Prime Minister (PM) Imran Khan delivered his inaugural address to the nation on August 19, 2018, one day after taking oath of office. Given the occasion, this is perhaps not a day for regurgitating the whole saga surrounding these controversial elections that paved the way for his long held ambition to ascend to power. Instead, in the long cherished tradition of responsible journalism, let us examine what the new PM said, the obstacles in his path, and the difficult task of managing the runaway expectations from him and his government, fuelled and fed as they are by his lofty (acerbic against political rivals) rhetoric.
First and foremost, a toast to the return to good sense and a demeanour that becomes the PM. Unlike his first address immediately after the elections when he sounded positively statesman like, Imran Khan lost his cool in reaction to the protest in the first session of the National Assembly by the PML-N and other opposition parties (not the PPP, let it be noted) regarding alleged rigging in the elections. Imran Khan the statesman gave way to Imran Khan the agitator-on-top-of-a-container. If he has cooled down and good sense has returned, as evidenced by his eschewing his trademark attacks on political opponents in his inaugural address, the result is the best proof of the best course for him: sounding positively prime ministerial.
As to the content of his inaugural address, it tries to be all things to all men, but the constraints on well intentioned reforms in various fields and therefore the need to prioritise tasks in order to allocate scarce resources optimally, i.e., a plan, appears conspicuous by its absence. To be fair though, some challenges automatically promote themselves to the top of the new government's to-do list.
Amongst these frontline contenders, the economy and foreign relations (and the relationship between the two) assumes pride of place. Foreign debt has soared, according to the new PM, from Rs 6,000 billion in 2008 to Rs 28,000 billion in 2018. So much so that according to the PM, the interest on this debt cannot be paid without more borrowing. This is a classic debt trap, in which the borrowing country is unable to service its debt liabilities without further loans. Debt in this situation therefore is more likely to go up exponentially rather than be incrementally retired. While PM Imran Khan and his government go searching for short term solutions, whether through bilateral loans from China and Saudi Arabia or Eurobonds to attract expatriate Pakistanis or (horror of horrors!) returning to the IMF for another bailout, they also need to revisit the structural constraints that condemn the economy because of the model of development being followed to a perpetual and ever increasing debt mountain. Pakistan's economy at a glance betrays a mixed and somewhat stagnant picture. Agriculture chugs along, with or without incentives. The services sector is the new attraction for some years now, but its contribution to GDP or employment is limited at best. The real crisis is in the industrial sector.
Existing industry, with its leading light textiles leading the debacle, is on the verge of collapse. Apart from lack of incentives (export-oriented amongst them), energy shortages, terrorism and related security issues, and lack of ease in doing business have ensured that both foreign and domestic investors turn away from Pakistan as a destination of choice. In today's world, the received mantra is private capital providing the engine of the economy. But in Pakistan (and similar developing countries), what do you do when private capital is shy as a whole or in particular, critical, but relatively lower-return-on-capital sectors?
To illustrate the conundrum, with all the reservations and critique of Zulfikar Ali Bhutto's nationalisation of the commanding heights of the economy in the 1970s and its debacle at the hands of the bureaucrats in whose hands Bhutto erroneously transferred the responsibility of running these commanding heights instead of competent professionals, the fact remains that the steel mill came on line then, investment in heavy engineering as the base of an economy no longer dependent on plant and machinery imports was initiated. This thrust was correct but the bureaucrats ran the industries and commercial entities entrusted in their care into the ground. The fault lay not with them, untrained as they were for the task, but with the authors of nationalisation who made little or no effort to replace dyed-in-the-wool bureaucrats with competent and efficient professionals.
Learning from that experience and global developments, there are few if any economies where the private and state sector both do not have a role. Where private capital is shy, the state steps in with investment in critical sectors. This argument has to be placed in the context of the solution to Pakistan's underdevelopment. No successful economic transformation since WWII has taken place in any underdeveloped country without industrialisation. The nationalisation-privatisation debate and the other constraints referred to above have virtually brought a halt to green shoots (fresh) industrial investment in Pakistan. This should be the long-term priority of the new government after getting over the immediate hiccups of external account deficits and foreign debt servicing if the PTI government's ambitious agenda of (10 million) jobs creation is to have any chance.
Foreign policy presents tricky ground. The US has finally taken off its soft mask since 9/11 to turn off the financial tap. Without visible progress in restraining if not exporting the Afghan Taliban and Haqqani Network fighters on Pakistani soil, don't hold your breath for any respite from Washington. This cannot be accomplished without bringing the military on board. This represents one of the most difficult of foreign policy challenges for the PM and Foreign Minister (for the second time) Shah Mahmood Qureshi. The PM's expressed desire for normalisation of relations with India has received a fillip from Indian PM Narendra Modi's invitation to a dialogue conveyed to PM Imran Khan on August 20, 2018. The track record shows however, that elected governments in the past ran into trouble if they deviated from, or attempted to leap ahead of, the military's policy in these two areas. PM Imran Khan and his team therefore have their task cut out for them in this regard. Settling the Afghan war and opening at least a dialogue with India would reap dividends in reducing US hostility and reopening the financial taps.
The rest of PM Imran Khan's agenda is focused on the social sector (health, education) and the ruthless eradication of corruption. While there are few quibbles with the former, the latter actually needs to be across the board (including the military and judiciary sacred cows), politically non-partisan, and imbued with the understanding that corruption at the top is the tip of a very large iceberg that afflicts the system from top to bottom. It may take a considerable period of time and effort informed by a holistic reform of the governmental system to dent this endemic affliction.
Pakistan and the world is watching. Time for PM Imran Khan to put his money where his mouth is and perform to meet at least partially the high expectations from his government.
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