This article links directly to my article, ‘The real contest of growth’, published in these pages on September 11, where I argued that America invents while China executes.
The US resets the frontier because ideas find top talent, risk capital and strong legal protection. China turns policy continuity into scale – special zones, reliable infrastructure and engineers who deliver. Different paths, same engine: private enterprise led by capable people under credible, predictable rules.
A perspective check. Through much of the 1980s, Pakistan’s income per person was higher than China’s; China’s larger total GDP simply reflected its bigger population. Then Deng Xiaoping’s ‘reform and opening’ (from 1978) rewired incentives – SEZs, dual-track pricing, VC-friendly FDI, export push – unleashing productivity and investment and propelling China to the world’s second-largest economy. If smarter incentives and disciplined delivery transformed an economy that started behind Pakistan on a per-capita basis, why can’t we engineer our own version now?
We cannot run a US-style, consumption-led model financed by the rest of the world. Whenever domestic demand outruns our ability to earn foreign exchange, we hit the external wall – devaluation, inflation and another IMF reset. Sustainable growth must be earned: raise firm-level productivity with technology and better management, and turn that productivity into exports.
The urgency is sharper in the era of AI, Generative AI and Agentic AI, which is compressing product cycles and automating complex workflows. The US is commercialising these tools through universities, startups, cloud platforms, and deep capital markets; China is embedding them at scale in manufacturing and logistics. Countries that harness AI will gain productivity and export share; laggards will fall permanently behind.
Yet we still manage to the next tranche, not the next decade. Pakistan is in its 25th IMF programme – three-year arrangements that prevent default but don’t build competitiveness. With debt above $130 billion, deficits are closed via higher taxes and import compression, not by installing a productivity-and-exports engine. Add a culture of complacency, low risk-taking and short-termism, and reform stalls. The obstacle is will – to slim and refocus an overgrown state and to back private enterprise with stable rules, as both the US and China did in their own ways.
Below is an eight-point agenda – grounded in those lessons and tuned for an AI-accelerating world – to move from crisis management to productivity-led growth.
One, make investment worthwhile: predictable rules and lower taxes. Legislate a 10-year path that cuts the effective direct tax burden from around 50 per cent to 20–25 per cent, lowers GST to 10–12 per cent, and sets a transitional 5.0 per cent rate for highly informal sectors to pull them into the net. Abolish turnover/minimum taxes; cap routine withholding at low, creditable rates; zero-rate exports with automatic, time-bound refunds and make capital goods and export inputs duty-free. Pair lower rates with digital, even-handed enforcement (e-invoicing, POS integration, risk-based audits) so compliant firms aren’t undercut.
Two, break the three-year trap. Adopt binding, self-enforcing rules that outlast politics: a legal fiscal anchor (debt-to-GDP and primary balance) with automatic correction triggers; a medium-term revenue plan that broadens the base while lowering rates; and a cross-party five-year Export & Human-Capital Compact. Create an independent Productivity & Competition Commission (global-calibre experts, protected tenure, ring-fenced budget) to expose bottlenecks and cartels. Link parts of federal/provincial transfers from NFC to measurable outcomes.
Three, put people first: education and skills. Human capital is the binding constraint. Keep girls and boys in school; address literacy and numeracy issues; link learning to work via short, employer-led training and modern apprenticeships. Use public-private partnership models (for example, Punjab/Sindh Education Foundations with strong boards with reasonable independence from governments) to produce talent at scale and quality for the 21st century.
Four, make technology adoption a priority. Technology is doing today’s work better, cheaper and more reliably. Use scalable levers: tax incentives for software and automation; matching grants for digital operations, quality systems, and energy management; open testbeds for AI/robotics; and digital public rails (identity, payments, filings) that cut transaction costs. Rule of thumb: people × tech = productivity.
Five, build the capital ladder – from ideas to scale. Banks mostly fund government and a few large firms; new ideas lack collateral. Shrink government deficits so credit flows to business and expand risk finance: a professional fund-of-funds to co-invest with private VC/growth investors; prudent pension/insurance allocations under strong governance; predictable exits via modern listing and M&A rules. Protect minority investors and IP so founders and backers trust each other. The state shouldn’t pick winners – just ensure good ideas find money.
Six, launch a National Productivity Mission. Shift incentives instead of micromanaging. Offer time-bound tax credits for verified productivity gains, low-cost finance for energy-efficiency retrofits and stronger quality infrastructure (standards, testing, certifications) so exporters meet buyer requirements quickly. Publish cluster scorecards – on-time delivery, defects, energy intensity – to drive learning and peer pressure. Make it cheaper to improve than to stand still.
Seven, put exports at the centre. Merge China’s export discipline with America’s product innovation. Digitise borders end-to-end (single window, standard data, service-level guarantees); expand bonded storage and cold chains; ensure steady, fairly priced power for export clusters. Keep the exchange rate realistic. Choose few, focused wedges where global demand is rising and Pakistan can be competitive within 3–5 years; align standards, finance, and promotion; measure outcomes, not announcements.
Eight smaller, sharper government: cut waste to fund growth. Do fewer things well. In 12 months, map entities; abolish or merge overlaps; sunset authorities that fail cost-benefit tests. Cap non-priority current spending below inflation for three years while protecting education, health, maintenance, and export logistics.
Freeze non-essential hiring; reduce administrative headcount via attrition/voluntary separation while paying for skill in frontline services and regulators. Move HR, payroll, procurement, and IT to shared services; hard-budget commercial SOEs, privatise/close chronic loss-makers, list viable ones. Mandate e-procurement and open contract data; tie secretaries’ and CEOs’ tenure and pay to quarterly KPIs.
Sceptics will ask if any of this is possible in a system with a deeply entrenched culture of status quo and live review-to-review. The answer is bold leadership – changing incentives so reform is rewarded and inaction is costly; making performance visible through public dashboards; and admitting what IMF programmes won’t: we cannot tax and import-restrict our way to prosperity; we must produce, compete and export.
The path is aligned with successful precedents – from the US and China to smaller high performers: rule of law and risk capital on one side, and discipline and execution on the other. Build capital markets that promote big thinking and smart risk-taking. Make exports the organising principle of logistics, energy, and standards. Enforce competition, not connections. Hold the state to the same standard we ask of business: deliver what you promise, on time.
Our future cannot be borrowed; it must be earned – or we risk becoming a country lost in time while others build tomorrow.
The writer is a former managing partner of a leading professional services firm and has done extensive work on governance in the public and private sectors. He tweets/posts @Asad_Ashah
