State and economy

To put economy on right track, it is imperative to pursue balanced approach, plug loopholes

KARACHI:

The ultimate goal of every economic model should be to develop a society where people are contented and happy.

In order to achieve this goal, different governments pursue different policies and strategies based on local, cultural and social values and requirements, and short, medium and long-term strategies and plans are devised.

Different economic models are used by different governments with varying degrees of state control. Globally, the state intervention level varies from country to country and even in different sub-units of the same country.

Pakistan right from the word go, has been continuously witnessing malfunctioning and mismanagement on the economic front. Despite being endowed with the most fertile soils, complete range of weathers, abundance of minerals and most importantly human resource with a high proportion of youth, the country has not been able to take off owing to political instability, economic mismanagement, law and order situation, hostile neighbours and other factors.

Pakistan has miserably failed to develop a long-term sustainable and viable economic model to address short, medium and long-term structural and economic issues. Leaving aside the factors contributing to the failures, to ameliorate the state of affairs the main focus should be on the globally accepted guidelines for economic development while keeping in perspective the local complexities, social dynamics and regional needs.

Private sector should be enabled to provide the perfect impetus to act as an engine of growth whereas the role of the state should be that of a facilitator and enabler with a clear understanding of national interest. Broader guidelines and principles should be set by the government from time to time while keeping in consideration the demands and needs of the public as well as the interest of the state.

The general objective should be to address unemployment and hence provide incentives and guidelines to private entrepreneurs and industrial sector to opt for labour-intensive regimes along with adoption of modern technologies and scientific development in a synchronised manner.

Workforce training

Human resource development is the foremost need if Pakistan has to grow at a good pace. Targeted, well-planned and diverse education and training in a systematic manner while fully considering the demand of the market is the right recipe.

The country’s institutions are producing graduates and masters without considering the market needs and demands. Technological institutions are still pursuing obsolete curricula.

Research side is completely neglected where the government needs to play its role, as the dividends of research studies are not instant and hence private sector, at least for the time being, finds no rationale in investing here.

The state’s role should be to make all efforts to develop quality institutions to impart modern era, demand-based education and training. Of late, we can witness some good institutions in both public and private sectors but a lot of work has yet to be done to catch up with the rest of the world.

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The immediate focus should be to revamp the existing educational and training institutions by reconciling the curricula and training with international standards. Career counselling at high school level must be made mandatory where experts from private and public sectors should be engaged for market demand-based guidance and counselling of the youth.

A brief analysis of the performance of main sectors and the respective roles state should play shows that some major interventions and adjustments are required.

Services sector and financial institutions are performing well when we compare with other sectors of the economy. The contribution of services sector to GDP continues to be the highest during previous financial years but still it has to be raised considerably to gain parity at the global level.

Agriculture, still being the backbone of economy, should be in special focus. Throughout its 74-year history, the country has absorbed deadly shocks, eg wars against India, nuclear tests, the war against terrorism, large floods, earthquakes, pandemic and many gory events, but the economy has exhibited unprecedented resilience mainly because of the natural potential of the agriculture sector.

This is one area, which if properly looked into, can turn the country into an upper middle-income nation.

State intervention in the field of agricultural research, dissemination of findings and development of vast areas which have potential can give miraculous outcomes and turn it into a modern and developed sector, which will contribute substantially to the overall economic progress.

Similarly, the industrial sector may perform better if focus is initially on the development and modernisation of small, medium and large-scale industries, which have a competitive edge over others to raise exports. Later, attention should be paid to the improvement of other industries to substitute the rising imports along with meeting the domestic needs.

Exports

The reasons for the poor performance of Pakistan’s export sector are deep and structural. The economy is highly uncompetitive even when compared with countries of this region like India and Bangladesh.

We are lagging far behind when we make a comparison with these countries on export per capita count.

During the previous fiscal year, the current account remained in surplus for the first 11 months but the year ended in a deficit of $1.85 billion, mainly owing to the rise in global oil prices and vaccine imports. Imports increased 23% whereas the export side was sluggish as usual.

If we compare with previous years, we see a better picture but this is occasional as the improvement in the current account has been largely due to more than $5 billion fall in energy imports and an unprecedented rise in remittances mainly owing to Covid-related return of the workers employed abroad.

Hence, this rise in remittances is only occasional and we must take special measures to permanently keep the current account deficit within manageable limits.

The country needs to improve its exports and widen the range in order to reduce the trade gap and thus lessen the current account deficit, which is one of the major problems.

The export-led growth model of China has lifted hundreds of millions out of poverty. This is a good, successful model to follow with some adjustments based on regional and local needs.

CPEC has provided the perfect opportunity to materialise the cherished dream of briskly developing the country into a dynamic middle-income state with a robust export sector mainly operating on a labour-intensive model.

While not deviating from the WTO requirements and other international commitments, the state should play its due role in having a well-measured check over unnecessary imports and thus reducing the trade gap.

Ease of doing business and carrying out all kinds of economic activities in a peaceful and stable environment is of utmost importance and must be ensured by the state to achieve the objective of economic and structural reconstruction.

State should leave no stone unturned to attract foreign direct investment, which will not only raise employment opportunities but will also improve the foreign exchange reserves.

Large-scale capital investment from domestic and foreign sources and more importantly its optimum utilisation can rapidly take the country to a high-paced development mode by addressing the problem of cash deficit.

To set the economy on the right track, it is imperative to pursue an all-inclusive balanced approach where the state should act to plug the loopholes.

The writer is a former research officer in Planning and Evaluation, Government of Punjab, and is now in Punjab civil service

 

 

Published in The Express Tribune, September 27^th, 2021.

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