TOWARDS A BETTER TOMORROW
SAAD ANWAR HASHMI
Mar 26 - Apr 1, 2012
Pakistan gained independence in 1947 and since then it has been on the road of developments to increase industrial output, encourage growth of businesses, create employment, and improve living standards of the population. The pace with which Pakistan has progressed may be questioned in terms of business, economic and political stability which may not only be reflective of Pakistan's past but may also give a reflection of the challenges which are to be accomplished in the near future.
The strategic advantage of Pakistan is its being an aggregation economy, which comfortably supports the food requirements of the country. In addition to the geographic location and trade relations from various countries, Pakistan has coal and gas reserves, which if exploited to the maximum can fulfill the country with its energy needs.
Pakistan in international media has mostly been reflected as a country, which is plagued with corruption, lawlessness, terrorism and political uncertainty. Dispute with India over Kashmir has been under discussion since partition and has led to no conclusion despite several meetings.
Political environment with frequent changes in the government and poor control by law enforcement agencies hamper foreign investment, which leads to poor economic growth and development.
Agriculture accounts for 20 per cent of GDP and employs 67 per cent of the workforce. SMEs in order to promote small businesses including agriculture which are the back bone of our economy face tough issues with respect to bank lending due to risk associated with the sector for repayments as revenues and expenses are undocumented.
One of the core issues faced by Pakistan is the living standard of those who are the middle class of the economy and are constantly being pushed below the poverty line due to high double-digit inflation averaging 12 to 13 per cent. In addition, the unemployment situation of the country is another concern since this pushes those without jobs or earning a living not sufficient to support their household to adopt life of crime, which is prevalent as witnessed. The unofficial rate of unemployment is six per cent, which cannot be confirmed to greater certainty.
Inflation is on a rise consistently driven through high cost of inputs from the supply side. Shortage of power and energy, high price of raw materials, and cost of imports due to devaluation of Pak Rupees by more than 40 per cent since 2007 has resulted in inflation, which largely has eroded the purchasing power of the people.
Industrial growth is slow with GDP at 2.4 per cent. The UN Human Development Report estimates poverty in 2011 at almost 50 per cent of the population which is a cause of concern since those without jobs or earning a living below what is required for a sustainable life have resorted to theft and various degrees of crime to earn a living witnessed in Pakistan. The crime is further unhindered due to laxity of the police to stop such crimes and maintain law and order.
Pakistan's government agreed to International Monetary Fund (IMF)'s standby arrangement in November 2008 in response to a balance of payments crisis. Although the economy has stabilized since the crisis, it has failed to recover to the full extent since new industries and expansion of current output is on a status quo. Foreign investments view Pakistan with high degree of currency risk with losses confidence for investments. One positive sign for our economy is human capital working abroad, who account for an average $1 billion in worker remittances a month since March 2011. These inflows support the government build reserves for debt repayments.
Another reason why Pakistan has not been able to meet the deficit is the tax base estimated at 1.7 per cent of the population, therefore, tax collection is insufficient to support economic expenditures resulting in undertaking of debt from IMF or World Bank and increase the existing taxes, which break the back of the population. The country has not been able to increase tax base since our economy is largely undocumented with unwillingness to pay tax since it is believed that the tax collected will be directed towards corruption rather than be spent on the economy. Long-term challenges therefore include expanding of tax base, investment in education, healthcare, and reducing dependence on foreign donors.
Pakistan has poor governance resulting in corruption, which is deep-rooted in the system and may not be eradicated in the short run. Corruption has led to loss of billions of rupees and wide mismanagement in companies including Pakistan Steel Mills, Railways, PIA, and KESC.
It has also been viewed that National Reconciliation Ordinance (NRO) introduced by Pervaiz Musharaf helped in legalizing corruption, which further promoted leakage of funds.
Transparency International Pakistan has uncovered the corruption of Rs8,500 billion during the current tenure of the present PPP government, which includes corruption in public sector organizations, tax evasion, awarding contracts to close friends and family and over invoicing.
With the upcoming elections, each political party is united on the front of eliminating corruption from the system since no economic development will be possible if funds to be spent on the economy are leaked through various channels. Corruption may only be eliminated through high degree of honestly, governance and sense of ownership to spend taxpayers money.
One of the most alarming news was the corruption in Haj operations and collection and usage of Zakat. The Supreme Court of Pakistan is in the process of reopening of cases against those involved in corruption and recover looted income, which seems a major challenge to accomplish.
Pakistan's financial system has shown stability not directly being affected by the international subprime mortgage crisis. Pakistan has been in existence for almost 65 years and has a long way to go before the country may be viewed at par with developed nations. The key to success is to create an enabling environment for growth of businesses to provide employment opportunities. In addition, the government needs to have high degree of ownership and governance to create a change for a better tomorrow. If countries much younger than Pakistan including UAE, Singapore and Malaysia can create this change, so can Pakistan.