It was rather amusing to listen to our Finance Minister the other day, where he claimed that the economy has been put back on track; exports are up; reserves are stable; and government expenses and borrowings are in control. Wish we all could be so upbeat The speech followed the latest SRO cum presidential order of March 15, levying not only an additional burden of about Rs 200 billion on the already struggling public, but ironically also putting an unnecessary spoke in the wheels of two crucial sectors of the economy - Exports and Investment. Now, which is more damaging, the ordinances content or its shoddy draft, is yet another debate that we will perhaps visit at another time because this would also require an insight into how the quality of our bureaucratic human resource has simply eroded over time Through this ordinance, the zero-rating on exports (mainly textiles), which have been rising in recent months despite the state policies, was ironically restricted in the five main economic sectors - textile, leather, surgical, sports and carpets. Absence of zero-rating in essence means that an undesirable and unnecessary tax is collected anyhow and then later on the government plans to refund it, once the export transaction gets completed. History tells us that such a procedure not only puts serious additional cash flow pressures on the exporters, adds to governments own expenses, promotes corruption (both in the bureaucratic and private sectors), but also, more importantly, is now considered obsolete and damaging (it is currently not being followed by any modern day successful economy). This process of needless government involvement tends to be counterproductive to exports and if we care to reflect on the past, when there was no zero-rating system in place, the government in fact was refunding more than it was collecting While all sorts of explanations, consultations and amendments are now afoot about redrafting its ambit and scope to ensure that it does not, as feared, affect the supply chain of exporters, the question that intrigues everyone is that why such a damaging ordinance was effected in the first place? The point is that, with the budget 2011-12 round the corner, can we depend on the present economic managers to put forward a credible document, which spells out policies that guide Pakistan towards progress and growth, provides the people with the much needed relief, and contributes to avoiding the currently brewing tendencies of social unrest within the country? Most people are not so confident. For a team that (a) trumpets its success by not even achieving half of Pakistans potential in exports (analysts argue that by simply accounting for the y-on-y cotton parity, sound and timely policies by the government could have yielded exports of up to $40 billion just in the textile sector); (b) remains under the illusion of counting borrowed money as its reserves; and (c) takes pride in penalising the penalised while the undocumented economy grows at the expense of the documented one, it is important that they realise their own follies and learn from their counterparts in other successful, emerging economies. For example, China recently announced its budget and a new five year plan. Like good and caring guardians, they neglected no aspect of their wards lives. The policies aim at turning China into a moderately prosperous society that can begin to enjoy the fruits of its labours. To help China on its way, the target for economic growth has been set at 7 percent a year from 2011 to 2015. The figure, however, should not be taken too literally as a target of 7.50 percent for the past five years did not stop China growing by more than 11 percent over that period. By slightly adjusting the target, the government is trying to suggest that the pattern of growth now matters as much as the speed. The importance of growth and employment generation has not been lost on the UK government either. In the budget announced by their Finance Minister, George Osborne, on March 23, he said his coming years tax and spend plans were aimed at promoting 'growth and jobs for Britain, and that he would be moving away from his last years policies of huge spending cuts. In a boost to Britons, he announced surprise cuts to business and fuel levies, while lifting the threshold at which workers start to pay tax and announcing financial assistance for the people struggling to buy their first home. Recent times economic events in various parts of the world tell us that not focusing on growth in the face of high unemployment is a mistake. For example, in countries like Portugal, Ireland, Greece, Spain and Britain, the austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence and that there would be few, if any, adverse effects on growth and jobs, but they were wrong. The Irish whose government - having taken on an unsustainable debt burden by trying to bail out runaway banks - tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts in other countries cheered. Ireland back in June 2009 offered an admirable lesson in fiscal responsibility, as its spending cuts removed fears over Irish solvency and predicted rapid economic recovery. Since then, the interest rate on Irish debt has doubled and its unemployment rate now stands in excess of 15 percent? So, what is it that Pakistan should do? Should it blindly follow the route to indiscriminately slashing subsidies and deficits, and taxing the daylights out of its public? A pragmatic answer to this is that while surely fiscal responsibility is much required in a country like ours where our hunger for borrowing and passion for spending has spiralled out of control, but at the same time we also need to be sensible enough to take into account realities that tax increases and business buster ordinances like the one issued on March 15, 2011, would only depress the economy further, worsen unemployment and stifle growth. Coercive and poorly thought-out tax policies in a deeply depressed economy are largely self-defeating, even in purely fiscal terms. Any collection gains at the front end are more than offset by lower revenues, as the economy shrinks. Surely, any serious fiscal plan for Pakistan would address the long-run drivers of spending and it would almost certainly also include some kind of tax increase, but for the moment the governments sole focus should remain on the 'real economy 'real because of its industriousness to tangibly produce goods using real resources, real raw materials and real people The writer is an entrepreneur and an economic analyst. Email: kamalmannoo@hotmail.com.