Sindh, governance issues a major dilemma | By Rashid A Mughal


Sindh, governance issues a major dilemma

SINDH, the third largest province of Pakistan, by total area and the second-largest province by population after Punjab, shares land borders with the provinces of Baluchistan and Punjab to the north, respectively, and the Indian states of Gujarat and Rajasthan to the east; it is also bounded by the Arabian Sea to the south.

Sindh’s landscape consists mostly of alluvial plains flanking the Indus River, the Thar Desert in the eastern portion of the province along the international border with India, and the Kirthar Mountains in the western portion of the province.

The economy of Sindh is the second-largest in Pakistan after the province of Punjab; its provincial capital of Karachi is the most populous city in the country as well as its main financial hub.

Sindh is home to a large portion of Pakistan’s industrial sector and contains two of the country’s busiest commercial seaports: Port Qasim and the Port of Karachi.

The remainder of Sindh consists of an agriculture-based economy and produces fruit, consumer items and vegetable for other parts of the country.

Sindh is sometimes referred to as the Bab-ul Islam (transl.?’Gateway of Islam’), as it was one of the first regions of the Indian sub-continent to fall under Islamic rule.

The Arab invasion of Sindh occurred under the Umayyad Caliphate, headed by Muhammad bin Qasim in 712 A.D. Ethnic Sindhi people comprise the largest group in the province; Sindh is also the place of residence for the overwhelming majority of Muhajirs (?’migrants’), a multi- ethnic group of Indian Muslims who migrated to the region after the partition of British India in 1947.

The province is well-known for its distinct culture, which is strongly influenced by Sufism, an important marker of Sindhi identity for both Hindus and Muslims.
Sindh is prominent for its history during the Bronze Age under the Indus Valley Civilization, and is home to two UNESCO-designated World Heritage Sites: the Makli Necropolis and Mohenjo-daro.

Sindh was the centre of the Indus Valley Civilisation, which rivaled the contemporary civilizations of Ancient Egypt and Mesopotamia in size and scope, numbering nearly half a million inhabitants at its height with well-planned grid cities and sewer systems.

Sindh has the second largest economy in Pakistan. A 2016 study commissioned by Pakistan Ministry of Planning found that urban Sindh and northern Punjab province are the most prosperous regions in Pakistan.

Its GDP per capita was $1,400 in 2010 which is 50 percent more than the rest of the nation or 35 percent more than the national average.

Historically, Sindh’s contribution to Pakistan’s GDP has been between 30% to 32.7%. Its share in the service sector has ranged from 21% to 27.8% and in the agriculture sector from 21.4% to 27.7%. Performance wise, its best sector is the manufacturing sector, where its share has ranged from 36.7% to 46.5%. Endowed with coastal access, Sindh is a major centre of economic activity in Pakistan and has a highly diversified economy ranging from heavy industry and finance centered in Karachi to a substantial agricultural base along the Indus. Manufacturing includes Textiles, machine products, cement, plastics, and other goods.

Sindh has the potential to become a high middle-income province in Pakistan, but it lags far behind in terms of economic, social and development indicators.

Sindh is also the most industrialized province, resource-rich and endowed with the country’s largest natural gas and coal reserves.

In sum, it has the potential to become a high-growth and high-income region. Nonetheless, Sindh has yet to translate this potential into commensurate economic and social development.

The province faces major developmental challenges. Sindh’s weak social indicators are partly the result of the inadequate reach and low quality of public service delivery.

A recent Public Expenditure Review by World Bank focuses on provincial finances and their utilization with the objective of identifying possible reforms to expand the resource envelope and ensure better value for money by improving the management and efficiency of public spending.

It includes two important components: (i) a detailed analysis of the major revenue challenges and the various expenditures, including development spending and; (ii) and in-depth assessment of how some of the key government priorities are undertaken, such as education, health and social protection.

The hope is that by better understanding the constraints, reforms can be designed and implemented to maximize Sindh’s potential and promote a more equitable and productive path.

Sindh’s weak social indicators are partly the result of the inadequate reach and low quality of public service delivery.

This in turn points to inefficiencies in provincial government expenditure on both physical infrastructure and public services.

While there are many reasons behind poor public sector performance in the province, two key issues stand out: first, the total resource envelope of the Sindh province needs to be increased to meet the financing needs and, second, the quality of public spending both in terms of allocative and operational efficiency could be significantly improved.

Sindh government needs to focus on maximizing its own-source revenue (both tax and non-tax revenue) collection.

Up to now, own-source revenue (OSR) remains very low despite huge potential for generating income from property taxes and general service taxes (GST) on services.

Improved collection of OSR will help generate much needed additional resources to plug social sector and infrastructure gaps.

Now that the Sales Tax on Services (STS) is collected by the province, STS revenues have soared, from just PRs 1.1 billion in the FY11 collection to Rs. 64 billion in FY16. This is a very positive step and shows the way forward for other potential sources of OSR.

However, more can be collected from STS, as the services brought under the STS umbrella so far are only those that have well-defined bases and are easy to tax and collect.

Although the Sindh government has now imposed STS on construction, personal care, and professional services, the wholesale, retail and transport sectors, remain almost entirely outside the tax net.

This is because they comprise a large number of small units that are difficult to identify and where access to accurate sales records is problematic.

Expansion of the STS tax base to include more challenging sources of revenue will require innovative thinking and management, which in turn will call for attention to be given to improving the Sindh Revenue Board’s manpower capacity and technology.

— The writer is former DG (Emigration) and consultant ILO, IOM.

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