Felicitations to Team Business Recorder (BR) on the Golden Jubilee; may BR have many more. Everyone, at least from the business community, will vociferously agree that BR is "The" publication for reliable and current business news, data and information in Pakistan. It is indeed an honour to have been invited to contribute an article on the 50th Anniversary Special Edition of BR.
The theme, as advised by the Editor, revolves around suggestions to revive the ailing economy of Pakistan; definitely the need of the hour, but unfortunately, exactly therein is a dilemma. Evidentially, there already exists a consensus, between domestic and foreign experts, over the solutions for Pakistan's economy; starting from removing barriers to international trade, deregulating flow of currency, facilitating foreign direct and indirect investment, enforcing international copyrights, all the way down to privatization. In short the standard prescription, referred to as the Washington Consensus, prescribed for developing nations fortunate, or unfortunate, enough to be advised by IMF. All of which might have been just fine, except that in the final substantive analysis, after having taken the medicine for around 2 decades, Pakistan still finds itself sinking deeper into the quagmire.
According to the conventional view, popularised by the monarchs of capitalism, a country's ability to borrow in the international debt market is the barometer of its economic health, hence Pakistan is doing fantastic; but somehow this adjudication remains indigestible. If the economy were healthy enough, there wouldn't be a need to borrow.
There are a host of other popular economic indicators and barometers which are quoted as evidence of an improving situation, depending upon which indicator is positive at a given time, but somehow, contrary to the law of physics, the trickling down of this growing opulence seems to defy gravity; the common man is getting more common with each passing day. And, as some might be aware, an ever shrinking middle class is fatal for democracy. But before beating the doomsday drum, let's analyze the results to date of all the above great solutions.
Opening the borders for international trade has been amazing for Pakistani consumers, albeit those who can afford to splurge on a luxurious life. In the balance however, the nation seems to be notching up an unsustainable import bill, which till now is being financed through an ever increasing foreign debt; it remains to be seen how long this particular party will continue.
Unable to compete with global corporations, domestic industries and services are taking a beating, resulting in stagnating exports with a continuing singular reliance on cotton. The world seems to want nothing from Pakistan except cotton and even that demand seems to be tapering over the last few years.
Imports have to be earned through exports; that is the irrefutable, fundamental law of international trade, which surprisingly all structural reform programs seem to ignore. Pakistan's solution to this edict is to export Pakistanis, but while this does bring home the bacon, there is a flip side. If the educated middle class and hard working and adventurous workers leave to toil in greener pastures, who will build Pakistan?
Free flow of currency is another great thing; it is amazingly simple now to move wealth, honest or ill gotten, out of Pakistan, a facility designed specifically for the rich. Notwithstanding, unhindered flow of currency also provides an opportunity for foreign speculators to invest in Pakistan's stock market, create a boom and leave before the collapse for greener pastures; Pakistan's gains out of these activities have always been a big mystery.
Free flow of currency is also great for foreign direct investment. But if the nation rampantly imports finished goods, which is more profitable for global corporations, FDI will be limited to guaranteed high return low risk short payback projects. So if the rich and the foreigners only want to take dollars out, where will the funds come for setting up hard core manufacturing industry in Pakistan? Has anyone been noticing, a host of global corporations, seem to be leaving, or have already left, Pakistan for greener pastures.
All thanks to the government of Pakistan for enforcing copyrights and allowing the citizens of Pakistan to watch latest Indian movies in comfort in cinemas in Pakistan; older generations who fought for independence could not even have imagined this turn of events. Domestic entertainment industry has almost shut down and whatever actors are left, are also leaving for greener pastures.
With no one investing, the rich exporting their wealth, educated, hard working and talented Pakistanis leaving, how else can the imports and debts be paid for but by selling whatever can be sold. But how long can privatization go on, there are limited assets and even more disturbingly, the crown jewels have already been sold, and foreign debt has increased!
So where is Pakistan going with all these stupendous solutions? If history is any guide, definitely not becoming an industrial power, or becoming a developed nation in the foreseeable future. And if all goods and even services continue to be imported, foreign national debt will keep rising and while the workers will keep remitting to families back home, the party cannot continue forever. And since nothing tangible is happening, schemes to defraud will increase for want of quick money and the social unrest will get worse for lack of employment; even the educated feel hunger pangs.
If this is not the desired state, the cart is definitely before the horse; whatever these solutions purport to solve, is not Pakistan's problem.
The problem is not in importing, as long as all imports are earned by at least equal exports. Problem is not free flow of currency, as long as flight of domestic capital especially the tainted kind can be curtailed. The problem is not with foreign investment, as long as it is utilized in setting up manufacturing which pay for imports. The problem is not with copyrights, as long as it does not harm domestic culture, initiatives and sensitivities. Problem is not with privatization, as long as it is not mandated by the debt trap. Problem is with enterprising Pakistanis leaving Pakistan, the country needs them.
If everyone agrees with the problem statement, that will be a huge step in the right direction.
Everyone, at least from the business community, will vociferously agree that BR is "The" publication for reliable and current business news, data and information in Pakistan.