Rising again

Confucius said, “Our greatest glory is not in never falling, but in rising every time we fall.” We find ourselves in an economic bind that is quite complex and difficult to solve.

Nations emerge from the ashes of such grave events, and we are no exception. As a country we have faced war on terror and wars imposed by neighbours and economic burdens of providing refuge to millions and facing long -term economic sanctions all in a lifetime of a generation.

Many nations have already faced such difficulties in the past. South Korea is a very familiar example as I talked about our rhetoric of providing them with our five-year development plan in another article, though that’s not the topic today but South Korean experience of getting out of an economic crisis is quite relevant for us.

The 1997 Asian financial crisis damaged the South Korean’s economy, yet the country recovered from it and emerged stronger. They followed a strategy that included measures implemented by all the key stakeholders, including the government and the private sector.

By 2019 against a global average of 4.4 times, South Koreans are 32 times richer than in 1950. No mean feat by any standards. How they were able to achieve this and what was their strategy, let’s explore.

South Korea took help from the IMF to stabilize the economy through a substantial bailout package worth 58 billion USD, this package helped the country to avert a slide into total economic meltdown. But the story doesn’t end with this package; rather it started from here.

South Korea embarked on a reform process of its financial sector that included increased regulatory control, increased openness in the banking sector, and improved risk management practices.

Like our State-owned enterprises that are bleeding our economy to death, South Korea’s major corporations, known as chaebols, were deeply in debt and on the verge of bankruptcy. For these companies, the government pushed for corporate restructuring, which included selling non-core assets, decreasing debt, and enhancing corporate governance. These policies aided the chaebols’ financial stability and competitiveness.

To stabilise the country’s budgetary situation and keep international lenders’ confidence the government implemented austerity measures. The country focused on export-oriented businesses, and this proved critical to the recovery. The key was competitiveness of South Korean goods and services.

South Korea undertook structural changes and economic liberalization in several sectors, making the country more open to foreign investment and trade. This strategy attracted foreign investors and contributed to the economy’s diversification.

A very important pillar of South Koreas economic recovery was the training and upskilling of its work force. South Korea adopted a variety of technical education and vocational training programmes. These programmes intended to address the labour market demands of the country, notably in industries such as manufacturing and technology.

Although an interested reader can find far more detail on the journey of economic recovery of South Korea; however, for our purpose today these few points suffice to outline the contours of the strategy implemented by South Korea when it found itself in an economic conundrum.

Probably, we might have provided the blueprint of its initial development in the form of our first Five-Year development plan but surely, we can now take a leaf or two from their strategy book to lift ourselves from the depths of eternal darkness that we find ourselves into.

If we need to improve our lot the government and the private sector must work together, where government must take up the role of an enabler and the private sector that of a doer.

We must start our journey on the path of economic recovery from fiscal balancing of our budget and improving the inflows of foreign exchange through export of goods and services. Unless we expand our tax-base and move away from over reliance on indirect taxation this is not possible.

Our tax system is unjust if we call out mildly and the injustice starts from giving exemptions and rebates to powerful sectors represented by mighty elite. Talking on the tax system will take more than a few articles but leaving this crucial subject untouched will also kill the purpose of today’s article.

For expanding the tax base, the system must be made easier with no discretionary power of the tax officials and the process of compliance made very simple and easy.

Our taxation system is encumbered with bureaucratic red tape with so many twists and turns that spins the head of any decent businessperson. So why bother complying and then be treated like a thief by the taxman, rather be the real thief, save on tax by non-compliance and when caught grease the palms of those who matter from the same savings.

Without going into further details, we need to fix the tax system, knowing that it is not broken, rather the system is working perfectly fine only that it is has severe design flaws; in other words, the whole game is rigged.

Another important element to survive this economic crisis is to diversify our exports. Diversification could be done through goods, but this would need investment in plants and machinery first, that will have far longer gestation period than we can afford, so while we must endeavour to undertake that as part of long-term strategy, in the short-term the greatest advantage could be had from exploiting the great wealth of our young human resource.

We must embark on a plan of upskilling our youth that hold some qualification in technology or areas that could provide services to the international world. We can follow South Koreas example of establishing technical institutes to upskill the workforce and technical schools to prepare freshly trained force into the skills that are relevant today ensuring to address the skills gap, improve the employability of the labor force, and support the country’s economic development.

These can be IT experts, technicians, welders or drivers, nurses or associate engineers. All skills are welcome. Quite few of these could generate foreign exchange from working within Pakistan and selling the services abroad, whereas quite some of these could be refined to be hired by international labour market. In both ways we would be able to earn foreign exchange and lift quite a lot of people from poverty.

For example, nurses and medical carers are in much short supply in the UK and many countries, including India, are filling this gap, though there are no country-specific quotas so our trained nurses could also apply and get the jobs and the visas, but the main obstacle is the quality of training and proficiency in English. In the short-term English proficiency could be improved and thousands of nurses, male and female, could find lucrative jobs abroad.

We need to start restructuring our economy by jettisoning the burdensome state-owned enterprises through privatization or outright decoupling and redeployment of good assets. Although privatization has its own pitfalls, we can steer clear of those by adhering to the principles of transparency, accountability and good governance.

As a cardinal point of our strategy, we must train our youth either fresh or upskill the ones already trained with an aim of making them compete at international level.

With one of the highest percentages of young population in the world we must wake up to the opportunity that it presents, and the government should make the best use of this resource through training and education ensuring economic recovery and social order both. The solution lies at our doorstep, we just need to adopt it.

Copyright Business Recorder, 2023