A Comedy of Errors

Spearhead Analysis-20.07.2020

By Farrukh Karamat
Senior Research Coordinator, Spearhead Research

“For we may pity though not pardon thee.”
[Duke (Act 1, Scene 1); The Comedy of Errors (Shakespeare)]

It was the year 2018, when on the back of discontentment and a rising quasi-revolutionary tide the Pakistan Tehreek-e-Insaaf (PTI) swept into power through democratically held elections. There have been voices that have raised concern over the legitimacy of the elections; but then when and where are elections totally transparent and fair. There were high hopes built up by the PTI through months of political rhetoric that promised the proverbial ‘Naya” (New) Pakistan. A 100-day agenda was charted out by the newly elected Prime Minister and onward marched the PTI stalwarts to bring about the revolutionary changes as the people of Pakistan waited with anticipation and bated breath. Over the days, weeks, months, and years it has become apparent that there is a wide gulf between criticizing Governance and actually implementing Governance. What has emerged since 2018 is a Comedy of Errors, as the government has been haplessly trying to establish its writ and create the promised New Pakistan. We may pity the PTI stalwarts for their naivety, but we cannot pardon them if they fail to deliver as they promised.

The PTI leadership appears to have over-promised in their quest for power and a series of glaring omissions and errors over the years have eroded their credibility, leading many who voted them into power now being disenchanted. From day one the PTI leadership appeared to be unprepared for the ‘formidable’ challenges that lay ahead. The problems were compounded by the fact that they had to deal with a governance structure and a bureaucracy that had been groomed for decades by the successive PML, PPP and dictatorial governments, often for personal as opposed to national gains. Bringing about change while faced by their unpreparedness, incapacity and the mis-governance and flawed administrative structures of the past was and remains at best a Herculean task. The initial cosmetic changes around the President House, Prime Minister House and Governor House Lahore were meant to create a populist sentiment and soon fizzled out. It was time to bring about real and fundamental changes that they had promised.

What followed was an unforgivable delay in negotiating with the International Monetary Fund (IMF) for a much-needed restructuring program; criticism of the projects under the China Pakistan Economic Corridor (CPEC); and the initiation of a ‘high-handed’ anti-corruption drive mostly against the opposition leaders. In the end, after a costly delay and with punitive conditions the government had to negotiate the IMF deal; they have had to accept the reality of CPEC and with Lt. General (Retd) Asim Bajwa now firmly in charge the projects again seem to be moving ahead; and with the departure of Nawaz Sharif for London, the anti-corruption drive has lost a lot, if not all, of its steam. In the process the government lost a number of professionals in the Economic Advisory Committee, Federal Board of Revenue (FBR), Board of Investment (BOI) and other organisations. The frequent changes and a high-handed attitude have led the Bureaucracy to adopt a pen-down strategy and suddenly the files have stopped moving. The PTI leadership lost control over the all-important Finance function and the State Bank of Pakistan. The most controversial appointment is that of the Chief Minister Punjab, which to date is creating ripples even within the PTI. Having criticized large Cabinets and the non-attendance of the National Assembly sessions by the PML-N Prime Minister, Imran Khan has a burgeoning Cabinet comprising Special Advisors to the Prime Minister, many holding Foreign Passports. His presence in the National Assembly has also remained sketchy for which the opposition has severely criticized him. As in the past most of the Ministers continue to advice and comment on issues that are out of the ambit of the portfolios assigned to them.

The initial ineptitude in managing the Finance and Tax functions led to high-interest rates, closure of businesses, and an unprecedented devaluation of the Pak Rupee. The parallel economy supporting the real economy suddenly dried up and the economic activity started to gradually come to a grinding halt. The promised Billions from overseas Pakistanis never materialized, and the Prime Minister was forced to ‘ask’ friendly countries to donate to support Pakistan’s tottering economy. His continued tirade against the ‘Elite’ (incidentally most of the PTI stalwarts are part of that same elite) and support for the so-called ‘down-trodden’ led him to come down hard on the investors forcing him to shift gears and move into a donation-asking mode as opposed to a more productive industrialization and investment mode.

Scandals have continued to plague the PTI government, starting with the still incomplete Peshawar BRT project, the Sugar, Wheat and Petrol crises, and the departure of one of his close aides for the UK. The frequent U-turns did not help at all, as ill-conceived plans and policies were announced in haste with the government then having to back-track. Where the PTI leadership has failed is in having a robust plan for restructuring Pakistan, and having failed to identify and install a professional team that could start delivering from the very outset. Imran Khan is no stranger to success. He won the World Cup, after having been convinced by General Zia-ul-Haq to return to cricket; and he erected the Shaukat Khanum Hospital after being provided land by Nawaz Sharif. He now needs to deliver on the Naya Pakistan having been provided the current opportunity to lead Pakistan.

After the COVID pandemic the state of affairs has worsened and the economy has taken a big hit. As before, the Government kept wavering while trying to debate the intricacies of a Lockdown versus a Smart Lockdown. The Military lent its full support and through the efforts of the NDMA and the establishment of the NCOC the situation appears to have been brought under control. At this point having run out of ideas and options to jumpstart the economy the PTI leadership has been forced to adopt a policy reminiscent of the past – an Amnesty Scheme for the Construction Sector. As stern opposers of Amnesty schemes in the past and the fact that Pakistan is on the Grey List of the FATF, it is nothing short of magical that the Government has come up with this novel solution to revive the fortunes of Pakistan.

The Commercial Banks have expressed some reservations on the mechanics of the lending under the Amnesty Scheme. Having been asked to allocate 5 per cent of their portfolios for this scheme, the Banks in the absence of adequate collateral could face sizeable losses in the future and suffer on account of lower lending margins, unless the Government compensates them and provides an undertaking for the lending. The latter is unlikely to happen and Commercial Banks are unlikely to take on considerable credit risk merely on the verbal request of the Prime Minister, as Housing Loans are typically long-term loans. After all they are answerable to their shareholders. As a result, while the scheme has been announced to facilitate the ‘down-trodden’ with low cost housing with low cost loans, this might not actually materialize. Another apprehension is that while the Banks continue to be heavily fined for gaps in their customer due diligence process by the SBP, the Amnesty Scheme assures that no questions will be asked about source of funds till December 31, 2020. Does this imply that a person can fund a Bank account with undeclared money and then invest these in the Real Estate sector with no questions asked? Or will the SBP come down hard on the Bank and the investor; and what is the legal cover for investors after the December 31, 2020 deadline? The Amnesty Scheme cannot be a knee-jerk reaction, it had to be debated, discussed and planned with robust policies after bringing on board the various stakeholders in the scheme.   

Unfortunately, a comedy of errors has been unleashed upon a hapless people as everyday they hear a new promise, which is never delivered upon. Starting with the Kekra-1 oil find off the coast of Karachi, we now have news of another large oil find in KP, which will help turn the fortunes of Pakistan. The people of Karachi were informed that their electricity problems would be over in 24 hours, yet nothing has improved in a city that is sinking under the weight of garbage and is inundated with rain water. The Aviation Minister unleashed such great reputational damage on the country and PIA by questioning the validity of the Pilot Licenses, that it might actually be irreversible. This could raise serious questions over the validity of the Certifications and Qualifications in Pakistan on a broader level, and could bring the educational edifice down if not tackled to reassure all that proper Compliance and Ethical standards are in place. The educational system needs to be aligned with the future needs and trends and requires an overhaul from the grass-roots level. The CEO of GEO Group remains in custody over a decades old land case and is now attracting considerable international press attention. If it is not one thing it is another and the consistent improvement that the Nation was hoping for has not materialized, as the Government appears to be mimicking the follies of the past.

While there is severe criticism by the Government over a rise in the price of a Naan or Roti, an increase necessitated by the input costs brought about by the Government policies, there is not a whimper when the large-scale automobile sector raises prices by hundreds of thousands of Rupees every few weeks. There is no justification provided when the PTV fee is raised from Rs.35 to Rs.100 as part of the already high electricity bills; or when the prices of drugs and daily use items continue to rise; nor when the price of petroleum products goes up to appease the so called oil mafia. One hopes that the comedy of errors over the past two years has taught the PTI stalwarts the art of Governance for change and not for merely maintaining the status quo. The nation holds a lot of hope from these leaders and it is time that they start delivering on their promises, by making Pakistan a proud, productive and respected nation. The primary responsibility is the revival of the economy and to increase the revenue-generating capacity. In the absence of that we would continue to flounder and drift, without being able to set a clear path for the future. For now a large chunk of the population has been swept below the poverty line and the challenge is to create an environment for sustainable investment and productive opportunities, and above all rekindle the dwindling hope of the Nation. 

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