Thursday June 01, 2023

Testing reforms

March 31, 2023

LAHORE: Reforms in India delivered after Indian Diaspora found them transparent and started investing there. The litmus test for checking the confidence on reforms is to see how the large Pakistani Diaspora having huge foreign savings reacts to Pakistani policies.

Experts point out that when the local entrepreneurs sitting on huge wealth do not invest in productive sectors of the country, then we should not expect foreign investors to come to Pakistan. Moreover, the first wave of foreign investment in the country would come from overseas Pakistanis, who after living away from their homeland for decades long to come back.

Pakistan’s so called liberal economy has remained in limbo because of frequent tinkering in reforms by both authoritarian and democratic governments. The inconsistency of policies and non-implementation of rules and regulations continue to keep overseas Pakistanis at bay.

Real reforms provide a level playing field, while bypassing the reform agenda on discretion of the ruling elite turns the economic system into a rent seeking structure. Pakistan has a large number of successful entrepreneurs operating in the European Union, United States and Canada and even in Dubai. They have since long been waiting for the opportune time to go back and invest in their home land.

However, for expatriate Pakistanis, the country’s policies make no sense, which they think have diminished our standing in the world. India’s Diaspora had similar sentiments about the policies of their government in the1990s but the reforms introduced by Manmohan Singh during the Narasimha Rao regime instilled confidence in them. Today, more than fifty percent of foreign investment in India comes from Mauritius where a large numbers of Indian immigrants reside.

If we analyse the foreign investment coming to India from Europe and the United States this is also coming mainly from Indians who have migrated to these regions. Pakistan is among the top ten recipients of workers remittances which indicate the strength of the Diaspora. But these overseas Pakistanis send petty amounts to their relatives in the country.

They are reluctant to establish industrial projects from their huge savings as they have no trust in the system. Ruling elites from Pakistan on their visit to developed economies increasingly experience, disjunction between their sense of Pakistan’s ancient culture and glory and their realisation that our foolish economic policies had led to a situation where few took us seriously.

Pakistani Diaspora ceaselessly tell these elites the fact that Pakistan’s policies had little rationale; they tell them in transparent economies Pakistani economic policies would be laughed out of court.

Pakistanis have demonstrated that, if only they are given the chance and the opportunity, they can work their way to the top: a possibility that the United States, a land made by immigrants which welcomes immigrants more than any other country, offers them in spades. Offer similar opportunities to expats and they will perform miracles.

Clearly there was nothing special about Pakistan that doomed it to its low growth rate, not its size, not its culture, not its geography, nor its history. The problem lay in our choice of wrong policies; when the policies were good, Pakistanis performed at the most enviable levels, second to none.

In case of Japan, its transformation occurred through major initiatives throughout the Meiji era, which sent gifted Japanese abroad to bring back ideas that were adapted to Japan’s culture and needs. The Pakistani Diaspora is also full of ideas that can transform its economy if the rulers and planners genuinely and sincerely engaged them.