Laissez-faire!: Time for the private sector to take the wheel

Government should restrict its role to supporting growth.

KARACHI: Sustained economic growth is universally considered by economists as a necessary condition for improving the quality of life and reducing poverty in any country. In recent times, it has driven many emerging economies to achieve impressive advances in living standards – notably those of Southeast Asia.

Pakistan’s economy is currently not growing comparative to its growth in population. This is problematic because wherever the economy grows in tandem to or less than the population, increases in the country’s gross domestic product do not translate to an increase in the general standard of living. For that to happen, the economy has to grow disproportionately.

Generally, it is the private sector that powers growth in all developing and developed countries. Unfortunately, our private sector is extremely underdeveloped as compared to other developing country economies. For example, the second largest company of India – Reliance Industries – is 50 per cent larger than all listed Pakistani companies put together.

We may begin by asking ourselves: why is that so? In our chequered political history, no government has ever been able to create an environment conducive to the continuing growth of the private sector. There have been spurts of development in between, but none that lasted beyond a few years.

Government policy drives economic growth and enables a healthy business environment. Its aim should ideally be the provision of robust infrastructure, ensuring transparent competition and the protection of intellectual and personal rights.

Macro-economic stability is a pre-requisite for sustainable economic development. To achieve this, the government must first balance its books by expanding the tax net and broadening its revenue stream. At the same time, it must diligently control its expenses and borrowing.

Secondly, policies and regulations must have some element of constancy to ensure that there is ample time for investments made now to deliver reasonable returns in the future. For this, government policy should include a commitment to refrain from interfering in private sector business. Its focus instead should be on the provision of ancillary services: infrastructure, sustainable supply of energy, transport and IT connectivity.

There is an urgent need for Pakistan to rejuvenate GDP growth. This may be made possible if all political parties agree on a “Charter of Economic Development”. Under it, the administration must be ordered to take immediate responsibility for education, health, energy, logistics, security, the expansion of the tax net and industrialisation through globally proven models.

In the coming elections, actions must speak louder than words. Politicians must cut the rhetoric and come up with plausible and implementable solutions to the problems of economic growth in Pakistan. The must put forth ideas for enabling extraordinary growth in the private sector. Every party should outline a clear economic manifesto and demonstrate a willingness to work for the betterment of the country.

The circumstances demand it.

The writer works in the corporate sector and is active on various business forums and trade bodies.

Published in The Express Tribune, March 5^th, 2012.