It was indeed a pleasure delivering a talk recently to accomplished professionals about economic nosedives of the country with special emphasis on causes and remedies. When I entered the hall a workshop on learning Arabic was in progress. The facilitator, a British Pakistani, also invited me to participate in an exercise on some fundamental conversational vocabulary.
Historical data shows that Pakistan has not been able to sustain growth for long periods. Rather, it has had short growth sprints followed by nosedives. This is because economic policies are subject to change with the changes in government corridors. This implies that when governments are concluding their terms they ignore long-term implications of spending and utilize funds for their immediate political concerns to secure maximum seats in coming elections at the cost of national reserves; this is clearly evident from at least the last three tenures of three different political parties.
During the fifth year in the office governments hastily extended unplanned subsidies and threw funds carelessly to constituency-specific projects to win voters for the forthcoming polling. This trend suggests reflecting on our policy of framing five-year financial plans. It would be better to have legislation for 10-year financial plans with the consensus of all parties in Parliament while the cycle of the government should remain the same five years. It will ensure continuity of policies and liberate outgoing governments from the urgencies of accommodating immediate demands.
State-owned white elephants are a double burden on the economy. Organizations which are supposed to earn and contribute to the GDP of the country are actually eating up what is earned by some of the state-owned enterprises. According to Dr Ishrat Hussain, “Currently we have 212 stat- owned enterprises (SOEs). 85 are commercial SOEs while another 83 are subsidiaries attached to one or another SOE; 44 are non-commercial entities (such as trusts, foundations, regulatory bodies, universities, research and training institutions, promotional and advocacy bodies and welfare funds). These SOEs make up 98 percent of the government’s assets and account for almost 100 percent of losses. The top ten loss-making SOEs contribute around 90 percent to the total loss of the government. The set includes NHA, Pakistan Railways, PIA, Pakistan Steel, five power sector DISCOs and ZTBL. SOEs are a major drain on the country’s budget and consume public resources without any guilt or hesitation. These corporate giants have been maintained by successive governments to fulfill their own political agendas. Governments have blatantly resorted to granting excessive and out-of-merit employment at all levels in these organizations, causing acute inefficiencies and deep-rooted corruption. In the financial year (FY) 2019-20, the commercial SOEs collectively recorded net losses of Rs. 143 billion. Oil and Gas companies show net profits of Rs. 242 billion while Infrastructure companies (PIA, Railways, NHA, Post Office etc.) show net losses of Rs. 267 billion and power companies of Rs 117 billion.”
Foreign direct investment (FDI) is extremely important for an economy. FDI helps generate employment, contributes to GDP growth and boosts foreign currency reserves. During FY 2021, the net foreign direct investment (FDI) dropped by more than 28 percent. Including uncertain government policies there is nothing right to attract FDI, factor costs, transport costs, political environment, exchange rate, trade openness, tax rates, infrastructure, and property rights: every dimension needs serious attention of policy makers to facilitate foreign investors to explore untapped opportunities in the fifth biggest market of the world.
Mismanagement of different government departments and organizations has always been discussed and the same happened during the Q&A session; it was the general consensus that there is no dearth of competence in the country, but it is probably the sense of responsibility and initiative which generally lacks in our government departments and organizations that costs us heavily in terms of economic nosedives and otherwise relatively poor performance and mismanagements in key areas and during critical events.
The parking of capital in real estate is the big challenge for coming governments. The obsession with real estate has understandable foundations and originates in a fundamentally good idea: the need to buy assets that generate inflation-beating returns. But it has gone too far and is now starting to create a drag on economic growth, investment opportunities, and housing affordability. There are some leading entrepreneurs who opted to invest in real estate due to attractive profits and less volatility. They blame government policies for not promoting investments in the manufacturing sector which has a better potential to provide employment. Construction sector does serve as a driver for several linked industries, but when it dumps capital in nonproductive tower blocks in mushroom residential societies, it becomes a real burden on the economy of the country. Government needs to introduce policies which can divert the capital to the employment intensive sectors for better productivity and economic growth.
A young population has exceptional potential to contribute towards the development of the economy particularly in the technology and startup sector, which is thriving, and the government has so far taken some initiatives to facilitate them, but still there is a long way to go.
Market development is the key for the progress of any economy. We hardly observe any initiative from relevant departments for market development in countries where we have few satisfied customers. Market development in international societies is a costly affair and needs government intervention to support businesses back at home by enhancing demand for those products in which we have absolute or comparative advantage over our competitors. On the other hand, international business development is the process to identify new markets, nurture and acquire new clients and business opportunities to drive growth in the demand of your core products to contribute to the increased profitability of your businesses in your country of origin. It has generally been observed that customers from international markets are better aware of our strengths and coordinate exactly with those industries and businesses that can fulfill their expectations and deliver on the promise. But we hardly experience any policy or practical intervention by relevant departments to attract and facilitate potential international clients to visit Pakistan and explore opportunities to get better products.
Mismanagement of different government departments and organizations has always been discussed and the same happened during the Q&A session; it was the general consensus that there is no dearth of competence in the country, but it is probably the sense of responsibility and initiative which generally lacks in our government departments and organizations that costs us heavily in terms of economic nosedives and otherwise relatively poor performance and mismanagements in key areas and during critical events.
