Things to do — 2020
People are desperate and poverty-ridden
PM Imran Khan. PHOTO: PTI
When Musharraf took power in 1999, the country was running on half-a-billion dollar reserves. It could only fetch a couple of weeks worth supplies. A year earlier, the country had exploded six nuclear devices in response to India’s and had since then been under severe economic sanctions for violating the Non-Proliferation Regime. As Musharraf grappled with both, usurping power and dealing with an empty treasury, the only recourse was the IMF. Within a year Pakistan’s economy was well and truly under IMF care.
IMF always has a grandmotherly prescription. Earn more (revenues), spend less (frugal) and generally be sedate within the constraints of routine living. As such most economies go into stagnation and growth remains depressed. The true potential of an economy is neither realised under their prescription nor allowed. Greater emphasis remains on balancing books; it always has eyes on its lent money and wants it accessible to reclaim if things head south. It is thus wary of any extravagance and development remains subdued.
Shaukat Aziz, Musharraf’s finance minister, however innovated some and through policy intervention enabled three key industries to take root and pick speed: he floated telecom licenses and permitted foreign companies to invest in the field as he opened Pakistan up to free and easy telecommunication away from state control. Not only was there a huge investment influx, there followed equipment and infrastructure induction which generated jobs and created revenue as money began to move in a 24/7 economy free from constraints of time and space. Business took off in Pakistan and with the world outside. Today Pakistan is one of the most densely connected nations with over 80% mobile-phone ownership and between 30-40% internet penetration.
The “city” hasn’t slept since. It has also become the foundation for the next level of economic evolution when “digitisation” of both the society and the economy has become a possibility. It has also meant jobs, jobs and jobs.
Next he eased construction and waived off duties and levies on anything to do with it. A great number of housing and commercial units began taking shape. Thirty-nine ancillary industries, if not more, were triggered into increased production and consumption. This meant even greater economic activity and even more jobs in significant numbers. People began having money to spend which spurred further economic engagement and commercial profit. With money to spare through gains and profit, diversification of economic avenues became possible. General well-being became common. All this while being under the sedated and subdued-in-effect of IMF care and its conservative prescriptions.
Next, Musharraf opened the media up from governmental control. He permitted private television channels and media outlets to emerge in the private sector and gradually enabled a new industry around infotainment which became the vehicle for a greatly more informed society and economy. That also meant more jobs and more profit; especially for the educated. All together the business environment was voluminously enhanced and the economy grew at a remarkable rate. Exports increased considerably around enhanced production as more industry was set-up in the private sector. Banks had money to loan at affordable rates. All indicators showed a country and an economy on the move. Just three triggers brought about this mini revolution under a sedate IMF programme.
As Musharraf’s time ended it became fashionable to cloister him as a dictator who was able to bring change around the dollars that he received from the US following 9/11, but that misstates a fact and ignores the criticality of policy and out-of-the-box thinking that was employed in triggering the economy.
Not for credit but for a historical example is how Pakistan must look at that model. Depressing the real-estate sector has been pedaled as an effort to free lock capital and diversify investment in more productive areas of the economy. It is a fallacious assumption. The money bottled up in real estate continues to lie there because no one is under-selling. Second, what real-estate begets as profit is at most in millions of rupees; industry is not set-up with millions but with billions. Investment in stocks is as speculative. These just need to be better regulated, not killed. So it remains money lost to the economy. Yes, over time, with incremental profiteering people will make enough to diversify. But isn’t that the essence of investment? Nobody is born a tycoon; you only make it there and then make your impact in the productive side of the economy. Can’t close that door.
Agriculture and livestock is another. State land and water infrastructure should be brought together through a strategic plan to make those estates productive to contribute to national growth. Forests and agro-based industry will follow. Livestock is our people’s natural recourse. It can be refined, facilitated and scientifically assisted. Just needs a good, driven leadership on top to push these areas. CPEC is one such opportunity which can assist in these sectors and help growth.
Misplaced emphasis, ill-thought conception and wrong objectives have killed the economy in the last 17 months. It must change in 2020. The government must think differently from the IMF. Think digitisation; think IT-based products and Artificial Intelligence and enable education, training and relief through policy in each of these to move the economy and plug into the international system and not be found out of step. Think real-estate again; regulate and tax it at a reasonable rate to keep people interested and open it up from dormancy. Despite the IMF. Monitor and regulate to satisfy FATF but don’t kill the economy.
Lower the discount rates. Let money be made available to the common man. Don’t depress demand. Lower the electricity rates and review the capacity charges agreed to under compromised and highly bloated agreements. Flat-rate the income-tax above a certain paying capacity to make it palatable. Most Pakistanis are poor and can only contribute so much to the state. The state will need to enable greater wealth generation through policy intervention and tap the growth for revenues. For the moment it is tapping people’s pockets not the overflows. Spare the poor. People are desperate and poverty-ridden.
Just ease life for people. Presently it is hardy, very hardy. A normally functioning system enthuses confidence. Let the system be normalised and function normally. Make incremental improvements. Not all will be corrected in the next four years; it will of necessity be a continuing effort. You have to keep the ball in play. No one ever won a game by stopping it.
P.S.: as I write these lines a war looms in the Middle East. Another impulse, another hubris is leading the region into an inferno. How will we keep out is anyone’s guess. Oil will rise in cost and the world will be nearer to another recession. The realities of an election year will perhaps exercise some restraint on President Trump but who will keep the Iranian fury in check? Keeping the eye on the ball will be that much more difficult for Pakistan where other challenges loom.
Published in The Express Tribune, January 5th, 2020.
IMF always has a grandmotherly prescription. Earn more (revenues), spend less (frugal) and generally be sedate within the constraints of routine living. As such most economies go into stagnation and growth remains depressed. The true potential of an economy is neither realised under their prescription nor allowed. Greater emphasis remains on balancing books; it always has eyes on its lent money and wants it accessible to reclaim if things head south. It is thus wary of any extravagance and development remains subdued.
Shaukat Aziz, Musharraf’s finance minister, however innovated some and through policy intervention enabled three key industries to take root and pick speed: he floated telecom licenses and permitted foreign companies to invest in the field as he opened Pakistan up to free and easy telecommunication away from state control. Not only was there a huge investment influx, there followed equipment and infrastructure induction which generated jobs and created revenue as money began to move in a 24/7 economy free from constraints of time and space. Business took off in Pakistan and with the world outside. Today Pakistan is one of the most densely connected nations with over 80% mobile-phone ownership and between 30-40% internet penetration.
The “city” hasn’t slept since. It has also become the foundation for the next level of economic evolution when “digitisation” of both the society and the economy has become a possibility. It has also meant jobs, jobs and jobs.
Next he eased construction and waived off duties and levies on anything to do with it. A great number of housing and commercial units began taking shape. Thirty-nine ancillary industries, if not more, were triggered into increased production and consumption. This meant even greater economic activity and even more jobs in significant numbers. People began having money to spend which spurred further economic engagement and commercial profit. With money to spare through gains and profit, diversification of economic avenues became possible. General well-being became common. All this while being under the sedated and subdued-in-effect of IMF care and its conservative prescriptions.
Next, Musharraf opened the media up from governmental control. He permitted private television channels and media outlets to emerge in the private sector and gradually enabled a new industry around infotainment which became the vehicle for a greatly more informed society and economy. That also meant more jobs and more profit; especially for the educated. All together the business environment was voluminously enhanced and the economy grew at a remarkable rate. Exports increased considerably around enhanced production as more industry was set-up in the private sector. Banks had money to loan at affordable rates. All indicators showed a country and an economy on the move. Just three triggers brought about this mini revolution under a sedate IMF programme.
As Musharraf’s time ended it became fashionable to cloister him as a dictator who was able to bring change around the dollars that he received from the US following 9/11, but that misstates a fact and ignores the criticality of policy and out-of-the-box thinking that was employed in triggering the economy.
Not for credit but for a historical example is how Pakistan must look at that model. Depressing the real-estate sector has been pedaled as an effort to free lock capital and diversify investment in more productive areas of the economy. It is a fallacious assumption. The money bottled up in real estate continues to lie there because no one is under-selling. Second, what real-estate begets as profit is at most in millions of rupees; industry is not set-up with millions but with billions. Investment in stocks is as speculative. These just need to be better regulated, not killed. So it remains money lost to the economy. Yes, over time, with incremental profiteering people will make enough to diversify. But isn’t that the essence of investment? Nobody is born a tycoon; you only make it there and then make your impact in the productive side of the economy. Can’t close that door.
Agriculture and livestock is another. State land and water infrastructure should be brought together through a strategic plan to make those estates productive to contribute to national growth. Forests and agro-based industry will follow. Livestock is our people’s natural recourse. It can be refined, facilitated and scientifically assisted. Just needs a good, driven leadership on top to push these areas. CPEC is one such opportunity which can assist in these sectors and help growth.
Misplaced emphasis, ill-thought conception and wrong objectives have killed the economy in the last 17 months. It must change in 2020. The government must think differently from the IMF. Think digitisation; think IT-based products and Artificial Intelligence and enable education, training and relief through policy in each of these to move the economy and plug into the international system and not be found out of step. Think real-estate again; regulate and tax it at a reasonable rate to keep people interested and open it up from dormancy. Despite the IMF. Monitor and regulate to satisfy FATF but don’t kill the economy.
Lower the discount rates. Let money be made available to the common man. Don’t depress demand. Lower the electricity rates and review the capacity charges agreed to under compromised and highly bloated agreements. Flat-rate the income-tax above a certain paying capacity to make it palatable. Most Pakistanis are poor and can only contribute so much to the state. The state will need to enable greater wealth generation through policy intervention and tap the growth for revenues. For the moment it is tapping people’s pockets not the overflows. Spare the poor. People are desperate and poverty-ridden.
Just ease life for people. Presently it is hardy, very hardy. A normally functioning system enthuses confidence. Let the system be normalised and function normally. Make incremental improvements. Not all will be corrected in the next four years; it will of necessity be a continuing effort. You have to keep the ball in play. No one ever won a game by stopping it.
P.S.: as I write these lines a war looms in the Middle East. Another impulse, another hubris is leading the region into an inferno. How will we keep out is anyone’s guess. Oil will rise in cost and the world will be nearer to another recession. The realities of an election year will perhaps exercise some restraint on President Trump but who will keep the Iranian fury in check? Keeping the eye on the ball will be that much more difficult for Pakistan where other challenges loom.
Published in The Express Tribune, January 5th, 2020.