Can anything be done about Pakistan’s economy?

By Maleeha Riaz

Pakistan is struggling. Struggling to keep afloat in a sea of political, economic and social issues. It suffers internally from inflation, power shortages and fear of losing our jobs, homes and families. Its people are divided along ethnic, racial and religious lines. Injustice and corruption rule the night and the day. All this is being reined by leaders who purport to represent the people but fail to mention who exactly is included in “the people”.

While the county’s political scenario has been interpreted as productive or destructive, depending on which house you belong to, its economic productivity is relatively easy to determine. Measures like the balance of payments, imports and exports, taxes and revenue can give a good picture of where the economy stands. The current picture is, unfortunately, quite miserable.

Every economy needs raw materials to propel its industry but be it water for crops or fuel for factories, Pakistan is witnessing the worst form of inflation and infrequent, if not non-existent, supply of raw materials.  Farmers have been left high and dry. They can no longer afford to cultivate and harvest crops. Who could imagine an agricultural country like Pakistan would be importing perishable food items like wheat and rice? This is because smuggling and hoarding have driven up costs. High input costs have driven companies out of business. Factories are sitting idle and workers are destroying public property in protest. Our famous and extensive textile sector is nothing but a source of embarrassment. But hey, at least Pakistan can boast of a booming consumer business. Swishing lawn prints, unimaginably cheap cell phone network rates, weddings so glamorous that it would put our western counterparts to shame and the opening of one European and American brand after the other paints such a lovely rosy picture of the state in Pakistan as brimming with butterflies and sunshine!

Some economists are optimistic about the impact of foreign trade on the nation’s economy.  The IP gas pipeline, for instance, would help diversify Pakistan’s dealings with other nations. Just like the British Railways stimulated growth in the villages of the subcontinent, the IP gas pipeline could help develop areas in Baluchistan. Pakistan is also looking into the potential market for marble in Kuwait. Under the MFN status, trade with India acquires a new color. Both countries seem eager to open their domestic markets to each other. For Pakistani industrialists, additional buyers could bring up sales especially for the textile and cement industry. Competing with the larger Indian market may have disadvantages but analysts feel this would help our local industry gain experience and grow in the longer run. Bangladesh’s trade with India is one example.  Restrictions can be laid down to protect local industries, for example, the negative list of trade items formulated by Pakistan ensures that only locally produced food items (vegetable and livestock) are distributed in the country. But pinning hopes on trade implies a healthy domestic production of exports which is not the case in Pakistan.

The effects of the country’s deplorable conditions have had a paradoxical effect on the public. While some burn tires other carry on with their social life unperturbed. The latter would argue that they are law-abiding citizens who pay their bills and taxes on time and contribute regularly to charity. Unfortunately, the elite in Pakistan are not just the educated upper class citizen. A major chunk of elite originate from the landlords who uphold their indigenous laws in their territories and disregard the authority of the government.

The government has a poor attitude of dealing with these issues. Actions are taken when the problem escalates to a crisis as was seen in the case of the Dengue outbreak in Punjab or overflow of the Hunza Lake. In financial matters too, the problem is ignored until it is no longer possible. Long term strategies and planning is hardly done. On the rare occasion when it is done, the strategy would either never see the light of day or would not be given an opportunity to be carried out to task.

This is partly due to the change in socio-economic policies that accompany the frequent change in governments.  Pakistan has experimented with different economic systems like the Great Decade of following capitalism and free-market principles under Ayub Khan that widened income disparity so much that 22 families controlled all the major companies and investments in the country.  Socialism under Bhutto enfolded awfully; nationalization replaced entrepreneurs with bureaucrats who had little idea about running business. Red tape and corruption grew. Musharraf was lauded for boosting the telecommunication sector but long term plans for industrialization and energy resources were not taken. The influx of FDI created a temporary boom which collapsed after his reign. The accomplishments of his PPP successor require no elaboration. Our culture of dependence on foreign aid compels us to follow conditions imposed by the donor.

In other words, Pakistan has been there and done every other that. Surely there is a better strategy to rescue the economy than relying on the ostentatious consumer industry to generate revenue. If the West is not a befitting example, the regional Asian tigers might be of some help.

East Asian Tigers introduced land reforms and followed and export-led growth model with high tariffs to promote local production. The revenue collected from a positive balance of payments was invested in education which ensured future supply of skilled human resources. East Asian model may not be so easy to emulate for Pakistan. Government intervention in industrial matters requires strong institutions, bureaucratic skills and a unified stance on economic goals. Sadly, Pakistan lacks in all three factors. It is also important to consider the manner and the commitment with which development is carried out. For Pakistan it would mean a shift from its defense obsession to socio-economic security. Another issue is related to governance. East Asian economies were authoritarian in nature. The current political climate in Pakistan is however against any depotic rule. Even the military has been staying clear from civilian matters. How far will such a  model be successful in Pakistan without a strict ruler? On the other hand, history shows dictators haven’t always been beneficial for the economy either.

Pakistan could also choose a more socialist approach to resolving its economic crisis. The public is disgruntled by the government’s selfish attitude when it comes to solving their problems. A system that endorses equality and abolishes hierarchies, except based on merit, is appealing. Different sectors of the economy will then be monitored by technocrats instead of bureaucrats. In addition, some conservatives and radical elements of Islam have protested against the individualist nature of capitalism. Anti-West parties believe it to be representative of Western values and beliefs. In contrast, certain characteristics of socialism do not clash with local cultural and religious values. This may even help make neighborhoods secure where the above mentioned groups are causing disturbances.  Without being completely against market or private property, a parliamentary government can be maintained with public ownership of goods to assuage the effects of capitalism.

In both socialist and East Asian economies, priority was first given to indigenous production. For any economy to excel, a consensus over economic goals must be reached.  Policies need to be formulated which are flexible enough to allow for minor changes but not too loosely bound that it permits every stakeholder to manipulate it for its own good. Economic institutions must be repaired and led by professionals only before we set out to follow an economic strategy for growth.