Pakistan’s economic model has essentially failed. Even aspirations about East Asia matching India’s or Bangladesh’s growth rates has been exposed as wishful thinking. Dreams of becoming a South Asian Tiger are giving way to the same old realities of poverty, water scarcity, energy crises, misallocated economic priorities, nepotism and graft. The growth of the early to mid 2000s seems a distant dream. No long-term visionary spending in power plants, human resource development, increasing industrial competitiveness, etc. A torrid global boom masked most sins, itself the result of negative interest rates in the West, the yen carry trade from Japan, China’s reserve accumulation and ultimately a flood of dollar liquidity that leaked everywhere from the US Federal Reserve. Pakistan too in quite a few ways was a beneficiary of this spillover!

Amidst changing government priorities where it no longer deems prudent to give manufacturing priority in energy allocation, Pakistan’s industry is crumbling. A far cry from the heady days of the 60’s and 70’s when Pakistan was being tipped as ‘the economy’ to emulate and when Pakistan’s manufacturing industry accounted for nearly 28% of its GDP, today it stands reduced to around 18% - in reality though it may well be even less. By different estimates, Pakistan has lost nearly half a million manufacturing jobs over the last six years. The economic boom fizzled out back in 2007, ending in a sort of stagflation; the sort that bedevilled Britain in the 1970s. Pakistan’s “misery index” is back where it was post the Bhutto nationalization era. The International Monetary Fund (IMF) expects growth to languish at the 4% mark with inflation between 10-12 %. Pakistan has dropped to 110 out of 189 in the latest World Bank Global Index (WBGI) on Ease of Doing Business. The real concern however is that with a fast dwindling economic situation and amidst all the adverse indicators staring us in the face, the government’s economic governance thus far has failed to impress. If we read the World Bank report closely, it notes that out of the ‘eight’ economies in South Asia, ‘six’ completed at least 11 or more economic reforms in 2014, and sadly Pakistan was not among these six countries. Even more alarming is the WBGI indicator stating that out of a total of 189 global economies, Pakistan ranked as low as 175 in supplying a reasonable level of “electricity to its business and industry.”

So where did this government lose its way and what does it need to do if it truly wants to stake its claim for continuing to govern Pakistan? From a general management perspective, the PML-N approach of trying to resurrect the economy remains flawed. Its pre-election economic manifesto, which by the way, was a sound and impressive document, seems to have been filed and forgotten. Even the persons instrumental in drafting it are either no longer associated with the party, are lost in obscurity or have simply been assigned inconsequential portfolios with little or no bearing on economic decision making. Its economic team virtually relegated to a one man show with a checkered record of team play or visionary policy undertakings and one better known for compiling rosy readings even at the cost of slight tweaking. Pakistan is a complex economy with multiple problems and limited liquidity, and therefore requires a holistic economic management approach. Simply signing MOUs, building flyovers or bus terminals will not do. Given the prevailing levels of employable youth population, inequality that is not just limited to population but also tends to be demographic in nature, a low quality human resource owing to decades of neglect in education and a weak currency, all these factors collectively act as natural obstacles towards high-tech cum large scale manufacturing investments and in moving up the production value chain, both in domestic and export oriented industries. What it also in essence means is that to ensure a balanced, equitable and sustainable growth path, the economy needs sound supervision. A transparent and supportive government that guards against anti-trust violations, shores up employment generating SME (small and medium sized enterprises), protects the home industry by ensuring a level playing field against global/regional competition, because markets such as ours cannot solve all problems on their own. Instead, what we have seen so far from the economic managers is the exact opposite of this and that too in the garb of false libertarianism (falsely combining free-market economics with permissive social views). In fact, in Germany (the most successful economy of the Euro Zone), we recently saw the German government act decisively by announcing reforms aimed at re-strengthening the slightly wobbling structure of their mid-sized manufacturers, collectively known as the ‘Mittelstand’. These Mittelstand tend to be small to medium sized family-owned businesses, located in small towns and ones that largely work in specialized products. More importantly, they appear to offer a solution to the two biggest worries haunting the developing world: ‘inclusiveness’ and ‘youth unemployment.’

An economy with high unemployment, a fast growing young employable population and limited capital/liquidity also has limited choices to flourish. Principal amongst them being to seek growth on the back of exports. However, promoting exports requires commitment on the part of the government to: a) undertake industrial reforms that help manufacturing competitiveness at home and b) ensure that the exchange rate remains stable. Industrial reforms refer to measures improving law and order in industrial centers, providing security to businesses and taming bureaucratic corruption by minimizing the contact between the entrepreneur and the regulator.

Such measures are never easy and often generate strong political reaction, but are now urgently needed. Going by a recent example, we saw the kind of opposition the Spanish government had to face when undertaking industrial reforms post 2008 financial crisis, but it stood firm and today the Spanish economy is bearing the fruit of some very difficult choices made by its government back in 2010-11. Its output today has been rising for 12 months in a row and exports have rebounded registering a growth of over 10% in 2013-14. As for the exchange rate stability, it will be advisable to first study the history of economies that have had major export breakthroughs over the last two decades. For example, India, China, Brazil and Bangladesh: India has jumped from exports of merely $25 billion in 1991 to nearly $300 billion today, China’s export climb since 1989 cannot even be properly defined in words, Brazil nearly tripling its exports from 1997 to 2007 and Bangladesh’s climbing from a meager $4 billion to around $30 billion; in all these examples the important common point to note is that their export growth has taken place amidst a period during which their respective national currencies remained fairly stable. In fact, in cases of China, India and Brazil, their currencies in this period remained firm against other major global currencies, let alone losing value in any way.

 The writer is an entrepreneur and economic analyst.

kamal.monnoo@gmail.com