The People vs. Roads

Assad Ahmad asks why we are spending on infrastructure rather than humans

The People vs. Roads
Pakistan’s road system is better than Brazil’s. It is also better than Russia’s. Brazilians, economic heavyweights, and Russians, recently citizens of a superpower, would likely be surprised to hear this. And Pakistanis, used to being at the bottom of most lists, might find it unusual that the World Economic Forum’s (WEF) Executive Opinion Survey ranks Pakistan’s road system quality smack in the middle (76th out of 137 countries) of the list.

The WEF’s Logistics Performance Index, built with input from thousands of freight companies around the world, shows similar results—rating the quality of Pakistan’s trade and transport infrastructure higher than the average result for upper middle-income countries (like, far richer, Argentina, Iran, and Mexico). So, when it comes to roads, we are clearly punching well above our weight.

Viewed in isolation, this is a good thing. Roads are a form of physical capital, and the accumulating capital is crucial for economic growth. But of course, in an economy, nothing can be viewed in isolation. Before we continue to bury money in asphalt, it is important to remember that a rupee invested in roads is a rupee that can be invested elsewhere instead. Juxtaposing our nice motorways against our terrible human capital position can help illustrate which area is now more desperately in need of investment.
Before we continue to bury money in asphalt, it is important to remember that a rupee invested in roads is a rupee that can be invested elsewhere instead

In sharp contrast to our transport infrastructure, the state of our human capital—the combined knowledge, skills, health, and personality attributes of our workforce—is disastrously poor.

Helpfully, the WEF has also developed an index to help quantify this. In its most recent Global Human Capital Index rankings, Pakistan is six places from the bottom. Only Mali, Ethiopia, Senegal, Mauritania, and Yemen fare worse. The index score incorporates indicators from literacy and numeracy, to education and vocational enrolment rates, and the availability of skilled employees.

The WEF’s index does not directly address the health aspect of human capital (which affects the index factors indirectly), but we know how bad our nation’s health is from many other sources. While we can compare our roads to those of upper middle-income countries, we can barely compare our health outcomes with those of what the UN classifies as “Least Developed Countries” (LDCs). Think, Burundi, Rwanda, Sierra Leone, and Cambodia. Think countries whose per-capita income is less than half of ours. And shudder to think, we have a larger percentage of reproductive age women suffering from anemia (putting their offspring’s physical and mental development at risk), similar stunting rates (permanently lowering our children’s cognitive abilities, (as I argued in these pages Dec 1 in ‘Pakistan’s learning crisis starts in the womb’), lower hepatitis immunization rates, and higher infant mortality.

It is intuitively obvious that investing in human capital is critical for sustained economic growth and better living standards. While economists bicker over its relative importance (and some offer up intriguing evidence arguing the opposite), the consensus is that a high and growing stock of human capital is at least as important for national income growth, if not more important, than the accumulation of physical capital. Indeed, public investments in primary and secondary education i.e. human capital, have been shown (in East Asian Miracle: Economic Growth and Public Policy, the World Bank, 1993, among others) to be the largest contributing factors in the East Asian growth miracle that our policy makers are fond of citing as a model for Pakistan.

It follows then, that a country with trade and logistics infrastructure that ranks well above that of its economic peers, and human capital indicators that are near the worst in the world, would likely do well to divert public resources from one area to the other. This is especially true if that country is underspending in precisely the same areas where it is the weakest (hint: we are).

To their credit, Imran Khan and his Pakistani Tehreek-e-Insaaf have had some success in shifting public attention to these questions. Despite this, with a few exceptions (notably, the KP budget allocation to health is up 50% over the term of this parliament), we are nowhere near the magnitude of change required.

Total (public and private) health expense is stagnant at around 2.5% of GDP (public spending is 1%), which not only compares unfavourably to middle-income countries (5.8%) but would need to rise 50% just to reach the average total expenditure percentage seen in the least developed countries in the world.

Spending on education is slowly moving in the right direction, with public spending rising from just over 2% of GDP to nearly 3% since the past election. Again though, the relevant comparison is that the least-developed countries in the world are spending 3.5% of GDP on public education, and middle-income countries are spending over 4%. So, while the public education spending gap is less stark than that in health, there is clearly still room for spending to rise from current levels. This is particularly true for Sindh and Balochistan where spending lags behind that of Punjab and KP (each of which allocate around a quarter of their provincial budget to education).

So where can some of the money to raise health and education spending, and improve our human capital levels come from?

Going back to roads, let’s look at the most important example. The National Highway Authority (NHA) will spend 320 billion rupees this fiscal year. That’s more than the total amount of government spending on health in the whole country. A good deal of the NHA spending is CPEC related, so 90 billion rupees of the NHA spending is directly foreign-financed. The infrastructure spending under CPEC is a reality, and quarrelling over huge injections of foreign cash into our economy can be counterproductive. We should take all we can get. But what should be quarrelled about is this: The foreign inflows into the NHA this year still leave over 200 billion rupees of our own current resources, going to improve a highway network which is, by most accounts, already pretty decent. That doesn’t include the money spent by provincial governments on overpasses, underpasses, signal-free corridors, and similar, highly visible, development projects. Given what we know about the state of our roads, vs. the state of our people, does this make sense?

Perhaps one should ask the half of our adolescents who are out of school. Or the millions of children studying in overcrowded classrooms with four other grade levels being taught by the same teacher. Or the half of our malnourished children whose mental development is held back by stunting. Or the millions of hepatitis patients or anemic mothers. Or the people who can’t afford or find adequate vocational training, or afford to take time off work for it. There is no shortage really, of people who, given the numbers, will come up with the right answer. But to make policy makers listen, those who care about the humans of Pakistan must scream loudly enough to be heard over the rumble of road rollers. And, with elections nearing, the time to scream is now. Sources: World Bank, World Economic Forum, PILDAT, Alif Ailaan.

The writer is a Lahore-based columnist and consultant. He has served as a director at a major European investment bank and worked as a management consultant at a leading global consulting firm, where he participated in an extensive social sector delivery initiative led by the Government of the Punjab. The views expressed are entirely his own. @assadahmad