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Wednesday February 08, 2023

What have they done to my country?

January 25, 2023

I get up in the morning anxious and frustrated. Not because of any personal circumstances, but because I believe my country is going down – not militarily, but economically. The anxiety comes from uncertainty as we are fast approaching a stage where we run the risk of being economically subjugated in the region. The frustration comes from the fact that it all happened right under our nose, and we kept on looking the other way, politicizing each blunder, passing the blame of every debacle on to our opponents.

As I sit here on a cold foggy morning in Lahore, I try to look back and see what went wrong. I was in the Senate in 2006. In a presentation by the Ministry of Petroleum, we were told that from 2011 our Sui Gas reserves would start depleting. Upon asking what our alternate plans were, I was told that by the time the reserves start depleting, the Iran-Pakistan gas pipeline would be completed. We were told that new equipment was being ordered by Ogra which would intensify its drilling efforts. We were also told that our oil and gas drilling policy and incentives were so good that the whole world would jump on the opportunity. I reminded them that there was a distinct possibility of the Iran-Pakistan gas pipeline to be hit by US sanctions. The pipeline did get hit by US sanctions. Despite the incentives given, most multinational companies closed shop.

The LNG policy, after many years of failure and after many hiccups, finally saw the light of day. Two big business houses set up LNG terminals in a matter of months. NAB references were made on the sponsors of both business groups, some went to jail. The politicians who made the policy were also thrown behind bars. This sealed the fate of further development in the sector.

In 2013, there was massive loadshedding in the country. The years following that, the power generation capacity was substantially increased. Most of the projects that materialized were funded through CPEC. Enough power generation capacity was installed for an economy growing at 6-7 per cent of GDP. Sadly, due to the recessionary conditions that followed as a result of policy blunders, electricity consumption came down dramatically, forcing the consumers to pay hundreds of billions in capacity charges.

In 2018, Nepra made a presentation to the cabinet, advising the government to put the renewable energy policy on hold. The rationale was that the country could produce cheaper electricity using coal and LNG (both imported fuels). Renewable energy is indigenous and does not deplete resources. I informed the cabinet that renewable energy is our lifeline and if we keep depending on imported fuel, we will be held hostage to the vulnerability of international fuel prices and exchange rates. The renewable energy policy was kept on hold. Today, much of the current account crisis can be attributed to imported fuel.

One of the main sources of pollution in Pakistan is the lack of oxygenate in our gasoline. Almost the entire developed and developing world mixes an oxygenate in its gasoline. The oxygenate converts carbon monoxide into carbon dioxide making it more environmentally friendly. Every time I made the effort for this, vested interests foiled my efforts. Pakistan produces ethanol from molasses that could have substituted for imported fuel by more than 10 per cent. India has a mandatory 10 per cent ethanol mix policy. It is targeted to go up to 25 per cent.

When Pakistan was a victim of terrorism, foreign investors had shied away. CPEC was a brilliant initiative through which China planned to invest $60 billion in Pakistan. Power plants and motorways had already been built. This was going to be followed by special economic zones. Many Chinese companies were interested in shifting their low value-added manufacturing facilities to Pakistan. CPEC was put on a go-slow mode due to political exigencies and vested interests, at great loss to Pakistan.

Free trade agreements with China – FTA I and FTA II – have been good initiatives. Our lesson from FTA I was that it was lopsided and had significantly increased our trade deficit with China. Rather than correcting this, FTA II has proven to be even more lopsided. How can Pakistani manufacturers compete with the economies of scale of Chinese producers, with Chinese low power and gas tariffs, with Chinese low interest rates? Manufacturing as a percentage of our GDP is constantly going down, putting an increasing burden on our imports and resultantly on our balance of payments. The FTA with China must be revisited. Our manufacturing must get protection for import substitution. Our domestic consumption has become import dependent. If this continues, we cannot have any meaningful growth without being hit by a current account deficit.

Pakistan’s population is one of the fastest growing in the world. We are gifted with monsoons and melting glaciers. But we have not done anything to conserve these blessings. Singapore does not have its own water. They import most of their water and have the world’s most modern water recycling plants. Australia is 90 per cent desert. Yet it has some of the best yielding crops in the world. Our crop yields lag behind most countries. Just across the border, with a similar climate, our neighbour gives substantially higher crop yields. If we do not conserve our water and do not improve our crop yields, we will soon have massive food shortages.

The job of the government is not running businesses; state-owned enterprises have harmed us tremendously. It is mind-boggling to see the indecisiveness of various governments in privatizing these bankrupt SOEs.

Exports are our lifeline. China, India, Japan, South Korea, Taiwan all focused on exports before they became economic giants. We need to make our exporters competitive, whatever it takes. The real progress starts once your reserves are large enough that you do not have to borrow from multilateral institutions that make you bend backwards with conditions so stringent that it is difficult to have a high GDP growth.

Encourage wealth creation. Billionaires and conglomerates must be welcomed. Today, unfortunately, making money is insinuated with tax evasion and corruption. The domestic investor is scared – of NAB, FIA, FBR and the SECP. Most of these agencies can freeze accounts, even snatch money from bonafide accounts. Business owners hate to keep spare money in bank accounts. They are parking their money in real estate or ensuring their capital flows out of the country. Every now and then, more regulation and more powers are being given to the regulators to scare more businesses. Big business players are shifting their residences out of Pakistan. The new generation is opting to stay out of Pakistan. There is a severe brain drain. Remember, foreign investors always follow domestic investors.

Tourism is another industry that needs focus. Governments have come and gone, promising to make Pakistan a haven for tourists. Nothing has happened. With the world’s largest mountain ranges all converging into Pakistan, we are a gifted nation. Look at Dubai. They are filling their sea with sand, making islands. People from across the world make money in their own countries but spend in Dubai.

A few decades ago, local banks, foreign banks, Development Financial Institutions (DFIs), foreign brokerage houses were all active. All these helped in the industrialization of our country. Today, all DFIs are gone. No long-term funding is available. Most foreign banks and brokerage houses have left. Pakistani banks have none or very little interest in developing the country. The opportunities that existed a few years ago are almost all gone.

Pakistan took the lead in opening up its economy in the 1990s by introducing major economic reforms. India followed us and has now taken the lead. We trained pilots from Emirates Airlines and Singapore Airlines. We told South Korea how our Planning Commission worked. We told the Chinese how our State Bank worked. And look where we are today.

We lack consistency, we lack patience, we take our nation hostage to protect our own interests. Many times, democratic setups have taken us on a growth trajectory which was stopped halfway either by the infamous 58-2(b) or by other extra-constitutional steps. Many times, we have brought governments down in the name of accountability. We are enemies of continuity. As a new regime fails, its attack on the opposition increases, its so-called accountability measures accelerate and its own delivery falters. Ultimately, it fails.

However, I am still very hopeful. We are a resilient nation. But for once we should stop blaming our predecessors. For once, we should appoint people on merit. For once, we should not encourage sycophancy. For once, we should try to make our nation rich and not ourselves rich. For once, we should let a setup continue and finish its term. For once, we should stop being hypocrites. For once, we should reduce our government expenditure significantly. For once, we should encourage wealth creation. For once, we should protect the investor from draconian policies. For once, we should stop victimizing our opponents. And for once be the nation our Quaid wanted us to be.

If Germany, South Korea, Japan, Vietnam could do it after being devastated by their wars, so can we. If Lee Kuan Yew could do it for Singapore, so can we. If Mahathir Mohamad could do it for Malaysia, so can we. If China could take out its 1.5 billion population from the shackles of poverty, so can we. So, help us God.

The writer is a former senator and former special assistant to the prime minister / federal minister for revenue.

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