By Saad Gul
Pakistan’s economy doesn’t look in good shape. The incumbent government argues that it inherited a disoriented, trade-based, import-led and consumption-driven economy. The direct consequence of this is the staggering current account and fiscal deficits. Therefore, rethinking government this year is vital but there is a caveat; the government capacity is limited, it is hamstrung by a governance regime that is obsolete, still centers on bureaucrats, and lacks pro-active smart approaches.
Can we cope with our economic challenges with the same governance structures? Probably not.
This is why, one would assume, the government, to provide a corrective direction for the future of our economy, has turned towards industrialization, export promotion, ease of doing business and import substitution. While these measures might serve as remedial tools and strategies to get our economy back on track, there are six things Pakistan must urgently do this year to become strong, sustainable and stable.
Firstly, we must empower women economically and politically. In Pakistan, women constitute around 48% of the population but they fall far behind in terms of political representation. We have to fully commit ourselves to changing current, though out-dated, social and legal structures, which hinder gender focused legislation. Extensive research into women’s issues both at work and at home as well as a liberal environment are equally important to allow women to become entrepreneurs. A big facilitating factor could be the various chambers of commerce and industries across the country.
Secondly, create jobs and alleviate poverty by moving quickly towards labour-intensive industrialization. This can be achieved through gradual and pragmatic structural reforms such as ease-of-doing business. The Board of Investment (BoI) has already cut down the steps involved in business registration from 47 to 16. This will hopefully encourage domestic and foreign investments.
Pakistan, in the present state of affairs, requires connected and integrated industrialization, which is an important driver of employment generation and poverty alleviation in developing countries encouraging small and medium scale industries. In the past, this sector – the SMEs – which provides employment and support to large sections of the population, was highly discriminated against and neglected, with inadequate financial incentives. Promotion of SMEs per say has never really been the focus, though economies in other countries depend a lot on the SMEs.
The manufacturing sector, which, in a developing economy, has greater potential to absorb surplus labour compared to the services’ sector. Combined with an export-driven strategy, more jobs can be created in labour intensive segments of the manufacturing sector. Employment in manufacturing, particularly in traditional labour-intensive industries like agriculture, footwear and clothing, mostly require on – the-job training. Thus, the need to focus on capacity-building and education.
Thirdly, prioritize education. Access to quality education can improve the economic outputs of citizens and determine the prospects of future generations. It increases human capital and serves as a driver of innovation and economic growth. While education levels have risen rapidly and impressively around the world in recent decades, Pakistan’s performance in this sector is far from satisfactory.
The Millennials, baby boomers, public office holders, policy makers, and technocrats should all be reoriented towards one major goal i.e. Pakistan great again. Hence, educating ourselves in areas like emotional intelligence, organisational behaviour and inter-personal communications and leadership is of utmost importance. Additionally, we must stop intellectual bleeding or ‘brain drain’ by incentivising students and young professionals to stay on in Pakistan or return after completing their education and work experience abroad. They bring with them a different exposure and work ethics, refined skill sets, and knowledge from abroad, which they can deploy here if given a chance.
Fourthly, water management. We cannot stress enough that water is vital for agriculture, human life, industry, and energy generation. Globally, agriculture accounts for over 70 per cent of freshwater consumption. Industries make the second largest claim on the world’s water bodies, accounting for nearly 25 per cent of global water use. Water used by households, schools and businesses accounts for less than a tenth of global water use today. As much as 40 per cent of Pakistan’s energy comes from water. Over 90 per cent of freshwater supply is used towards agriculture. An estimated $21 billion worth of water (roughly 35 million acre feet) is dumped into the sea, annually, since water conservation systems are absent. Unfortunately, Pakistan’s record in harvesting water i.e. collecting water in small reservoirs wherever possible is extremely poor. While collecting funds from the public for the Diamer Bhasha dam may be ambitious, there is little hope that this project will be executed soon because the difference between the actual and expected funding requirement is immense.
Additionally, working for new dams is necessary but equally important is judicious management of available water resources. No awareness campaign on this aspect of water is visible – neither at the centre nor provincial level. Water conservation and smart management of existing water resources, too, needs to be prioritized.
Can we then, learn from Israel? It implemented a centralised water planning market-pricing system, which works like a pay-as-you-use model. Furthermore, it appointed regulators and educated its citizens to conserve water. Can we build water reservoirs and kill two birds with one stone; conserve water and generate employment. We have to start awareness campaigns which are customized to educate farmers, industrialists as well as individuals.
Fifth, bring more small businesses and individuals into the filer category of tax payers. With clear erosion of state writ to collect due taxes in the past, we must radically reverse this trend and increase efficiency to increase our tax base, preferably using technology. By lowering tax percentages across all industries, especially SME’s since they make up some 90% of the business population in developing countries, we can incentivize business owners to get registered through a proper, not-intimidating mechanism. Business owners ought not to be scared away but lured into contributing to the national kitty. They should be given the confidence that paying taxes is a sacred, voluntary cause and not a punishment or penalty. The trust gap ought to be closed if the government could reassure citizens that tax revenues will actually be spent on good governance i.e education, health care and administration. Similarly, from an implementation point of view, all citizens should realize that non-compliance would result in corrective measures taken by the government.
Last but not the least, we have to embrace technology to disrupt our out-dated governance systems. Tech-based solutions – from tax collection to innovative agriculture and to business registrations – can hopefully benefit us all, including raising the state revenues through documentation and digital checks and balances on all business and services.
The author is a Research Fellow, CRSS. He also has a business administration and marketing background and is an upcoming private entrepreneur in Islamabad. He can be reached at email@example.com
This piece was originally published in The Pakistan Accountant: Magazine of the Institute of Chartered Accountants of Pakistan