Reflection on China’s reforms

2018-03-13T23:39:55+05:00 Dr Kamal Monnoo

So what has this PML-N government really missed out during its term? Answer: Meaningful and broader reforms. To add clarity to this rather generic term, reform is an on-going process adopting to new evolving global realities, and in essence means that while investment is very essential, its real fruits can only be reaped or its optimization can only be achieved if the economy is opened up in a way that encourages free and fair competition and ensures that anti-market forces remain in check through robust and professionally managed oversight institutions. For example, for investments in the power sector to be truly productive we need reforms in the sectors that allow new entrants to compete freely with WAPDA; likewise, for big-ticket projects like Saaf Pani, Metro and Orange train to be sustainable we will require management reforms that define management structures under codes of corporate governance of such investments. And to get to this, basically three things are essential: 1) Private-Public partnerships to see to it that governmental investments are transparent and self-sustaining, 2) A clear role of the private sector in economic policy making to ensure that laws framed are not anti-business, and 3) Extension of code of corporate governance (through respective apex boards) in running of state enterprises and in functioning of key oversight-institutions such as the FBR (Federal Bureau of Revenue), CCP (Competition Commission of Pakistan), EPA (Environment Protection Agency), Food Standards Monitoring Institutions (now a provincial subject), SECP (Securities & Exchange Commission of Pakistan), etc. Examples that have adopted or at least partially adopted these essentials are quite a few in recent times, with the ones standing out closer to home being: Turkey of yesteryears under Turgot Ozal, Malaysia under Mahatir Mohammad, and of late, Bangladesh – their ensuing success is there for everyone to see. Leaders who during their tenure in office succeed to undertake these essential economic reforms can then pretty much go on to stay in power for long hauls. Latest example, China’s President Xi Jinping, who through his charismatic, corruption free and back to basics (equitable) approach to economic policymaking in China, may just be voted to stay in office for life!

What President Xi has successfully done under his tenure is to institutionalize the study and formulation of reforms and new policies in China. Organizations like the Chinese Academy of Social Sciences, Development Research Centre of the State Council, China’s Cabinet, and the State Commission for the Restructuring of the Economic System now work in tandem with active input from the real movers and shakers of the Chinese economy. Not burdened by the bureaucratic interests like many traditional government departments, these organizations partner with the Chinese private sector in formulating and directing ever happening economic reforms. The main difference though being that under the present government the latest Chinese reforms have focused on what can be termed as ‘enhancing the market’. Its two main ingredients being: a) A gradual expansion of the social safety net (pensions, healthcare and welfare), and b) a return to the industrial policy. “Techno Industrial Policy” has found its way back at the center of China’s economic focus and we have seen a fresh Medium-Term Strategy being launched for Science and Technology along with 16 mega projects, bringing industrial policy to the forefront of China’s policymaking.

The global financial crisis in fact helped this cause, as it prompted the Chinese government to announce a large stimulus, encouraged the policy of increasing competitiveness and value addition in the local industry and where the State’s banks and the state owned enterprises were literally called in to help this cause. The 19th Party Congress’s report also confirms these policy directions: market-based allocation, a dominant role for private sector ownership, a strong emphasis on industrial policies, focus on science and technology to achieve the goals of the “first phase” of the New Era (2020-2035) namely socialist modernization, and most importantly, reframing cum instilling corporate governance principles for all Chinese monitoring and collecting agencies to ensure transparency and a professional environment that encourages entrepreneurship or risk taking.

On an even grander scale the new China stands reformed in a peculiar way where in order to grow it is not looking outwards but inwards. OBOR (One Belt One Road) and within it, CPEC (China Pakistan Economic Corridor) represent this very endeavor. World economy faces uncertainties and pessimism in 2018 over a series of “black swan” moments like Brexit, rising right in Europe and Donald Trump’s protectionist approach to Global Trade, which in-turn creates a vacuum of global leadership that presents ripe opportunities to allies and adversaries alike to reorder the world’s power structure. And the likely contender: Of course China. The Chinese are eager to fill this evolving void - that Washington is leaving behind – on everything from setting the rules of trade and environmental standards to financing the infrastructure projects that will give Beijing vast influence. Almost to the end of the year, unlike the rest of the world, China instead sees positive developments in the global economy. It firmly believes that as its dominance on the world stage grows the outcome from its push on trade & connectivity will further strengthen the global markets despite the current challenges and opportunities they face. And it is in this context that one needs to be mindful of the reality that OBOR and within it, CPEC, may not entirely be a manifestation of the mutual desire of China and Pakistan to expand economic ties, but primarily a representation of the larger global vision of China to revive the ancient silk route, thereby returning China to the glory days of the Ming Dynasty when China literally dominated global trade. The ultimate aim being to find new growth avenues for China from within China by focusing future spending primarily on the currently underdeveloped or poor areas of China. And this takes us back to President Xi’s vision, which envisages a large-scale shift of China’s labor-intensive industry from its East Coast to its West Coast (in mainly the Xinjiang province). A shift that is being supported cum subsidized through a deliberate government policy set to achieve many targets with one move: employment generation, rise in wages and income of people in this area, in-turn leading to consumption and home-driven growth and with the resulting prosperity putting an end to discontent among the Uighur people and to any separatist movements in the area.

These developments in China serve as good lessons for the Pakistani political leadership to learn from, since quite a few policies also hold relevance here. The real problem that has plagued Pakistani style of democracy relates to mixing politics with governance. More often than not critical decisions relating to the economy, businesses and industry are taken by decision makers who either have no expertise in the area or are just short sighted; out to seek cheap popularity even if it comes at the expense of long-term damage to national prospects. In good corporate management - which one reckons would be the counterpart of ‘good governance’ in the political sphere - there is no room for decisions based on popularity. If only, our leadership could concentrate on real policymaking with the help and involvement of the actual stakeholders, instead of resorting to cheap slogans and self-glorification!

 

The writer is an entrepreneur and economic analyst.

kamal.monnoo@gmail.com

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