan: Staying Afloat

Written by Chris Cork • April 2008

The incoming government is going to have its hands full balancing its political act, but it needs to get to grips with a set of chronic infrastructure deficits – quickly! writes Chris Cork

April 2008 - Power and the games associated with it are not just political, and it is power – or the lack of it – that is the most pressing problem facing the incoming government who take charge of an economy on the slide and inflation approaching double-digits.

Pakistan is fast running out of an essential commodity, electricity; and water – which generates a substantial part of the power - is also in increasing short supply. Lose much more of both and the entire economic system starts to shut down altogether.The power cuts that made the last winter a more miserable experience than it needed to be are set to get worse. There are reports that the Pakistan Electric Power Company (PEPCO) has warned that there is to be an unprecedented shortfall in power needs of 3050 MW by the end of March 2008, with an inevitable increase in power-cuts to follow. The principal dams which provide all of the hydro-generated power are at ‘dead’ level as of the middle of March. Consumers are being told to expect cuts of up to 11 hours a day, perhaps more, and businesses large and small are expecting a hard summer. The effects will not be localised and will hit everybody and everything at a time when the nation is about to turn on its fans and air conditioners, exacerbating an already intractable problem. This is not a natural disaster - like an earthquake - it is entirely manmade; and it was entirely preventable.

The failure to curb population growth followed by a failure to check the flight from the land to the cities has brought a huge increase in the demand for power and other utilities; a demand that shows little sign of diminishing. Set against the ‘more people = more power consumed’ equation is the fact that there has been no increase in Pakistan’s power generating capacity since 1999, a failure that has become a criminal neglect. It was a gross failure of vision and planning and for industry, adapting now to dead power lines, little short of a catastrophe. Everything from the ubiquitous photocopy shop to the millers and threshers ands spinners are suffering losses that are going to break the backs of many. Larger industrial units likewise suffer, absorbing an increase in production costs coupled with a loss of efficacy – not least because they have to use gas or diesel powered generators to keep production going and POL prices are currently rising on a fortnightly basis.

None of this needed to have happened if the period since 1999 (and before, the current power crisis was predicted in the early ‘90’s) had been used to construct power generation resources rather than merely talking about them and having proposals and plans crippled by inter-provincial squabbling and rivalry. There is no shortage of grandiose schemes on paper including thermal plants and wind-driven generation, but they are far in the future; and as the Europeans have discovered wind-power is not free or cheap, neither is thermal. Both require a huge infrastructure investment in technologies that are still relatively new and it will be decades before alternative energy sources make much of an impact on the European scene. Grand ideas such as this needed to be moving from the drawing board a decade ago, and at the current rate of development it could be another decade before any of them generate a single megawatt.

In the short-term there seem to be few solutions. The new government will have to face the harsh realities associated with inheritance – if you inherit nothing, you start with nothing. Power cannot be conjured out of thin air, it is a finite resource, but consideration should be given to relief for small businesses which are going to be the first to go to the wall, with tax relief and other subsidies the most obvious way of easing their pain. The new government also needs – as a matter of the utmost urgency – to offer a real commitment to those who have just voted them into power, backed up by real projects rather than pipe-dreams.

There also needs to be a timely reminder to the consumer that the government is not the only one to blame for this sorry state of affairs, as the consumer has to bear some of the responsibility as well. Electricity is not free and has to be paid for by the consumer. If bills are not paid how is infrastructure to be maintained or developed? In Sindh the Hyderabad Electric Supply Company is owed 7 billion rupees by the Sindh government, and domestic consumers are in default to the tune of 13.6 billion rupees. Electricity companies have their own bills to pay, and it is hardly fair to castigate them for not providing a service if customers are not paying for the service they are provided!

Pakistan does not have a good track-record when it comes to developing and completing – on time and in budget – infrastructure projects such as those outlined above. There are clear deficits in terms of national capacity to deliver the large projects that are needed to address the shortfalls in every area of infrastructure – water, irrigation, power and transport, and unless and until they are remedied growth is not going to be sustained and the country will lose what competitiveness it has in local and international markets.

The country is on the list of the most water-stressed countries in the world and the entire water infrastructure is in poor repair; and it needs an investment of around 60bn rupees per year in large dams and their related works over the next five years to mitigate the effects of the current crisis. The power cuts of this year could be as nothing compared to what awaits in 2010. By that date the power deficit will be around 6000MW, almost double what it is today in the space of two short years. If the population continues to grow at current rates (and there is every indication that it will as every attempt to slow population growth since partition has failed) and the cities expand, this figure will have risen to a shortfall of 30,700 MW by 2020. Per-capita energy consumption is among the lowest in the world and inadequate energy resources are stalling economic growth and impact negatively on poverty alleviation programmes.

Inefficiencies in the transport sector cost the country 4-5% of GDP every year, indicative of a need for massive investment in roads, railways, air transport and port facilities. The much-trumpeted Gwadar port mega-project received its first ship in mid-March, and it will be at least twelve years before the project matures into a viable resource. These figures and projections are not figments of the imagination; rather they are the crux of a report by the World Bank, published in mid 2007. It goes on to detail in crisp and unambiguous language what lies at the heart of the mega-problem of mega-projects.

The challenges faced by the incoming government all revolve, to a greater or lesser degree, around the chronic infrastructure deficits that are gradually dragging the country downwards. There is a national paucity of human resources and materials; with those human resources that are available being poorly educated (the better educated having joined the brain-drain that sees most of Pakistan’s skilled professionals in just about every field seeking work elsewhere) and hardly fit for purpose.

There have been generations of incompetent planning and Pakistan is unable to attract substitute external implementers to turn around slow or failing projects; all of which means that the likelihood of bringing any mega-project on stream on time and as budgeted is extremely low.

The World Bank report concluded also that industry stakeholders lack the capacity to deliver on the Medium Term Development Framework (MTDF) for the period 2005-10 that is designed to support the medium-term growth target of 7%. Most stakeholders agreed that contractors are still getting work even though they obviously lacked the capacity to perform/deliver, with contractors having a ‘give it to us, we’ll do it’ attitude which merely serves to further institutionalise existing deficits.

The electricity and power problems of today are symptoms of a far wider systemic malaise, a national sickness that successive governments have failed to treat let alone cure. The challenge for the new boys and girls in parliament is going to be in putting political rivalries on hold in order to give urgent attention to the things that need to be done to save the nation from decrepitude – and perhaps failure. A look at past coalitions and attempts at political collaboration does not bode well for the national future.