The social factor and GSP Plus

What Pakistan’s economic and trade development policies lack

Pakistan is by no measure an infant state though it has never ceased to behave like one. There is no bigger proof of this fact than the country’s economic governance and policy planning, and no better example than the upcoming budget that’s looming over everyone’s head. This is not a country known for people-friendly economic planning.

The country’s economics is the story of the snake that ate its own tail. The human factor is missing from our planning, which will bring our downfall.

Salman Shah, former caretaker finance minister of Pakistan, tells the public precisely what to expect from the upcoming budget: nothing. “What to expect from the budget? You can see all the budgets from the last eight to 10 years, one is essentially a slightly tweaked copy of another before it, with a slight increase in percentages,” he says.

“Budgets have no sanctity in Pakistan, unfortunately. And it has completely eroded in the last four or five years. I don’t put too much hope in the budget,” he adds dryly.

It isn’t just the budgets that should worry us, for Pakistan always has a bigger fish to burn while playing with the frying pan that is the economy. The current subject of our culinary torture is the GSP Plus privilege which the leaders are bent on trying to find a way to undo.

The Generalised System of Preference (GSP) Plus scheme tries to help developing countries develop faster by allowing them duty free exports. But this duty free scheme isn’t particularly freeing for the leadership because it’s conditional to 27 conventions relating to labour rights, human rights, environment, corruption and narcotics control, sans which the Plus will become a minus.

While the budget does little to cater to the Toms, Dicks and Harrys of Pakistan, schemes that force the country into action seemingly do little to motivate action, too.

“It is a misprioritised strategy which is going to push us into a big hole,” Salman laments. But the priorities need to be straightened out, and soon. While the status is approved for a period of 10 years, every two years the EU looks into whether Pakistan deserves the status. So far, they have already been irked by Pakistan’s devil-may-care attitude about human rights. The revival of the death penalty hasn’t helped matters either.

All signs point to social indicators and development of the people before anything substantial can take place. When Pakistan will learn is a question oft repeated, while the answer eludes us still.

Khurram Hussain, a senior journalist who focuses on the business and the economy, confirms the lack of emphasis on people. “In terms of policy discussion, this much I can say, the human side of economic policy is a very, very neglected dimension of the entire scenario,” he asserted.

One sad example of this precise problem is that of the current government’s response to climate change. The Ministry of Climate Change was a two-year-old infant (and only established two long years after the 2010 superfloods) before it was shut down by the PML-N government during 2013. However, the need was soon felt because of international pressure and the ministry was resurrected in haste. So far, it has issued several interesting notifications on the perils of climate change, mostly information that is easily available on Google. It has yet to do anything substantial.

A brick where a house should be

But before Pakistan can tackle issues such as child labour, trafficking, degradation of the environment, etc, it needs to remedy larger problems.

“What indicators?” Salman says without looking for an answer.

“The reality is that at present the most important thing is employment generation. If the private sector does not invest, there will be no economic growth, which you desperately need. No economic growth means no employment generation. All these youngsters that are coming out in hoards into the labour market, how will they find jobs?” he asks.

“I think that whatever projects we can see in Pakistan, none of them are really projects that create wealth for Pakistan. Look at the China-Pakistan Economic Corridor. If we set up coal plants worth USD33 billion, which are obsolete and create pollution and cost must more than they should, what is the use?” he asks.

“If you invest this instead into big dams then you get rid of electricity issues, the farm productivity issues, and what not. Pakistan can generate huge amounts of surpluses from just the agriculture sector and you won’t need loans anymore. So why aren’t we putting the priority on big dams when China is an expert in big dams. The funny part is that even the Chinese are asking why we are spending our money and time on imported coal and LNG,” Salman explains.

This also brings to life the issue of environmental degradation (which coincidently is also on the list of 27 conventions). Instead of focusing on keeping emissions low and focusing on curbing the effects of climate change, Pakistan has happily signed on to darken its skies with a solution that the world is slowly giving up on. Once again, the social aspect of the economic policy was never a part of the discussion.

There are crises at hand and discussing the human side of things is not all that easy.

“Before we can even talk about the conventions we need to look at the overall situation. Our textile industry is pretty non-competitive even now because of gas load shedding and electricity load shedding,” he laments.

Energy itself has become the butt of many jokes. The government has played around with two annual national plans on the matter and managed to fail to achieve its own goals.

Salman believes that there is a whole lot of wasted potential that is keeping Pakistan from really moving forward. The country has not gained as much from the GSP Plus status as it could. “We have a 23,000 megawatts capacity for electricity but for some reason we can’t seem to produce more than 11,000 megawatts or so. The power crisis is totally gripping us,” he points out.

The coin’s crooked side

Despite several sources, echoing concern over the little to no progress made on the GSP Plus in terms of the social indicators, those associated with the government don’t see much of a problem.

An ex-official from the government says there’s no reason to worry. “I don’t think that we are about to lose the GSP Plus. There is a system, and there is a review after two years. There is a process and they ask the country concerned what has been achieved and what hasn’t. There are several stages, I don’t think we will lose the status at all,” he asserts.

Despite there being some reports that Pakistan is in trouble with the EU over human rights violations, the official remains adamant that the rose tinted glasses must stay on at all times. “I’m not sure what reports anyone is talking about. I am doubtful that we would lose the status. Perhaps eventually we might lose the status but it is not happening immediately,” he says.

“I understand that Punjab has been making progress on these things. They lack in some things but they are making headway in some other things,” he adds.

Interestingly, while believing the GSP Plus status provides an excellent opportunity to Pakistan, the ex-official believes it isn’t all it’s cranked up to be.

“I am not sure what we are really even gaining from the GSP Plus status. Our exports did rise by 800-900 million but they were diverted from somewhere else into the EU. Overall our exports are still stuck, there hasn’t been much progress. So far schemes such as the GSP Plus have not helped much,” he says. “What’s needed is internal reforms. Those reforms unfortunately are not taking place,” he added.

The GSP Plus might not even be silver lining Pakistan has been looking for. “They have set the target that between 2012-2015 we should achieve 25 billion but that’s nothing. If something moves from 25 to 26, that’s not really a big jump. India has no GSP status yet their exports are jumping by much larger numbers and they have around 15-20 per cent exports,” the source explains.

It seems that once more the conventions for social development aren’t all that important. The human element is not needed. “Well, the conventions are technically already in our constitution and they are not being implemented by us. These are core conventions that Pakistan is already a signatory to and that is something we need to work on irrespective of the GSP Plus status,” the source asserts.

Surprisingly, he also feels that the GSP Plus status did motivate the government to do more, to do better. “The government set up a lot of committees. Nothing happens overnight and we need to appreciate the effort that is being made. No society changes overnight, the government has worked on this extremely actively. I’ve had no adverse reports on this. Sure, they can work harder, but it’s not as if they’re not doing anything. A lot of this has to be done by the provincial governments so it’s not all federal government’s fault,” he explains.

Irfan Shahzad, Lead Coordinator at the Institute of Policy Studies, feels that linking basic human rights and other social indicators to a foreign scheme in itself is wrong. “Of course these are core conventions but they should not be focused on just because some scheme tells us to. Whether there is a convention or not, necessary social services should be provided to the people,” he exclaimed.

The discussion goes back from the GSP Plus status to the budget. “The GSP Plus scheme isn’t as beneficial as it could be. For instance, instead of increasing exports, people began diverting exports to the EU and pulled back goods and services from other countries. What we should do is focus on ourselves,” he says.

“For instance, the budget allocation for health and education is a little too low. Moreover, the budget that is allocated is often not released completely and/or not utilised in full. For example, the HEC was allocated around Rs20 billion of which only Rs7 billion were released within this year,” he informs wistfully.

Meanwhile, circular debt is once against rearing its ugly head and putting up for display the many shortcomings decorated on the current government’s cap. It isn’t just regulatory mechanisms that are amiss but also governance, which is the perpetual Achilles’ heel.

Over the course of the last few years, the only work done has been to develop one committee after another to solve social development issues. Some problems were lucky enough to even get a nice stack of paperwork to their name. However, apart from this any real implementation with actual implications is missing.

From over 34 Millennium Development Goals, Pakistan is on track to achieving only nine, and that too, by the skin of its teeth. Social development has not been high up on the agenda but the time is ripe for the leadership to wake up and smell the air.