No shortcuts to sustainable growth
Apple, the world’s largest company valued at $2.95 trillion, faced near-collapse in 1997. Back then, in the midst of severe losses and fierce competition, Steve Jobs, the company’s visionary founder, returned to steer its turnaround.
Rather than opting for quick solutions, Jobs focused on fundamental changes: streamlining products, enhancing design and quality, and investing heavily in R&D and branding. This methodical and long-term strategy not only restored profitability but also set Apple on a path to global dominance.
The transformation of Apple underscores that there are no shortcuts to lasting success, a lesson with profound implications for economies worldwide, including Pakistan.
Pakistan’s economic landscape is currently engulfed in a crisis, characterised by a severe downturn and record high inflation.
Latest data from the National Accounts Committee revealed that the economy shrank by 0.17% in the last fiscal year. Despite a slight decline in the inflation rate, the cost of living remains excruciatingly high, with October recording a 27% year-over-year increase in prices.
The industrial sector, particularly large-scale manufacturing (LSM), which only expanded by a meagre 0.7% in the first quarter of the current fiscal year, is evidently struggling. This sluggish growth, which came in spite of a low base effect, strongly suggests an uptick in unemployment rates.
While there have been some positive developments, such as the stabilisation of the rupee value, Pakistan still faces a considerable journey towards achieving economic growth.
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At this critical point, policymakers seem to be gravitating solely towards those solutions that can swiftly revive the ailing economy. This approach is reflected in recent efforts to attract foreign investment for specific projects.
While such measures, designed to bypass bureaucratic hurdles, might produce immediate benefits, their effectiveness in steering the economy towards a sustainable recovery is doubtful, as they fail to tackle the underlying structural issues.
Take the case of the new oil refinery policy, recently introduced to attract both local and international investment in the oil refining sector.
The policy aims to boost the development of oil refineries and significantly increase the production of refined petroleum products, particularly those compliant with Euro-V standards. This initiative was expected to not only diminish fuel imports but also open up export opportunities and lay the groundwork for the petrochemical industry development.
There was marked interest from foreign investors, especially from Saudi Arabia, and local refineries, which had planned to enhance and expand their capacities.
Yet, the policy execution has encountered obstacles. As per media reports, just one of the five local refineries has formalised an agreement with the government. It seems the policy’s final version was drafted without sufficient consultation with the refineries on crucial aspects.
Additionally, the slow pace of governmental procedures is exacerbating the situation. The anticipated Saudi investment in the refining sector remains elusive, casting doubt on its eventual realisation.
However, even if all local refineries are brought on board under the policy, it’s important to recognise that firstly, the prolonged indecision and revisions in the refinery policy have sent a wrong message to both local and foreign investors.
This uncertainty has persisted for years, considering that Saudi Arabia expressed its intent to establish an oil refinery in Pakistan nearly five years ago, and local refineries have since prepared their investment plans.
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The ongoing issues with the refinery policy cast a negative light on the government, suggesting a lack of commitment to improving the business environment.
Secondly, the refinery policy alone may be insufficient and a long-term strategy is needed to push this sector to new heights.
Comprehensive measures are required to attract FDI and maintain a steady flow of capital in the refining sector. These include easing regulatory burdens, liberalising pricing controls, developing human capital, enhancing coordination between the refining and financial sectors, improving the security situation, building robust infrastructure, and establishing clear and consistent policies for environmental compliance.
Similar challenges extend to other sectors as well. Numerous industries such as IT, pharmaceutical, telecom and fisheries have struggled to achieve their full potential in the absence of a conducive business climate.
This underperformance can be largely attributed to the government’s fondness to seek quick solutions rather than committing to the arduous task of developing a strategic, long-term plan that creates a supportive environment for growth.
A shift in focus towards long-term strategies, tailour-made for each sector, is needed for the revival of many industries.
Virtually all segments of the economy urgently require comprehensive reforms. This encompasses overhauling the taxation system to improve government revenues, thoroughly restructuring the power sector to address the escalating circular debt, and enhancing the performance of state-owned enterprises, including divesting those that drain national resources. The reforms can put Pakistan on the path of sustainable economic growth.
However, it must be understood that these are not quick fixes; they demand time and a steadfast commitment. Pakistan’s path forward must be charted by leaders willing to roll up their sleeves and undertake the essential, albeit challenging, structural reforms for the long term.
The writer is a corporate consultant specialising in business and economic issues
Published in The Express Tribune, December 4th, 2023.
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