Well done Nadeemul Haque

I do not see eye to eye with Dr Nadeemul Haq, deputy chairman of the planning commission, on most issues, but what he said in Islamabad the other day on the agenda for economic research was spot on. In his inaugural address at the annual jamboree of economists called the Pakistan Society of Development Economists, he lamented that “research does not respond to the key issues of the time.” These include governance, democracy, legal and regulatory frameworks, institution building and entrepreneurship. Issues such as qabza groups, property rights and other eminent domains have been ignored. From my own experience, I can conclude that even research degrees claiming to teach applied economics do no such thing.

Why is it that social issues have either been ignored or tangentially dealt with? Nadeem’s answer is that research is driven by methodology and not by interesting or relevant questions. He was speaking at a conference, the theme of which was “Fiscal Decentralisation: Empowering Provinces, Strengthening the Federation”. Now these are the relevant issues of the day. A glance at the programme, however, shows that half of the papers selected had nothing to do with the theme. Those which did were concerned mostly with various aspects of the Seventh National Finance Commission (NFC) Award, a tried and tested area of research. Great strides in provincial empowerment have been made in the Eighteenth Amendment, not the NFC that still has federal dominance in tax collection. The paper selection, panel discussions and invited lecturers did not do justice to this profound shift in the level of governance.

There are a large number of issues arising from the Eighteenth Amendment, deserving the attention of the economists. Only the salient ones can be mentioned here. The Eighteenth Amendment allows provinces to raise external and internal debt against the guarantee of the Provincial Consolidated Fund. This has implications for the conduct of monetary policy and debt management policy. Debt recovery, especially from small borrowers, is no longer possible without a fair trial. The abolition of the Concurrent List raises the issue of how much capacity will have to be built at the provincial level. Provinces produced deficit budgets even after a very generous NFC award allocation. What is the likely expenditure burden of the large number of devolved subjects? How might it be financed? Some taxes, such as death and estate duties, have been devolved too. How significant can their contribution be to provincial revenue? What are the institutional imperatives of collecting sales tax on services at the provincial level? The social sector is entirely with the provinces. Does it augur well for our poor social indicators? Elementary education has been made a fundamental right. The Eighteenth Amendment has transformed the Council of Common Interests into the chief forum of interprovincial decision-making. National planning and the National Economic Council are now on Part II of the Federal List. As result, the Planning Commission has to be an interprovincial institution rather than a centralised body. Has anyone noticed that balanced regional development is now an essential part of the mandate of the National Economic Council? How can the right to information contribute to transparency of economic decision-making and the integrity of the statistical system?

One can go on and on, but none of these issues attracted the attention of the economists. No wonder Nadeem had to ask: “Why do we continue to run regressions on old issues and old questions, merely copying methodologies?”

Published in The Express Tribune, December 31^st, 2010.