Spearhead Analysis – 28.09.2018
By Farrukh Karamat
Senior Research Coordinator, Spearhead Research
The never-ending saga of inept decision making continues to haunt the corridors of power in Pakistan. The fault inherently lies in the ineptitude of the decision makers, borne out of years of neglect, inexperience, and a nonchalant attitude that does not allow them to think on a macro level long-term basis. The recent addition of Rs.2.3 Million to the National Exchequer from the sale of buffaloes at the Prime Minister House is a case in point. At a time when the country faces huge levels of public debt, rising deficits, and rapidly falling foreign exchange reserves there are far more pressing issues at hand than selling buffaloes to raise funds. Herein lies the problem, leaders in Pakistan in recent years have focused on optics, taking media-appeasing decisions rather than being able to adopt a hardline stance where they could think in terms of the long-term betterment of the country. This has cost us dearly in the recent past and will continue to do so unless the thought process behind the decision making is changed drastically. Dr. Mahathir has taken hard decisions in the national interest of Malaysia, but then his stature and capability is at another level.
In Pakistan, the Government has lost three eminent world class Economists, who had offered their services to help rebuild the economy of Pakistan. In the process they are now reliant on the same team of individuals who have guided the economy over the past many years and are in part responsible for the state that we are currently in. The country has unfortunately never had continuity of policies as each new government has tried to undo the past and create a future, that has never really materialized. In the process the problems have compounded and Pakistan has been pushed further back. Perhaps, it is now time to forget the past, stop the blame game and concentrate on actual decision making for guiding Pakistan into the next century.
Elections are a costly business and no one is in the game just to dole out funds. There is an inherent feeling of entitlement for a pay-back that is attached to being elected. While the Election Commission of Pakistan has imposed a ceiling of Rs.2 Million for each candidate for the election campaign, the fact is that the amounts actually spent by the candidates are far in excess, running to about Rs.12-15 crores per candidate for the major seats in the provinces. The Senate vote is also rumored to be worth around Rs.12 crores. These are colossal amounts for a country like Pakistan, which is on the verge of an economic melt-down. These are also amounts that are never disclosed and fuel the ever expanding parallel economy. The issue is that while these amounts are an open secret, no one is willing to take a decision to set the record straight and rationalize the system.
The present government needs to remain cognizant of their own criticism of the last government and not repeat the same mistakes. The ever-expanding Cabinet and the inclusion of ‘questionable’ candidates in the affairs of the State, smack of compromised decision making on account of having to grant favours for favours taken in the past. This should definitely not be done at the cost of the State of Pakistan. The issue of the water crisis has been rightly highlighted by the Government. This, however, is not about constructing two Dams; it has to be done with thorough planning and as a comprehensive study with linked dams across the country, with the requisite storage, transmission and distribution network. These are mega-projects that can certainly not be completed on the basis of donations alone, but require the inclusion of investors and project financiers. The government has so far adopted a relatively casual approach in this regard and needs to exhibit the tenacity and decision making to take this much required project further.
There are repeated references by the Prime Minister about converting Pakistan into an Islamic Welfare State on the lines of Madinah. A welfare state is possible when the majority of the population contributes to the state exchequer through taxes. In a country where out of a population of 220 Million hardly 0.8 Million people are registered tax payers, it is only possible to create an Islamic Welfare State through incurring additional debt and then doling it out to the poor and needy. Revoking decisions about non-tax payers not being able to buy automobiles or land is certainly not going to help, especially in the context of the Financial Action Task Force (FATF) Grey List, and it might actually encourage people to exit the tax roster given the hassles involved in being a tax payer.
At a time when the government is aiming to cut down on developmental expenditures; has raised the rates on utilities; hiked interest rates and where estimates for the growth rate has been drastically cut to around 4.8 per cent, it is well near impossible to construct 5 Million houses or provide employment to 10 Million people. It might be possible if borrowing can be secured to burden an already over-burdened nation with debt. Of course there is also the project for planting 10 Billion trees. The government has continued to contract additional debt whether to manage the economy or repay the existing debts and the reserves are coming under increasing strain. At the moment they are also scrambling to find the much needed funds from their Middle Eastern allies, but to date the contributions are insufficient to meet the requirements and these are all short-term measures. On top of this, statements are issued, such as the one about the grant of citizenship to Afghans, and then retracted with feeble explanations. Such actions are likely to weaken the confidence level in the decision making ability of the government, which can be detrimental for investor confidence.
At the moment the inflationary pressure is rising and coupled with a contracting economy could severely impact the common man. At different levels there are contradicting statements by the government on whether or not the International Monetary Fund would be contacted for a bail-out or not. The decisions at this time need to focus on infusing confidence into an economically beleaguered nation and diverting resources towards building internal capacity to capitalize on the regional connectivity initiatives to enhance the revenue generating capacity. At the moment, there appears to be a process of decision making that is often self-contradictory, amateurish, and unplanned lacking the leadership strength that is the need of the hour. It is well and good to create the optics to appease the population, but the focus needs to be on jump-starting the economy through a revival of the Industrial and Agricultural sector as an engine of growth and for that it is essential to plug the fiscal gaps and identify how that will be done. Confidence does wonders for an economy, as it changes the investors’ perception; unfortunately, that confidence is still lacking. Pakistanis are an emotional and impatient lot. They expect instant change – that is not possible in the current context, but the direction needs to be charted and communicated clearly to infuse confidence into the Nation to convince the populace that we are headed towards better times.