Needed: A miracle on the Indus

We mustn't be afraid of private companies getting bigger; rather, govt must support them in meeting their targets

I recently had the opportunity to visit South Korea on an official trip organised by the Korean International Cooperation Agency. The visit focused on the economic development that has taken place in the country in the previous half century. Koreans call it the “Miracle on the Han River”. This phrase is actually an imitation of the German equivalent known as “Miracle on the Rhine River”.

We, the members of the delegation, were spellbound by South Korea’s progress. What struck us most during our training were the stark similarities between the country’s early history and that of Pakistan. Both countries got independence around the same time, Korea in 1945; both countries faced war early in their existence (Korea in 1950-53); both faced autocratic governments during the 1960s, Korea in the shape of former president Chung Hee Park. South Korea, like Pakistan, has shared its border with a hostile neighbour in North Korea.

The similarities do not just end there. South Korea went to the American camp during the Cold War era. It has been a major recipient of US military and civilian aid. Pakistan’s GDP per capita in the year 1960 was $81 while that of Korea during the early 1960s was around $82. As of now, for the year 2014-15, the GDP per capita of Pakistan is just $1,512, whereas that of Korea is $28,000. Now Korea stands at number 12 in world economies and is a major aid donor. Pakistan, on the other hand, is still an aid recipient. This drastic change in the fate of both countries needs explaining.

During some of the lectures given to us, we were told about the success of Korean chaebols, i.e., business groups. They showed us a remarkable list of companies like Samsung, Hyundai and LG that have been featured in the list of top companies worldwide. When asked if we had any renowned chaebols of international standards in Pakistan, we could not name a single one. The discussion then went on to the nationalisation process and the famous report by Dr Mahboobul Haq in which he had hinted that most of the wealth in Pakistan was being amassed by 22 big families. The professors questioned if it was wise of Pakistan to nationalise companies and factories in the 1970s that had started to make an impact in the national and international arenas.

Forty years down the line, there is a general consensus that privatisation is the way forward. All successive governments since 1990s have tried to privatise state-owned companies. Large public sector enterprises that are sucking national resources by running at a loss, like the Pakistan Steel Mills and PIA, are on the priority list for privatisation. In the process, those private companies and business families, which are already strong, financially and technically, will eventually be able to benefit. By looking at the Korean example, this is not necessarily a bad thing, as the large Korean chaebols are mainly family-owned. The business these corporations generate fuels growth and are the backbone of the Korean economy. Even India, having entered the free capital market quite late, has started to make its mark with big corporations like Tata and Reliance.

Like any other economic model, there are problems, of course. The fear that these big corporations might become so strong so as to challenge the writ of the state is a threat. Then there are cases of corruption involving big corporations. But as they grow, so does the economy. It is the duty of the government to regulate and encourage a healthy business environment rather than doing business itself. In order for Pakistan to develop, we need a ‘miracle on the Indus’. We should target potential industrial sectors to develop. For Koreans, it was heavy and chemical industries and later technology-based industries. For us it could be the textile, steel or IT industries. We must not be afraid of private companies getting bigger; rather, the government must support them in meeting their targets by giving them incentives. The Vision 2025 presented by the government is a remarkable document. One of the pillars of the vision is private sector-led growth. If we fully support our private companies, I have no doubt that a similar delegation visiting South Korea in the year 2025 might be able to proudly list a few Pakistani companies that feature in the Fortune 500 list.

Published in The Express Tribune, July 21^st,  2015.

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