The bottomless pit

Pakistan’s debt burden, which is almost breaking its back, is the outcome of poor economic management and bad politics. Reversing the trend is as difficult, if not impossible, as pushing back a huge rock rolling down from a hill. The situation in reality is: damned if you do and damned if you don’t. There is no solution without hard decisions but then who can take hard decisions during hard times.The economy, reeling under the worst fiscal and current account deficits, is unlikely to make a quick recovery in two years. With the looming danger of default now averted and some harsh policy decisions made, we still cannot expect a striking increase in investment and exports. Although some countries and companies have shown an interest in coming to Pakistan to get a benefit from tremendous opportunities available here – particularly from the huge untapped market and abundance of natural resources coupled with cheap labour – the underlying structural problems impede real growth.The key governance issue, where the country cannot afford an ad-hoc approach and haphazard plans, is managing the economy. Replacing one minister with another is no more than changing the batting order. How can a structural problem of team selection, coaching and motivation be solved with simply changing the order of players? Not only have we seen different faces running the show for the last seventy years but also different governance models without any sustained economic progress.Besides many structural problems, the political leadership needs to build consensus on three fundamental issues – the documentation of the economy, broadening the tax net, and across-the-board accountability. So far, no serious effort has been made to focus on these issues. During Musharraf’s regime, there was some lackluster plan for documentation but having legitimacy problem, he could not make it through under pressure from business elites and other mafias.Failing to broaden the tax net has also been a pernicious problem. We have the lowest tax-to-GDP ratio and most of the tax revenue comes from the salaried class and via indirect taxation in the form of GST. Agriculture is still outside the tax net and so are many services and sectors. Indirect taxes put the burden on all citizens indiscriminately and constitute one of the main drivers of inflation. The tax system has to be fair, simple and transparent for people to pay taxes.The accountability system is also deeply flawed. It is presumably selective, discretionary, and largely counter-productive. The structure, process and function of NAB need to be revisited in light of the lessons learned since its inception. Ascendance of the West is due primarily to honest leadership and credible institutions. It is not possible for rulers in the West to play with institutions for their advantage. Free media, independent judiciary and powerful oversight parliamentary/legislative bodies make it impossible for anyone to misuse authority as is done in this country of ‘pure’ people.Mudslinging and name-calling inside and outside parliament will not revive our economy. Blaming one another for the failure of the system is also not very helpful. Throwing old ideas of presidential system versus parliamentary system are fanciful slogans aimed at deflating criticism for failure. Let the political leadership rise to the occasion and capitalize on the current economic crisis for building an economic revival strategy which focuses on all the fault lines of our governance system with the core goal of sustained economic growth. China and India, with different governance models, have realized this goal.A blueprint for a “broad consensus” on economic revival already exists in the form of the National Action Plan (NAP) which, though not fully implemented, has steered the country out of a marshland of ubiquitous terrorism in the country. Following the APS tragedy, all stakeholders put their heads together and chalked out a comprehensive anti-terrorism strategy with action plans for all concerned. The unity of direction and action led to unimaginable results in a very short period. Only God knows where we would be now if the pre-APS lack of direction and political will had persisted. The same is true for our perpetual economic woes.The writer teaches at SZABIST, Islamabad.Email: dr.zeb@szabist-isb.edu.pk

from The News International - Opinion http://bit.ly/2VO7M4W