The new government after May 11 polls shall face tough options. The economy is in ruins and has to be revived as an emergency. The problem of terrorism and sectarian violence has to be curbed before Pakistan is put back on track. We are now told that the figure of those killed in the War on Terror is 49,000 since 9/11. Incidentally War on Terror was started by American President Ronald Ragan in 1981.
The burning problem of all third world counties is power supply due to the rising cost of fuel and declining local currency. In Pakistan, load-shedding has increased to 18-22 hours. Load-shedding has become a chronic problem with no immediate end in sight. The subsidy in the form of payment for fuel till the end of March 2013 was Rs185 billion of which only Rs 50 billion has been so far paid to PSO. But before we go for ‘reforms’ we have to rebuild our collapsed institutions due to political meddling and disregard of merit an area rarely discussed and poorly researched in Pakistan. Since the inception of Pakistan we have talked about institutional ‘reforms’, which visualised only perks and salary increase of the staff. We are still not sure how to ‘reform’ our institutions. This has been our resounding failure and downfall of the state. This is where ‘change’ is urgently required.
In India, 30 percent of the population is unable to pay utility bills and survive on wood or dried cow dung cakes as a source of fuel. The figure for Pakistan and other Third World countries must be higher. Egypt’s foreign exchange reserves have crashed from $30 billion to $13 billion in the last two years. The government subsidises to the tune of 30 percent of its budget mainly for fuel. Egypt imports 75 percent of its wheat while the tourism industry, the main earner, has plummeted. Egypt is now asking for $ 4.2 billion loan from the IMF, which has been linked to the abolishing of subsidies.
Amid horrid stories of Pakistan’s future we see ray of hope. In an open sale at Karachi the Expo Centre sans advertisement of used Suzuki cars the lot of 136 cars were sold in the first few hours. The cost was 5-15% higher than the local market. Thanks to ‘amnesty’ given to smuggled cars some 51,000 are up for grabs. According to the former chairman of the Federal Board of Revenue Rs16 billion has come into the government kitty. Most of the vehicles were bought by people in Quetta and Peshawar, some of the the poorest parts of Pakistan. The Excise and Taxation department has been let off the hook, and people have money to burn.
It may be surprising that the Pakistan furniture industry (mainly Gujrat and Chiniot) is booming amid gloom and doom. According to All Pakistan Furniture Exporters Association consumer spending on wooden furniture is all time high. The World Trade Organisation claimed that the wooden furniture export in 2011 was five million dollars. The local manufacturers claim that more than 50 times is consumed by the furniture buyers locally ($2.5 billion dollars). This is part of our ‘hidden’ economy. It seems that our ‘hidden’ or ‘informal’ economy also called ‘black economy’ is, according to a study by ‘Pakistan’s central bank’, is 30 percent of the GDP. Others claim it is more than 40 percent. A study by the Lahore School of Management Sciences has shown that ‘informal sector’ has 75 percent of non-agricultural labour force, which is 44 percent of the total labour force of Pakistan. The informal economy or hidden economy is what is keeping Pakistan afloat.
According to Dr Ashfaque Hasan Khan government borrowing amounts to four billion rupees per day and the deficit target shall reach one trillion rupees. White elephants like the PIA, Steel Mills etc are subsidised and aggravate present budgetary problems.
Dr Maleeha Lodhi in a TV talk show claimed that 70 percent of taxable concerns pay no or minimal tax (Indian figure is 80 percent). Of the 180 million population of Pakistan only 150,000 pay taxes (70 percent of our parliamentarians in the previous government paid no tax). If we take out the salaried people who get taxed at source we have only 300,000 people who pay tax! She felt that the governments have spent $16 billion on power subsidies. This figure pertains to less than 12 hours of electricity. Thus, if Pakistan was to receive 24 hours electricity the subsidy figure should be doubled! Dr Lodhi failed to mention ‘line losses’, or in simple terms, theft. Since our institutions are dead or on life support there is no way to plug the gaps.
The way out for a poor government is to boost its wretched corrupt tax collection system. This system like other government intuitions takes in more money than it collects. A major part of the GDP is taken up by corruption at all levels of government employees. It is not surprising that most of the money collected by the government is through direct taxation where the poor suffer the most.
The police are mixed up with the criminals and dacoits, a solid state for their earnings. Our justice system favours the rich in exchange for money or threats from criminals. Corruption has been institutionalised and difficult to eradicate in one sweep especially when the rulers are deep into it. In a macabre way, lack of governance enhances hidden economy and promotes welfare of a large segment of our society. But the state remains poor with the GDP growth rate of less than two percent. It seems that Pakistan’s ‘hidden ‘ economy is growing at a rate of seven percent or more despite security risks, paying extortion money to criminals, bribes to government officials, lack of electricity and gas. Yet Pakistan has a large population of poor who cannot afford basic facilities including food. This is the population that haunts us and no welfare programme or policy has been devised.
The inherent lack of finical discipline of the Pakistan People’s Party (PPP) has to be reckoned with by the next government. In the last eight months of the PPP government Rs. 911 billion were ‘borrowed’. This was the last ditch effort of a failed government to drum up support for the elections. For the people of Pakistan inflation has been an overriding issue.
One way forward for the people of Pakistan to survive is to use the existing corrupt system rather than try and change it. The multi-billionaire, Malik Riaz Malik of Bahria Town fame. He claimed to infuse $40 billion into two offshore islands (Dingi and Bundai islands) through an Abu Dhabi prince. Port Qasim Authority leased these islands off Korangi Creek. This deal was later denied by the Abu Dhabi. He then roped in an American developer, but this time the amount was reduced to $20 billion.
My conclusion is that the government has failed but not the people. Long live the people of Pakistan and corruption.
The writer is a freelance columnist