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July 10, 2020

Faulty planning blocks long-term growth

Business

July 10, 2020

LAHORE: There is something wrong in Pakistan’s economic planning policies that even after decades the country is mired in prosperity, while those who were far worse some decades ago are either prospering or are moving towards growth.

The difference between our approach and that of competing economies is that their planners are focused on long-term goals. Our planners try to wriggle out of difficult situations not through reforms but through concessions.

When you dole out undue concession you block the process of long-term improvement. They have realised that institutional stability and competence is vital for growth.

In Pakistan, institutions operate on the whims of the government. The regulatory institutions often remain non-operational as the retiring board or commission members are not timely replaced.

It has happened in recent past in almost all regulatory institutions including Oil and Gas Regulatory Authority, Competition Commission of Pakistan, Securities and Exchange Commission of Pakistan and others. The institutions further weaken when government appoints temporary heads till the appointment is finalised after due process.

Successful economies have free media that promptly points out any deviation from rules or special favours not available to all. In Pakistan, the media is gagged; the head of the largest media group is under lockup on frivolous charges.

Progressive economies have vibrant courts that give priority to cases relating to governance and finance. In Pakistan, cartelisation fines on cement sector are in limbo for more than 15 years because the stay of cement association has not been vacated.

They do give subsidies, but to the right persons and sectors under strict conditions. The exemptions granted to influential groups and sectors are de-facto subsidies granted to the rich.

Their facilitations are more focused on encouraging the small businesses and removing hurdles that come their way.

This dedicated approach helps businesses to operate with confidence.

Institutions are strong, which ensures level playing field for all. Bureaucracy moves the files of every person and stakeholder with same speed. We all know that all facilitation and favours in Pakistan are garnered towards the rich.

In our competing economies, importance is given to the subsectors of an industry that have the potential to create jobs and boost exports. These sectors are usually small industries and investors as they are the engines of growth and export the world over.

In Pakistan, importance is given to the large scale manufacturers and investors. They invest big but create little jobs.

In the auto sector for instance the original equipment manufacturers have more say in the ministries of commerce, finance and industry then thousands of small auto vendors.

Vendors and the manufacturers are made to sit in front of each other while negotiating the auto policy.

Vendors dare not oppose many proposals by the original equipment manufacturers because they are captive manufacturers of their auto parts. The auto policy should be discussed separately with these two main stakeholders. Equal time should also be given to them while formulating policies.

Similarly, All Pakistan Textiles Mills Association (APTMA) that officially represents low value manufacturers and exporters has more clout in the corridors of power than the apparel manufacturers and exporters. There is a conflict of interest between low value-added textile manufacturers (the suppliers of basic raw material to the value-added manufacturers) and the apparel manufacturers.

Since the clout of APTMA is stronger, the textile policies incorporate things that suit the spinners and weavers.

Apparel manufacturers end up buying local inputs at higher than global rates because of protections incorporated in the textile policies to protect basic textiles.

Trade and industry have separate trade associations and chambers. But in Pakistan the chambers represent both the traders and the manufacturers.

The interests of trade are opposite to the interests of the industry. Since the representatives of chambers are elected by both traders and industries the resultant elected body has to compromise on policy decisions.

Documentation of the economy suits the industry. The traders oppose it strongly. The chambers in their statements and meeting with policy makers say that they strongly support documentation of economy, but always seek some time to create awareness and prepare the non-documented traders to accept it.

This is going on for the last 33 years, as the documentation drive was started in 1987. Why can we not separate the chambers for traders and manufacturers?

There is a need to find out as to why the cost of doing business in Pakistan is higher than most regional countries even in raw materials that are indigenously available and in products where imported inputs are used.