Challenges of change

Last week’s announcement by the United Arab Emirates (UAE) government about a generous financial package for Pakistan was a big shot in the arm for the four-month old Pakistan Tehreek-e-Insaf (PTI) government to cope with the balance of payment crisis.Finance Minister Asad Umar has several weeks before said the imminent balance of payment crisis for the country has conveniently been averted with the generous support from the friendly countries.According to Umar’s calculations, Pakistan needed 12 billion dollars to meet external account liabilities for the current financial year.The UAE has matched the three billion dollars for balance of payment commitment of Saudi Arabia for Pakistan with its own package and there are strong indications that Dubai would also give a commitment, matching the Saudi pledge for oil on deferred payment, which would ease pressure on Pakistan for external liabilities for the current year.Now that Pakistan is all set to ride out the balance of payment crisis for the current year, the question is that can it afford to put off bailout package from the IMF for the time being?Analysts say the big financial packages from the two friendly countries undoubtedly provided the much-needed breathing space to Pakistan but it needs to conclude talks for the IMF loan as quickly as possible as it would boost Pakistan’s image for doing business with the international financial and donor agencies as well as with the Western countries.The support from friendly countries has eased pressure on the government but it is not yet fully out of the woods.While welcoming the UAE financial package, the finance ministry in its statement maintained that it would help build foreign exchange reserves, contribute to strengthening rupee, and help the government’s “home-grown (economic) stabilisation program” succeed.The so-called economic stabilisation program is primarily driven by hefty increase in exports, remittances and private and foreign investment.The previous government had last year announced a sizeable financial package for the textile industry to boost country’s exports, but it failed to produce desired results. Prime Minister Imran Khan and the finance minister as well as PM’s advisor on trade and commerce have assured government’s full support to industrialists in their efforts to increase exports but the major question is what practical steps are being taken to achieve the desired results. The exports in the first five months of the current fiscal year posted a nominal increase of 1.2 percent to 9.12 billion dollars which was the slowest pace of growth in five months. The figures simply show the government’s strategy is not working well and there is a need for out-of-the-box and innovative ideas to spur growth in this stagnant sector.Pakistani trade authorities need to study the Bangladesh model. They have to understand what this impoverished nation did to succeeded in pushing its exports to an impressive level over the past few years.In October, the Bangladesh’s exports surged 31 percent from a year ago to 3.71 billion dollars mainly because of a rise in overseas sales of readymade garments. The country registered 19 percent rise in exports in the first four months of the financial year starting from July. After overcoming energy shortages to a large extent, the value addition, ease of doing business, as well as cost of production are the three main challenges for Pakistan to bolster its exports.Pakistan also needs to offer incentives for overseas Pakistanis to send their remittances through banking and other official channels instead of unofficial ones like hawala and hundi.Though, the present government boasts of taking major steps to crack down on money laundering as well as flow of money into Pakistani economy through illegal channels, much more needs to be done in this regard. The government also needs to curb smuggling.In November, the country saw a drop in foreign remittances sent home by Pakistanis living abroad.Many observers believe that exporters withheld their money in foreign banks because of a sharp decline in the rupee value. The government needs to take steps in consultation with the State Bank to discourage volatility in the currency market as it dissuade businessmen to bring their money into the country. Foreign as well as other private investment is also badly needed for Pakistan. While the government leaders in recent months announced return of several major foreign companies to Pakistan which had either wound up or scaled down their businesses here because of security situation, it however needs a major push from the government to attract foreign investors to put in their money into Pakistan.So far, the foreign investments are largely confined to China but there is a need for the country to lure investment from other countries.The government has recently announced that Crown Prince of UAE plans to visit Pakistan next month, which would be followed by a similar visit from the Saudi Crown Prince Muhammad bin Salman in February raising hopes that Pakistan could see major investment commitments from the Gulf businessmen in the coming weeks.The government needs to look into the bureaucratic bottlenecks, which discourage businessmen from investing their money.The government needs to prepare a comprehensive set of measures to stabilise the economy as the steps taken in piecemeal could not produce good results. But for all attempts to put economy on sound footings to succeed there is a need for political stability in the country.Crackdown on corruption is a must for an economy to grow but this drive should not frighten businessmen out of doing business in the country.A heavy-handed accountability drive in the early years of former military president Pervez Musharraf’s rule scared businessmen away from Pakistan, forcing the former general to rein in his accountability czars.Moreover, such heavy-handed policies also slow down bureaucratic processes, which forces businessmen to take their investment to other countries. The government in consultation with all stakeholders needs to prepare an all-encompassing strategy to discourage corruption and incentivise private and foreign investment in the country.Now that the PTI has spent four months in power, its leaders should have apprised themselves of the problems faced by the business community and it is high time for the government to come up with a robust strategy to deal with these challenges.The writer is a senior journalist based in Islamabad

from The News International - Money Matters http://bit.ly/2QWbXdl