SAARC urges to increase public investment
Jan 10,2007 00:00
by
Biz Correspondent
A recent study prepared by SAARC Secretariat has urged governments of South Asian countries to focus on increasing public investment in key sectors to foster growth and reduce incidence of poverty.
“The South Asian economies tend to limit public investment, based on the argument that they crowd out private investments,” states Regional Poverty Profile 2005, a comprehensive report on incidence of poverty and the rate of productive employment generation in South Asia, the report says.
The reasoning, however, is at odds with empirical evidence, as increased public investment in sectors such as energy, rural roads, irrigation and primary schools has often stimulated private investment, adds the report made public at a function held in Kathmandu Wednesday.
The report has, thus, reckoned that the governments of South Asia need to raise more money and increase investment in building of infrastructure, especially in rural areas.
“Availability of superior infrastructure gives workers an opportunity to earn greater wages, ultimately contributing to the poverty reduction measures of the government,” states the report. “Besides, increased investment in rural infrastructure generates additional employment in non-agricultural sector directly, and at the same time, stimulates development of the rural non-farm sector.”
Development of non-agriculture sector and generation of additional employment opportunities in non-farm sector is essential for countries like Nepal and India, as labor productivity of agricultural sector in these countries is 5 to 6 times lower than that of non-agricultural sector. “Such large inequality shows similar magnitude of rural-urban disparity,” states the report.
According to the report, per person engaged in agriculture sector, in Nepal, earns Rs 11,935, while the same working in non-agricultural sector gets Rs 67,206. “In case of India, per person employed in agriculture sector yields Rs 12,925 (Indian Currency), while the same working in non-farm sector earns Rs 70,101 (Indian Currency),” states the report.
The report has, however, stated that while looking for avenues to increase the revenue, the government should adopt measures that do not affect the poor.
“Apart from that better allocation and utilization of public funds is also required,” states the report, adding - “Reforms are needed in direct and indirect tax policies to generate more domestic resources.”