Archive for March 20th, 2010

Rising disparity in urban-rural incomes

Post Source: Dawn Economic and Business Review

By Saleem Shaikh

 

RURAL Sindh accounts for over 50 per cent of the province’s population and about 32 per cent of GDP ($34 billion) annually. But the sluggish growth, particularly of agriculture, and lack of rural industrialisation have resulted in rampant rural poverty, which is double of that in urban areas. Over 70 per cent of rural people still earn their livelihood from agriculture, livestock, forestry, or fishing, according to the Sindh Economic Survey 1972-2008. This contrasts dramatically with urban Sindh, especially Karachi, where nearly 95 per cent of the population is employed in manufacturing and services.

The slow growth of rural economy has created a yawing income gap between urban and rural Sindh. Huge disparities between rural and urban economic and social structures in Sindh have given birth to a dual economy in the province.

The absence of backward and forward economic linkages between Karachi and rest of Sindh is a major cause of widening urban-rural divide. Based on agriculture and livestock, rural economy of Sindh does feed the province’s urban economy. But, in return there is hardly any spillover impact of the Karachi’s growing economic activity on the socio-economic lives of the people in the rest of Sindh.

Disparities in income as well as wealth distribution have sparked off mass exodus of jobless from rural to urban areas in search livelihood and better living standards.

Though a major hub of economic activity, Karachi’s robust economic growth over last 10 years has not benefited rural Sindh, says Dr Javed Akbar Ansari, a development economist in Karachi.

“Although the fundamental factors of economic activity in Karachi, which include a range of raw material, manpower and now major portion of investment, is largely provided by the rural Sindh, there is no trickle-down impact of Karachi’s economic activity and growth on the lives of the people in rural Sindh,” says Ansari.

He underlined a serious need for embedding Karachi’s economy into rural economy of the province by establishing and boosting forward and backward linkages on sustainable basis.

“But setting up the forward and backward linkages is not possible until a survey is conducted to find out how the linkages between Karachi and the rest of Sindh can be established, deepened and sustained for diffusion of economic benefits to rest of the Sindh,” believes Ansari.

The backward and forward linkages at the industry level can be segregated into two basic categories: first the kind of industries that produce inputs for agriculture (pesticides, fertiliser, farm implements and allied machines) and others which depend on agriculture output as their input (cotton, rice, wheat, fruits and vegetables), pointed out an official in the Karachi office of Small and Medium Enterprises Development Authority (Smeda).

He suggested that agro-based industries that depend on agriculture’s outputs should be set up in rural areas to help generate economic activity and employment there. While backward linkages in education, services, health, technology can also be developed by setting up network of education, health, technology and services facilities..

Rural development expert Mumtaz Khaskheli says unequal distribution of wealth is a major problem, which has widened urban-rural divide in the province.

But former president of Hyderabad Chamber of Commerce Shafiq Qureshi remarked that rural Sindh continues to remain unattractive for investors for want of required facilities and incentives.

“Initiatives have to be given to encourage investors to explore new avenues for investment in rural areas, particularly in agriculture, livestock, dairy, and poultry sectors,” he added..

Agriculturist Abdul Majeed Nizamani says setting up of agro-based industries, introduction of value addition facilities for different farm products, their processing, cold storage and packaging would greatly help revitalise rural economy. And, setting up of food manufacturing centres at SIEs should also be encouraged to boost export of farm products. The development of agro-based industry can check migration from rural to urban areas.

According to a survey of Sindh’s economic indicators, the share of agriculture sector in gross provincial product (GPP) declined by nearly 11 per cent to 15.4 per cent in 2008, down from 26 per cent in 1982.

Investors are reluctant to launch any business or industries in these semi-urban areas on account of bad law and order situation, extended power outages, poor credit facilities and pathetic conditions of industrial estates and small industrial estates (SIEs).

Over the last two decades, the province’s semi-urban areas have not witnessed any industrialisation. Although industrial areas were set up in Nooriabad, Kotri, Hyderabad while SIEs in Nawabshah, Khairpur, Sukkur, Larkana and Shikarpur, Ghotki, Naushero Feroz, Thatta, Badin, Mithi to industrialise rural Sindh, no substantial activity has taken place at any of these areas, complained an industrialist and member of Karachi Chamber of Commerce and Industry.

But Nawab Pirzada, assistant chief (Industries) in provincial P&D department, said that the government had launched different uplift schemes for SITE areas and SIEs in different parts of Sindh to boost backward and forward linkages and plug urban-rural gap.

“Most of these industrial estates in the province were in bad shape but the present government has taken initiatives to revive them and offered incentives to the potential investors for launching new projects at SIEs”, he said.

Pirzada also said that nine SIEs in Thatta, Sanghar, Dadu, Hala, Badin, Nawabshah, Rorhi, Shewan and Mirpurkhas were being upgraded at a cost of Rs79.518 million, while extension work on Hyderabad SIE has been completed recently at a cost of Rs34.457 million. In addition, infrastructure facilities had been provided to eight SITEs and SIEs in different districts.

He said that a survey had been started recently to establish rice processing mills and other processing and packaging units at the SIEs for value addition of dates, mango, guava, red chilly and other farm productions.

But, just setting up of SITE areas and SIEs would not attract investors to generate economic activity in rural Sindh, said Khair Mohammad Shaikh, president of Larkana Chamber of Commerce and Industty.

Without provision of good road networks, improved public and goods transport facilities, easy financing facilities at lower markup rates, five-ten years tax holidays and export tax exemptions, improved law and order situation, industrialisation in rural Sindh is not possible, he explained.

Development economists also believe that dynamic urban centres can serve as powerful engines to pull the rural economy up and suggest that focus should be on revitalising rural growth with the strengthening of agriculture.

But, growth in the agriculture alone would hardly help grow rural economy, says Mohammad Din, president of Sukkur Chamber of Commerce and Industry. “Consolidating rural-urban linkages and diversifying rural economy into non-farm activities are need of the hour to generate income and lowering the risks linked to fluctuations in agricultural output,” he suggested.

An official in the provincial department of industries suggested that an enabling environment should be created to attract private investment to build the province’s social and physical infrastructure.

In addition, the provincial government should focus on improving its efficiency in public spending and strengthening its monitoring and evaluation of public works at all levels with involvement of third party, said Pirzada.

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