More than six years after a transition that saw a complete exit of overt military presence in politics and a return to a civilian democratic rule, the security forces are again being invited back to maintain law and order on the streets or to protect the key national institutions and political figures, albeit this time on the invitation of those very politicians who wanted them out in the first place. This is a development tantamount to a confession of civil administrative failures and mitigation of the euphoria that greeted the return of governance to civilian rule. An image further tarnished by a quick brewing environment of regular political flare-ups and rolling back of some media freedoms. While the military by its very organizational structure commands authority and unity of policies, the challenge on the other hand for the political parties has always been to somehow overcome the urban and rural thinking-divide within their own fold. And this is the very divide that animates Pakistani politics and perhaps prevents our political system to deliver better economic results in comparison to military-led tenures. On one side is the urban, intellectual elite that is fiscally moderate, high on transparency and favours principles of corporate governance. On the other, is a rural majority of elected or party members who measure low on professionalism and sub-consciously perceive elements of transparency and good corporate governance to be in direct conflict with their notion of feudalistic authority. Being a democracy, naturally the majority prevails! Unless the political parties overcome this structural weakness in their approach in solving the long standing national economic issues that plague the masses, the desired results will not be forthcoming.

During the period 2002-2007, Pakistan’s GDP growth on average hovered around the 6% mark. Ever since, under civilian democracy, GDP growth is averaging between 3-4%. As a result, hopes have been dashed for any meaningful up-swing in the national living standards and of narrowing the gap between Pakistan and other comparable emerging economies of the world or those in our neighborhood. The question that needs to be asked now, is what must be done to restore the more dynamic conditions of the high growth period of 2002 to 2007? The answer in effect depends on diagnosing correctly all that went wrong since 2007. According to well known World Bank economists, Otaviano Canuto and Phillip Schellekens, the improvement in the economic performance of the developing countries after 2003 can mainly be attributed to three forces: rising commodity prices; use of some tough macroeconomic policies by the successful governments of the day (targeting inflation, stabilizing currency and imposing budgetary discipline); and their supply-side improvements in business conditions, labor markets, infrastructure and competitive conditions. The first, being an external factor is clearly outside the government’s control, but luckily it turns out to have been the least significant. Now many Pakistani analysts may say that our fortunes in terms of exports and domestic market buoyancy are closely tied to global commodity prices (oil excluding), but this is a misconception.

Pakistan is, in fact, less vulnerable to external shocks than almost any developing economy, with a ratio of trade to GDP lower than most developing countries apart from perhaps economies like Sudan. Moreover, the domestic and global prices on a like-to-like basis of our main commodity exports – cotton, rice, wheat, textiles, leather, etc – still remain almost at par (if not more) with their average during 2002-07. So this leads us to believe that the problem really may be that post 2007, the macroeconomic policy has become both more lax and more unpredictable – over the last six years inflation has accelerated, budget deficits have widened and the currency has weakened quite sharply.

Further, if the above arguments hold ground then we also need to ascertain that once we exclude these two factors: a) macroeconomic mismanagement and b) the effect of commodity prices, then what else is left that can explain Pakistan’s poor performance over the past few years? The answer to this lies, ironically, in the success of the military-led government from 2002-07 in raising national productivity and reducing unemployment. When unemployment is falling and productivity is on the rise, the very creation of all this extra work automatically translates into rapid economic growth. Sadly, it is weak productivity that has invariably been the Achilles’ heel of the Pakistani economy. Improving productivity requires supply-side measures – better education and training, improved transport infrastructure, rationalized tax laws, increased domestic private investment, intensified competition and more openness to trade. Policy changes of this kind are now urgently needed by this government. However, the challenge for them in this will be that supply-side policies often generate strong political opposition, especially when they affect labor practices and corporate vested interests. The up-side though is that such policies are comparatively easier to implement in economies where the platform is already ripe and people are desperate for a ‘change’ that can bring about an enhancement in business and employment opportunities. Pakistan surely falls in this bracket. In addition, the poor economic governance over the last 5 years has presented the PML (N) with an ideal opportunity to push through such policy measures that aim at shoring productivity and employment. Still, the reality is that even if the government does not encounter much resistance the implementation will require some doing. Both in terms of marketing the resultant benefits of such measures (in order to mold public opinion) and strong will on part of the policy makers. What they need to remember is that good economic governance does not necessarily translate into higher popularity ratings; in fact the opposite may often turn out to be the case. Finally, the public must also bear in mind that the key to success in dispensing sound economic governance lies in maintaining stability and continuity. It is therefore in Pakistan’s long term interest that democratic principles strengthen and the democratic system continues. But for this to realistically happen, the political governments will need to start delivering fairly soon, because the proof of the pudding is only in its eating!

 The writer is an entrepreneur and economic analyst.

kamal.monnoo@gmail.com