This is an opportunity to address some deep-seated wrongs.
KARACHI: The recent debates about conferring the Most Favoured Nation (MFN) trade status to India has inadvertently brought up the debate of the economy in Pakistan. This is an opportunity to address some deep-seated wrongs.
Two hallmarks of Pakistan’s economy are price fixing and central planning, both features of a socialist system. For example, in order to set up a uniform price, the retail price of a shoe by a national company is the same in Karachi, Islamabad and a remote village in Gilgit-Baltistan. Surely the cost of delivering the product to each of these locations is not the same. In essence, what really transpires is that they may extract a minimal profit in Gilgit and a whopping one in Karachi or Islamabad. The cost of this profit is passed on to the consumer, who is generally poor. The same applies to petrol, diesel, CNG and automobiles.
In protecting prices, the incorrect argument is made that these high costs are paid by the rich. This is wrong, since the rich make up a small percentage of the national population and the bulk of the market is comprised of the general population that is poor and getting increasingly poorer, according to the State Bank of Pakistan and the National Planning Commission.
So why is MFN status for India important? Recently, newspapers reported that onions may be imported from India at the cost of Pakistani Rs140 a mound. Even allowing for a 400-500 per cent markup for middlemen and including transportation costs, these onions would become available for retail at under Rs20 per kg; compared to the current price of Rs45-50. The main beneficiaries would have been the people of Pakistan. India obviously has similar lower prices in many commodities and free trade with India would reduce the crushing hardship that people are facing daily.
However, in order to do so, we will have to review our economic system. A move to a free market economy will be welcome as it will drive prices lower and perhaps allow for further savings by reducing government waste. This move may be far away but at least let us start the debate and capitalise on these opportunities to make the lives of people less crushing.
Danish Ullah
Published in The Express Tribune, November 10th, 2011.
