The Asian Development Bank has recently given quite a grim warning about the Pakistani economy by essentially citing that the growth trajectory will remain on a declining trend at least for the foreseeable future. With the GDP growth rate currently at a paltry 2.80% and expected to be further under pressure in the coming days, the situation does not augur well for an average Pakistani – not only growth being well below inflation, but also job creation being only just one third of the desirable level.
Unlike the developed western or European economies, Pakistan’s peculiarities are quite different: It has a burgeoning population with a population growth rate next to none and nearly 2-2.5 million people enter the job market every year from what is a rather a young population where majority are 35 years or under – Youth as we know can be quite volatile, meaning, in essence, the current situation depicts to be an explosive mix of elements that can go wrong the moment any government fails to deliver on its promises on upward social mobility.
PTI is no different. Little wonder that public love affair with the party is waning fairly quickly – As the election time promises fail to materialize the dissatisfaction mounts and the public temper rises. The fact that Pakistan already has a painfully long history of successive government-delivery failures (almost since the 70s now) is not helping either – naturally, as a result the threshold of public patience stands quite thinned! Also, in the process the desperation has grown to an extent where the masses are even willing to condone inefficiencies cum corruption as long as they got something in return! The average man on the streets neither understands nor really cares about the economic mumbo jumbo on deficits and debt!
And for this reason alone, despite numerous allegations, the Muslim League perhaps still remains the party that finds the most traction with the Pakistani people, because its shortcomings aside, the thing is it visibly undertook projects that positively affected the life of the common man, thereby creating an impression of a government, which not just takes, but also gives. And this is precisely where the Imran Khan government is failing: the empathy is missing. The heart or more appropriately the rhetoric may be in the right place, but operationally it finds itself to be out of its depth in being able to solve the issues confronting an average Pakistani.
Time we discarded these failed initiatives of the past and instead brought about some real fresh thinking on the table aimed at increasing both, productivity & output!
So, the question here arises that where exactly is this government going wrong? Answer: Mainly, in its mindset and in its understanding of Pakistan’s economic culture. Very few governments understand that changing culture can often be impossible. Economic management is a science, which relies on elements such as economic history, structure, environment and culture, as much as it relies on pure economic theories. Meaning policies needs to be devised in the context of an economy’s history, environment, culture and its existing structure.
Any government that does not understand these elements when devising economic policies will just end up facing a brick wall instead of making any progress. Numerous management gurus like Drucker, Schumpeter, Porter, Prahalad and others, have delved into the process of changing organizational or even an economic culture and have almost unanimously come out in observing that such a thing is almost impossible over an economic cycle spanning as long as half a century (50 years).
The only way to change a culture is to totally deconstruct and then rebuild an organization or an economy and still this may not be fool proof – with economies this option may simply just not be there. Their solution lies in first understanding the very culture and environment of an economy and then build the desired ‘change’ around the very underlying realities that otherwise are largely unalterable. It is obvious that PTI failed to comprehend this and although at places well intentioned, it simply rushed into bringing about a change that simply went against the ethos and the operational dynamics of the Pakistani economy.
A tunnel vision of people who are either simple accountants or have little experience in the way of working in Pakistan have ended up unleashing dynamics that have resulted in scaring people away from operating or in putting up the cost of doing business so high that it has just become unviable for most to operate. The unnecessary registration drives, abolishment of zero-rating instead of finding viable solutions, an unbridled FBR, unrealistic interest rate hikes, an over devalued currency, etc., all of these, unless quickly checked or corrected, will cause nothing but more damage and pain.
Read more: No Free Lunch – Economy under PTI government?
The second principal mistake, in managing Pakistan economic affairs, has been that of a flawed mindset: Everyone is corrupt and every existing structure is wrong. One must realize that there are some basic fundamentals of the way things happen here in Pakistan: a) There is big culture of philanthropy that helps the government in shoring up public and social safety nets that otherwise it simply could not have managed on its own (by many accounts private sector philanthropy in Pakistan is perhaps one of the largest in the world in terms of per capita spend and connectivity); b) Pakistan is amongst the lowest ranked in terms of state support deliveries, meaning if the government collects less it delivers less as well; c) There is a large undocumented sector in the economy, which may not be directly contributing to the national exchequer, but indirectly its contribution tends to be immense, since it provides unemployment to the poorest of poor, in areas and sectors where government’s reach may not be possible or limited, pays its due share of indirect taxes and sometimes even more due to higher tax rates for this sector, and last but not least keeps the markets flooded with capital crucial to ensuring domestic consumption. Come too hard on it and most of these operations will either close down or go out of business; and d) Pakistan’s bureaucracy is in general inefficient and corrupt and unless it is first overhauled, the more capital that gets diverted its way the more capital will in effect be moving away from efficient to inefficient hands.
So in essence what this implies is that any reforms that are brought about should not only be sensitive to these realities, but also be aimed at a gradual change without eroding the very benefits being reaped in the present way of working. This is where this government has mostly come across as being confused. It wants to bring about an ease in doing business yet it unleashes an untamed cum untrained bureaucracy on businesses, in the process killing private ambition and innovation (risk cum out of box thinking) – the very tools successful economies these days thrive on! It wants to end conflict of interest yet the appointments speak otherwise.
It wants to shore up public sector enterprises and preserve national wealth yet it puts National Bank of Pakistan up for privatization. It wants to boost investment and exports, yet it puts no check on FDI that merely profits locally and repatriates abroad; It wants Pakistani manufacturing to grow and be competitive yet it supports an unrealistically high interest rate – around the globe there is instead a drive to reduce interest rates and corporate tax rates. It wants employment generation and poverty alleviation yet it focuses on a surplus economy rather than a sustainable economy. The list of contradictions is endless.
Read more: Is the government taking enough steps to make way for a stable economy?
To sum it up, regardless of the latest government rhetoric that we are hearing, advising that the economy is finally on the mend, that the worst is now behind us, the truth is that unless the government goes back to the drawing board and properly comprehends the real nuisances of managing Pakistani economy, the results will not be forthcoming. Merely meetings with a select group of businessmen is not going to take us anywhere except more of rent seeking or more of business as usual in farce production floors that in reality only represent import based assembly lines or more new conduits of channeling wealth through unproductive schemes for artificially shoring up stock exchanges. Time we discarded these failed initiatives of the past and instead brought about some real fresh thinking on the table aimed at increasing both, productivity & output!
Dr Kamal Monnoo is a political analyst. He is honorary consul general of the Czech Republic in Punjab and a member Board of Governors of Islamabad Policy Research Institute. He is author of two books ‘A Study of WTO’, and ‘Economic Management in Pakistan.’ He can be reached at: kamal. monnoo@gmail.com. This article was originally appeared at The Nation and has been republished with author’s permission. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.