Public appeasement may reward in polls not on economic front

LAHORE: Economy is sure footed if the entire nation takes the ownership of government policies, as is happening in India and Bangladesh, whereas the economy trudges on sloppy ground, as in Pakistan, where government policies are globally acclaimed but lack national consensus.

When in early 90s, Narasimha Rao lost elections on opening the Indian economy, all the governments that followed adhered to his economic agenda; and kept bringing second and third generation reforms. All economic reforms introduced to date enjoyed the blessing of whoever was in the opposition. Even today, the most contentious issue of general sales tax has been resolved as the parties that matter supported the move.

This is the reason that the multilateral agencies and economic experts the world over confidently predict the growth rate of India in the medium term. There are no if and buts attached to these predictions that are normally in line with the government set targets. Today, India is the largest growing economy in the world.

Sheikh Hasina Wajed and Khaleda Zia are the two bitter opponents in Bangladesh’s politics. These two have changed hands in power for several times during the past 25 years. They do not see eye to eye on any political issue, but when it comes to the economy, they are on the same page.

In fact, the current Bangladeshi Prime Minister Sheikh Hasina Wajed in her meeting with Pakistani business tycoon Mian Muhammad Mansha at Dhaka had wondered at the approach of different ruling parties on economic issues.

She in fact said neither she nor her bitter enemy Khaleda Zia would tinker with the economic policies of the other when in power. She said this assurance of consistency in economic policies has given the confidence to the investors to chalk out long term plans.

In case of Pakistan, when Nawaz Shariff was removed in 1993 while the construction of Lahore-Islamabad Motorway was half completed, the Benazir government that followed reduced the number of lanes from four to two.

When she was again replaced by Nawaz Shariff in 1997, he reverted to the original plan, but questioned the award of power contracts to independent power producers that were given sovereign guarantees to ensure the sanctity of these contracts.

After long bickering and international arbitration, the original contracts were restored but investors lost confidence in Pakistan’s economy.  Both interferences caused losses worth billions to the national exchequer.

The GST issue has remained unresolved for the last 30 years. Both Benazir and Nawaz governments supported imposing value-added tax regime while in power, but aggressively opposed when in opposition.

The documentation of economy remains elusive because of this and as a result of which we have the lowest tax to GDP ratio. Privatisation process is in limbo as politicians are divided on the issue.

This absence of consensus on economic policies is the reason that the reviews of all multilateral institutions on Pakistan’s economy are based on ifs and buts. The International Monitory Fund, the World Bank and the Asian Development Bank appreciate the economic policies of the present regime, but going forward warn of various obstacles and risks of derailment of these policies.

The policies can, at the most be guaranteed for the tenure of each government. Then again the tenure of any elected government is not sure.

No elected government in the past 30 years had been able to enjoy smooth sailing. The risks of being removed are always there, and that uncertainty is detrimental for the economic growth.

This makes the investors uncertain, and they are not sure whether the next government would continue with the same economic policies. Governments have changed in Bangladesh too as a result of agitation, but the economic policies remained unchanged.

Every government in Pakistan appeases the public to ward off agitation from the opposition. Drug rates are not allowed to increase fearing public backlash. The resultant shortages and higher black market prices do not bother the rulers.

The petroleum products rates are fixed on the whims of rulers not on the basis of their prices in the global market. While users complain of low gas pressures, the government, keeping the coming elections in mind, has lifted ban on gas connections for residential colonies, industries and commercial entities. The kissan package was a public appeasing gesture too.

All elected governments launch only projects that can be completed during their tenure. The absence of long term beneficial projects keeps high growth at bay.