Prof. Dr. Khawaja Amjad
August 30 - Sep 05, 1999
An objective assessment of Economy of Pakistan for the last 52 years is
the crying need. Every ruling Government has been claiming success stories. On the other
hand, opposition to the ruling Governments have all along been harping on the theme of
economic failure. Public wishes to know the truth of our economic performance of the past
and have a yearning desire for a prosperous future.
It is interesting to refresh our memory relating to our socio-economic
conditions at the time of birth of our country.
Quaid-e-Azam Mohammad Ali Jinnah, Father of the Nation, had visualized
a stable and prosperous Pakistan with benefits flowing on wider frontiers and to all
segments of the society.
It would be refreshing our minds, if we study the speeches made by the
founder of Pakistan. Pertinent Excerpts from his speeches are quoted below:
"Nature has given you everything; you have got unlimited
resources. The foundations of our State have been laid, and it is now for you to build,
and build as quickly and as well as you can. So go ahead and I wish you God-Speed."
(Message by Quaid-e-Azam on the first anniversary of Pakistan i.e. August 14, 1948).
"It is in your hands; we have undoubtedly talents; Pakistan is
blessed with enormous resources and potentialities; providence has endowed us with all the
wealth of nature and now it lies with man to make the best of it." (Radio Speech
delivered by him from Lahore on October 30, 1947).
"I also hope that in planning your factory, you have provided for
proper residential accommodation and other amenities for the workers for no industry can
thrive without contented labour." (while laying foundation stone of Valika Textile
Mills Limited on September 06, 1947).
"that enough there were many rich merchants in the Muslim Chamber
of Commerce, he could hardly think of anyone who was running a heavy industry. Great and
heavy industries formed the backbone of a nation." (Speech delivered in Bombay on
October 01, 1943).
"Commerce, gentlemen! is more international than culture and it
behooves you to behave in such a way that the power and prestige of Pakistan gain added
strength from every act of yours. I have, no doubt, the commerce of Pakistan would be an
effective instrument in the establishment and maintenance of high standards of business
integrity and practice. If Pakistan goods are establish for themselves a reputation all
their own, a beginning must be made now and here. I assure you, Gentlemen! that anything
my government can do to achieve this end, they shall do. I would like Pakistan to become a
synonym and hall-mark for standard and quality in the market place of the world."
"Pakistan has no desire to unduly interfere with your internal
freedom. On the contrary, Pakistan wants to help you and make you, as far as it lies in
our power, self-reliant and self-sufficient and help in your educational, social and
economic uplift and not be left as you are dependent on annual doles, as has been the
practice hitherto which meant that at the end of the year you were not better off than
beggars asking for allowances, if possible a little more. We want to put you on your leg
as self-respecting citizens who have the opportunities of fully developing and producing
what is best in you and your land. You know that the Frontier Province is a deficit
Province but that does not trouble us much. Pakistan will not hesitate to go out of its
way to give every possible help financially and otherwise to build up the economic and
social life of our tribal brethren across the border." (Addressing Tribal Jirga on
April 18, 1947 in Peshawar).
Dr. Mohammad Iqbal, Thinker of Pakistan, had visualized teeming
millions as Muslim to come out of the clutches of ruling British and Hindus. He dreamed of
such a Pakistan as would be inhabited by prosperous Muslim on wider canvas. His great
desire was to see that Muslim got rid of economic strangulation of vested interests. Some
excerpts from his speeches and writings are quoted below:
"The problem of bread is becoming more and more acute. The Muslim
has begun to feel that he has been going down during the last 200 years. Ordinarily he
believes that his poverty is due to Hindu money-lending or capitalism. The perception that
it is equally due to foreign rule has not yet fully come to him. But it is bound to
come." (wrote on May 28, 1937).
"The character of a Muslim State can be judged from what the Times
of India pointed out some time ago in a letter on the Indian Banking Enquiry Committee.
"In ancient India," the paper point out: "the state
framed laws regulating the rates of interest, but in Muslim times, although Islam clearly
forbids the realization of interest on money loaned, Indian Muslim State imposed no
restrictions on such rates." I, therefore, demand the formation of a consolidated
Muslim state in the best interest of India and Islam. For India it means security and
peace resulting from an internal balance of power; for Islam an opportunity to rid itself
of the stamp that Arabian imperialism was forced to give it, to mobilize its laws, its
education, its culture, and to bring them into closer contact with its own original spirit
and with the spirit of modern times." (correspondences with Quaid-e-Azam between May
1936 and November 1937).
"One nation pastures on the other, one sows the grain which
another harvests, Philosophy teaches that bread is to be pilfered from the hand of the
weak, and his soul rent from his body. Extortion of one's fellowmen is the law of the new
civilization. And it conceals itself behind the veil of commerce." (wrote in 1936).
"What they call commerce is a game of dice: For one, profit, for
millions sweeping death. Their science, philosophy, scholarship, government preach man's
equality but drink man's blood."
"Let me tell the honorable representatives for Simla that the
first European author to refuse his theory was the Frenchman Perron in the year 1777.
Later in 1830, Briggs made a very extensive inquiry as to the law and practice in India
and relating to the theory of state ownership of land. He gave in his book an accurate
description of the Muslim law, and practices prevailing in various parts of India-Bengal,
Malwa, the Punjab etc. and arrived at the conclusion that at no period in the history of
India the state ever claimed the proprietorship of land. In the times of Lord Curson this
theory was put forward, but Taxation Committee's report, which was published some time
ago, had come to a very clear finding that this theory had no basis at all ...
However, we have to see in the first place, how far the present system
of assessment is just, workable and sanctioned by a very old tradition, but we have first
to see whether or not it has justice on its side. My submission is that it is not at all
just. The injustice of it is perfectly clear. If a man happens to be a land-owner, big or
small, does not matter, he has to pay land revenue. But if a man earns from sources other
than land less than Rs. 2,000 a year, you do not tax him at all. This is when injustice
"We do not apply the principle of Progression in the case of land
revenue whereas we apply that principle in the case of income-tax."
"Whether a man holds two kanals of lands, he is liable to pay the
land revenue. In the case of income-tax the principle of ability or the principle of
progression is applied, that is to say, there is a graduated scale an some people do not
pay income-tax at all." (speech on land revenue on February 23, 1928).
"We spend practically nothing on industries. And as I have said
before, and as many other speakers have pointed out, industrial development alone can
serve us from the curse of unemployment. There is a good future for weaving industry in
this province, and for shoe-making industry also, and if we encourage these industries, I
think we shall be able to save the province from unemployment, provided we protect these
industries against Cawnpore and Ahmedabad."
"The modern struggle, Iqbal believed, was conditioned by trade and
industry. "Among the Asian nations, the Japanese were the first to comprehend the
secret of revolution. They dedicated themselves to industrializing their national economy.
Today, they are recognized as one of the industrially advanced nations of the world. They
had achieved this distinction because of their highly industrialized economy and not
because of the contributions of any national philosopher, poet or literature."
Economy of pakistan: an appraisal of past
Our decade of 1950s passed off in Political Uncertainty and a struggle
to settle down. Our First Five year Plan (1955-60) did not get approval until in the
middle of 1957. Martial Law was imposed in 1958. Our Second Five Year Plan (1960-65) was a
great success. It is generally said that South Korea took most of the ideas from it, but
implemented it to achieve a high degree of success. We bracketed with South Korea with a
figure of US $ 2.5 billion in exports in the middle of 1960s. Whereas South Korea, despite
recent economic difficulties, has achieved great heights in exports to the extend of US $
128 billion, we are dreaming an export target of US $ 9.00 billion.
The 1965 war with India pushed us seriously. Socio-economic tensions
mounted high and social upheavals, industrial strifes and strikes coupled with several
factors tore our country and we lost the then East Pakistan (56% of United Pakistan). It
became Bangladesh in December, 1971.
During 1960s, we achieved food autarky. Our GNP was 8.3% - second
highest in Asia after Japan. We innovated new varieties in Wheat and Rice. Our spectacular
growth in industry was the envy of many. Several countries considered our economic
policies to be model for their implementation. Our paybacks periods were the lowest - in
many cases seven months.
Our 1970s was the turbulent period in our economy history. Due to
socio-economic compulsions, nationalization of industries, agro-based sector, financial
institutions, social infrastructure projects, shipping services and various other
productive sector industries was resorted to without appropriate and adequately cushioned
logistics. Payments to wage earners went up without productivity increase. Massive
devaluation was made. Incentives did not exist for private initiative. Hundreds of Public
Enterprises were established and were beefed up with political motives, Corruption grew,
Inefficiency developed. Economy in expenditure was never followed as an inflexible rule.
Effectiveness got punctured. All in all we progressed on retrogression on economic
frontier. Martial Law was again imposed in the middle of 1977 and the then ruling junta
never addressed Economic Agenda as priority one. Attention was focussed on Afghanistan and
other outside issues. The result was that the later part of 1970s and considerable part of
1980s saw Pakistan operated on the famous principle of Business As Usual.
The decade of 1990s saw change of guards from Nawaz Sharif to Benazir.
Both continue to rule one after the other. Both have so far spent time to politically
demolish, if not eliminate each other. We wonder who were the winners. However, the
country has been a net loser on several fronts, specially on economic front. Our economic
performance has been a dismal one. Despite public announcements of self reliance desire,
actions continue to be on routine basis. Our borrowings are increasing. Our exports are
declining. Loan defaulters are not behaving with the spirit of returning the borrowed
money. Nearly 5000 industrial units are sick. So far several committees have been
appointed. The citizens of Pakistan are awaiting productive results. There are
announcements to alleviate poverty, but the poverty-striken continue to yearn for
prosperous times. Fixed income earners received little to protect their wage basket. The
business community is totally uncomfortable, if not fed up with the multiplicity of taxes
at several levels. Economic gains on agricultural and industrial front have been marginal,
if not significantly low. Indeed the decade of 1990s, excluding the 28th May 1998 when
Pakistan became nuclear, did not emerge as economically prosperous period for the country.
However, we need not get despaired. Pakistan has a tremendous potential
which needs to be properly harnessed to our advantage. We need to address Economic Agenda
on priority basis. The later part of this piece addresses the major issues which are
screaming for our attention in the next millennium.
Our preparation for the third millennium
Our future course of action is suggested below in terms of twelve
Regime no. 1 - governance
The driving slogan for every government is Good Governance at Macro
level and Good Corporate Governance at Micro level. We hope that the cabinet and elected
members will follow our humble advice which is as under:
a) Minimum qualification for becoming a member of Federal and
Provincial Assemblies be prescribed. For National Assembly the minimum qualification
should be holding a Master degree from a recognized institution and for Provincial
Assemblies, the minimum qualification ought to be a Bachelor degree. Every contestant must
have paid income tax for the last three consecutive years.
b) Accountability at all stages is the crying need. Strengthening moral
frontier and transparency are highly significant tools to pave the way for march forward
towards accountability. Divine values have been included in Holy Quran. Gist of these is
( Do Justice: between person & person and between person & God.
( Do good to Others: Extend welfare to others.
( Extend Charity to the kindred - incapacitated, downtrodden,
( Avoid obscenity: By men and women
( No Coercion: at any cost
( Avoid Wickedness: In toto
There will be an urgent need to effectively communicate the above for
operationalization in real life in the next millennium. Transparency of decisions is a
strong instrument for ensuring accountability. Islamic approach is self accountability. In
Surah Yaseen of Holy Quran, the Almighty Allah has said:
"On the day of resurrection, we will seal the human mouths and
their hands will talk to us. Their feet will stand testimony regarding what they used to
A cardinal pre-requisite of Islam is a staunch belief in the Hereafter.
Accordingly, there will be a great need to create an effective awareness about the above
aspect. This will usher in an era of self accountability. The Western model is to enforce
measures through strong constitutional provisions. Judicial Systems are strong and
enforcement is ensured. Many Japanese Prime Ministers lost their jobs because through
transparency it was clear that they burst the prescribed limits of receiving gifts.
Examples from USA, UK and European countries are replete with similar conduct.
However, in developing countries systems are weak and mostly fragile.
Laws exist on statute book and yearn for implementation. Street justice is then an obvious
It is high time that all of us should learn from enlightened leaders.
Mr. Mitteran, President of France released his wealth statement to the public when he took
over in his first tenure. Later he got reelected, at that time he released his wealth
statement publicly with a reconciliation of the first wealth statement and the later one.
This was an outstanding example of transparency and accountability. On the other hand, in
India, a member of Federal Parliament issued a five-point Charge Sheet to Mr. Rajiv
Gandhi, the then Prime Minister of India. One of these included a vital question namely,
reconcile the opening wealth of his father in law when Rajiv Gandhi took over as Prime
Minister of India with the closing balance when he died. He preferred to ignore it. When
another Member Parliament enquired of him whether he would like to reply, he said that he
need not reply to a barking dog. Reacting sharply, the earlier member Parliament sent a
message to Rajiv Gandhi highlighting that dogs start barking only when there were thieves
in the neighborhood.
The future era looks forward to declaration of all assets (at home or
abroad) by all Government functionaries. This will be a step forward towards transparency
and will strengthen accountability.
c) Financial scams, defalcations, manipulations have resulted in lack
of good performance reflected in financial statements of Corporate Sector. Stock Exchanges
have lost their credibility and consequently faith in Corporate Governance is eroding. The
third Millennium looks forward to institutional measures to inspire hope in our financial
system. The earlier this is done the better. The screaming call is to install Good
Regime no. 2 - depoliticisation
Our politicians ought to be role models. Their life styles clean in all
respects must be manifested for inspiring people to follow them. But politicization of
institutions has beefed up the organizations with incompetent persons. It is generally
believed that corruption has not done as much damage to our country as incompetence. The
future era looks forward to a total depoliticisation of institutions. Lee Kawn Yee, the
Senior Minister of Singapore and its architect, while delivering a lecture in Pakistan
during the First round of Mian Nawaz Sharif Government had explained that Meritocracy was
the inflexible guiding principle on the basis of which Singapore sky rocketed in
development. Starting as a boat country in 1964, Singapore has outshined in the world
considering various socio-economic indicators. Its saving rate is the highest in the
world. Its financial system is the envy in the world. With a population base of 3.3
million, its exports are around US $ 128 billion. Our performance on export front was US $
7.2 billion for 1998-99 and we wish to accomplish the target of US $ 9 billion in
Our political set up needs education. At present there is no staff
college for training them. The Third Millennium looks forward to institutionalizing the
depoliticisation of financial system, employment system, and related systems. The earlier
we understand, the better.
Regime no. 3 - long range planning
Ad-hoc measures for political survival do not last longer. Our approach
for quick success through short-term measures does not produce fruitful results. A good
ray of hope is 2010 program. The learned State Minister is doing a fine job by injecting
new spirit of long term planning. Participation of youth and others at the grass root
level is the clarion call of the Third Millennium.
The future Government needs to strengthen Planning Commission with
financial analysts, Cost and Management Accountants, Sociologists, Psychologists,
anthropologists, education, development economists, management experts and many others to
ensure that we give a kick start to LRP. Only then strategic moves can be initiated,
failing which we will keep operating in the style of "Business as Usual".
Our previous experience in LRP was introduced by Dr. Mehboob-ul-Haq
when we introduced a perspective plan (1965-85). This was given a good-bye because of
separation of the erstwhile East Pakistan which later became Bangladesh. Later another
effort was undertaken in this direction. The misfortune is that our system believes in
making decisions on moment to moment basis. The Ninth Five Year Plan (1998-2003) was to
start w.e.f. July 01, 1998 but it has yet to see the light of the day. One of the real
challenges of the Third Millennium is to develop faith in LRP and later operationalize it,
failing which we will continue to be victims of adhoc decisions and this will not augur
well for our future in the next millennium.
Regime no. 4 - self reliance
Every political Government of our country had been harping on the music
of "Self Reliance". Except for some emotional and low profile decisions, Self
Reliance yearns for a concrete plan for its implementation. Micheal Hammer, father of the
concept of the Re-engineering had stressed on analysis of the business process. Every
announcement must be backed up with logistical support measures to ensure a steady start
to the above theme. If we continue with existing system, we will keep on adding to our
borrowings (at home and abroad), will keep on seeing increase in absolute amount of budget
deficits and will continue to see targets not achieved on several socio-economic fronts.
The next millennium looks forward to first conceiving the Self-Reliance Plan and then
backing it with logistical support to cushion it and later the rewards will follow to our
There is need to boost exports to achieve a quantum jump. The Eight
Five year Plan (1993-98) had forecasted exports to be US $ 13 billion plus. During
1999-2000, our export target has been fixed at US $ 9 billion. Moreover, our foreign
remittances have been showing a steep decline. We achieved a height of US $ 2.8 billion
during 1981-82. During 1998-99, our remittances did not cross the threshold of US $ 1
billion. The next millennium expects a tangible plan to be prepared supported by capable
and competent full time and well trained Minister to be the incharge of remittances so
that at least we must register substantial increase to reduce the pressure of short term
lending. Export Led Growth strategy must be properly understood, its details be developed
and implemented in reality. Moreover, there will be an urgent need to reflect austerity in
real life. This will have genuine demonstration effect. The present Government of Nawaz
Sharif has pages of newspapers full with the wish List of Self reliance.
However, concrete measures appear to be the agenda of the next
millennium. This area requires special attention so that we are not only politically
sovereign but also economically viable and confident enough to make our economic and
financial decisions on our own.
Self reliance does not mean that we should close our doors to new
technology, new thoughts and new systems. Introversion is a suicide and while the next
Millennium will look forward to a new and innovative thinking, we must stay in the main
stream and adopt with firmness new initiatives to ensure strengthening the foundation of
Regime no. 5 - managerial revolution
It is certainly believed that Good Management is the key to opening
several new doors of development. This did play an important part in the socio-economic
development of Far East. Japanese were driven by the concept of theory Z. Taiwan developed
due to implementation of Corporate Concepts of Lord Buddah. Chinese and several other Far
Eastern Countries developed due to implementation of Theory "C" - following
thoughts of Hakim Confucius. The west grew and developed due to enlightened Management
theory and concept.
It is generally believed that for promoting foreign investment, cheap
labour and availability of capital are not as important today, as good management
practices. Management as a discipline is growing. From principles to practices, it is now
getting into quantified results. The last three decades have seen the rise of new concepts
e.g. Balanced Score Card, Reengineering, Sigma Six, Total Quality Management, Learning
Organizations, Strategic Planning, Strategic Management, Just-in-Time, Materials
Requirement Planning (MRPI and II), ISO series of 9,000 and 14,000 etc. Pakistan, in the
next Millennium, needs to comprehend the latest management techniques and implement these
to reap dividends and apply Strategic Intent Model to revolutionize our spirit to be
higher achievers in the next millennium.
Every Government functionary needs to ornament himself/herself with
modern management concepts and introduce these to achieve three Es namely, Efficiency,
Effectiveness and Economy. Bureaucracy must be thrilled with the Max Webber's concept and
must implement its spirit. The crying need of the third Millennium is instant decisions,
good bye to red tapism for all times, service to the system, which finances the salary and
Regime no. 6 - tax culture
We have a very narrow base of income tax payees in Pakistan. In a total
population of 131 million, the total number of income tax assessees is around 1.4 million
- around one percent. This ratio in Singapore is 52%. This is 25% in Hong Kong. The next
millennium will look forward to shop by shop survey, industry by industry survey, farm by
farm survey, institution by institution survey, etc. Second schedule annexed to the Income
Tax Ordinance 1979 should be eliminated. The golden principle of Public Finance that every
person above the threshold of taxable income should be subjected to income tax,
irrespective of colour, caste, creed, sex, name of income of status. This principle should
be implemented in toto without any exception. Self assessment system should be resorted to
on a wider scale. Feedback on the operational aspects be institutionalized for corrective
action to pave the way for continuous improvements.
Regime no. 7 - financial system
Financial defense has attained greater significance in today's time.
Territorial defense is always kept as first priority, however, countries which are
financially weak or fragile are unable to enjoy respect for political sovereignty. Our
misfortune is that we are under a very heavy debt. Our internal debt is more than 1.16
trillion Rupees. Our external debt is around US $ 30 billion. Our debt servicing ratio to
GDP is very high. We continue to suffer from fiscal deficits and current account deposits.
We are all the time trying to have rescheduling of debts in Paris Club and London Club.
Our financial affairs need drastic changes. The demands of the next millennium require a
revolutionary plan to reverse the earlier negative trends and to accelerate the
socio-economic development on self-financing basis. This will require determination and
wise action planning on the part of our Government(s) to work on the following strategic
a) Drastic Reduction in Fiscal deficit and current account deficit in
the short run and elimination in the long run.
b) Significant reduction in debt servicing.
c) Developing strategic plans to ensure self-financing of development
projects. We must realise that sense of urgency should be developed to declare financial
defense of Pakistan on high priority agenda, failing which our financial position will
continue to become weaker and weaker.
Regime no. 8 - community development
Several countries in the world have registered tremendous growth due to
contributions extended by community. Kerala state of India achieved 100% literacy due to
contribution by the community. There are few outstanding names in history of Pakistan
which have outshined due to their noble service to the socio-economic development of
Pakistan. A vigorous orientation is needed to motivate the community development programs
so that in future grass root association may be established and rather than expecting the
miracles from the Government in every respect, community's contribution should be on the
Regime no. 9 - weapon free regime
Run gunning needs to be abolished for ensuring law and order in the
country. The next millennium clarion call is to ensure that Pakistan should become weapon
free country. The crime rate will come to a grinding halt and peace and tranquility era
will usher in.
Regime no. 10 - functional literacy
Unfortunately the literacy rate in Pakistan has been very low. Social
sector has been a story of neglect. The next millennium screams for development of
knowledgeable society. There should be knowledgeable workers, knowledgeable management,
knowledgeable governments, knowledgeable organizations, etc. Consequently, the dire need
in the next millennium will be to accelerate the pace of functional literacy in the
country. Action plan is needed to be prepared to achieve this objective.
Regime no. 11 - poverty elimination
Poverty is a curse, which needs to be eliminated. However, those who
possess big wealth are not prepared to share it with the have-nots. The yawning gap
between the rich and the poor needs to be first reduced significantly and later on
eliminated. Implementation of fiscal laws and initiation of enlightened socio-economic
policies for eliminating the poverty in the long run and alleviating the same in the short
run will remain challenges of the next millennium.
Regime no. 12 - islamic socio-economic system
On July 21, 1948, while inaugurating the State Bank of Pakistan,
Quaid-e-Azam Mohammad Ali Jinnah, the father of the nation had advocated for developing
socio-economic system of Islam for enforcement in the country. This dream has not yet
materialized. The next millennium, big challenge will be to first evolve socio-economic
system consistent with Islam, implement it and ensure its enforcement.
* Dean: Executive Programs, Punjab College of Business Administration,
Constituent College of Mohammad Ali Jinnah University, Lahore
President, Institute of Cost and Management Accountants of Pakistan
Member, Governing Council, International Federation of Accountants