KARACHI: In the face of multi-dimensional obstacles to revival of economy, the desired acceleration of annual growth rate to 7 to 8 percent will not be possible without wide-ranging reforms aimed at addressing the structural problems, such as quality of governance, shortages and high cost of energy, effectiveness of resource use, the chronic fiscal deficit, and widespread corruption, according to Vice President of the Pakistan Business Forum (PBF) Ahmad Jawad.
Talking to Business Recorder, PBF’s senior office-bearer said unfortunately the expiry date of most government policies is a maximum of five years, which is one of the reasons for our decline.
For the first time in Pakistan’s history, the federal government’s entire income is being used in debt servicing. This means all expenses, including defence, are met from borrowing. This should set off an alarm bell.
Ahmad Jawad demanded that out-of-box solutions be implemented for economic revival. It seems that Saudi Arabia’s decision to not provide Pakistan with any additional bailouts or interest-free loans has shocked the government and prompted the finance minister to complain that even friendly nations aren’t interested in helping Pakistan at this critical juncture.
It’s time to wake up and implement drastic steps for austerity and end cartelisation across the board in such a manner that it’s apparent to our lenders, he said. “Saudis used to give direct grants and deposits without strings attached and they are changing that. Now they are working with multilateral institutions and actually saying we need to see reforms.”
Previously, foreign nations used to help the country after a phone call from the prime minister or foreign minister, but this time it’s different.
The current prime minister has the largest ministerial cabinet, boasting as many as 80 members. They all enjoy full privileges and perks. “If you continue to enjoy such luxuries while the foreign nations are undergoing a cost-cutting drive themselves, why would they assist you?”
Ahmed Jawad said the process of globalisation has changed the structure of production and trade in the world economy. There are a number of new opportunities that have opened up for countries like Pakistan, which is geographically close to some of the more rapidly growing and dynamic economies of the world.
Pakistan has a well-developed agriculture sector that can become the engine of growth and also become a significant earner of foreign exchange provided we undertake a major programme of diversifying into value-added agriculture, he said. Similarly growing income in rural areas as a result of higher commodity prices will also generate demand for many industrial products and assist in the revival of the economy.
He said a strategy that can propel Pakistan into such a high trajectory of growth will have to include the following main elements.
A very significant improvement is required in the quality of governance across the board, but especially in relation to public sector enterprises. At present corporations like PIA, Pakistan Steel, ZTBL and railways and discos like Qesco, Hesco, Sepco, Mepco and Pesco have accumulated debts of billions of rupees.
Unless these corporations and utilities are restructured and managed strictly on merit and sound business principles, the fiscal imbalances will persist.
Reducing the cost of doing business in Pakistan is also an important prerequisite, including arrangements for enforcement of contracts, tackling technological backwardness, arrangements for health insurance and pension of private employees and lowering the cost of capital and energy, he said.
Although the agriculture sector contributes 23 percent to the GDP, tax collection in the sector is extremely poor. In a similar vein, Pakistan’s retail and real estate industries also make significant contributions to the GDP but they almost entirely avoid taxation.
Ahmad Jawad was of the opinion that Saudi Arabia is interested in investing in Pakistan’s expanding information technology industry as well as the country’s energy sector, including both renewable and fossil fuels. However, he stated that Saudi Arabia would not make this investment until economic reforms are implemented.
“Utilising only two percent of the country’s area for solar power generation would meet Pakistan’s current electricity demand,” remarked the PBF office-bearer. Similarly the country would need to revamp its board of investment on an urgent basis and recruit “specialist human resources and incentives”.
Copyright Business Recorder, 2023
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