LAHORE: In the prevailing culture in Pakistan, collusive behaviour, exploitation, and cartels are tolerated and respected by the society. This is the reason that we lag behind in competition from the rest of the world.
Economy is the key to peace, harmony and prosperity. Fair competition boosts the economy. Moreover, economic progress is only possible under a responsible government that takes decisions on merit instead of political influence; a government that is accountable for all its deeds.
Sustained economic growth is possible under a government that has the courage and determination to establish its writ on fair implementation of law, rules and regulation on all segments of society, irrespective of their wealth status or political influence.
Full transparency eliminates corruption and ensures level playing field to all. Making money is not bad if earned legally.
According to Adam Smith, we get our dinner from the butcher and the brewer because of their self-interest, not their generosity. The market can turn their private vices into public virtue.
So, greed may not always be bad if proper checks and balances are there.
It is the injustice that is bad. Social injustice and economic deprivation breeds discontent that could in extreme cases lead to terrorism.
All sensible governments ensure that at least food is available to the common man at affordable rates because a hungry man is more dangerous than any diehard criminal.
However, when hoarding of all food items like wheat, rice, potato, onion, garlic and ginger is tolerated by the state, the food prices would then be determined by the hoarders, which of course would be out of reach of a large section of society. All this is happening in Pakistan.
Liberalisation has not put Pakistan's economy on a sustainable growth path like the other countries of the region. We were more eager to liberalise our economy than the other states of the region, but the process was complemented with strong institutions, that are vital in any economy and planners overlooked the crucial importance of these institutions for good performance.
Institutional capacities depend to a large extent on the combination of the rule of law and democracy. In fact the global data implies that not only democratic governments, but authoritarian regimes with strong rule of law can deliver efficient institutions that ensure sustainable economic growth.
Liberalisation was carried out without strong market institutions in Pakistan that led to the extraordinary output collapse. The importance of liberalisation cannot be underscored, but the devil is in details, which often do not fit into the generalisations and make straightforward explanations look trivial. Restructuring due to market imperfections is associated with the temporary loss of output. Governments with populist postures are not prepared to risk this temporary loss.
In economies where the weak institutions are reformed into strong ones, the decline in the production of non-competitive enterprises and industries is offset by an increase in the production of competitive industries and enterprises.
Economies with weak institutions always underperform. This happens because of barriers to capital and labour flows such as poorly developed banking system and securities markets, uncertain property rights, the lack of easily enforceable and commonly accepted bankruptcy and liquidation procedures, the underdevelopment of land market, housing market and labour market infrastructure.
Private sector of Pakistan should facilitate and guide the government in making the institutions strong. The new world economic order calls for Pakistan’s private sector to develop special skills, flexibility and acumen in order to gather terrific advantages in a transparently liberalised economy that would buffer them from current confusion and the impact of risks.
Local entrepreneurs must apply governance checks in their institutions. Best practices also align physical, mental, and strategic checks. The margins of error are sharp and any slippage may doom companies to failure or underperformance. Better managed companies would boot bad governed companies out of the market.
The entrepreneurs must realise that the risks to an enterprise are interconnected, which include supply of capital, disruption of markets, and volatility of values.
Currently, addressing the credit market and operations of banks are posing problems for most of the manufacturers. This means companies have to go back to the drawing board to identify, assess, manage and structure risks.
It is important that organisations should now be cognizant of where it hurts. Ideally, they should also be aware of its major clients and suppliers operations of banks all at the same time. Threats and opportunities come from many different sides. Prudent entrepreneurs grab the opportunities and imprudent ones endanger the existence of their enterprise.