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January 24, 2020

Selective policy changes, a roadblock in sustainable growth


January 24, 2020

LAHORE: Economy cannot be improved on a sustainable basis with selective policy changes. There has to be a broad based analysis encompassing all regulatory and administrative procedures to ensure level playing field for all sectors instead of a selected few.

Successive governments have continued to ignore the inherent weaknesses in our economic system. They try to address the problems of one sector even if it hurts the other sectors of the economy.

We have established scores of regulatory institutions without giving them actual independence. The Oil and Gas Regulatory Authority has the mandate to determine the gas and petroleum rates on the basis of actual costs.

The government however is authorised to issue the notification in this regard which it may or may not. Every government claims that they have taken the hit on the recommended rates and would absorb it by reducing either government levies or through subsidies.

We all know that no government in Pakistan in the last three decades has resources to provide subsidies or tax concessions. They do so by increasing the fiscal deficit that is already very high.

It may even reduce the rates without assigning any reason. The regulator thus becomes a spectator only and all the calculations done by its experts go in vain. What is the use of wasting so many resources on this regulator when the final determination of petrol and gas prices has to be determined by the ruling elite?

We see the same pattern on the decisions of almost all institutions. Many institutions remain inoperative because of the failure of the rulers to fill the regulatory posts.

The government has completely ignored the regulatory institutions of the country that are an integral part of economic management the world over.

It is simply not part of their economic paradigm. The government should strengthen all the regulatory institutions or disband them.

Three vital regulatory institutions - the State Bank of Pakistan, Security and Exchange Commission of Pakistan, and Competition Commission of Pakistan - need to be fully independent to ensure sustained and equitable growth in free market economy.

A strong and independent SBP would ensure stability of the banking system; the SECP needs full autonomy for better corporate governance and CCP for keeping the markets functioning fairly, providing equal opportunity to all. Had these three institutions been allowed to operate independently, Pakistan would not have been in an economic mess it currently faces.

Successive governments have also restricted economic growth by giving preferential treatment to few sectors while ignoring the others. The state lacks economically prudent human resource, as economic decision makers are always career bureaucrats who have served in different ministries at some point.

These bureaucrats take decisions on the presentations of most influential trade bodies that might hurt the interests of the other sectors of the economy. We will have to formulate a uniform policy for all economic sectors for sustainable growth.

Concessions should not be provided to specific sector or particular individuals, but if necessary, to all businesses. Our engineering sector has the potential to penetrate global markets if facilitations granted to the five exporting sectors were also given to them.

In fact every domestic industry from producers of plastic products, furniture to table salt processors possesses the potential to add to our exports. We must be ashamed that the rock salt that we used to export to India dirt cheap was processed and exported under different brand names at more than 100 times the price they paid us.

In Pakistan, no salt processor can even think of getting similar facilities that are available to the five preferred exporting sectors.

We also need judicial reforms that ensure quick disposal of finance related disputes. Some businesses are hiding under the stays from the courts.

Stays should be vacated within two weeks through regular hearing to settle the matter once and for all. The pending cases should be decided on urgent basis without any adjournments. Both parties should be given seven days notice to come fully prepared as there would be no adjournments.

The delay from government should be a punishable offence. Streamlining the judiciary at par with developed economies would accelerate economic growth to new heights.

It would also ensure that decisions on cases impacting the interests of the consumers speed up and delaying tactics used by vested interests get defeated.