Quite frankly, the uncertainty is simply killing Nothing can be more harmful to business and the corporate world than confusing signals and continued uncertainty. One can plan and prepare for disaster, but not for the unknown. What we see is that from the present government's supposedly harmonized (all ex-Citi bankers) economic team, the public ironically gets different messages by different managers at different times. To point out only a few: Interest rates will come down, but then no, at least not in the coming six months or perhaps even in an year; Inflation is effectively coming down yet it still remains out of control; Economy is out of the woods, but no we are still not in a position to pass on the benefits to the consumers of reduced oil prices; Industrial output is declining and the size of the economy is shrinking, but we want more taxes; Inflation capping is not responding well to monetary tightening measures, but we need protection from cheap imports (recent anti-dumping duties clamped on the Chinese polyester staple fibre are quite baffling); Unemployment is going up, but it is the banks and not the industry that need special care; Pakistan's industry should not look to government for support and become globally competitive on its own, however, we need to raise the gas and power tariffs even if internationally their rates are on the decline, etc. It is hard to exaggerate how much economic trouble we are in. Consumers, their wealth decimated and their optimism shattered by collapsing assets all around and a sliding stock market, have drastically cut on spending, which though may be welcome in the long run, remains a huge blow to the economic activity right now. Even the phenomenon of savings going up owing to cut in spending, cannot be safely assumed in Pakistan since cut in spending in our case does not always correlate to enhanced savings, because the average consumer's ability to spend generally remains fully stretched in any case. Real estate developers, who are witnessing a faltering demand and soaring costs of financing, are rapidly slashing their investment plans. Businesses are cancelling plans to expand capacity, since they are not selling enough to use the capacity they have and exports, which were once regarded to be the main thrust of Pakistan's development model, are now plunging as the financial crisis grips us, severely hitting our main trading partners (US & EU). It is no wonder then, that most economic forecasts warn that in the absence of any timely and prudent government action we are headed for a deep, prolonged slump where an already high unemployment level in Pakistan can end up reaching unprecedented levels. Worst of all is the possibility that in these difficult times if no stimulus package is offered, the economy will end up in a prolonged recessionary trap. As per the famous economist Schummpeter, "Recession, once started tends to feed on itself." Further, if the recession translates into stagnation then it can go on for a long time. Japan experienced a "lost decade" in the 1990s. The only thing that let Japan escape from its trap was a global boom that boosted its exports, but in our case if the competitive edge on the cost of production is eroded then what chance do we stand to recover even if tomorrow the world markets begin to take an upturn? So what should the government do? To start with, it must understand (like China and India decided a couple of decades back) that if it seeks long term development and growth of Pakistan's economy the only logical option is through an export led growth model. For this to happen, while it can surely play the monetarist's tools, it really needs to focus on the supply side mechanisms combined with fiscal prudence. More importantly, it will need to bring down the cost of production in Pakistan through a series of measures like correction in interest rates, stimulus through tax breaks passing downstream and across the board, the benefits accruing from global resource sourcing and finally by making sure that in these difficult times it does not take the tempting but slippery road to turning protectionist. Trade encourages specialization, which brings prosperity; Global capital markets, for all their problems, allocate money more efficiently than local ones; Economic cooperation encourages confidence and enhances security. Recent studies and more importantly the current developments taking place on the global front after the present downturn, point towards the need for a renewed emphasis on improved trade and investment. This global trend of regional economic cooperation, which has rapidly gained importance in the last few years has been able to remain strong and persistent, because increased globalization in spite of the faltering Doha Round Talks (to reach a consensus Agreement on World Trade Organization) rules and regulations) is making its need felt more than ever before. In short, given the "right policies" at home, the more a country liberalizes trade the more are its chances to gain enhanced global market share through exports. Under the circumstances, no support plan can be big enough to make sure that in our country the engines of production and the productivity of these engines, both keep on track, because, God forbid, if the economic activity in Pakistan comes to a halt, then it will not be a single lost decade, but many.