“Which road should I take?” Alice asks the cat at a crossroad in the classic children’s story of Alice in Wonderland. “Where are you going?” the cat enquires. “I don’t know,” replies Alice. “Then it doesn’t matter which road you take,” the cat says in response, “Any road will take you there”.
This exchange designed to ingrain in the minds of children the logic of having a direction in life is a lesson that we as a nation need to imbibe in our collective national psyche and activities. As a nation, not having a direction and a goal, without knowing where we are going, and without resolute determination, we will not achieve anything. We will never get “there” nor arrive anywhere in the hierarchy of nations because we haven’t really determined our destination. Without a destination and without any goals, we cannot pick a direction, choose a road, strategize or plot a course of action, to get “there”.
Pakistan was born out of the crucible of a mesmerizingly clear vision masterfully channelized by the founding fathers into an epic people’s movement that created a unique new country for the Muslims of the sub-continent. Unfortunately, the untimely early passing away of the Quaid and his able lieutenant threw Pakistan into total disarray, disrupted its long-term direction, and derailed the creation of a consensus-based strategic roadmap of nation-building.
Successively poor leadership was unable to consistently guide the nation to stability and prosperity. As a result, seventy-five years after the eclipse of colonial rule, Pakistan is littered with a litany of poor outcomes, driven by muddled thinking, poor choices at critical crossroads, missed opportunities, fossilized institutions, resistance to change, retarded politics and retarded economics.
Read more: Has the economy been thrown away?
What we are witnessing today in Pakistan, is a result of not having an overall desired destination for the country, embedded in an acceptable and popularly acknowledged vision for development which has led to a hotch-potch of myopic policies. These were often contradictory and usually had extremely damaging socio-economic outcomes. Our divisive politics has always damaged our economy at critical junctures as illustrated by our twenty-two mostly failed and abandoned IMF programs.
A clear-cut and well-thought-out national vision and direction for ‘development and growth’ coupled with alignment of appropriate rules of business has eluded us. In the first twenty-five years of independence, we were touted to be the model of economic growth yet our politics and enemies combined to break the country. In the later fifty years, we have aimlessly drifted between Bhutto’s Islamic Socialism, Zia’s Islamization, Sharif’s Asian Tigers, and Musharraf’s Enlightened Moderation. From Afghan Jihad against the Soviet Union to the American War on Terror. We have been the frontline state suffering enormous collateral damage with nothing to show for the people.
The distressed and confused populace engulfed in a catastrophic social-economic-political meltdown is struggling with multiple questions and looking for answers. They are grappling with the toxic scale and dimensions of our problems. They are searching for the root causes and the culprits to blame for the prevailing situation. They are looking for the light at the end of the tunnel and the roadmap that will take us out of our current malaise. Most importantly, they are looking for the leadership that will set our direction and leads us in these difficult times.
How Pakistan suffered at the hands of a visionless leadership
In our long fruitless national pursuits since the catastrophic breakup of the country, the people have been deceived, impoverished, and denuded of security of life and livelihood. Worst of all they have been deprived of any hope for a better future. The nation’s morale is at an all-time low. During the last fifty years, the current incumbents have been in-charge for twenty-seven years, the military has directly ruled for twenty years, and PTI the remaining three. Each one bears the responsibility for omissions and commissions directly in proportion to their longevity in power.
A visionless leadership, many with sticky fingers made numerous distorted choices at critical crossroads which are haunting us today. The results are all over the place for us to see. We have the most expensive, dysfunctional, corrupt, and unaffordable power sector, which is incapable of powering Pakistan’s future exports and growth. We have a broken public financial management system, that has plunged Pakistan into an intractable debt trap. The debt burden will be borne by us for many years to come. We have miserably disgraceful global rankings in critical economic performance and governance metrics that are a reflection of a failed economic system and gross incompetence in nation-building.
We rank at the bottom of world tables in per capita income, economic freedom, investment climate, trade openness, competitiveness, productivity, logistics, innovation, technology, and digitalization. We are also amongst the worst in socio-economic indicators of human development, nutrition intake, child stunting, and pervasive poverty. The failures are too glaring and all-encompassing. The same old players who created our economic mess, to begin with, are in charge again, pursuing the same policies in the same system that created the mess in the first place.
The incumbents are the ones who plunged us into the debt trap of unsustainable foreign debt by consistently violating the fiscal responsibility and debt limitation act passed in 2005. In their long stints in power they have presided over the creation of an inward-looking economy whose exports do not balance out its imports, an economy that exports labor instead of products, an economy that is highly regulated, encourages rent-seeking, penalizes investment, discourages competition, promotes big government and bureaucratic controls.
We are now unfortunately inheritors of a grossly non-competitive economy that is no longer sustainable in a volatile uncertain global environment. The entire ecosystem has to be rebuilt and transformed for our survival. A transformation that will take considerable time, effort, determination, and focus.
The people are victims of this comprehensive cumulative policy failure. With the debased currency, and escalating food, power, and fuel prices, they are facing runaway inflation and a stagnating economy, with sharply rising unemployment and a distinct possibility of a lurking default; a sure recipe for social disruption and political upheaval.
Unfortunately, due to our financial bankruptcy, we are also facing severe threats to our national security and hurdles in the pursuit of an independent foreign policy. We have lost our sovereignty to international lenders. With 22 mostly unsuccessful IMF programs under our belt, political considerations once again are ineptly trying to derail the 23rd program only weeks after it was signed.
As of today, we continue to face a pervasive and colossal failure of leadership and statesmanship with no indication of stepping back from the brink. The whole country is on tenterhooks, while the contenders are engaged in a vicious and uncertain game of thrones that is rapidly pushing the economy into an abyss. Pakistan’s political risk is soaring in spite of an IMF program in place.
Read more: Pakistan and the incoming Sovereign Default
Pakistan’s Credit default swaps are trading at an astronomical rate of seventy-five percent, and its international bonds and sukuks continue to sell at a massive discount foreclosing any possibilities of refinancing our debt. The rulers clinging on to power are running helter-skelter like headless chickens further exacerbating a crash landing.
Credit Default Swap (CDS) is kind of insurance on loans by country. If the country defaults, CDS guarantor pays the loan according to rates.
In March 🇵🇰, CDS rate was 5% i.e. low default risk, 95% of loan guarantee for CDS purchase.
Today, CDS 📈 75.5% i.e. very high default risk pic.twitter.com/NegzG9OeEU
— Economy of Pakistan (@Pakistanomy) November 16, 2022
In short, the country is enmeshed in a perfect storm ignited by a political and governance meltdown that is gelling into an economic collapse leading to a possible default and social breakdown. To top it off, one-third of the country has been devastated in a flood of epic proportions and destruction. The largest political party is out of parliament and on the roads. An unwieldy coalition of 13 small parties is running the country. The state institutions are culpable, paralyzed, and incapable of stopping the slide into oblivion.
Miraculous transformations via realistic development strategies
It is quite obvious that the first step back from the brink is to immediately eliminate uncertainty and reduce Pakistan’s international risk premium. The government needs to give an unambiguous roadmap for inducting a responsible caretaker government that pursues the IMF program in letter and spirit and holds transparently free general elections in the constitutionally prescribed time period.
Going back to the sovereign and seeking a new mandate for governing the country is critical. Only a popularly elected government with a large two-thirds majority in parliament capable of changing the rules of governance can rescue us from our endemic political and economic crisis. The incumbents have no credibility left to steer us to safety.
The prime question that must be addressed for the benefit of the electorate during the elections is: Can Pakistan, like a phoenix, rise from the ashes of the last fifty years or not? To rise from the ashes it not only desperately needs to avoid default in the coming months but also needs to comprehensively transform its economy in time to celebrate, twenty-five years from now, its 100 years of independence.
Read more: Pakistan once again in a lurch!
The task is difficult but doable. In recent history, we have witnessed many countries that have performed this type of miraculous transformation of going from the ‘worst to the best’ in a matter of a single generation. ‘Role-Models’ exist all over East Asia and elsewhere to emulate.
A major characteristic of the transformation in these countries has been the presence of exceptional visionary leadership with resolute determination, clearheaded goals, missionary zeal, and uncanny skills to organize and build effective economic institutions of development and reform.
These leaders were able to force changes in the system that streamlined bureaucratic procedures and modernized decision-making processes. They were able to assemble and empower quality management teams based on excellent skills, expertise, and knowledge to deliver results in line with the national vision and goals set out by them.
General Park in Korea, Lee Kaun Yew in Singapore, Mahathir Mohammad in Malaysia, and Deng Xiaoping in China, to name a few, all initiated a ‘process’ of national development that ultimately transformed their societies into wealthy and prosperous nations.
They mobilized enormous amounts of capital, developed and harnessed national technical capacities, modernized their political and economic institutions, and revamped their organizational structures and processes to achieve national goals. This has all happened in the last fifty years at a time when we were drifting aimlessly, fighting myopic power-hungry political battles devoid of economic progress and development.
Each leader’s successful development strategy was not just based on tinkering at the periphery but in reality, was a comprehensive process of transformation. Encompassing a wide range of areas and sectors and driven by an overall vision. The transformations were based on clear identification and address of obstacles to change and incorporated the implementation and monitoring reforms needed to ensure the achievement of national economic goals.
Pakistan’s 25-year plan: Global markets
For Pakistan going forward, our leadership has to find space in our political system for an effective and comprehensive economic transformation. This would be possible via a two-thirds majority in Parliament for the winning party. Whoever gets this majority has to come prepared with a well-articulated Vision of ‘Development and Growth’ to be rolled out immediately with periodic milestones and accomplished in the next twenty-five years.
The vision has to be driven with absolute determination at the top and participation and ‘same page’ commitment of social, bureaucratic institutional, and political stakeholders to ensure smooth compliance and implementation. It is particularly important to have such a ‘National Vision’ in an era of intense global competition.
It is important that as an integral mission within the vision, the nation is motivated to eagerly participate in and be a winner in a global economic race of nations. Strategically developing a competitive advantage for Pakistan in global markets will be the cornerstone of winning this race.
It is abundantly clear from recent history, that in the race of nations, competitive advantage in global markets is not a fixed endowment but is crafted, developed, and nurtured with imagination and great national effort. This is particularly true when the effort and transformations involve not just achieving macroeconomic stability but also structural economic changes that are longer-term in impact.
Furthermore, successful countries have not only invested in developing long-term visions, in the context of global and domestic environments faced by them but have also connected the visions and missions with the institutions needed to translate long-term visions into economic reality.
Thus, investing in institution building and systematic monitoring to follow up on actions and ensure results are essential. If we want to permanently escape from the recurring bankruptcy of the economy and its dreadful consequences, then laying the foundations of rapid economic growth on the basis of a strong competitive advantage in global markets is crucial for Pakistan.
Economic gap between India and Pakistan
Our weak economy is not only responsible for the collapse of the social security of our people but also poses an existential threat to our national security. We have been left far behind in the economic ‘race of nations’ both globally and regionally. In particular, we have fallen behind economies in our immediate neighborhood.
The economic gaps are growing and reaching ominous dimensions thereby disturbing the balance of power on our borders. Overcoming and meeting the regional growth challenge is thus one of the biggest tests facing the nation. National security and social security concerns are intertwined with our economic retardation and require simultaneous resolution.
Around ten years ago the Asian Development Bank (ADB) published a revealing report entitled ‘the Asian Century’ in which the economic trajectory of various member countries of the ADB was projected to the end of 2050. The study projected in the case of India a per capita income (PCI) of around forty-two thousand dollars and in the case of Pakistan the projection was at eight thousand dollars, a gap of thirty-four thousand dollars.
In other words, it was projected that by 2050, an average Indian would be five times richer than an average Pakistani in terms of income and the aggregate Indian economy would be thirty-five times larger than the economy of Pakistan, a sure-shot recipe for disaster. The challenge to our existence clearly comes from our divergent economic trajectory with our neighbor India which is on a fast growth path that will take its economy from its current position of being the sixth largest to the second or third largest in the world.
G20 summit announced India’s arrival on Global Stage.
Marching ahead to become third-largest Economy by 2027 🇮🇳
— Devusinh Chauhan (@devusinh) November 18, 2022
When the study was released around 2010 the gap in PCI between India and Pakistan was around a hundred dollars, today in 2022 the gap has increased to around 1200 dollars. The ominously rising gap is an existential threat for Pakistan that requires immediate redressal. If we want to survive then our reforms and economic transformation have to be deep-rooted, fast-paced and the best in the region. We have to catch up very quickly for our survival.
Make no mistake about it, if our current retarded trend continues and further intensifies, due to our existing political and socioeconomic morass then by 2050 the fifth largest populated country, with the fifth largest youthful working age population, the gateway into Eurasia, the inheritor of the mighty Indus and its tributaries with its gigantic plains and fertile valleys, the seventh nuclear power, the dream of our forefathers will be buried under its own self-inflicted annihilation and lose its sovereignty without a fight.
The nation is again at the proverbial crossroads; One road, the current destructive path, will lead us into global oblivion and misery while the other road, a more onerous path, one that we must take, requires dramatic alteration of our economic trajectory and direction, a path of difficult reform and constructive change, a path leading to ‘double digit’ annual growth that will propel Pakistan to become the fifth largest economy in the world at par with the size of its population and reach a per capita income that will match India dollar for dollar by 2050. In this world cup of economic performance, we cannot afford to be outclassed by India.
Building a vision-driven system
The people of Pakistan need to wake up from their slumber before it is too late and choose a leadership that will turn around the economy and put the country on the unprecedented path of rapid economic development and preserves its sustainability, freedom, dignity, and self-respect in the comity of nations.
Pakistan needs a leadership that can think big and causes a paradigm reversal in decision-making; from a myopic, politically driven, decision-making system that has created the inward-looking retarded economy of today, we need a ‘vision-driven’ system that will create an outward-looking dynamic economy, based on a well thought out economic vision and strategy befitting a large country like Pakistan. A vision that has a built-in goal of extraordinary and sustainable double-digit economic growth at its core.
We need a system that will foster and manage rapid economic growth as the means of propelling us out of our debt quagmire and ushering in unprecedented prosperity and wealth for the people. This would necessitate an economic strategy that produces the desired results of macroeconomic stability in the short run and the beginning of structural reforms that put us on the road to achieving sustainable high growth in the medium term.
We will need an economic development strategy that totally transforms Pakistan; its investment climate, human resources, technical capacities, institutions, way of doing business, financing, and marketing systems. We will need to aggressively promote a competitive market economy with a social consciousness where wealth is created and the poor are protected.
The economic transformation canvas is wide and challenging but the objective of creating a competitive and productive economy has to be achieved. At the federal level, our mission is clear. We have to transform our power sector so that it is not import-dependent but climate-friendly renewable and hydro, affordable, and not a hurdle in our development. We have to implement a debt strategy that charts a safe passage for us to exit from the debilitating debt trap we are engulfed in. We have to create a conducive environment for a surge in investment both domestic and foreign, as a sequel to macroeconomic stability embedded in the IMF program.
We have to deregulate the suffocating system of permissions and NOCs. We have to privatize and reduce the size of the government and give economic freedom to our people to unleash their entrepreneurial genius by removing the barriers to the achievement of their dreams and enabling them to become the engine of growth for Pakistan.
Empowering the public
The two hundred and thirty million people of Pakistan have to be at the center of our economic strategies. We must equip them with skills and capital to be the lynchpin for making Pakistan a new ‘Mini China’. Pakistan is the next ‘Factory of the World’, the next ‘Food and Fruit basket of the World’, and the next ‘Services and IT Hub’ of the world. We must fully exploit our geography as the gateway into Eurasia and become the center of connectivity in the region by creating the wherewithal and infrastructure to leverage our location.
This would necessitate us to incentivize each production and service sector of Pakistan to upgrade both qualities of output and standards of productivity for competitive integration in global value chains and markets. We would require to facilitate effective public-private partnerships to develop the multidimensional ecosystem of competitiveness (comprising regulatory freedom, the knowledge base, skills development, connectivity, logistics, special infrastructure, cheap energy, access to technology, finance, and markets) for various products needed in global and domestic markets.
If we want our destiny to be the next ‘economic powerhouse’ at the confluence of West Asia, Central Asia, and South Asia then our economic transformation and development strategy has to transform the livelihoods of millions of people living in the villages and towns of Pakistan.
Sixty percent of the people of Pakistan live in rural areas engulfed in poverty and existing on subsistence-level primitive agriculture. Rural youth are migrating to urban areas in huge numbers. In fact, Pakistan has one of the highest urbanization rates in the world and by 2050 over eighty percent of the people will be living in urban areas.
A very quick analysis on Urbanization sprawl of Karachi in last 30 years using #GEE. Malir is not included in this analysis. Karachi east, west, south & central included. What we have done with this economical hub city of Pakistan just because of poor management. #RemoteSensing pic.twitter.com/IXESvFsnHN
— Salar Saeed Dogar (@isalardogar) July 27, 2020
Read more: Urbanization in Pakistan
This demographic shift can be turned into an opportunity by investing in the economic transformation of both rural and urban economies in an integrated manner. This will require an economic strategy that encompasses all tiers of Government.
Utilizing the potential of 160 administrative districts
The federal government will have to deal with the macroeconomic challenges at the aggregate level and engineer a conducive national environment for a quantum jump in investment to drive growth. The real game changer though would come when we unleash in tandem a process of transformation that jumpstarts investment and growth at the grass root level in the numerous administrative districts where the people of Pakistan eke out a living.
This will involve building and upgrading the competitive advantage of each district to enable its products to competitively participate in domestic and global markets. Pakistan administratively comprises 160 districts where the rural and urban economies are intertwined. Going forward, each district currently viewed as an administrative unit has to be also viewed as a ‘strategic spatial economic unit’.
The district is usually headquartered in a large city surrounded by smaller towns and rural villages. Every district has an average population of 1.5 million with a GDP between two to three billion dollars. This provides sufficient scale to develop each district’s ecosystem for competitive advantage through an integrated ‘District Economic Strategy’ that translates into a ‘District Development Plan’ (DDP) for uplifting its production and services sectors to international standards of productivity and competitiveness.
This will require an enormous amount of investment in each district managed through an integrated rural-and-urban economic coordination setup with public and private representation. Each DDP should be designed to unshackle growth at the ground level and catalyze private investment to supplement public funds provided through the budget.
To fully exploit the district’s potential to participate in the global economy, for every Rupee of public development funding, we should target to raise ten additional Rupees in PPP arrangements that should further unlock thirty Rupees in purely private investment. District development budget formulation would have to switch from having largely political motivations to having stringent economic considerations as a basis.
Administratively, the 160 districts are grouped together in 38 divisions. Each division can play a vital role in coordinating the economic infrastructure of each district within its ambit into a seamless inter-dependent economic cluster of cities with their rural hinterlands. The Divisions have an average population of six million with the largest being over twenty million, larger than many small-sized European countries.
Each divisional GDP, composed of inter-district specialized value chains and economic activities can be multiplied and scaled up through strengthening industrial and agricultural clusters with requisite paraphernalia to supply to domestic and international markets with minimal transaction costs. Divisional-level integration of district and provincial strategies is critical for scale and agglomeration impacts, connectivity, and competitiveness initiatives.
Above the division, at the provincial level, all divisional plans can be integrated for an overall provincial strategy. Finally at the federal level all provincial strategies should be harmonized with federal government regulatory, financial, trade, and development strategies for a comprehensive ‘economic reform and transformation plan’ comprising both soft and hard interventions. The country urgently needs such a plan that is driven by an inspiring growth vision encompassing all tiers of government and meticulously implemented to meet national goals and aspirations.
A Prime Minister’s responsibility
The components of the entire integrated system for developing an appropriate economic transformation plan involving all three tiers of government include policy priorities settings, policy formulation entities, policy approval processes, policy implementation mechanisms, monitoring mechanisms for service delivery outcomes, and evaluation of development results. This would need a concerted and systematic effort.
In a parliamentary democracy, the onus of any national transformation rests on the Prime Minister as the chief executive of the country assisted by the chief ministers at the provincial and local levels. The federal and provincial cabinets are part of the management teams. This requires close horizontal and vertical coordination across various tiers of government.
Unfortunately, the governance system is overwhelmingly driven by cut-throat politics rather than economic considerations. The cabinet is selected from elected members of parliament who excel in winning elections and are not known for their economic or management prowess.
The bureaucratic system is attuned to paper-pushing rather than having analytical-based economic policy capabilities or problem-solving abilities. The Prime Minister’s office is not equipped to support economic transformation initiatives while the cabinet members are ill-served by their respective ministries due to a lack of specialization in strategy formulation.
In this governance environment, the agent for change has to be the PM office. To effectively play this role and enable the PM to be the bully pulpit for change and delivery, a powerful economic transformation wing directly reporting to the pm has to be established in the PMO.
It will augment and reinforce the existing administrative setup of the PMO. The task of the transformation wing would be to ensure that the economic transformation of Pakistan through timely formulation and implementation of the ‘Economic Transformation Plan’ by the line ministries and the provincial governments is accomplished.
The tasks would include, articulating the PM’s economic vision, delineating the key priority areas and goals of transformation, coordinating and collating the development of strategies by each economic, planning, and service ministry, and facilitating collaboration with the three tiers of government and the private sector. Developing a monitoring system for timely implementation and effectiveness.
This would also require, ensuring the alignment of development budgets and governmental expenditures with strategic interventions, coordinating and aligning federal, provincial, and local government strategies and interventions to achieve national goals, and using the power of the PM office to ensure merit-based appointments in key areas, compliance and removing hurdles in implementation of action plans, reporting results for feedback, policy correction and ensuring goals are met.
Unfortunately, no political leader or political party has ever focused on or given a befitting ‘economic vision’ that Pakistan needed, nor a detailed comprehensive ‘transformation plan’ with an accompanying ‘organizational setup’ strategy that would have secured our place in the ranks of the developed world. But it is never too late.
Between now and the next election, a minimum of 100 days away, every political party has an opportunity to develop its vision and a transformation plan to inspire the masses. A plan that could be implemented whenever the party emerges victorious in the elections and gets a mandate to implement ‘the plan’ in its next term of five years. A two-thirds majority in parliament at the federal and provincial levels would be a prerequisite for implementing the plan and then perhaps, Pakistan will finally be able to reach the long-lost destination envisaged by the founding fathers.
Dr. Salman Shah is the Former Finance Minister of Pakistan. The views expressed in the article are the author’s own and do not represent the editorial policy of Global Village Space.