Money Matters

Dire need: Economic vision

By Sirajuddin Aziz
Mon, 03, 24

Perhaps most readers immediate reaction to the caption would be, not another one, of, old wine in new bottle; or new wine in old bottle. Yes, it is both; the dilemma is, most of us do not know what is new or what is old … the wine or the bottle.

Dire need: Economic vision

Perhaps most readers immediate reaction to the caption would be, not another one, of, old wine in new bottle; or new wine in old bottle. Yes, it is both; the dilemma is, most of us do not know what is new or what is old … the wine or the bottle.

The nation, rightfully so, is fatigued by the ever ready chatter of “The Charter of Economy"; which has been done to death with no results, except more decay. This scribe in the next few paragraphs will also talk about the old and the new; however the attempt will be to focus on a few elements, whose correction has the lethal potential to unleash upon the dwindling and fledgling economy, a new lease of hope and life.

The economy of any country is too serious a business to be left alone in the care and custody of the politicians. They get to sit on the floor of the two houses by virtue of promises made to their constituents, and as such they are populist in nature, and most of which are either undeliverable or non- achievable. The rhetoric has to be ultimately replaced by reality. The populace also ought to know that there is no free lunch in life. Hence the tall promises of free utilities, as a sample, is a non-starter.

The formula of taxing the rich and paying the poor has been talked about for close to eight decades; it hasn’t happened. Instead from amongst the hapless population, Paul is found to pay to Peter… that saintly Paul is usually the salaried class. In fairness of reality, this class is not paying taxes out of feelings of great patriotism or with a sense of duty towards the nation, but they are helpless, due deductions made at source. Given a choice, all are likely to refrain from paying. And here lies the difference in national character, which results in what we are witnessing in our poor economic conditions. Let me explain.

Talking example of two tiny, yet economically advanced states, Singapore and Hongkong (although part of of PRC), people out of respect for prevalent laws, voluntarily, file their tax returns directly and for any payable tax, they issue personal cheques, not "Banker’s Cheque" or “Payment Orders”, in favour of Inland Revenue Services (IRS). Having done this personally for almost a decade in Hong Kong, I must mention that, there was not a single exchange of communication, except, the acceptance of calculations made and the receipt of tax paid. Trust is the name of the game in established societies.

The obvious question is, how does one beget “trust" in the system? It is both, very simple and extremely tough; simple when it is abiding to the laws; extremely difficult, if the intent is to circumvent payment of taxes. Every other day, the dailies flash how much the exchequer is short in its collections. Without an increase in revenues, our expenditures continue to rise; in other words, every rupee the state spends is not an ‘earned money’ but ‘borrowed funds’. Hence the piling of debt. The situation on the foreign currency front (FCY) is no different; we are spending precious foreign exchange by borrowing; the FCY debt is estimated at $130 billion.

Between now and until streams of milk and honey start to flow in our land of pure, to keep the country afloat, we have to prepare for fresh borrowing of up to $8 billion, before end of this fiscal, to repay a maturing borrowing. This cycle has been going on ... Can we stop this haemorrhaging of resources? The answer is, yes. So what will it take to stop the bleeding?

The country needs courageous and decisive leadership that is perceived and accepted as honest and patriotic. Leadership has to set the highest standards of personal frugality; such behaviour can serve as an inspiration to the nation, who can then be called upon to make a few sacrifices. One needs to scan the import bill; nauseatingly we will find that we are collectively guilty of importing luxury cars, items, cell phones, palm oil (we cannot cook food without it), etc. The malaise of foreign trade components and its mix, indicates lack of economic imagination. There has been no significant shift in the ranking of our trading partners; there are no new markets added for selling our goods and services.

Desperately, there needs to be in place an ambitious vision backed with action plans for a major transformation of the economy. The economic plans developed must be efficient, effective, focused and fully integrated with all sectors of the national economy, that simultaneously should remain aligned with the realities of global market conditions. The political will must appear to be bold and must take a tough line to revise the economic roadmap. The fear of privatisation is a case in point. The reforms must cater for innovation, sustainability and inclusive growth. It must if need be encompass political reform, economic corrections and also address social, climate and environmental development.

Human capital requires continuous development. This will facilitate the creation of a highly skilled and productive workforce. A fresh roadmap for creating a talent pool is a necessity. Only with qualified human capital can we target to achieve self-sufficiency. We must exploit and exhibit our technical talent. We must break the bowl that we keep emptying and place again and again before the ever ready ruthless lenders. The reality of serious brain drain hasn’t hit the policy makers yet; how sad it is that only last year we lost 800,000 young professionals to the global markets.

To achieve resilience, we need new capabilities and capacities. There is a need to arrest the declining economic productivity; the manufacturing base has to grow; this can happen only when we upscale our skills, across the board.

Scanning just the automotive industry, we find that we continue to import all related spare parts, in spite of the agreed deletion programme made with the auto assemblers. There is therefore no growth worth the mention in the peripheral industry. This feature of deletion was meant to help develop the small and medium size industries; in most of the developed countries the SME’s constitute the backbone of the economy; also related to the SME sector, is the emergence and growth of the middle class, because of the employment opportunities that unfolds. The growth in the middle class helps the development to maturity of the political structure and its apparatus. The feudal structure of the society begins to lose space with the growth in the middle class and with enhanced literacy rate of this class.

We have not been intelligent enough to handle and unravel the mystery of circular debt. This is only growing. The alternative sources of energy have to be looked at with a magnifying glass. Renewable sources of energy, including solar, must be deployed. The relative reduction in CO2 emissions will allow for obtaining carbon credits.

We have heard for the longest time that we are rich in minerals and natural resources. The imperative need is to create the wherewithal of management to exploit the resources; coupled with technical know-how and understanding of the dynamics of international metals and mineral markets. Square pegs must go into square holes, just as round ones should. Political appointments must be banished from the system.

A robust infrastructure must remain in step with growth targets. Resilience in the economy can only be achieved through integrated thinking and congruent policies. Let the special economic zones emerge as game changers; currently they are dying to neglect. Enough of not letting the right hand know what the left hand is up to, this policy must be consigned to limbo of forgotten memories.

Political pundits and economic guru’s must sit to agree upon some major changes that are needed to spur the economy; structural changes are a dire need. From policy making to implementation and governance, the framework has to be laid for strict adherence. While each political party may have unique and different economic inclinations, but on certain bare minimums , they all must agree to abide by, for say, the next 25 years. The accountability process for any derailments must be swift and severe. Accountability sans political victimisation, is the way to go forward.

We need leadership that will take our country to transcend as a nation into being a society that is fully capable of achieving sustainable development.

The writer is a freelance columnist