The PM has announced his six-point agenda for not only the youths of this country but also to kick start the economy. Cynics might say one thing or another but it is an example of trying to do well by the country. Pakistan has to realize that these reforms have to be radical and fast to be effective. There will be repeated negative elements that will distract from these reforms but these can be disregarded. In the last six decades plus surely our political system and policymakers have learnt a few things and one can see these being implemented. The fact that something is going to be done means that some fundamental changes are being sought. Whether these are actually to take place will depend on the wisdom of not only economists but also other social scientists and in fact the subject of social functioning is now divided between social architects and social engineers. All dreams of such cataclysmic aspects are doomed to failure unless a broader view is taken. The sequencing that is thought out by theorists is only of academic interest and those in the public domain have to develop their own pragmatic rules that ipso facto have to be self-negating. Why do I say this? The reasons are embodied in the culture of self denial and unless we do this the good that all of us envisage is driven out by these parochial policies.
Unavoidable time lags, political and social pressures exerted by various mafias, human failures and unimaginable complexities required for the transformation process make it impossible for a fledgling democracy to work effectively.
So how do Pakistani policymakers feel about the financial resource gap that we have? We have been to the IMF and the past mistakes have eaten into the system and made the system very precarious. And yet all the conditionalities attached to the loans will make life more difficult. If one goes for foreign aid then the utility of that foreign aid is only marginal and the barter of one’s own independence to another richer country is indicative of economic imperialism. So the catch can only be countered by using existing resource in the most optimal manner. Certain rules would have to be developed and those that are sitting on their backside wasting resources will have to be taken out of the economic system. Islamabad is full of dead wood that ought to be cast away.
Pakistan is also aware that the maximum growth in agriculture came when the subsidies were withdrawn. There is no need for any intervention to be subsidised. Historical facts will bear this out. Farmers are resilient enough to handle difficult situations and the growth rates of the late eighties and early nineties will bear this out. There is no need to shelter anyone. The industrial sector has been subsidized in a different way. Start examining the invoices and the over-invoicing of machinery. The fixed capital cost has made our industry uncompetitive. There are a number of other reforms that are required. So what about our banking and services sector? These are non-performing sectors. One of the underlying fundamentals of all these reforms is to make the nation, and the masters of capitalism, realize that sharp practices bordering on criminality will not be tolerated. Much is going abegging as cricketers would say.
Difficult as the going is to be there is a further requirement for having a very restrictive macro policies and one can no longer believe in what the central bank is doing. The issue really is that these over-arching institutions leave much to be desired. These umbrella organisations do not protect anything rather they have huge holes in the system. The macro system prepares the grounds for price and foreign trade liberalisation and – by cutting hidden and open subsidies – announces a dramatic change in entire economic policies. No one likes that – certainly not the exporter – but then they have to be competitive in world markets. If these steps are taken then galloping inflation, repeated devaluations growing foreign indebtedness and budget deficits will come our way. We already in inflationary tends so far as price-wage spiral is concerned. If one were to go to indigenous markets one would see that is happening to prices and how the labour market is setting its own wages.
There is in life no clear-cut and neat decisions for they always are complicated and leave sharp edges. So the ideal policymaker or decision-maker will have to be alert and flexible. There has to be merciless price and foreign trade liberalisation where the exporter has to find new markets. We have protected our textile industry to such an extent with preferential and subsidised polices that they have lost the art of finding new markets. The initial period will be difficult but those that are worth their salt will unlock such a lot of new markets that the road to recovery will always be there. The signals that will go to the economic agents operating on the supply side of economics. If liberalisation is full of ifs and buts then there will be new price distortions and that will mean that the entire effort is lost.
The state-owned enterprises (SOEs) have to undergo a similar fate. Mock organisations cannot be allowed to stay no matter how emotionally attached we are to these institutions (PIA, PSM, Railways). The state is bad at business no matter of what kind. The PIA was examined by me in 1973 with Ansett Airlines (Australian private sector). PIA even in those early days was 40 times overemployed and with only 22 airplanes. The tragedy has been that these intuitions were riddled with political appointments.
There are other reforms that have to take place on an immediate basis – tax, legislation, improvement of market structures, new financial intermediaries and other market-type institutions and reforms. There has to be a continuous need for thoughtful reforms ready for use when needed. That means that someone in the government has to be on the conceptual level feeding the government on not only what to do but also how to do it.
These rules are neither new nor innovative but these are and others that I may have missed out are necessary requirements if we are to prosper. The philosophy of the nation has to be reworked through a psyche that is positive and well meaning. The rule of thumb is that the policies have to be articulated through those that hold this nation supreme and that means finding a new set of innovative economic players. The belief that policies are for many and not the few needs to be articulated by all these super individuals that do not go out of their comfortable offices. There lies the crunch. Where should the liability to persuade lie? Should the leaders be responsible for their acts? How does the ordinary citizen know what the leaders are doing? In Japan the PM’s daily agenda of work is published in the newspapers. Are we mature enough to be transparent to that effect!!!
Dr Zafar Altaf, "Systemic reforms," Business recorder. 2013-09-28.Keywords: Political science , Political issues , Political leaders , Political challenges , Social issues , Social rights , Social activities , Economic issues , Economic system , Economy-Pakistan , Policymakers , Pakistan