Pakistan’s economy: Time to be a destination

Pakistan’s economic success is being told more frequently and widely. A spate of recent articles in the Western media has rightfully heralded the country’s significant progress, finally giving Pakistan some good press.

This is a fortunate turn and may be the ascent towards a new ‘normal’.

The megatrends of the international economy are in Pakistan’s favour. Three of the world’s four largest economies by 2050 will be in Asia—with China and India neighbouring Pakistan and the third Muslim-majority Indonesia, a geographic stone’s throw away—marking a civilisational shift of economic activity, a return to the pre-colonial historical and natural economic order right at Pakistan’s doorstep.

As Beijing seeks to project its economic dominance towards the growing markets of Africa and the Arab world—in the form of a ‘new silk road’—Pakistani geography is indispensable.

In shortening China’s path westwards, providing it with a rapid overland route into the strategic Arabian Sea and towards the 400 million people living in East Africa, Pakistan will sit at the heart of international business for the foreseeable future.

However, any Pakistani prosperity is dependent on the favourable fates of geography being coupled by a domestic reform process.

So while Pakistan must seize Asia’s geopolitical dividend and embrace it, this must not dilute a simple truth: Pakistan can only become prosperous if it changes from within.

After all, is steady 5% growth the objective, or is Pakistan in pursuit of an economic miracle, tripling its GDP in a decade and lifting tens of millions out of poverty in a single generation?

If the latter isn’t the objective, it certainly should be; Pakistan must ultimately see itself as the destination of the next economic miracle, not just a conduit of others’ prosperity.

So as growth slows in China, as India struggles with a lack of federal-state cohesion, and as Mexico wrestles with the Trump Administration, there is an opportunity for Pakistan to seize the moment and grind its way into becoming a major industrial power – by tapping into its people.

Pakistan needs to have a genuine belief in its people and enable them to be the drivers of the nation’s prosperity—not merely vassals of foreign companies planting sweatshops to fill the lowest rung of the global value chain. Awakening a nascent Pakistani industry ought to be the country’s pathway into the future, providing goods for both a growing domestic market and tapping into the markets of Central Asia, the Middle East and a burgeoning Africa.

For example, the country’s automotive and truck industries are growing, but nowhere near their potential, considering Pakistan’s size and strategic location.

Pakistan must seek socio-political maturity. The country cannot afford reckless politics if it wants to put itself on the global economic map. If terrorism and security concerns were not enough of an economic obstacle, then shambolic political stunts and personalised dog-whistle politics only compound the challenge.

Protections for existing Japanese carmakers must be lifted. They must be willing to compete by innovating and ramping up quality if they are to survive the competition. The Auto Industry Development Policy’s early fruits of bringing Hyundai, Kia, Renault and MAN SE are a sign that industry is responsive to bold Pakistani reform when it happens.

If supported by further competition and innovation, more efficient production lines and favourable policy conditions, Pakistan will have a productive ecosystem that can splinter off broader and deeper gains across the industrial economy.

Just as the Asian Tigers did in the 70s, Brazil did in the 80s, China did in the 90s, and Turkey did in the 2000s, such ‘miracles’ necessitate bold moves to align the country’s standards with global expectations.

The first place where Pakistan needs to lift its game is skilled labour and education. Without them, the requisite know-how for innovation and development is limited and rapid industrialisation is impossible.

And due to decades of meagre budgets and abundant mismanagement, the results show: Pakistan lacks a single university in the world’s top 500 (QS World University Rankings 2016-2017) and ranks 124^th, out of 138 countries, for its higher education and training quality according to the World Economic Forum (WEF).

This weakness is systemic and starts from the earliest years: Pakistan has 46.5 pupils per teacher, the worst ratio of any country in Asia (UNESCAP, 2014). For comparison, Indonesia has 16.5 pupils per teacher while Sri Lanka is at 23.6.

With such poor outcomes and indicators, the upside is that low-hanging fruits abound.

Government investment in education and private sector solutions must be encouraged. A consortium recently formed to undertake applied research in China-Pakistan Economic Corridor’s industrial zones, combined with a memorandum of understanding between edX and the Information Technology University, are small but promising moves.

If replicated on a larger level, space can be created for universities to spin off the IT, advanced electronic and manufacturing companies and champions of the future that can underpin an economic ‘miracle’.

Much as China puts targets for its provinces and local governments; thus, setting a reference standard by which success and failure is measured, Pakistan must develop a culture of accountability and reward for economic performance.

Beyond the human capital, Pakistan’s current infrastructure ‘obsession’ also needs to be pushed even further. In tying the country together with CPEC and adding up to 12,000 megawatts towards rectifying Pakistan’s energy woes—which has perhaps been the country’s biggest drag on growth over the past decade—recent progress has been impressive.

But more is needed. In particular, the country’s massive gaps in digital infrastructure need immediate prioritisation. With an internet penetration rate of just 18%, and an average internet speed of 2.5 Mbps, Pakistan lags a generation behind the rest of the world.

Facilitating e-commerce and online education would go a long way to dealing with Pakistan’s legacy problems. If the country is to witness an industrial surge and nimble entrepreneurial business activity, quality internet access must be a top priority.

Finally, Pakistan must seek socio-political maturity. The country cannot afford reckless politics if it wants to put itself on the global economic map. If terrorism and security concerns were not enough of an economic obstacle, then shambolic political stunts and personalised dog-whistle politics only compound the challenge.

Voters and media need to prioritise national development as the primary issue and punish elected officials who show neither economic competence nor interest. Furthermore, instead of fostering a loyalty to a party and leader, the Pakistani electorate should develop a hawkish fixation with economic data and outcomes.

Much as China puts targets for its provinces and local governments; thus, setting a reference standard by which success and failure is measured, Pakistan must develop a culture of accountability and reward for economic performance.

Simply put, an obsessive culture of economic excellence and accountability must be revived right across the country if Pakistan is to unleash its full potential.

Pakistan, certainly, can seize the moment.