With the judicial commission’s report somewhat vindicating PML-N, it is time now to move on and perform. Up until now, critics have been consistently moaning about this government’s style of economic management, or the lack of it, and why it needs to quickly assemble a team of visibly competent managers if it truly wants to bring the Pak economy out of its current impasse. Mr. Dar’s rhetoric aside, the reality is that investor confidence is at historically low, external account deficit remains stubborn, foreign debt level has soared and even more alarmingly there tends to be a negative growth rate in employment generation. All these elements are the most powerful indicators in their own right, that not only serve as a barometer of the state of the economy but also as warning signals on the looming dangers ahead; unless a corrective action plan is unleashed fairly soon. The score card makes grim reading if looked upon in the current back drop of highest ever level of intra South Asian investment during 2012-13 (excluding Pakistan), and now the once again, (post Iran deal) declining world oil prices. The easy way out for the government is to of course indulge in the usual political jargon cum blame game on the sagas of gross mismanagement by its predecessors, negative role of the opposition parties of Imran Khan and Tahir-ul-Qadri vis-à-vis the infamous dharna, or on a tricky geo-political situation where Pakistan often finds itself grappling with external and internal threats, but for any sincere and thinking government its own performance over these past two plus years would be a cause for some serious concern.

More importantly, these indicators serve as a guide on where the government needs to be focusing in coming months. Assessing these trends collectively, it becomes obvious that what mainly ails the Pak economy is an on-going decline in its “manufacturing competitiveness”. Meaning, the foreign investors do not find Pakistan as an attractive destination to invest in, the domestic investors can no longer reap fair returns for their capital and labor, the potential exportable surplus continues to shrink on account of being out-performed by global competitors and the government persists on indulging in a skewed prioritization of national resources resulting in wealth concentration instead of job creation. Also, from a management perspective, these indicators advise the government on which of its ministries are under performing. While one can draw a lot of examples from various parts of the world on what lessons can be learnt from varying economic fall-outs and how respective governments over the years planned economic revivals, in our case we will perhaps be better served to simply take a peek at our own economic history starting from the period prior to the colonial take-over.

Back in 1750, the sub-continent accounted for one quarter of the world’s manufacturing output. By 1900 it had come down to a mere 2 percent. The tell-tale anecdotes on how the colonial rulers robbed India - but unconvincing for the common man who on the contrary believed in the British enriching India through undertaking key infrastructure development and providing an exemplary governance system – can only be explained from the fact that during the British rule the West became more productive as a result of the industrial revolution whereas India was deliberately made to lose its manufacturing competitiveness, eroding its leading exports which even then were in textiles. Though the data is fragmented, the best estimates show that the sub-continent’s living standards declined through the middle of the 19th century and that its economy retrogressed, in spite of borrowing some technological improvements from the West, as the technology provided was always a step older!

Naturally, since the Indians were not their own masters, the Indian economic mangers (British) just didn’t do enough to ensure moving towards production on a larger scale or investing in home based research and development in supporting the Indian industry so that it could competitively challenge the West. This story of India’s loss to foreign competition is documented in “Deindustrialization in the 18th and 19th Century India,” a paper by David Clinigingsmith, and Jeffery G. Williamson, professors at Case Western and Harvard respectively. Fast forward this to today’s economic realities and one realises that not much has changed since. Ignoring or losing focus on ‘Manufacturing’ can cost countries dearly and no one more than the US has learnt this the hard way by allowing its industrial competitiveness to erode back in the 1980s and 90s. At home, the PML (N) too has been guilty of this mistake. Its first two years at the Centre just happen to be reflective of its governance style in Punjab (the largest province) since 2008, where both manufacturing growth and employment creation over the last six years have stalled. The sooner it rectifies this situation the better it will be both for its own and for Pakistan’s fortunes.

The next phenomenon where the government needs to tread carefully is in managing international trade, especially regional trade. Economists are accustomed to emphasising the benefits of international trade, and their arguments are largely correct. But in Pakistan, internal regulations, underdevelopment and lack of reforms, combined with British colonial depredations, still prevent Pakistani resources from being redeployed productively. In the last 20 years, the economic surge of Asia, especially China and India, has brought a large trade adjustment to the world, one with few parallels, with the possible exception of the rise of the Western economies several centuries ago. The Chinese and Indian economies are today amongst the largest economies of the world and fast gaining upward ground in becoming leaders of trade in general and exports in particular. Pakistan, which is geographically clubbed with these two giants, needs to carve its own way in determining a trade policy that protects its self-interests rather than blindly following general trade doctrines.

What the government needs to understand is that unless we protect our own backyard and develop a manufacturing niche we will simply be like a child that gets tossed from one foster home to another (West to East). If we don’t support our home manufacturing base today and help nurture it to strength our case will soon be similar to those economies that try very hard to preserve old jobs at rising wages and diminishing productivity – Always a losing battle. While liberalising trade is certainly the right way forward it at the same time needs to be a win-win for both trading partners. The lesson we have to keep in mind when pushing for higher trade - particularly with India and China with whom we run huge trade deficits – is that large negative international trade can lead to decades of economic decline in an economy unless that economy is geared up for mounting its counter response in the foreseeable future. Mr. Sharif needs to ensure this by the time his term ends in 2018!