Lo they have not been able to shed their diapers these many years, observed renowned economist Professor Samuelson regarding inability of various industries/sectors to grow out of government protection. Contrary to what the economic orthodoxy once held sacred, official patronage invariably ends up doing more harm than good, turning entire sectors into complacent producers at best, addicted to unending injections to stay afloat. Yet the subsidy/protection phenomenon remains central to our economic model, despite obvious wastage.
The centre’s position is understandable to an extent. Resource and energy bottlenecks continue to undermine central pillars of our growth, with no immediate sign of improvement. Also, there is a blatant lack of capacity in both government structures and industry setups to engineer economic growth. The development budget is a prime example. Despite devolution of crucial powers to provinces, we observe a disturbing inability to implement policy, resulting in economic retardation.
In industry, we observe resistance to progressive change primarily because of government patronage bailing out sick enterprises, in effect discouraging necessary upgradation without which competitiveness will forever be compromised. Little surprise, then, that our industry manages little value addition in the export market. The government is advised to channel subsidy funds into capacity building where most needed, so dedicated sums become targeted investments, enabling recipients to stand on their own feet sooner rather than later.
The international financial environment is undergoing a phenomenal change in the aftermath of the great recession, with countries turning to their comparative advantages to fine-tune new trade regimes. For Pakistan to partake in this paradigm shift, we will need industry to produce at its maximum. And for that, capacity building must replace subsidy dispersal. In the present system, patronage, essential though it seems, is actually adding to resource drainage. This trend must reverse immediately.
