As the budget and the general elections near, the confusion about the state of the Pak economy is growing? There are critics like myself who consistently moan about: Pakistan losing its competitiveness, continuously dwindling domestic and foreign investment in the country, growing unemployment and poverty, widening gap between the haves’ and have-nots, mismanagement in the public sector enterprises, rising debt, naked fiscal imprudence of the government, and last but least about a painfully extended cycle of an environment comprising of low economic activity and high inflation, which is testing the patience and resilience of the Pakistani people like never before. Corruption is rampant, internal law and order is seriously compromised and sadly a perception of Pakistan amongst the international financial and corporate communities seems to be emerging of a country difficult to engage and perhaps best avoided unless necessary!

On the other hand, the government’s side of the story is starkly different. Backed by some questionable statistics its leaders claim that the critics focus only on the empty portion of the glass and by not acknowledging the achievements of the government, which has managed its successes amidst great adversities, these nay-sayers are in fact hatching a plot against democracy. According to the government, the revenue collection this year will be on target and may for the first time touch the Rupees 2000 billion mark, the very fact that more than 1.50 million motorcycles were sold last year and Automobile Sector’s sales are about 30 percent above 2004-05 fiscal year (regarded by Auto pundits to be their best year) speaks volumes about the growing purchasing power and consumption in the economy, power crisis is on the mend as the duration of load shedding in recent months has come down and not gone up, Corporate profits are healthy where especially the consumer goods companies have churned out unprecedented results, foreign remittances are growing at a surprising pace thus marking the confidence of the overseas Pakistanis in their homeland’s economy, agriculture produce is again set to post a decent year as the cotton and sugar crops have been good and the wheat sowing has gone to plan, Pakistan’s exports have stubbornly defended their ground in spite of serious recession in our principal export markets of EU and USA (the recently announced EU concession package will also be of help), the financial sector remains healthy posting impressive results (MCB & UBL just announced net profits after tax of more than Rupees 19 and 16 billion respectively), Regional trade issues are being resolved proactively to help enhance trade and create opportunities within the neighborhood, Foreign Exchange reserves are stable (in fact have moved up slightly), the Pak Rupee has held its own over the last twelve months, the high inflationary trend has somewhat been arrested allowing the central bank to maintain its competitive monetary policy, the state run enterprises this year collectively retired their largest amount of debt in more than a decade, and finally even the, Shaukat Aziz indicator of economic confidence, the stock exchange index is rising with KSE crossing the 12, 700 mark on Friday last!

While both sides may carry good briefs in their own right, it is important to look at two key aspects in this regard, a) Some economic trends that have emerged over the tenure of this government to raise alarm bells, and b) How others (global perspective) view our affairs? As for the latter first, the recently released IMF report says it all. One can argue with their findings, but the fact remains that Pakistan’s economic image is taking a serious dent internationally and this does not augur well for our future ratings. The debate here is not about whether IMF recipes are good or bad, but about our own policy choices. One can debate the IMF findings, but we first need to put our own house in order. Agree, that IMF formulas more often than not hit at the very competitiveness of a developing economy, however, we need to remember that being a financial lender and that also sometimes a ‘lender of the last resort’, it primarily concerns itself with macro management cum macro indicators. This invariably allows the engaged governments with space to maneuver the micro emphasis to suit their agendas while pursuing the laid down macro benchmarks by the IMF. And if the governance is poor and the focus misdirected, then while things may overtly seem to be heading in the right direction, in reality the very functional dynamics of an economy get bruised. Further, if there is corruption then the compulsion for borrowing on part of the government grows and so does the IMF interference. Bankers as history would tell us are not necessarily good visionaries or managers and naturally as policy dictates by them assume an impersonal tone the social unrest in that economy grows – Pakistan’s case has sadly been no different! For me a good question here would be that, shouldn’t there be some sort of a principle that blacklists an economic manager or an economic team that agrees on financial support packages without thinking them through from all implementation aspects?

As for the former point, it will serve the government well to closely study the following alarming trends fast taking root in our economy,

The unhealthy and rapid growth of the undocumented sector at the expense of the documented one. The other day talking to a Professor at LUMS, he put down the undocumented sector to be as high as 80 percent, that is if one includes a large part of our agro-economy (which he argued remains unregulated) in this bracket. Perhaps, exaggerated, but certainly it appears that the undocumented sector is now larger than the documented one. Such a development carries grave long term dangers. If not arrested, then over a period of time it constrains the ability of a government to play its due role in development and equitable distribution of national resources, which in-turn leads to extreme poverty and complete destruction of the underlying national social order.

In manufacturing, the principle of ‘Economies of Scale’ is becoming a disadvantage rather than an advantage – Such a development is very alarming for Pakistan in terms of global competitiveness, an investment yardstick on which Pakistan is fast slipping downwards. Also, analysts attribute such a development to rise in corruption, unethical practices and crime in running businesses; Traits that become barriers to entry for legitimate domestic and foreign professional operations.

Phenomenal success of consumer goods companies, which on paper may look very good, but deep down may reflect some undesired changes in national dietary realities that point towards replacing healthy eating with packaged substitute/alternative meals, high on synthetics & inorganic, low on naturals, but affordable.

Blue Chip Pakistani corporations can borrow cheaper than the government (especially provincial governments) – A trend that amply serves as a mirror on any delusions that this government may harbor on its economic performance! 

The writer is an entrepreneur and economic analyst.

Email: kamalmannoo@hotmail.com