Daily Times

Gilgit-Baltistan (G-B) is frequently billed as the Jewel of Pakistan. This nomenclature has gained newfound importance in context of the China-Pakistan Economic Corridor (CPEC) projects.

During my recent visit to Gilgit-Baltistan, I was overwhelmed to see the extent of local obsession with the corridor. A shabby roadside dubbed “CPEC Hotel” can be seen as an illustration of this.

This feeling is rooted in a conviction that G-B has been contributing to the economic well-being of Pakistan without any benefit in return.

How far can we expect economic gains stemming from infrastructure development projects like CPEC to be distributed fairly to regions like G-B? Despite popular believe, the process through which these gains are transferred from federal to provincial and regional level is not straightforward. It is determined by a host of factors all of which are not necessarily economic in nature. These factors constitute political, social and cultural realities and, in turn, shape the way institutions responsible for transferring economic gains operate.

In case of G-B, the mix of these factors has shaped institutions such that they have adversely affected the transfer of economic gains from infrastructure development projects. In G-B, most such institutions fall either under the rubric of development sector or of public sector.

The development sector is mostly supported by foreign aid. Projects that are being run with foreign money come across multiple pitfalls. This not only affects effectiveness of these projects but also subvert their distribution potential. One of these major pitfalls is that of moral hazard. Those in-charge of these projects routinely present inflated cost figures or intentionally under-provide a service to justify requests for additional grants from donors.

The dismal condition of a school playground I visited during my stay was certainly an instance of moral hazard. The school providing education to over 500 students was being run with foreign donations. Upon my inquiry about the ragged and dusty condition of the playground, I was told that the administration lacked funds to ensure its upkeep. Surely, the administration could have managed to at least spray water on the ground to settle the dust.

Interestingly, the compound serving as residence of the person in-charge of the school administration had three separate building in it. Two of these were registered as hostels and lofty sums of money were being received from donors for their upkeep.

It seems that financial benefits from such foreign-aid funded projects are usually enjoyed mostly by those managing the projects. Only the leftovers trickle down to the community. This gives an incentive to the locals to seek entry into the coveted elite that manages development projects. As the size in this elite soars, resource leftover for trickle down to the community fall.

The public sector also faces similar issues. In case of G-B, the public sector is still evolving since it was only recently given the status of a quasi-province. However, the situation renders state institutions as dysfunctional. For instance, the revenue officer of G-B has hardly anything of note to do. One may expect this is not possible in a region that has its own legislative body. But efforts to entrench democracy in G-B have been superficial at best. Locals routinely complain about the ineffectiveness of the legislative body.

The result of this has been minimal political activity in G-B. Hardly anyone seems to care about the issues that transpire in the mainstream political arenas of Pakistan. It is no wonder, then, that I saw only one political signboard in the main market of Gilgit city. That too belonged to the federal ruling party, PML-N. Political diversity, which is so important to a well-functioning democracy, is virtually non-existent.

Low political mobilisation among the people, in turn, has given rise to perverse incentives that are detrimental to ensuring fair distribution of economic gains. The political elite of G-B is more affluent than either their counterparts in major Pakistani cities or the aforementioned foreign-aid funded elite.

The culture in both development and public sectors is not congenial for transfer of economic benefits likely to be accrued from the CPEC projects to the people.

As long as this state-of-affairs continues, complains by the people of G-B of not getting their due share in economic gains will not be uncommon.

So what can guarantee fair distribution of economic gains in G-B? Only markets operating freely can cause fair distribution of economic gains. Economic agents pursuing their profit motive are better positioned to transfer economic gains. G-B needs more of its CPEC hotels to internalise gains from such projects.

The writer is an Adjunct Scholar at Policy Research Institute of Market Economy, an independent public policy think tank based in Islamabad