There is no denying the fact that Pakistanis are an extremely philanthropic lot (unofficially ranked amongst the top three in the world in terms of private charity) and one can only laud the government’s efforts in quickly announcing relief packages for the unemployed daily wagers and the poorest of the poor, but make no mistake that such measures will only do so much and regrettably, tend to be ineffective beyond a certain point. In economic history, cash grants have never had a good success rate and naturally are not considered a sustainable solution. The highest success rate ever of money reaching the rightful pockets and delivered when it was actually needed, dates backs to the 80s in Chile’s experience of cash dole outs and that too with a success rate of barely in the 50s percentile. Now Chile has a relatively small population, so imagine the kind of ineffectiveness such programmes can suffer in a country like Pakistan with a 220 million population-count and a rather embarrassing track record on administrative corruption. So, the solution only – and only – lies in keeping jobs secure and by aiding further employment generation. An Old Confucius saying that goes something like, ‘it is always better to teach a man to fish than feeding fish to a 100 men’ applies here. This is what all prudent and sensible governments are doing in their respective wars against the COVID-19 pandemic – “Aid the employer, shield the job”. For example, countries like France, Austria, Czech Republic, Sweden, Denmark, Germany and many others were quick to announce a host of measures directly aimed at helping businesses, albeit on the precondition of keeping jobs. In fact each one of them has a complete toolbox of helping measures for businesses to select from, depending on their peculiar requirements. Thankfully the West learning from the 2008 financial crisis, when it didn’t take aggressive steps to support workers and businesses (unemployment jumped to 10% & stayed there for nearly half a decade), this time by contrast is doing things differently. Pakistan also needs to follow suit. The state has a social contract with its people, which broadly comes about in two ways: a) where the state takes over everything and undertakes upon itself to assumes full responsibility for people’s needs, and b) Where the state provides an enabling environment to let the market forces take hold in finding the most efficient, optimum and sustainable solutions to people’s on-going and often changing needs. Now we know the former failed many nations many times and for good or bad or for whatever it is worth, the latter still offers the best outcome. Even for models that tweak the capitalist model with more social leanings, like in the Scandinavian countries, the model is still essentially of a market economy. For example, Denmark, despite being classified as ‘democratic socialism’, in effect relies on some of the most globally competitive multinationals in the world (A.P. Moller-Maersk, Danske Bank, Novo Nordisk, Carlsberg Group, Vestas, Coloplast, the Lego Group, Novozymes, etc.) and on a very robust SME private sector on the pattern of Germany’s Mittelstand, both serving not only as the linchpins of employment generation but also for ensuring social safety nets for the Danes in their times of need.

So, the question is that what can the Pakistani government do next? The answers to this are actually all intertwined and go back to the very basics of sound economic governance, entailing the following:

1. Unleash a new revised/updated industrial policy that takes into account new realities post COVID-19. This means partnering businesses, factories, work places, farming and all other sectors (especially the SMEs) in tangibly helping them to establish the required safety and health protocols under the revised global codes. Remember this has become necessary both for the new sanitising requirements of domestic markets and for meeting the post COVID-19 compliance requirements for exports. Now this does not mean that there will be no mistakes, no accidents or no casualties and therefore the challenge will be to nurture, motivate and improve our workplaces instead of indulging in a draconian blame game cum extortion or killing the very will of the investors to continue to operate.

2. The markets are going to be distorted and countries are going to turn increasingly protectionist during the foreseeable future, thus leading to a scenario where in the next few years earning proportionately to foreign debt repayments is going to be extremely challenging, to say the least. Recognising this reality, we also need to start re-negotiating our national external debt, lest we miss the bus.

3. The cost of doing business will need to be brought down and private capital needs to go to work instead of lying idle in the banks, and for this the interest rates need to be quickly brought down to around 6%. Inflation, as we know, is already de-escalating and was recorded at a single digit figure of 9% in March 2020. With pressure on demand and capitulating global commodity prices this inflation figure is expected to go down further in the coming months.

4. Some closures are inevitable and need to be taken in one’s stride without panicking about them. Packages, grants and help aside, some business houses are always going to balk at the efforts or the relief provided and instead ask for more or for outright bailouts. It will take some expert analytical handling to ignore such demands that stem from personal greed or sheer corporate incompetence.

5. Amnesty schemes in general tend to distort markets and disturb the delicate market-investment-equilibrium between different sectors, thereby running the risk of negatively skewing the very underlying pattern of long-term investment growth; other than of course taking away the incentive to work legitimately for the businesses that thrive on operational excellence instead of fraud. For a moment, the FATF sensitivities aside (which by the way cannot be taken lightly), even with a thought of genuinely encouraging a healthy business environment in the country, nothing could have been more damaging than (yet again) providing another sector specific money whitening scheme. Either it should be withdrawn or limited to no more than 6 months (i.e. marking the peak-hit COVID-19 period).

6. Lastly, once again, as one has been consistently advocating, in order to achieve the above goals this government needs help and will do well by quickly assembling some good human resource comprising of competent professionals in their respective fields.