Made you look!
Nope, I am not braver than everyone else - this is not about that ISI. Recall from last week's column, this is the abbreviation coined by Investopedia for Import Substitution Industrialisation.
But now that you are here, I implore you to stay: whatever the abbreviation may stand for, undeniably, the ISI is extremely important.
Only ISI can put Pakistan's economy on the right path. Reforming regulatory bodies, reforming tax policies and administrations, even automation, selling State Owned Enterprises (SOE), energy markets, letting imports come in freely based on a stupid theory that it will help domestic industry innovate, and trading with the enemy just won't cut the mustard.
Albeit, if we still get excited by reforms, notwithstanding our track record of failing on each and every reform we ever undertook in history, how about doing it right this time: let's start with land reforms, immediately followed by police reforms, and then judicial reforms focused towards resolving each and every property dispute, within the foreseeable future of say 3 years, and giving back the lands forcibly appropriated from the weak and the oppressed. And I kid you not; the economy will start growing leaps and bounds.
Unfortunately, land holdings is where elite capture is at its worst in Pakistan -for my money, the showcasing of businessmen, who despite their greed create jobs and keep the economic wheel moving, as elite capture by the media is a spurious initiative to shift the limelight from the Nobles and Barons who sit in the parliaments and essentially have the power to scuttle any steps designed to rattle the status quo -strangely their tentacles seemingly have even penetrated the Establishment, which appears to be hapless when it comes to reforming land, police, and judiciary. Even the Change Machine has failed, till now, on these key three initiatives, and our so-called independent and powerful journalists also suspiciously keep a stiff upper lip on these issues or any related discussions.
I have always wondered why the IMF never made these three reforms, land-police-judiciary, a condition precedent for their bailout packages; have Western Universities stopped teaching that property rights and contract enforcement are the foundations of capitalism, or is there conspiratorially something more than meets the eye?
Even ISI policy may fail because of lack of reform in these three areas, land-police-judicial- no, not that ISI.
Dear Readers, my apologies, I seem to have strayed from the topic, ISI - primarily because these three reform initiatives, land-police-judiciary, are very dear to my heart.
And no, I am not vying for a lifafa - albeit a briefcase full of greenbacks might do the trick - I sincerely believe that the three reforms, land-police-judicial, are the crux of the matter when it comes to the economy.
If the truth has to win, it has to be repeated more oft than the lies!
Someday, someone out there with the power to change the status quo will listen. But for now, let's get back to ISI.
So why exactly is ISI important?
To borrow from an international chain of bun kebabs: I am loving it!
Well, in a nutshell, Pakistan's external debt and liabilities stand at USD 112.8 billion dollars on 30th June 2020; exactly 45.4% of our GDP at current market price (source: State Bank of Pakistan website, which was finally updated for June numbers in September). Failing to meet the tax collection targets is peanuts compared to how we have failed in trading: we seem to have a death wish every time we go to the international markets. Imagine how good we are at trading from the mere fact that to export USD 1 of our goods we have to buy USD 2 of foreign goods.
If you fail at tax collection you can, technically, print more Rupees and turn a deaf ear towards the IMF when they jump up and down asking for reducing short-term government borrowing - it is not as if their policies and reform packages have ever worked in the history of Pakistan. The proof is in the pudding: if anything they had said worked, we would not have immediately gotten into a bigger mess each time they left the building!
On the other hand, if you fail at trade, the problem is that we cannot print dollars (at least not legally). So in order to meet our dollar requirements to finance our trade deficit, and pay external debt obligations, which basically are accumulated historic trade deficits, we have always chosen the easier path: beg for aid or borrow. Given the size of our external debt, aid is now simply not enough, and the option to continue borrowing dollars is getting more and more difficult with the passage of time. Every time you borrow, you pay with a pound of flesh - whether we like it or not, we really are not exactly a sovereign nation anymore, thanks to all the partying during the last lost decade of democracy (will elaborate in another write up). Pretty soon the creditors will want land - oh, hang on, they are already buying our land!
If we are to stop this bloodbath, we will be forced to take the difficult path - fish consumer choice. However, despite all the rhetoric and the tall and wide claims and all the incentives to multiple sectors, let's not fool ourselves: we have failed at increasing exports - miserably. So the only other way left to get to a trade surplus is ISI.
Will continue next week with ISI - hopefully!
Rise the Last Mercantilist, your time has come - it is the dawn of ISI!
(The writer is a chartered accountant based in Islamabad. Email: syed.bakhtiyarkazmi@gmail.com. The views expressed in this article are personal. The views are not necessarily those of the newspaper)
Copyright Business Recorder, 2020