Charter of Economy

Pakistan is facing existential financial and economic crisis. Foreign debts are soaring and economic activities shrinking. Inflation is on the rise while people have limited choices for livelihoods. It is the result of deep structural flaws, including consumption-led GDP growth, commodity-based market, lack of innovation and diversification.

The consumption-led growth has severely impacted economy hindering its transition from primary to secondary or tertiary economy. Country is striving hard to come out of this situation and is looking for avenues which can help people.

In this context, PM Shehbaz Sharif has come up with the idea of Charter of Economy and is urging all the power players and stakeholders to join hands for conceiving innovative ideas and real-time solutions. It is not for the first time such an idea has surfaced. Unfortunately, it never materialised in the past due to differences of priorities among the power players.

Present crisis is compelling us to take practical steps to come out of this crisis. For that purpose, we need to adopt scientific approach, not big statements. It is required to get rid of fancy slogans and devise a charter based on ground-realities. Thus, before formulating charter, Pakistan should ponder on few questions. First, from where the crisis originates? Second, what are the needs of people? Third, what are the ground-realities like state of human capital and financial resources? Fourth, which sector has potential to give immediate relief and pave way for sustainable development? Fifth, which country can act as anchorage country? Sixth, charter for the elite or the common people?

Second step should be to devise charter by adopting a phase-wise methodology and every phase should be tagged with a concrete number of GDP and priority areas. A study by the Asian Institute of Eco-civilisation came up with following phase-wise framework. Phase-1, low-hanging fruit (two years), targeted GDP $430 billion and priority areas would be agriculture and tourism. Phase-2, short-term (five years), GDP target $600 billion and priority areas would be SMEs and industry. Phase-3, medium-term (15 years), GDP target $1.5 trillion and priority would be areas would be industry and SMEs. Phase-4, long-term (25 years), GDP target $3 trillion and priority areas would be services, industry and SMEs. It is pertinent to mention here that phase-wise priority does not mean Pakistan ignore other sectors, it is just priority for certain phase.

Third, due to expansion of economy, Pakistan would be in need of an anchorage market, which can accommodate surplus production and provide required foreign direct investment. Owning to CPEC, China can act as an anchorage market for Pakistan.

Fourth, Charter of Economy should not repeat mistakes of Charter of Democracy. As most people think, it was a charter among the power players and there was nothing for the common people. Thus, Charter of Economy must be pro-poor, with strong mechanisms of distribution of resources. State-owned enterprises can serve this purpose.

However, Charter of Economy cannot achieve the goals without overhauling the governance system. First of all, Pakistan will have to go for bureaucratic overhaul. For that purpose, first intervention should be to reform the inducement policy and merit system.

Second, the planning system of Pakistan is weak and exclusive in nature. There is strong need to refine it. Planning should start from grassroots and not be influenced by so-called representatives of society like NGOs, think tanks etc. In this regard, we can learn from China, especially from the process of development of five-year plans.

Third, there is need to improve the business environment, not only by ranking. For example, registration of business is a complex process and involves seven agencies, and security clearance further complicates it. It takes several days, in some case months, to register business. Further, tax system must not be extractive neither for industry nor for common people. As Ibn Khaldun said, tax rates should be rationalised, and tax net must be expanded.

Fourth, it is a well-established fact that implementation and monitoring are the weakest links in the execution of policies and programmes. Deadlines are not observed due to lack of monitoring and accountability mechanisms. Besides, political point-scoring creates problems. Pakistan can overcome the hurdles by creating M&E and accountability mechanisms and by tagging promotion with successful execution of a specific number of programmes.

Fifth, the most important intervention would be to produce high quality human capital with strong values, ethics and commitment to society development. It should take care of needs of economy and fourth industrial revolution.

Sixth, to create buy-in among all, there is need to constitute a joint committee comprising heads of five leading political parties (not government or opposition), opposition leader, chief of services, chief of judiciary with Prime Minister as head of the committee. It will help curb political point-scoring and ensure smooth implementation of Charter of Economy.

Seventh, there should be no rehiring of retired civilian and military personnel at all. If someone wants to serve nation, he/she should do without pay as he/she is already enjoying post-retirement benefits.

In conclusion, Pakistan needs to learn about the importance of indigenous wisdom and role of Islamic laws. Father of Nation always emphasised role of indigenous wisdom and Islamic principles for building a prosper society (speech at the opening ceremony of State Bank of Pakistan). Lastly, being an Islamic country, “interest (Riba) system” must be eliminated.