Sunday May 22, 2022

The way forward

October 18, 2017

The economy of Pakistan is worrying and presents a mixed picture. Our budget deficit has reached Rs1,864 billion against the estimated Rs1,276 billion. In 2014-2015, the external borrowing used to finance the budget deficit was 12.4 percent of the deficit but in 2015-2016 it increased to 27 percent, and in 2016-2017 to 29 percent. The fiscal deficit is about 5.8 percent of GDP against the target set of 3.8 percent. Similarly, the current account deficit is now about 4 percent against the target of 1.5 percent, indicative of the challenges ahead.

On the positive side, the economic growth rate has improved somewhat from that seen in the previous PPP government and is now about 5.3 percent. The decline in exports has now slowed down, and the results for the last quarter indicate that the situation has stabilised. Imports have jumped to  53 billion and continue to grow. However, if these are largely in the form of machinery, then it amounts to investment in the future. The government needs to take immediate measures to freeze imports to a maximum of $45 billion by restricting all non-essential items. It also needs to increase exports by providing additional incentives to exporters and by making the manufacturing sector more competitive through a substantial reduction in tariffs for electricity and gas to industry.

The current account deficit in has grown to $12.1 billion (4 percent of GDP) which makes the situation unsustainable. The overall external debt has grown by $9 billion while the government external debt has grown by $4.7 billion. Pakistan’s total external debt and liabilities have now grown to about Rs25,000 billion, 76 percent of our GDP. Clearly, there is an urgent need for major fiscal reforms.

The vision and strategy of successive governments have been wrong. We have ignored our real wealth: the potential creativity of our children. We need to understand that the only way forward is to migrate to a ‘knowledge economy’. How is it that Singapore, a country without any natural resources and with a population one-fourth of Karachi, has exports of about $300 billion while Pakistan’s exports stagnate at about $21 billion? The reason is simple. Singapore has a government composed of eminent technocrats, all experts in their respective fields, who understand the ingredients of a knowledge economy. The same is true for Korea, Taiwan and China. So what is it that these and advanced Western countries are doing that we have failed to do in Pakistan? The answer is: innovation.

Science, technology, innovation and entrepreneurship are transforming those nations that have learned to unleash the creative potential of their young. A small reflection of what can be achieved is apparent from the policy changes related to the information technology and telecommunication sectors that I made in 2001 when I was federal minister of science and technology. Massive investments were made to set up IT institutions across the country. A 15-year tax holiday was given to the IT industry and the cost of bandwidth was reduced by 10,000 percent (hundred fold). I persuaded the CEO of Intel when I met him at a conference in Hong Kong in 2001 to invest in training school teachers in computer science across Pakistan. This led to 225,000 school teachers being trained in 70 districts across the country at zero cost to our government.

These and a host of other measures led to the growth of IT business from only $30 million in 2001 to about $3.2 billion now, a hundred fold increase. Similar reforms introduced by us in 2001 to uplift the mobile telecommunication sector have led to the increase of mobile telephony from only 0.3 million users in 2001 to about 160 million users now, making this the hottest sector of our economy. These two examples illustrate the tremendous power of the knowledge economy.

For a strong knowledge economy to be established, our prime minister needs to take matters in his own hands and form a group of top technical experts in the field to advise him about the way forward. The measures needed to transform Pakistan are: Give the highest budgetary priority to primary, secondary, technical, college and university education with special emphasis on engineering sciences. This will involve a complete overhaul of school and college education with major governance reforms. It will also involve improving the quality of technical training institutes, with international accreditation to guarantee the quality of output. We will need to increase the number of students being sent abroad, for Masters and PhD degrees, to at least 5,000 per year to provide high quality manpower in carefully identified priority areas.

Promote innovation and entrepreneurship by suitable policies to foster new start-up companies through access to a nation-wide network of innovation parks, legal, financial and mentoring facilities as well as venture capital. Completely restructure national S&T organisations through a contractual system of appointments with regular performance monitoring against carefully set targets directed at promoting medium and high tech manufacture.

Make knowledge transfer essential component in foreign direct investment in all projects approved by our government that are above Rs100 million. Formulate and implement a National Technology and Innovation policy to increase global competitiveness. Encourage private sector R&D through grants for R&D expenditure and training of personnel in top institutions abroad to improve our skill sets. Promote high-tech manufacturing in the private sector with foreign collaboration, grant ‘pioneering’ status to high-tech industries, establish technology parks and high-tech industrial estates and give 15 year tax to medium and high-tech industry.

Establish an organisation for Technology Assessment and Forecasting (TAF) for regular Technology Foresight studies. The prime minister should chair meetings of the Knowledge Economy Commission, which is based in the PM’s Secretariat and dedicated to transforming Pakistan. This commission should have top scientists and engineers of Pakistan, visionary representatives of the private sector, ministers/secretaries of key ministries and provincial chief ministers and representatives; at least five percent of our GDP should be allocated to the commission’s programmes.

To implement the above programme we need a visionary, honest and technologically competent government that understands the role of knowledge for socio-economic development in the world today.


The writer is the former federal minister for science and technology and former chairman of the HEC, and president of the Network of Academies of Science of OIC Countries (NASIC).