How is this story being told?
So how is our government telling Pakistan’s economic story? Answer: A thumbs up by global financial lenders like the ADB (Asian Development Bank), IMF (International Monetary Fund) and the World Bank (WB). In a recent report published by the World Bank titled, “Global Economic Prospects; Weak investment in uncertain times”, it has been nearly all kudos for Pakistan, in which the WB has revised Pakistan’s GDP (gross domestic product) growth rate upwards to nearly 5.4% by 2018 and as high as 5.9% beyond it; terming it as the fastest growing Muslim economy of today. According to the IMF, its $4.5 billion extended fund facility program, helped in resolving some of the key issues in Pakistan’s transport and power sectors, in-turn helping consumer and investor confidence. The China Pakistan Economic Corridor (CPEC) is on course and will be a game changer. China under CPEC is expected to further enhance its investment level in the medium-term and which will bring new prosperity and strength to the Pak economy through its 23 economic zones and 28 industrial parks to be spread strategically throughout the country. The Pak Rupee is holding its ground (stable), foreign exchange reserves at around the $23 billion mark are healthy and again consistent and the Pakistani stock exchange is booming like never before – it just crossed the once un-thinkable barrier of 50,000 points.
But then these numbers and statistics mean nothing. Corporate history is full of examples of corporations with short-term success stories that occurred either on account of windfall external breaks or through access to borrowed capital, only to go bust quickly due to lack of sound management structures being in place and once the market corrected itself. So what are these sound management structures and what exactly do they do? Sound management or corporate governance in essence means a check and balance on all facets of operations while ensuring that their fruits combine in a way that ensures both return and sustainability. Apply this on a national economy and the critical elements would be: borrowings do not exceed an economy’s underlying propensity to pay-back its debt; funds borrowed are spent equitably and transparently; project prioritisation from debt is based on each endeavor’s independent financial sustainability; professional executive management; investment’s operational autonomy coupled with independent institutional oversight to instill accountability and excellence.
Sadly, when it is with this yardstick that one measures the recent performance of economic governance in Pakistan, one is unable to say with conviction that PML-N has been successfully able to instill any of these management attributes in running of the Pak economy. In fact what we see today is total negation of all such principles. The list is long, from adhoc decision-making to a sheer mindset to erode institutional autonomy at the first presented opportunity. Little wonder that when you scratch the surface of any of its touted economic successes, beneath it lays complete toxic malaise. The stock exchange may be over-performing for now – largely due to a public sentiment being driven by ownership stakes picked by the Chinese rather than any real fundamentals – but it also happens to be one of the most narrow based exchanges in the world where a handful of companies can significantly affect the performance of the index; the reserves figure may be high but in essence it reflects debt, which is getting difficult to service by the day; infrastructure spending may be apparent but almost all of it is going into projects that are not self-sustainable and require subsidy; as for the real estate sector it collapsed like a house of cards when efforts were made to document it and an amnesty had to follow; and the CPEC investment may eventually turn out to be an economic blessing one day but take away its political and strategic factors and one sees little or virtually no foreign direct investment coming Pakistan’s way from any other quarters. And if we reflect honestly, even how many Chinese companies would have really come and set-up shop in Pakistan in the absence of CPEC?
Still, the biggest failure of the current economic leadership lies in failing to shore up national competitiveness and productivity over the last 3 ½ years. Or perhaps, on an even more alarming note, Pakistan during its tenure has in fact slipped in these two indexes. Nose diving export figures in their own right tell the sorry tale of competitiveness and productivity! The government has finally announced incentives to help resurrect exports, but not only is its package a year too late, it is also poorly termed, as it correlates itself to growth instead of the real problem on hand: to first arrest the continuous decline! On the productivity side, its growth in the Pak economy has been lowest ever and according to some local analysts the slowest since the country’s inception. We all know that faster productivity growth is the basic source of resulting higher (legitimate) incomes and living standards (after discharging once honest tax obligations).
If not reversed, the productivity slowdown actually implies something close to a long-term stagnation in investment. The most obvious and a quick way to address this is to look at and remove excessive government regulations and to bring in economic reforms (operationally freeing-up the economy), where necessary. However, having literally wasted its time thus far in office from the perspective of ringing reforms, it seems highly unlikely that this government now at this stage of its term will make a serious attempt at it, because with each passing month the country will simply slip into the 2018 elections’ mode.
