The international financial order has been changed dramatically following the recession in 2008. More importantly, it has radically reshaped the way we think about economic organisation and policy. Yet in Pakistan, we have continued in the same old chronic pattern – stuck in a stagflationary cycle with chronically low growth and a monetary policy unable to arrest inflation.
One of the basic problems is that in toggling employment and inflation, we have lost focus on growth and productivity. While we kept ourselves preoccupied with stabilisation responses, emerging markets, especially in Asia, have concentrated on kick-starting sluggish growth to thaw out of the recession. While our narrative has remained more tax and subsidy oriented, we have lost sight of key drivers of economic growth. Over time, our collective mindset has become accustomed to the subsidy (rent seeking) system and aid-led public sector projects, which naturally discourages innovation and value-addition in the long run.
It bears noting that even a five per cent annual growth rate (which is the potential growth rate of Pakistan economy) will not absorb the extremely large number of young professionals entering the market every year. Therefore, the New Growth Strategy (formulated by the Planning Commission) targets seven per cent sustained growth over the medium to longer term horizon in order to avoid an employment crisis.
We must immediately adopt a more growth-focused posture. The strategy is straight forward, but one that will require a mix of political will and structural adaptations in the country’s economic machinery.
In the first place, investment must be directed towards innovation and entrepreneurship. Private enterprise remains stunted when the government takes over the market in almost every sector.
Second, our urban areas are not properly configured for growth. The mere conceptions of dense and high rise urban growth are missing from our narrative. Even our larger cities are not tuned to promote growth and most of the country’s urban setup still resembles a rural milieu. The current zoning and building regulations impede domestic commerce. The growth strategy aims at upgrading access from rural to urban market places and freeing prime urban property from government use, leveraging it for commercial enterprise. This will have several quick advantages. Labour-intensive activities including medium-scale construction will receive a boost. The private sector will now see an increased investment space and available portfolio. This will in turn also benefit the government in the form of increased revenues required urgently for keeping social sector and infrastructure programs up and running.
Third, the growth strategy recommends improving productivity in the public and private sector by removing inefficiencies from the system. Our present model is too slow to adapt to changing requirements. In the public sector, the structure of the bureaucracy and size of civil-service expenditures need reforms to free resources for development. Public sector enterprises must be restructured to allow fiscal control and clear space for private investment. The legal and judicial framework for commerce should be overhauled if we are to encourage economic transactions.
Fourth, we advocate building better and inclusive markets. Presently, they are uncompetitive. We need to remove hurdles in the way of doing business. Bureaucratic bottlenecks cannot be allowed to stunt investment in new businesses without which increased employment and consumerism cannot materialise. Entry of new firms should be facilitated, agricultural markets should be deregulated, storage and warehousing facilities should be improved. Unilateral trade liberalisation program must be re-established and present system of distortive regulatory duties should be abolished.
Markets follow density. By combining our resources and encouraging innovative investment that will be tapped by efficient markets across receptive cities, we can start on the road to high growth that is essential to break out of persistent stagflation.
Fifth, the strategy proposes stronger connectivity between people and places. Our rail, road and aviation sectors are heavily regulated and we punish the entry of private sector through a distortive policy regime. There is a need to reform the public private partnership process, Pakistan Railways corporate restructuring should be a priority, the aviation policy needs to be revisited and there is a dire need to embed ICT practices in our connectivity channels including customs procedures.
Sixth, the energies of the large army of youth need to be redirected into constructive and growth generating opportunities grounded in successful ideas and ideals. Once empowered through voice and capabilities, the youth will utilise market and urban linkages to promote employment and commerce. In doing so, we will also inculcate the habit of innovative thinking, prompting vocational learning and generating industry trends that will augment growth as well as exports.
Therefore, it is basically a matter of turning national attention towards economic growth processes, and subsequently devising policies that facilitate growth-orientated private sector investment. In it lies the solution to our employment and inflation dilemma as well. Our academia, media and relevant authorities should advocate this narrative of growth, without which we will not be counted among emerging economies that have fared the best in the global downturn.
The writer is Deputy Chairman, Planning Commission of Pakistan
