Strictly from an economic perspective the first sixty days of this government have been rather disappointing, to say the least. Inflation has rebounded to an alarming level, value of the Pak Rupee has eroded by nearly 5 percent (meaning at 30 percent per annum), contrary to initial expectations the industrial investor’s confidence has not picked up, both the current account deficit and governmental borrowings have gone up, and owing to the longstanding constraints that still remain to be addressed, production or manufacturing has failed to register any real upward trend.

While the intentions may have been good, what seems to be lacking is management competence. It is as if the economic managers have failed to fully grasp the underlying complexity of the economic challenges facing the Pak economy and like a confused and desperate team has simply resorted to knee-jerk actions. As we know, managing national economies is an entirely different ball game to basic corporate management, since a state needs to think beyond the domain of mere profit-taking to safeguard the well being of all its citizens. More like a ‘not-for-profit’ organisation that, though surely strives for achieving overall sustainability, does not necessarily aspires to break-even in all the transactions it undertakes.

Further, the state’s economic policies tend to have multi-dimensional effects and, therefore, require deft handling to ensure that short-term quick fixes do not end up in a long-term collapse.

After so much of hype, the recently announced energy policy has also been a complete disappointment. Egged on by advisors, who may have done well in their personal financial affairs, the policy lacks a sound vision and fails to explain how it will help safeguard the global competitiveness of the domestic industry. The new industrial tariff at nearly 15 cents to a unit is now not only amongst the highest in the world (India’s average tariff is 10 cents, China’s  8 cents, and Bangladesh at 7 cents per unit), but will also unleash a fresh wave of inflation, further punishing the common man.

Business ventures operate to make a financial profit and will push to pass on the increased costs to the end consumers and where they are unable to do so, will have no option, but to close down their operations. Either way, the loser will be the national economy, since a compromised supply side can sooner or later result in higher unemployment, increased imports, ballooning current account of deficit and a devalued national currency, pushing the home industry into a vicious trap where the capital cost takes over as the main barrier to new investment.

To make matters worse its effects will not be uniform across the country where the industry in the north will find itself at a significant disadvantage to the one in the south. What was instead required was a comprehensive plan that resolved to:

i    Reset the national industrial gas tariff (in relation to global prices) to use excess revenue to bridge a part of the recurring losses in the power sector and, at the same time, rekindle fresh interest in new gas field exploration;

i    Demonstrate that this government believes in itself by raising tariff (for now) to only the envisioned post three-year generation price calculated by its team of experts, i.e. once the planned lower generation-cost plants and option come on stream. This would somewhat help plug the current revenue gap in the power sector and yet not place the home industry at a distinct disadvantage with its regional competitors;

i    Re-negotiate agreements with the independent power producers;

i    Come up with a detailed plan that not only explicitly covers calculated targets on savings through clamp down on theft and corruption, but also explains the remaining shortfall amount that may require financing during this catch-up period;

i    And last but not least, share the financing plan for the benchmarked (three years) deficit, if any.

However, such bold announcements that provide clear timelines, set numerical targets and, at the same time, are easy to monitor (accountability) along the way, can only be given by a government that believes in itself and is confident. Regrettably, in its early period, the courage and resolve to take difficult decisions have been found lacking.

Their approach in taxation or in the revenue generation sphere has also, thus far, been quite appalling; again to put it mildly.

Governments have decisive influence over many aspects that shape the costs, risks, and barriers to competition in locations that influence investment and productivity - meaning improvements by firms that can benefit both workers and consumers. The ability of governments to successfully manage these factors, in turn, determines their rate of success in collecting the revenues the states or the provinces require to remain self-sustainable and also responsible towards their citizens.

A good example here would be of the State of Gujarat in India, which not very long ago was struggling to meet its fiscal obligations, but just in the last few years has reformed its management to evolve as a model of good governance that can be emulated for other aspiring governments. While India still ranks a lowly 171 amongst 183 economies on the ease of paying taxes, its state of Gujarat, on the other hand, is leading the way by showing on how to deliver first and then demand reciprocity later in the shape of taxes. As its governance improved, the tax collection responded respectively.

Today, for instance, Ahmadabad’s corporate payments on average and as a percentage of the state’s budget exceed their counterparts in South Asia by two to one and nearly seven to one when compared to similar sized areas within China and Brazil (BRIC members). So what did the Gujarati government change to achieve this? The answer: nothing new or revolutionary, but simple implementation of basic pre-requisites that all managers by now know by heart - start by reducing corruption, minimising regulatory burdens-cum-red tape, and facilitating taxpayer by reducing the number of taxes and rationalising tax rates. Instead what we are witnessing are complete ad hoc and half-baked measures. A recent one time luxury tax on properties levied by the Punjab government fails to explain any kind of purpose or rationale behind it. The endeavour seems more like a princely levy from a by-gone era when such demands were enforced every time a ruler ran out of money to spend.

Ancient civilisations from Greece to China had such levies on land and property, but as mankind progressed, governments realised that property taxes can be regressive in nature and can only be imposed after doing a thorough homework to make sure that they are fair and not exploitative.

On the federal front, if only we had studied the recent experiences of Sri Lanka and (to a lesser extent) Bangladesh, we could have realised that why Sales Tax or VAT is no magic formula and can not only fail as a lifting-measure on tax collection; it, in fact at times, can also tend to be counterproductive in an environment like ours. In a depressed economic environment, a government is often better off by finding more innovative ways to increase tax revenues while remaining within the current framework, instead of tampering with a functioning system, even if this system is not the most efficient one in place.

The writer is an entrepreneur and economic analyst.