Stop being populist. There has to be strict accountability. If banks lend, the lender has to repay. Control power theft. Do away with grey traffic in telecom.
It is an argument that successive governments use whenever they are asked why things are not getting better. Usually there is no solid economic rationale behind this, mostly political rhetoric and populist jingoism. It’s pretty much like telling the people to not expect anything, and then it becomes a self-fulfilling prophecy.
But while the economy is not doing great and we are not about to become the next Asian tiger, it is not exactly in danger of collapsing either. And if the next government is smart, it can actually use this as an opportunity instead of continuing to whine that it inherited a lemon.
So we have already made it clear, with adequate economic rationale that the economy is on fairly solid ground.
This is where the opportunity lies, that is, if the incoming government can plays its cards right.
Fiscal tightening
A lot of tough decisions need to be made however if this is to happen. For a start it has to maintain the extremely tight monetary policy that the State Bank of Pakistan has been pushing for the last few years. Banks should not be allowed to live off the spread or off lending to the government. Make them work. Put simply, force them to lend to the private sector. That is what they are there for.
If there is readily available financing for the private sector we should see industrial growth which will be the biggest catalyst for kick-starting the economy.
Power generation
Power issues are solvable. For one thing there needs to be a complete and strictly enforced ban on all power plants except those coal, hydro and alternative energy generating units.
The country needs to stem the gradual shift in the energy mix towards furnace oil and gas. Furnace oil is too expensive and we are just running out of gas. We need to build dams, big dams, small dams, and we need to get the political squabbles out of the way and make this happen.
Nation of thieves?
Pakistan has one of the lowest tax-to-GDP ratios in the world. This is disheartening. Not paying tax is pretty much akin to theft. Are we a nation of thieves? Pretty much so. The majority pays no taxes. A lot don’t pay for the power they use – mostly government entities – and a lot steal power outright. The current power theft ratio is 25%.
Now wonder we have a critical circular debt issue that is threatening to cripple the entire economy. This is simply not sustainable. It is not sustainable for even the most vibrant economies in the world, and certainly not for an economy like Pakistan.
Cheaper inland transport
We may hate the British for ruling us for so long, but there are some things that they gave us which were a blessing. One of these is the railway. Even with all the technological advancements of the 21st century, railroad remains the cheapest for of overland transport. And we had a thriving railroad that we have literally run into the ground. Trust me, we can do without a white elephant like Pakistan International Airlines, but we need the Pakistan Railways. And it will not to do to make a transport tycoon the minster for railways. Such a conflict of interest will never work – as we just saw with Bilour.
Finances and insecurity don’t go together
The law and order situation has to be brought under control. Right now Balochistan is pretty much off the economic grid because of political and ethnic strife. This has to change. Karachi is a fertile hunting ground for extortionists, for mobile snatchers and has been leaking investment to other parts of the country as for a long time now. It is a cyclical thing. Economic stagnancy breeds crime, crime breeds economic decay.
The buck has to stop somewhere. Let the police do its job and keep it away from escorting bigwigs and politicians. This will be a tough call but it has to be made.
Make the tough decisions
No more subsidies. People need to pay for what they use. Stop writing off taxes, stop giving generous tax regimes and stop giving people tax holidays. There is money to be made here, which is why they are investing; they can pay tax, so make them.
We have large land holdings which are basically generating nothing. Put this land to good use. If the land is agricultural, cultivate, if not, industialise! Implement a non-utilisation tax for large land holdings.
And above all, stop being populist. There has to be strict accountability. If banks lend, the lender has to repay. Control power theft. Do away with grey traffic in telecom.
Published in The Express Tribune, April 8th, 2013.
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@Mia: It is the geopolitics, dear, that have brought us to this very point. Do not misunderstand the causality of our predicament.
As for those who believe that the PPP is liked by the ET, consider what you're smoking. This article is brilliant in the sense that it has separated fearmongering pessimists from patriotic optimists.
@Author: The Pakistani economy is affected by a multitude of exogenous factors; trying to identify them, and endogenise them, would require a strong (united - majority rule) government only focused on the stabilisation and growth of our economy (in the short, medium and long run). While I share your optimism, it is far more reserved.
And I thought the writer would give some genuine reasons to elaborate his title further by talking about the current growth rate, GDP, FDI.
The author's easy and simple but impractical solution for the problem signals the lack of knowledge about the complication in the problems.. consistent growth of economy at least more than than double the birth rate may bring in some stability. solution of energy crisis( at cheaper cost) with proactive steps eyeing to meet the future requirement deserves the highest priority as this is the most essential input for all manufacturing activities. electricity generation through fossil fuel will continue to be dearer and no government can afford( has no option) to cut subsidies on energy for fear of populist outburst and to keep the manufacturing cost competitive( fear of collapse of export of goods.Besides,, economic growth needs capital investment for which required conducive atmosphere ( reduction in extremist activities) to be provided. next government shall have to focus on it.
Two articles on the front page alleging that the economy is not as bad as everyone thinks. This cant be coincidence. ET has clearly lost its objectivity.
I agree with the author. Another proof of sound economy is that the stock market of Pakistan is at an all time high. Stock market is a forward indicator of the health of economy. The fact and numbers do not lie and cannot be twisted.
What's with this series of pie in the sky articles?
If the economy is on the verge of recovery it is the people of Pakistan who should be patted on the back, not the last Govt., which was like a giant hand pressing Pakistan down, eating our civilian institutions from the inside like a cancer, it was like a disease. No governance would have been better than our last government. . If the economy revives, the People of Pakistan should have a renewed faith in themselves that they collectively beat the PPP government while it was still in Power.
I Am not sure which country this gentleman seems to be alluding to suffice it to say it is not Pakistan. To begin with a country that has nothing to offer besides hostility to any potential investor, non conducive economic climate and the ever present threat of terrorism. Just The external debt is around $ 70 billion or so. I wont even go into the nightmare of servicing this debt Servicing this debt, again its a burden on growth not to mention the fudged GDP then there is the huge accumulated internal debt. Investment to GDP ratio is nill to non existent. Average median age hovering around 22 and no business activity to absorb the shock of this burgeoning populi. Infrastructure in tatters and the one vital ingredient of power missing from the equation of growth? Crime is at an all time high for obvious reasons and city of Karachi reminds me of the movie escape from New York.
Other than that a great place to call 4e77.
Open your eyes and ears the country is ever so ready for collapse if it wasnt for the geopolitics that saves it. You give too much credit to the inept that just left the house after plundering the treasury.
How do you expect someone to push banks to lend to the private sector when he himself has defaulted on loans worth billions of rupees? The economy needs someone who is nonpolitical and whose interests are not aligned with those of the ruling party. Only then can economic growth be spurred.
Even though all the things mentioned are right. However, the approach mentioned is simplistic!
ET, by posting these kinds of articles do you think you can fool the public?
So you mean to say that every successive government in the history of this country has had a bad lemon except the last PPP government which left an apple! WOW, thats news for me and a lot of the public who know better!
This report has been brought to you by PPP. Thank you Mr. Zardari/Gilani/Raja!!
Well certainly these are the right things to do, but we surely are the nation of thieves and will remain the same.
I am hopeless for our country :(
It seems the writer is completely ignoring the stark reality of the facts or is unaware of them. The facts on the ground are very different and the next government will have to deal with the worst ecomic crisis in the history of the country. The loot and plunder of the previous PPP govenment forced SO much lending that Pakistan's total debt burden has DOUBLED in just 5 years! That means the TOTAL amount every successive government borrowed across the 65 year history was matched by ONE 5 year term of the PPP government. Just that is going to make the job of the next government that much harder.
The security situation during the last 5 years has worsened badly and is another feather in the cap of Mr Rehman Malik! The number of people killed during the last five years is almost double that killed in the past 65 year history.
So we have a lot to thank the previous government for!!!
Ok, this is getting unbearable now - ET, why is this published under top news or news for that matter. For heaven's sake this is a piece of opinion