Failed governance mindset

Pharmaceutical, dairy, beef, stock market, housing industry, cabs, logistics, sugar, and so many other industries have something in common. They all have been or still are a victim of a governance mindset that aims to protect the poor in a manner that is irrational and therefore wholly or partially prevents economic growth in those respective sectors. For the uninitiated, here is quick rundown of affairs.

In the pharmaceutical industry, there was a price cap on a large variety of medicines that led to poor investments in the sector, (disinvestments too in some cases), whereas many players resorted to producing poor quality of drugs. Eventually, the consumer suffered.

In the dairy and beef sector, bureaucrats from the district management group fix prices of milk and beef in their respective districts. The result: poor, adulterated quality and short supply of milk and beef as the cost of producing good quality is higher than the prices fixed by the government.

In the stock market, historically, the regulations favoured the small investor that came at the cost of the market development, where the role of big boys is critical. Likewise, in the case of mortgage industry, where irrational model of consumer protection came at the cost of growth in mortgage industry.

On a related note, tenancy laws are one of the many factors that limit growth in housing industry, because of excessive focus on the protection of tenant while turning a blind eye to the supplier and producers of housing.

In the public transport segment, there are consistent attempts to ban ride sharing business models that are a part of formal sector. Instead there is a desire to protect the taxi drivers to charge at least 20 percent higher fares for 100 percent poorer service.

Last year BR Research’s spotlight coverage on logistics industry revealed that most experts demand that trucking sector be improved and old trucks be banned so the country can become efficient and ‘hopefully’ win some part of the promised CPEC business. But truckers counter argued that ‘you want to kill the poor truck owners’. As if trucks come at the cost of donkey cart!

In gas and power sector, successive governments would rather subsidize and give more importance to consumers where either it is the case of inefficient utilisation or it is the case of losses and theft. Again, in both cases, it distorts investment incentives and results in poor quality of service. Thankfully, there is slow and weak but still growing realisation to clean the lens of governance in that sector, though ideal solutions are still far from being implemented.

The underlying theme in these and many other sectors is that the governance mindset to irrationally protect the consumer or the poor at the cost of growth in production and improvements in quality is a tried, tested and failed mindset. There are serious limits to improvements that can be brought about in these sectors through merely anti-corruption efforts. There has to be a change in mindset that if you control the prices or protect the consumer without taking into account the needs of the producer, it’s a clear recipe for disaster.

There was a time when these policies ‘may’ have made sense. Everyone was recovering from the romanticized hangover of command economies, and poverty was in abundance in Pakistan. That romance is long over, whereas the country has also seen poverty going consistently down over the last few decades, whether one measures it using calories, income or multidimensional indicators. Today we also have Nadra and BISP, using which there can be better collection of resources as well as better targeted distribution of resources to the poor, where and when need be.

Failure to clean the lens of governance thinking is tantamount to playing a patron to the masses, as if those in charge of governance imagine themselves as benevolent rulers protecting the poor instead of imagining themselves as jobbers whose jobs is to empower the poor, financially and politically. Or perhaps, the failure speaks of their intellectual weakness to think of governance models where the un-ignorable interest of the consumer and poor can come hand in hand with un-ignorable interest of the producer and not at the cost of it.

Then again changing this dynamic that also going to be unpopular with large parts of voter segments. Any government, in doing so, needs to have good command over reform communication and solid political capital. Both these traits are so far in short supply, ‘naya’ or ‘purana’ regardless.