Despite a government change this summer Pakistan’s economic woes continue. There are no visible signs of an improved growth in an economy, which as we know, has been consistently slowing down over the last six years.  A growing sense of desperation prevails, particularly amongst the young, as Nawaz Sharif’s economic team tries to grapple with some serious challenges relating to high inflation, low investment, rising current account deficit, declining reserves, an eroding Pak Rupee, high unemployment and persistent energy and security issues that continue to hold ‘economic growth’ hostage.
While the intentions of the new leadership may be very good, analysts fear that owing to (thus far) a rather dismal display of professional competence and poor management skills, a general perception seems to be building that governmental delivery over the next five years is not going to be much better than the one in the last five years. This ongoing constellation of higher inflation, softening growth, falling currency, rapidly rising debt and waning of investor confidence could spin into a vicious cycle that (if not dealt with in a timely manner), by it self will become difficult to contain.
Surely, the government on the other hand in its defense can sight some logical reasons like; inherited constraints due to receiving empty coffers and a serious security situation left unattended for so many years, which will now require time to address properly. Further, global factors such as the potential end to US stimulus and the recent tension over Syria resulting in rising global oil prices and consequent pressure on respective national currencies have sent nearly all emerging economies reeling, and Pakistan cannot be an exception. While these may be somewhat legitimate excuses, the problem in using such a defense-brief (by this new government) is that it helps shape a perception amongst Pakistanis that once again their economic leadership is either just completely misunderstanding the real underlying economic malaise confronting the economy or is deliberately (as a ploy) using such excuses to send confusing signals. What they (people) instead need explained is the government’s economic vision and strategy going forward. And this sadly is still missing. For example, how exactly and under what time frames will the energy policy work; what truly are the understandings reached with the IMF and how will they affect the common man; how does the government plan to promote investment and competitiveness in Pakistan; what measures are being undertaken to revive industry; how exactly will the government spend fresh borrowings, and last but not least, how will the country cope in future with the rapidly mounting national debt; are all questions that require explicit explanations? Frustration in people is once again quickly rising, since out there is a consensus that the present lot was voted in power (and that too with such a sounding majority) to be the harbingers of ‘change’. ‘Business as usual’ will simply not be accepted as an option.
Sadly, the government appears to be time warped in the 80s & 90s. What we are witnessing today is a re-run (after a gap of nearly 14 years) of the same old autocratic mindset of preferring loyalty over merit, an obsolete economic team that has failed to remain abreast with new developments and fast evolving modern management solutions, and this is resulting in a complete paralysis of bold, innovative and proactive economic initiatives – being the only way to bring about any real ‘change’. One may then ask here where precisely has the economic leadership failed? Since a comprehensive answer to this question can be rather lengthy, for the sake of limited space in this article we can look at some of the key areas where one expected them to perform differently or at least better.
The economic and industrial decline in Pakistan has had some quite bare chronic problems, ironically little remarked upon by our new economic managers. An antiquated infrastructure, a sclerotic job market, exorbitant real estate costs and poorly managed state-owned enterprises, all of which has never allowed manufacturing, especially manufacturing for exports, to grow strong. If Pakistan is to revive investment, regain industrial competitiveness and enhance exports, then the government spending in the above mentioned areas needs to get away from political considerations and instead be focused with a single objective of facilitating industrial revival. The root of the problem is Pakistan’s failure to create a vibrant industrial base with the strength to export. As Western buyers scour Asia for alternatives to increasingly expensive Chinese factories, Pakistan and its enfeebled manufacturing sector are mostly ignored. Talk to entrepreneurs and factory owners in Sialkot, Gujranwala and Gujarat, making fans, electric motors, surgical equipment, etc, and they will tell you that a recovery can never arrive until the underlying structural problems are addressed. Most medium sized operators choose to work in smaller units, 50 workers or less, and continue to work with equipment from the 70s and the 80s. Their worry being that if they exceed a certain size or go for economies of scale then they become subject to some severe and unhealthy governmental oversight, draconian tax laws and skewed labor legislations, which will simply make them uncompetitive.
Poor infrastructure is yet another problem that has driven up the costs for industrial real estate in Pakistan, which are high even when compared with China. Unlike the industrial revolution of the 60s in the country where infrastructure and real estate for setting up industries was facilitated by the government, today more often than not, the capital cost of these two elements exceed the entire machinery component when undertaking a sizeable industrial investment.
Some economist turnaround and say that they hope Pakistan is just going through a V-shaped economic downturn, with a rebound perhaps round the corner, as a weak Pak rupee will rejuvenate Pakistan’s struggling exports. The problem with this argument is two fold: a) Historically, the data in Pakistan does not support any significant correlation between currency devaluation and volume based surge in national exports and b) Unless competitiveness of the domestic export industry is shored up, it is unlikely that any meaningful export gains will be witnessed, especially since the two main markets for our goods, EU and the USA, continue to be depressed, and recovery there, if any, can at best be described as sluggish. The fear is that with a government hungry to squeeze all resources out of the organized cum documented sector, an unresolved energy situation, and renewed inflationary pressures owing to rising global oil prices (approaching winters are likely to make matters worse) & poor domestic taxation policies, the country may instead be heading towards a dangerous stagflation trap!

The writer is an entrepreneur and economic analyst.