Desperate measures driving millions more below poverty line

LAHORE: Stuck in the firefighting mode, the government is striving to mobilise resources through foreign or external borrowing, ignoring the mounting inflationary pressures that are actually impeding its efforts to enhance exports and reduce poverty.

The rulers must understand that every country has its own culture, business dynamics and institutional capabilities and they cannot replicate the experience of other countries like China in Pakistan. We have to put our house in order to move ahead. We will have to promote a culture of honesty and fair accountability if we want to bring about a change for better.

Above all, we will have to establish the writ of the government to ensure implementation of policies and decisions. Since its coming into power, the present regime has shown that it’s no different than its predecessors, who operated by transferring bureaucrats that tend to work according to law instead of obeying unfair verbal orders of the rulers.

China is not the only country that has moved ahead. Neighboring India and Bangladesh have also made great strides in reducing poverty, increasing exports and attracting both foreign and domestic investment.

Making things work economically is not a rocket science. All you have to do is operate transparently, fairly, and equitably to remove hurdles to investment.

At the same time the corruption should be curbed at all levels and accountability should be across-the-board. Through selective accountability the government gives an impression that those who have been spared from this process could go on with their unethical ways.

The planners must realise that the poverty is expected to rise with most recent increases in gas, electricity, and petroleum products’ rates. The devaluation of rupee was already a big blow both to the economy and the poor.

The prices of every basic essential will increase, be it transport, edibles, daily use items, or housing. The income of the poor would not register any increase. The poor were hardly pulling on before the above inflationary measures were taken by this regime.

There is no way they could be able to manage to survive following a 10-30 percent hike in the prices of necessities. The inflation clocked 7 percent last month and is constantly on the rise and will remain so during this fiscal. It is has already crossed the budgetary target of 6 percent. The exporters have been facilitated in power and gas prices but the rulers must understand that 35 percent of the industry located in Sindh, Khyber Pakhunkhwa and Balochistan already had access to low cost gas from which they generated electricity.

Still these industries were unable to export. The reduction in gas rates in Punjab has simply restored the gas price parity that was not available to the province’s industries.

Even a massive devaluation of rupee could not help exports increase as was being expected they would. In fact the exports of yarn declined by 17 percent in September and fabric exports increased 1.65 percent only. This is pathetic in view of over 26 percent devaluation in rupee.

Let us not forget that the past government did take steps to reduce the cost of doing business as Pakistan moved up 11 places to 136th position in the recent Doing Business Report by the World Bank. The export performance shows that the ranking has to be further improved. This is not possibly going happen without strengthening institutions.

The industry needs upgrade. The interest rates however are now at four-year high and are expected to increase further. Unfortunately the sponsors of exporting industries failed to invest in technology when the going was good and interest rates were low during the previous regime.

Sustained increase in exports would remain a dream unless the industries are modernised. This government would face the dilemma of persuading the manufacturers to upgrade technology.

The industrialists would definitely demand of the government to subsidise mark-up on the upgrade of technology. The finance minister in his recent speech had asked the exporters to improve the quality of their products. This would only be possible if the technology is upgraded.

The economic managers would have to be careful in granting interest subsidy on new technology. They will have to choose sectors carefully. The spinning and weaving machines are extremely expensive. The stitching machines are comparatively much cheaper.

A spinning mill worth Rs4 billion would employ up to 200 workers. But the number of stitching machines that can be imported for Rs4 billion would run into thousands. These machines would provide employment to around 20,000 workers. Now the ball is in the court of economic mangers.