Martin Luther King Jr. once said that “We must create full employment or we must create [basic, guaranteed] incomes.” The irony is that more than 40 years later, we just talk a lot about the last half of that statement, whereas, there is virtually no real talk about the philosophical underpinnings of King’s other idea—“full employment.”

Since the developed western economies have by and large been successful in guaranteeing a job to any new yearly entrant into the job market - in fact today the UK and the Central European Economies like the Czech Republic are complaining about shortage of workforce - the original debate about the right of every able-bodied and able-minded person to hold a job has either gone on the back burner or simply off the radar. While we see entrepreneurial icons and Economists like Sam Altman, Bill Gates, Chris Hughes, Joseph Stiglitz, Thomas Piketty and others, often campaign for the trendy and fashionable ideas of Equality and Universal Basic Income (UBI) - the idea that everyone should receive a regular, unconditional, government stipend that would be sufficient to cover one’s material needs - but no one is really talking about the millions of young people in the developing world who enter the job market every year to disappointingly find that there is just no work for them! However, the dilemma in countries, such as ours, is that the debate on the right to employment warrants as much debate as on the right to equality or the UBI, if not more. Even by conservative estimates nearly 2 million (some estimates though point to as high as 3 million) young adults enter the job every year and need to be provided with livable job opportunities.

Compound this with the issue of disguised unemployment where the estimated ratio nearly touches 8:1 in the family tilled small rural land holdings and the problem of real unemployment reaches even more serious proportions. The history of the justification for full employment is embedded in the “right to work,” which was written into the Universal Declaration of Human Rights (UDHR) in 1948 and which some argue can be traced back to the 1848 French Revolution’s droit au travail. Article 23.1 in UDHR reads: “Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.” While what the “right to work” truly means still remains a matter for debate, for us the simple interpretation points to a guarantee of gainful employment by the State, since it has a corresponding duty to actually ensure its citizens gainful employment by availing itself of all means (such as the market) or other (state employment) to bring this about. And it is in this context that this government needs to primarily focus on ‘job creation’ – Any witch hunting or self-righteousness can perhaps wait for now! According to a study conducted by the World Bank in 2016, in order to create roughly 2.2 million jobs per annum, Pakistan needs to grow its GDP by roughly 7.50% in the same year.

Though these numbers may no longer be valid, as the rupee has devalued since and the economy has shrunk, therefore theoretically requiring a higher GDP growth percentile over a narrower base to generate 2.2 million employment opportunities, let’s for argument’s sake keep to the previous equation for now: Meaning, that even with the previous size of the GDP, due to merely 2.8% growth there has been a job-creation shortfall of nearly 1.4 million in the first year alone. The situation by any stretch of imagination is alarming. So, the saga of follies of the past governments and the constraints of an IMF program aside, what is it that really needs to be done?

To start with, a realization must set in within the government itself that its economic management in the first year has not been conducive for economic growth and the economy’s wellbeing and some things must change. Only an honest introspection and the courage to accept mistakes will ensure that, going forward, they are rectified. The fundamental mistake thus far has been that the government’s actions, policies and posturing, spelled in economic terms, has had the effect of economic contraction instead of expansion. This by itself set the tone for some very strange decisions that followed, thereby ending up not only in slowing investment and eroding of investor’s confidence, but also in taking the economic activity in the very opposite direction to what was required. Pakistan’s main problem is that of its external account deficit and look at it in any which way you want, a mere currency devaluation is never an answer.

While no one is debating that periodic corrections in accordance with international trends or accommodating inflationary-adjustments to retain industrial competitiveness are and will always be a part of prudent currency parity settings, it is the abrupt and such a high value erosion of in excess of 30% that just does not make any sense. Currencies like the PKR are not freely trading currencies and simply attributing a fall to market forces seems simplistic, to say the least. To a large extent perception and the respective central bank’s willingness to defend its currency play an important part in determining the prevailing parity. One has written time and again that there exists no empirical evidence (or data) to establish any type of real correlation between devaluation and sustainable growth in a country’s exports. The stories of successful exporting countries climbing the value added chain over the last decade come out as being no different. In fact a very detailed WTO study on value addition (2008) points to a stable currency environment as one of the main pre-requisites to a sustainable value-addition drive in an economy. As if this folly by itself was not damaging enough, the removal of zero-rating and imposition of a sales tax slab of as high as 17%, (even 20% in cases) defies logic. And in all this, still missing is any mechanism to ensure an expeditious refund to the exporters; the newly announced program FASTER being full of lacunas and Red tape.

If previous history is anything to go by, refunds at the time had a backlog of 18 to 24 months with nearly a 10% level of disallowances or deferment. End result: The already cash starved exporters now suddenly have an even larger liquidity crunch to grapple with! In comparison, Bangladesh’s central bank guarantees its exporters their refunds in 3 working days from the date of export receipts and in many cases where its exporting units are either located in the EPZs or if their export sales account for 90% or more of their turnover, they are simply allotted a zero-rated registration. In addition, this levy of such an exceptionally high rate of Sales Tax or VAT (value added tax) raises the larger fundamental concern of further increasing the cost of doing business in Pakistan – an indicator on which we already fall fairly short! At a time when other countries are trying to shore up industrial competitiveness by lowering sales tax we have instead opted to move in the other direction? For example, today in Sri Lanka ST stands rationalized to 13.50%, in Egypt 14% and in more conscious economies like South Korea to 10%, Japan 8%, Thailand 7% and in Malaysia to 7%. Indonesia this year did a second reduction by bringing it down to10% and in Nigeria to 5%. Make no mistake that exports alone hold the potential of being the most likely and natural driver of growth and job creation in Pakistan and to optimally capitalize on it, Zero-rating needs to be restored, albeit with safeguards in place to ensure against its misuse in the domestic market.

Ostensibly, economic mismanagement carries long-term repercussions, because economic cycles can invariably take a long time to correct themselves: On growth and job creation, the present managers will be well served by also studying some very respected work in this regard by the eminent Russian economist, Nikolai Kondratiev, who advises on how disturbed economic cycles in a non-conducive environment can sometimes take as long as 50 years to re-correct themselves. Incidentally, he also emphasizes why nations cannot sustainably develop unless they ensure cheap capital to the investor. In fact, the underlying argument to his work is that how a government is responsible for arranging cheap capital in its economy and what it must do to see to it that cost of capital to its investors is always globally competitive. A cursory look at the successful economies and not only have they all ensured this for their investors, but in fact today are operating at negative interest rates – Still in the US the Federal Reserve further cut the interest rate last week despite fears of inflation owing to the on-going trade war between the US and China! Closer to home, Turkey recently reduced its discount rate by nearly 400 basis points in one go; India is expected to further lower its discount rate from the present 6%; and China just announced another cut of 100 basis points, with expectations for more in the coming months.

For Pakistan to support 13.25% in an economic structure where discount rates have little correlation to real inflation is just not healthy for business. At most, it should be 10% or may be slightly less than this to capitalize on the psychological advantage of single digit discount rate. For anyone arguing that such policies recently worked very well in Egypt and therefore should do in Pakistan as well, the caution is that firstly, things may not anymore be very rosy over there and secondly, any buoyancy that may have been temporarily witnessed in Egypt was largely owed to the largest ever natural gas field discovered in 2015 by the Italian energy company Eni (largest ever natural gas find in the Mediterranean Sea, almost twice the size of the nearby Leviathan gas field with the total gas in place in Egypt’s new Zohr gas field estimated around 850 billion cubic meters - 30 trillion cubic feet), which by the way, incidentally happened to more or less coincide with the launching of the last 2016 IMF Program in Egypt. No such luck so far here in Pakistan!