Reviving the economy

By Farhan Bokhari

ISLAMABAD: Finance minister Shaukat Tarin’s promise to reverse Pakistan’s sluggish economic growth marks a timely departure from an ill-advised officially-accepted slowdown of recent years.

Mr Tarin’s promise though welcomed by many stakeholders, nevertheless needs a redefinition of Pakistan’s economic direction, both in policy terms and backed by long overdue reforms of key institutions. Historically, periods of a relative lift in Pakistan’s economic growth have not been sustainable.

Exactly what were the missing elements that drove Pakistan through its boom and bust cycles remains an unresolved riddle? Was it the inflow of generous foreign assistance that helped raise the numbers till the patronage dried up? Was it divine help that raised the output of vital crops and had a salutary but temporary impact on the overall economy? Or was it simply a mix of unforeseen factors like a lift in private foreign inflows coupled with elements such as a dip in global oil prices that gave a temporary fillip to the economy? Any one or more of these trends may well have helped Pakistan improve its performance but only temporarily. A broad consensus from cursory review of Pakistan’s economic history points towards one conclusion; that the country’s managers failed to put in place the necessary frameworks that could translate short-term gains in to a long-term and sustainable economic growth. As finance minister Tarin moves ahead to lift Pakistan’s economic growth which presently is barely on a par with population growth, his choices for action realistically promise to revolve around the existing sectors of the economy. These principally include the large and often neglected agriculture sector backed by areas like existing industry and services. Even at the best of times, Pakistan unlike the South East Asian economies has never succeeded in becoming a destination for large inflows from foreign investors. Faced with challenges such as the paucity of a significantly large segment of a well-educated population and a legal environment where enforcement of contracts cannot be taken for granted, savvy foreign investors have often looked at Pakistan with a degree of skepticism. The other challenges that have deterred investors include gaps in infrastructure, questions surrounding the continuity and/or pricing of energy supplies, and a labour force lacking the skills to stand on a par with labour output in other parts of Asia. In the short-term, the promise of revival of economic growth mainly lies with agriculture. With almost 60 per cent of Pakistan’s population consisting of rural dwellers that directly or indirectly rely on agriculture as their main source of subsistence, Pakistan’s agriculture remains a cornerstone of the economy. While Prime Minister Imran Khan this week launched the new ‘kisan’ or farmers card, it will take more than just another well-publicized official plan to make a difference.

The challenges for agriculture across-the-board are driven by parts of a nearly collapsed irrigation system to the failure by the provinces which have the charge of agriculture to ensure availability of quality seeds, fertilizers and pesticides. These daily life challenges are felt nowhere more acutely than across the Punjab —- a province ruled by Prime Minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) and his handpicked Chief Minister Usman Buzdar. With more than two-thirds of Pakistan’s agricultural output coming from the Punjab, the province effectively holds the critical ‘make it or break it’ position for the sector. Unless the rot at the grassroots across the rural heartland is tackled urgently, the fate of Pakistan’s agriculture sector will remain in disarray.

Meanwhile, the reform of key institutions is essential to grant a new lease of life to Pakistan’s economy. Year after year, the reported loss across key public sector companies has come across as nothing short of criminal neglect. Unlike its predecessors, the Khan government now in its third year was initially expected to take decisive action. Tragically, that is yet to come. The latest plan for reforming the public sector, including the Pakistan International Airlines, sounds more like a broken record.

The previous governments have tried to restructure entities such as the PIA but just failed in the process. In sharp contrast, a decisive action must include shutting down some of the worst performers and selling them off at nominal prices, as long as the disposal of such companies will reduce their repeated financial burden on the Pakistani state.

Institutional reforms must also prompt a closer focus on key areas like entities responsible for tax collection as well as provision of key public services, notably healthcare, education and policing. For long, Pakistan’s mainstream population has heard much by way of a lip-service to the cause of reforms. So far, the Khan government’s record suggests no different than the past.

Mr Tarin, a savvy businessman armed with a successful track record in the private sector may well oversee a lift in growth rates from recent years. But success in sustaining that trend for the long haul must depend on long-term reforms, including institutional ones, to mark a break from Pakistan’s economic history.