- Improving position not the only yardstick
Pakistan has improved its ranking as a global reformer 28 places on the Ease of Doing Business Index. This is good news, but it does not mean that the long-awaited economic turnaround has begun. It should lead to an increase in Foreign Direct Investment, but it has not yet done so. It should do so in the future, but until it does, it will not translate into the actual creation of new capital, assets and jobs, which the government badly wants for the economy to perform at the level it wants.
It is certainly not doing so now, as can be seen in the decline of 6 percent shown by largescale manufacturing in the first two months of the fiscal year, July and August. This signals the start of an economic slowdown, or rather meltdown which will not only ensure that there are no new jobs for entrants into the job market, but will lead to people presently employed actually being thrown out of work. It will also mean that the government’s attempt to achieve the ambitious target of tax collection of Rs5.5 trillion becomes nonsense, no matter that it has been promised to the IMF. With the world facing an economic slowdown, capital for FDI seeks profits in economies which seem to be bucking the trend, but certainly not if they seem to be following that trend. The PTI must realise now that it would face electoral punishment, and the electorate will not hear excuses about a global slowdown.
All that improvement in the Index will bring a willingness by investors to consider Pakistan. However, the decision to actually invest will depend on any other factors which the government still has to tackle, such as the physical and regulatory infrastructure, and the business dispute resolution mechanism. Merely giving the international financial institutions access to policymaking will not improve matters if other factors are not dealt with effectively. The PTI government has set great store by its anti-corruption drive, arguing that prosecution of the corrupt will lead to an improvement in the economy. That has not happened. If the anti-corruption drive seems directed against political opponents, as it does, it will not yield the results that have been promised.
