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Finance Minister further compounds the economic blunders with his latest mini-budget

Finance Minister Asad Umar has, with his latest mini-budget, further compounded the economic blunders that successive governments in Pakistan had continued to commit since the advent of the Nawaz Sharif-led IJI government in 1990.

In his first term, Sharif had introduced an economy based on privatisation and economic liberalisation. This boosted the economy but at the same time allowed the rise of business oligarchs and further widened the wealth gap, contributing to political instability. Those who mopped up windfall profits from cotton and cotton textile industries during this period and subsequently consistently failed to reinvest in research and development, innovation, value addition and non-traditional lines of industry. This had led to export of low value-added goods which eventually started facing competition from comparable goods exported by more efficient competing countries.

We also lacked the raw materials needed to produce much of the goods in demand in the world markets and also the technologies that were needed to make such goods. And above all, we also lacked the three essential ingredients needed to jump-start an industrial economy. We were dependent on costly imports for energy; for capital we were completely dependent on foreign dole; and we continuously failed to enable our youth to acquire skills in the fast-advancing telecom and information technologies. Besides, we kept neglecting the three comparative advantages we had: agriculture, strategic location and the ever-expanding youth bulge.

Lastly, our private sector over the years has consistently failed to shoulder its entrepreneurial responsibilities in a free market economy. It had instead acted more like a rent seeker. It evades taxes, pilfers utilities and makes low-quality goods to keep expanding its unearned profit margins and under-invoices and over-invoices its imports and exports. And now Prime Minister Imran Khan’s government seems all set to hand over the country’s economy to this very sector which since 1990s has only thrived on monetary and fiscal concessions, cheap credit and subsidies even on exports.

It is the public sector that we need to promote and expand, not the rent-seeking private sector. A government has no business doing business — sounds logical. But a government devoid of the necessary instincts of a sharp businessman would find it almost impossible to frame socioeconomic policies that ensured progress with equity. Such governments either end up widening the gap between the rich and the poor, or failing them both miserably.

Governments totally dependent on imported fuel need to be business-minded enough to be able to reduce the burden on the import bill by being an expert of the market as are the international oil sharks, raking in millions on price fluctuations of as little as a minimal most fraction of a cent. Donor-driven poor countries need business-minded governments even more because if you are not well-versed in what is happening in international trade, you are going to end up returning almost the entire aid back to the donor country in import bills. Also, it is only a business-minded government which can make a distinction between an enterprise that yields profits of immense social value and those that yield purely financial profits. A government without business know-how would hardly be able to maximise social benefits of a public-sector entity at a minimum financial cost.

In most developed societies, the private sector’s profit motive is kept within reasonable bounds by establishing legally-sound autonomous statutory regulatory mechanisms.

A big chunk of unnecessary financial losses that public-sector entities of social value are incurring currently can be eliminated by cutting down on waste and replacing inefficient managements with efficient ones. Also, their burden on the budget could be significantly eased if the government were to collect the taxes that are due to it from all its citizens who earn taxable incomes. Only a business-minded government would know the importance of enforcing tax laws strictly across the board without exception and exemption.

Published in The Express Tribune, January 26^th, 2019.

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