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Opinion
Panacea for Pakistan Economy

About 48% of the total income is spent on debt servicing, 40% on defence and 12% on administration

By Aziz Ahmed
Mar 06 - 12, 2000

Pakistan is one of the few unfortunate countries that have been marred by persistent switch in policy and designs. Since her inception, the country is confronting one crisis after another. Different systems of government accompanied by various doctrines played havoc with this land of purity, which was created in the name of the Almighty and which was meant to a place where tranquillity, fraternity, equity and justice may reign supreme. Instead chaos, anarchy, nepotism and corruption are the orders of the day and the condition of our dear country is not much different from what W. B. Yeats [1] has portrayed of the world after World War I.

"Turning and turning in a widening gyre,

The falcon cannot hear the falconer,

Things fall apart the center cannot hold,

Mere anarchy is loosed upon the world."

Each of the five decades after partition saw a new modus operandi. Constitutionalization in the fifties, industrialization in the sixties, nationalization in the seventies, Islamization in the eighties and privatization in the nineties have so far not been able to produce any desired tangible result.

Over the years the world politics has gone through a vicissitude, the hegemony over other countries is now established not only by making ones arsenal replete with sophisticated weapons, but also by cementing the economy, in fact a strong economy is more potent than a powerful arsenal. The erstwhile Soviet Union had probably the most formidable defence in the world, but she collapsed under its weight as her economy was not sound enough to sustain it; whereas Japan, which virtually has a defence equivalent to cipher but an economy which has few parallels, is not only standing tall as an exemplary nation but also has a major say in the world affairs. For Pakistan the need of the hour is to take drastic measures to revamp the economy so that the imminent peril of an utter disaster may be evaded.

Our economy is right now in a fix as we earn less and spend more. About 48% of the total income is spent on debt servicing, 40% on defence and 12% on administration. Therefore the entire income is consumed on these three major items. Additionally about 50% extra is spent on development which is hardly 12% of the total GDP, and the losses incurred each year by public sector organizations like Wapda, Railway, Steel Mill, KESC, etc. add more fuel to the fire. This additional burden is further aggravated by the massive corruption and it has made the economy bleed profusely, so much so that short term measures like IMF administered Blood transfusion is not enough. We need a major surgery.

Some of the remedial measures are outlined as under.

Creation of tax culture

One of the biggest tragedies of this country is that less than 1% of the population pays taxes. 83% of the tax is contributed by the corporate sector, 10% is forced out of the salaried class by deduction, and the rest by small and medium level businessmen. The agriculture sector, which earns roughly 26% of the GDP, pays hardly any income tax. We have over a period of time developed culture of tax evasion. Our rulers with enormous amount of income go scot-free and enjoy not only power but also all the perks and privileges. This creates an air of disparity leading to further disobedience. We need to enact legislation not only for the taxing of agriculture income calculated on the basis of P.I.U.s (Produce index unit), but also take some measures on the political front. No one should be allowed to contest any election unless the person is a tax payee for three years. The current pattern and number of taxpayers has to be increased from less than 1% to at least 5%. The motto should be No Representation Without Taxation.

The services sector like doctors, lawyers, private educational institution owners, etc. earns exorbitant amount of income but their tax contribution is a joke. Likewise the unorganized sector escapes the tax net even though some calculations indicate that its size has grown as much as the organized sector. Time is now ripe to include such a big chunk of people into the tax ambit.

Another area from where the Government may collect huge amount is to withhold 30% of redemption of bearer securities, if they are not declared in the wealth statement of the holder. It is estimated that the amount of bearer securities is roughly 150 billion rupees, so it possible to collect nearly 45 billion rupees, from these holders of tax evaded money. The Government should also put a complete ban on issuance of such instruments to stop massive parking of tax evaded and ill gotten money. It does not make sense when one talks of documenting the economy while bearer securities are being encouraged like the introduction of higher denomination prize bonds.

Cut in expenditure

A major portion of our income is frittered away by extravagance on the part of the rich rulers of our country. It is pretty paradoxical that in a country where even potable water is not within access of the entire populace, the politicians are enjoying the luxury of private planes at Government's expense. Furthermore, many of the departments and ministries are very vocally telling us the meaning of white elephant, as they are not only producing nothing, but instead adding to our woes. On the other hand in a bid to imitate the West, not only the government but also the people in general are squandering the money and going astray. We must learn that to modernize does not necessarily mean to westernize.

Privatization

The other measure of increasing the savings is to do away with most of the public sector organizations. The United States of America, which is recognized as a paragon, has only the defence, foreign affairs, currency and the postal departments under the federal administration; rest of the business is managed by the private sector and some of the departments like police and civil administration are controlled by the states. Privatizations at a massive scale will not only result in the renaissance of our economy, but will also stunt corruption as the government servants and politicians will not have avenues to enjoy perks and privileges at the cost of the economy. It Should not be the business of the government to do business. However, a vigilant check by the government is imperative as if the corporate sector is totally unleashed then depression similar to 1930s always hangs like the sword of Damocles.

Exports

This country has a titanic amount of potential not only in its manpower, but also in its natural resources. If ably supported by the policies, we can do wonders in the international market. Exports may be increased by providing cascading scale of incentives, to diversify and encourage value added goods. The best way to increase exports to lower the cost of inputs like gas, power, and reduce interest rates as these make our products less competitive in the international markets. Additionally, policies like allowing the export of cotton without knowing the size of the crop and then importing them at higher costs for local industries should be done away with. After determining the size of the cotton crop and its local requirements we should whether we have a surplus or not, and only on finding a surplus the export of cotton should be allowed, preferably in value added form.

It does not require a deal of intelligence to understand the fact that there is no such thing as free trade in the world. Pakistan should not buckle under pressure unnecessarily, and should learn to assert itself The so-called W.T.O. Conventions, which lead to nowhere and are violated globally, should not be accepted by Pakistan in toto. Even the proponents of free trade like U.S.A and the developed world do not follow it. They should be told clearly to first disband various quotas under various heads and categories on the Pakistani textile products before sermonizing on so called free trade. The so called first world has no right to talk of things like child labour when they do not mind indulging in child prostitution in poorer countries.

Our culture is our identity, by improving our exports we will not only gain foreign exchange but our culture will also be promoted resulting in the betterment of the whole nation.

Policy vis-a-vis IMF and World Bank

No doubt it is very difficult to keep IMF and the World Bank at bay simultaneously, but a beginning can be made by trying to adopt a policy of self-reliance. A total isolation from these financial institutions is not plausible, as a sudden recession like the one in South East Asia can never be a distant possibility and something must be left in store for the rainy day. Still self-reliance is the only panacea for the resurrection of our economy. Not only the people in Pakistan, but also the expatriate Pakistanis can do a lot for their country. We should inspire invigorate confidence amongst our overseas Pakistanis, who have both the expertise as well as the finances, to invest in the country by offering them extra incentives. Most of them left the country in sheer frustration being victims of injustice and nepotism. If they are assured equity, justice and a promise of growth they would certainly look towards their motherland, as has been the case in similar situation in other countries. Moreover, many of the Pakistani entrepreneurs are investing in the foreign countries as they have all apprehension that their investment in Pakistan is not secure. Such sort of fear should be dismissed immediately and our country should be conducive not only for the investment of our overseas brothers and sisters but also for the foreigners.

Relations with the rest of the world should be made cordial so that no one in the international market might raise a finger towards us on the grounds of our foreign policy. In this capricious world where Mammon worship is at its zenith, atomic bomb has been replaced by economic bomb; the survival lies in these irrevocable words of Iqbal [2],

"The only course open to us is to approach modern knowledge with a respectful but independent attitude and to appreciate the teachings of Islam in the light of that knowledge, even though we may be led to differ from those who have gone before us."

Conclusion

To conclude, suffice it to say that a strong conviction precede great actions. We should be strongly possessed by the idea of ironing out all the wrinkles that have developed in our economy and system of government. As "clear, deeply held convictions rule the world" so with a clear and convinced head we should proceed in the direction of prosperity and soon we will see light at the end of the tunnel which would further add to our vigour.

No doubt the task ahead is a Herculean one for which a dedicated, honest and charismatic leadership is needed to investment and to bring about this 'revolution'; but no success can be achieved by doing something in fits and starts so not only those should strive who possess an enlightened mind and soul, but time is ripe for those to wake up who possess even an iota of love and patriotism for their beloved motherland, as Martin Luther King Jr. warns [3],

"We will have to repent in this generation, not merely for the hateful words and actions of the bad people; but for the appalling silence of the good people."

References:-

[1] Y.B. Yeats. The second coming, The selection of Yeats' Poems.

[2] Allama Dr. Muhammad Iqbal. Reconstruction of Religious Thought in Islam

[3] Martin Luther King Jr. Speech delivered during civil rights movement.