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Beyond begging and taxing

Iam ashamed of our constant begging. How do you feel when you see the PM sitting in front of rulers of fiefdoms the size of Gulberg begging, supposedly on your behalf?Meanwhile our economic analysts have only one refrain: ‘tax more’. They can’t seem to think independently of donors who employ

By Nadeem Ul Haque
January 25, 2015
Iam ashamed of our constant begging. How do you feel when you see the PM sitting in front of rulers of fiefdoms the size of Gulberg begging, supposedly on your behalf?
Meanwhile our economic analysts have only one refrain: ‘tax more’. They can’t seem to think independently of donors who employ them as consultants on trifling contracts. I have suggested in other writings that donor claims on taxation are really misguided economics.
They point to our deficits arising from the government’s incompetence and self-aggrandisement and use them as a reason to tax the people of Pakistan more. As further reason for taxing us more they point to the abysmal level of public service here. They fail to see that the government has no motivation to provide us public service as it is preoccupied with self-aggrandisement and useless mega projects for ‘unknown’ reasons.
We do have a national employment emergency. The youth of our nation constitute over 50 percent of our labor force and need jobs. The economy is not growing fast enough for them to find these jobs. Our government should be doing all it can to create employment.
‘Begging and taxing’ is not creating jobs. Instead, it is keeping the government distracted from the work that needs to be done to create more jobs.
Let us get some answers by looking at ‘distressed companies’ with cash flow problems and slow growth. Such companies go through a ‘restructuring’ at all levels to come out of this situation. The ‘restructuring/reform’ plan does not involve ‘rob (tax) your customers more!’ nor does it allow more mega-projects. In actual fact, grandiose plans are slashed.
‘Restructuring/reform’ involves three key areas of work. First, review and refine your product line for focus, efficiency and increased margins. Second, review costs to cut them; and third, restructure assets and liabilities for increased income in the years ahead.
Of course this requires some thought and expertise which is missing in our government.
An ‘economically-distressed’ country such as ours sadly has no ‘restructuring/reform’ plan but many ill-advised mega-projects for which it is constantly seeking funding and debt.
I focus on asset restructuring for four reasons. First, to show the strident lobby for increased taxation that the government has huge investment, growth and income options in the restructuring of the many assets that the government is holding. Second, to show the ‘tax-first’ lobby created by donors that if the economy is allowed breathing space through such restructuring and investment, and growth takes place, it will lead to more employment, growth and taxes. Squeezing more taxes of a dead economy is what austerity is and it destroys societies.
Third, government assets are currently ‘dead capital’ that is weighing on the economy making us an ‘economically-distressed’ country. Fourth, this dead capital amounts to a tax on the rest of us and must be included in our tax calculation when we are called a low tax country. So dear donors, please stop abusing us.
If only our government took asset restructuring seriously, we could hold our head high and neither suffer donor abuse and poor policy nor have our PM be a supplicant to every tiny country. Here are a few examples of asset restructuring.
• City centre government property could be made available for big-time mixed use development ranging from hotels, shopping malls to apartment blocks. My estimate made at the Planning Commission is that such development in Islamabad alone could generate over six trillion of investment sales generating about six million jobs.
• Then there are large tracts occupied by government training institutions – NDC, Staff Colege, Naval War College, NIPA, the Civil Service Academy in Lahore all come to mind. Why can they not be moved to Quetta or Kohat and this land freed once again for serious development? If converted into serious mixed-use development, this could easily allow large commercial construction and much employment.
• A large part of city centre land is given over to the elite for their entertainment at subsidised rates. This includes the polo ground, golf courses as well as elite clubs. If the peasants’ land can be acquired for DHA, why not take over these ‘rich man’ facilities for serious commercial development that relieves our debt burden. This could be a large bonanza yielding many jobs. We could even build libraries and community centres on this land.
• Creative destruction could yield a huge bonanza. Take the major markets in Lahore and Islamabad. If we merely find a way to turn these relics of another time into modern assets, dead capital can be converted into gold. For example, a popular shopping market in Lahore could house a beautiful modern multi-level shopping mall as well as hotels, apartments, offices and parking. Use of this concept in other places could mean more output, revenue and jobs.
• Still more creative destruction. Our cities look dated and decrepit because our silly bureaucracy does not allow renewal. Housing stock has normally an average age of 20 to 30 years. Zoning also needs renewal each generation. Yesterday’s suburb or housing could be today’s commercial hub leading to large valuation gains. As I have been arguing for many years, our zoning laws are antiquated and anti-development. Allowing our housing stock to be renewed from low slung kothis to high-rise flats and commerce in all our cities from Karachi to Kohat could be a big bonanza. I think this could be huge leading to an acceleration of growth of about two percent per annum for about 20 years.
There is more but I am limited in space. With so much dead capital lying around, why do we beg with such dishonour? My calculations suggest that with these simple changes our GDP could double in about 10 years or less through the growth of construction, hospitality, retail and ancillary industries. Moreover, none of this requires financing – only a rule change. More importantly, it will vitalise investment.
Of course our rich and famous might become a little uncomfortable. Is that so bad?
The writer is former deputy chairman of the Planning Commission.
Email: nhaque_imf@yahoo.com
Twitter: @nadeemhaque