A lack of economic liberty

2015 Index of Economic Freedom ranks Pakistan 121st among 178 countries of the world when it comes to economic freedom

Economic freedom has a bad reputation in Pakistan. The left derides it as the imposition of a neo-imperialistic agenda on a hapless nation. The right occasionally pays lip service to it but then sacrifices it at the altar of economic nationalism. In short, there is virtually no advocate for a truly level economic playing field, for the freedom of entrepreneurs to build companies without fear of stifling over-regulation or anti-competitive behaviour from more established rivals. So it should perhaps come as no surprise that Pakistan ranks close to the bottom of the list compiled by the Washington-based Heritage Foundation, which rated our economy “mostly unfree”. While the Heritage Foundation has a definite right-leaning ideological agenda, we find ourselves mostly agreeing with its diagnosis of our economy.

The game is truly rigged, and designed to favour the incumbents and the larger businesses at the expense of smaller ones. How else does one explain the fact that our automobile manufacturing industry, which was set up in 1962, is still considered an ‘infant’ industry by the government and protected by monumental tariffs that render competition virtually impossible? Or the fact that the current industrial policy favours providing natural gas to larger textile factories for their captive power units, which ends up starving state-owned power companies of cheap fuel, leaving smaller industrial units without a source of affordable electricity? Or the fact that prudential rules designed by the State Bank of Pakistan effectively prohibit lending to new businesses? The rules are bent in favour of the already wealthy and privileged, resulting in a sclerotic economy that has hardly any sector capable of competing with global rivals if forced to do so. We continually subsidise the inefficient industries of yesteryear with billions of rupees of taxpayer-funded and borrowed money, while starving the newer, smaller companies that could one day grow to become the champions of tomorrow, were they allowed to flourish. Pakistan’s entrepreneurs are not asking for a handout, but they should reasonably be able to expect that their government will not go out of its way to prevent them from earning an honest living. Perhaps, the embarrassment of yet another bottom-of-the-pack showing on an international list will jolt Islamabad into action.

Published in The Express Tribune, February 2^nd,  2015.

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