SOUTH Punjab will be an economically viable unit as a separate province, the low level of the region’s social, economic and industrial development notwithstanding.

“Overall, south Punjab appears to be economically viable as a separate province, especially in terms of basic food security,” says a new report of the Lahore-based Institute of Public Policy (IPP).

The report, ‘The State of the Economy: The Punjab Story’, talks, although very briefly, about the possible implications of the low level of development and the structure of the economy in south Punjab for the idea of a new, separate province in the region. The idea of a separate Janoobi Punjab province comprising Seraiki-speaking district seems to have gained momentum recently. The national and Punjab assemblies have already adopted separate resolutions over the last few days to carve out a separate unit comprising southern districts of Punjab as is being demanded by a substantially large body of Seraiki-speaking population.

The demand, according to many, stems from the very high incidence of poverty and very low level of social and economic development in the region as compared to the central and northern sub-regions of Punjab.

The IPP report does not actually support the demand for dividing Punjab. Nevertheless, it underlines the “regional inequalities” that keep the area least developed sub-region of Punjab.

Research indicates that the level of poverty in south Punjab is 43 per cent compared to 27 per cent for the whole of the province. Poverty is higher in small towns and cities than in rural areas because the limited urbanisation in the region has not been supported by the development of industry and services. Consequently, unemployment is high in spite of strong agriculture and rural economy.

The report shows that 10 districts of south Punjab are amongst 12 least developed districts of the province.

The only exception to this ‘rule’ is Multan, which has been categorised amongst the 15 districts with intermediate level of development. “The bottom one-third of the population (of Punjab) lives mostly in south Punjab. This confirms the fact that south Punjab is the most underdeveloped part of the province,” it says.

It notes that south Punjab has been “somewhat neglected” in the provision of economic infrastructure and services. Most districts of south Punjab have declined in their relative development ranking in the province.

“All these (southern) districts were not always backward. In fact, in the seventies Multan and Rahim Yar Khan were relatively developed districts with a ranking of fourth and sixth (in Punjab),” it says.

The IPP report states that there was a decline in regional inequality in all districts of Punjab, the trend being most pronounced in the provision of social services. “Despite there being demand for a new province, Punjab has the least regional inequality amongst all the provinces,” Dr Hafiz A Pasha, vice-chairman of the IPP, said at the launch of the report the other day.

The estimates by the Pakistan Institute of Legislative Development and Transparency (PILDAT) indicate that the share of south Punjab in the development budget of the province has increased substantially since 2006/07.

“The share of south Punjab in development spending of the province has virtually doubled from less than 15 per cent in 2006/07 to 29 per cent. It is now approaching the region’s share of 31 per cent in the population of the province. However, the share of south Punjab in the provincial development budget will have to significantly exceed the population share to achieve a degree of fiscal equalisation,” the IPP report emphasises.

The IPP underlines the limitations of the ‘proposed’ province with regard to its ability to generate its own (provincial) tax revenues because of the very weak manufacturing and services sectors, but points out that it — with a lower population density, higher incidence of poverty and somewhat less due to lower share in (tax) revenue collection — will get more from the divisible pool in per capita terms than the rest of Punjab if the revenue-sharing formula in the seventh National Finance Commission (NFC) award is applied.

“The fiscal equalisation built into the award will ensure that south Punjab does better (as a separate entity),” says the report.

Still, there are some who feel that the new province in southern Punjab is not an economically viable idea given the low level of industrial development and a very weak services sector.

“It is the region’s economic underdevelopment that will prevent it from becoming a viable economic entity just as it has spurred demands for a new administrative unit in the area,” argues an economist, who did not want to be identified because of the ‘political sensitivities’ of the issue.

“The region of south Punjab is essentially an agrarian economy as also pointed out in the IPP report and with a very limited tax base unless income from agriculture is also taxed, something that appears improbable at the moment because of the political clout of big landlords of the area,” he says.

“The best solution to the deprivation being felt by people of south Punjab at the moment lies in increasing spending on the provision of economic and social services in the region within the ambit of province of Punjab and encourage development of manufacturing and services sectors by giving private investors tax and other incentives,” he adds.

Another economist at the Lahore University of Management Sciences (LUMS), however, disagreed with him. “The IPP report clearly indicates one thing: the regional inequalities in Punjab have narrowed over the years but south Punjab remains the most underdeveloped sub-region of the province. It shows that the region has slimmer chances of coming at par with the rest of the province unless it is made a separate unit,” the LUMS professor says on condition of anonymity.

He says the formation of a new province out of southern districts of Punjab will not immediately spur economic development of the region. But it will certainly allow its people to articulate their economic and social aspirations as well as bring the political and administrative structure of government closer to the neglected areas and population,” he contends.