The solution to any problem, whether it is associated with a person or a nation, is dependent on its orientation. How realistic, based on Pakistan’s current circumstances, is the direction that has been decided by our leaders? The current economic policy undertaken by the government seems completely unfathomable. Throughout the world, governments fuel economic progress by convincing commercial banks to provide loans to the lower and middle classes to start businesses. This allows the whole economy to flourish.
The complete opposite, however, is being done by the Pakistani government. The government is taking loans from the banks for itself. The risk of banks losing their investment is higher when loaning to the public in case the business or person who has taken the loan defaults. However, with government loans there is no such risk, making this is a much more profitable deal for the banks. The private banks in Pakistan do not issue loans to anyone without a strong guarantee. Despite this, if the person who has taken a loan goes bankrupt, the recovery process for the banks is quite challenging. Thus, banks are issuing loans to the government and are earning money on those loans while still accepting deposits from the public. Banks do not have any money of their own, so their investments are composed of the deposits they take from the public. Banks lend that same deposited money to the government and then earn a profit off of it in the form of interest. That is why we can say that it is the public’s money that is being given to the government in the form of loans. The party that is profiting from all of this is the government. At the same time, the government is extensively using taxes to subsidize a certain sector.
Similarly, their creation of hope among the people about revitalizing the economy through a thriving textile sector is more of an illusion than a reality. Why is this an illusion? First, the country’s water reserves are being depleted with each passing day. Water is a staple in the agriculture and cotton industries. Let us assume that we end up with a good crop, how would enough cheap electricity be supplied to power the machines needed to add value to the raw material by producing fabric? The production of affordable electricity in Pakistan is dependent on either finding alternative energy resources or constructing new dams. The creation of these resources will require atleast five to ten years.
Our leaders are on futile efforts to revive the manufacturing industry, such as textiles, which are negatively impacting the country’s exchange rate. On one hand, the government wants to discourage imports while on the other hand, it turns a blind eye towards online consumer websites
Until then, the power used to fuel new production in any industry will utilize energy generated from imported liquefied natural gas or oil. With these expensive energy resources, how can we produce goods that are both affordable and of high export quality? Or will our tax money instead be used to provide subsidies and facilities to these industries so that only the government can get the foreign exchange? The incumbent government should shift its focus from the manufacturing industry towards the information technology sector. This would allow us to produce skilled labour that could work abroad and earn foreign exchange for their country.
Some economists have claimed that we should stop importing the foreign goods being utilized by the upper class. If a country whose production industry is almost bankrupt stops imports, then how can they meet consumer needs? If we impose restrictions on imports, then the same goods will be smuggled into the country. Then, whatever revenue the government is generating via import duties, taxes, and tariffs would be lost while criminals and corrupt officers will fill their pockets.
To reduce import costs, competition must be created between neighbouring countries. However, due to our foreign policy towards India, the idea of trading with them is currently far-fetched. Most of our imports come from China. If we start to import the same goods from India that we are now importing from China, the competition between these two countries would increase.
This, in turn, would yield tremendous benefits for the Pakistani buyer. Trading with India would also be comparatively easier for Pakistan as opposed to trading with China. The language barrier is a significant issue in trading with China while the same barrier is almost non-existent when trading with India. Moreover, the land route to India is already developed while the existing road system makes it possible to enter the country within a few hours. All of these aspects make regional trade an attractive option to revive the economy.
Our leaders, however, are focused on futile efforts to revive the manufacturing industry, such as textiles, which are negatively impacting the country’s exchange rate. On one hand, the government wants to discourage imports while on the other hand, it turns a blind eye towards online consumer websites. These web portals encourage people to purchase expensive goods online from the USA or other foreign countries with their credit cards. This is causing us to raise a generation who has become used to buying unnecessary products at much higher prices online.
The government claims that it will enact policies that will compel overseas Pakistanis to start businesses or to make investments in Pakistan. Businessmen generally look for two prerequisites before making an investment in any country. First, the country’s laws should facilitate business. Second, their safety and the safety of their investments should be guaranteed. For these two things to be present, work needs to be done on the judicial system.
A weak judicial system, however, benefits the powerful echelons of society. For this reason, while we do see a war being waged against corruption in the country, no significant measures have been taken to improve the judicial system. To build a flourishing country equal attention should be rendered to trade, economic policy, and judicial reform. If we keep on ignoring these institutions then this country will never be able to stand among the truly developed nations.
The writer hosts a current affairs talk show on PTV News. Follow him on Facebook at: www.facebook.com/syedzishanhyder
Published in Daily Times, November 16th 2018.