When reading the subject line it sounds almost maniacal because there is almost nothing imaginable that holds the promise of tripling the size of the economy in just five years. That too at a time when Pakistan’s growth has been consistently nose diving for the last three years and has a massive increase in public debt and inflation despite strong macro conditions.
I must also give a disclaimer that I am neither an economist nor a governance expert. But as a lawyer I am working with some of the brightest tech minds in the country and have drafted and negotiated contracts and policies that have led to the inflow of millions of dollars into our economy in just a few months. Hearing ideas of how Pakistan tech companies are looking to expand globally with innovative products makes me realize that we have the potential to change our future.
Pakistan stands at a crossroads, it is symptomatic of an economy that is maturing on one hand and yet is fraught with inequality and corruption on the other. It has a unique problem of determining how to add the next hundred billion dollars to the GDP, both from the supply and demand sides.
The supply of Pakistani products is consistently hampered by overregulation by the banks and international pressures. Even when some individuals overcome these problems, they are faced with corruption and inefficient judicial systems. On the demand side the situation is more challenging, as the GDP growth is negative with and the lack of easy credit for the masses further drives down demand.
The first and most important solution required is digitization of Pakistan’s economy. Only 1% of the population pays tax. In a country where 85% of the population has mobiles and cellular data covers 90% of the area, there is hardly any reason to hold back punches. Fintech companies hold the promise of heralding a renaissance for entire economies with innovative financial products that not only increase the demand but also digitize the economy so it can be taxed. At present only 11.4% of the total GDP is collected by taxes making it around $31 Billion. Imposing digitization and fintech on the rupee would send the GDP skyrocketing with close a trillion dollars being added by tax collection alone.
The second solution to Pakistan’s gloomy economic outlook is to fund small and medium enterprises to become bigger and selectively find markets for exports. This is one of the reasons China went from being a baby tiger to a fiery dragon. The Chinese government actively helped SMEs grow, so much so that by the year 2000 there were more SMEs in China than USA and Europe combined. In Pakistan SMEs make 90% of all business and 78% of the non-agricultural labor force. Yet they contribute to only 30% of Pakistans economy. Today Pakistan is the final frontier for start-ups and venture capitalists looking to make explosive gains in the next few years. By supporting start-ups in the SMEs segment Pakistan can experience powerful growth in exports and local demands at a time when the world economy is plateauing. A Fintech company that I work with is in the business of slicing and dicing these SMEs into data clusters neatly categorized by algorithms to make portfolios and find strong and weak spots for international investors. Companies like these are looking to bring hundreds of billions into Pakistan for investments not just into SMEs but also tokenized real estate and stocks. Investing in SMEs and integrating them with ecommerce has changed the fate of countries like Thailand. We can leapfrog Pakistan by using cutting edge technology to push Pakistani products around the world. I am perpetually dumbfounded and ecstatic when twenty year millennial startups ask me to draft multi-million dollar contracts for exporting goods and placing them on platforms like Amazon, Shopify and eBay. Empowering these youth not only increases local exports but integrates Pakistan strongly as a trade partner to reckon with in the global community. This growth will be granular, of high quality and thus more democratic. It would improve the inequalities of the system as well as create a level playing field and add billions of dollars.
The pessimism of Pakistanis is justified because the systems are utterly corrupt and every business faces the evils of bribe and speed money. The cure to corruption has proven to be much worse, as the present government peddled the medicine of death for the illness afflicting the country. Where corruption causes losses worth billions of dollars in years, the mismanagement of the economy to address this corruption has caused losses of billions of dollars in months. It is estimated that if a small road project of Rs. 2 Billion is stalled due to a NAB investigation on one officer for say Rupees 10 million, the loss to the economy would be Rs 16 million per month. Most investigations last years and the losses caused by faulty investigations alone cause damage several hundred times more than the benefits that would accrue by a project. Furthermore, if such matters go to courts, the excruciating delays in the judicial system are sufficient to ensure that even the slightest hope for justice is removed. In a country like the USA judicial delays cause damage worth 2% of their entire GDP. The average decision time for a case in USA is 83 days and in Pakistan it is close to 12 years. I will not even attempt to calculate the damage to our economy this lethargy of the judicial system causes.
However, its uncanny how there is an exact solution to our problems that has just been invented in our darkest hour. The advent of smart contracts and block chain offer to transform the entire legal system of Pakistan by offering electronnic ledgers that are immutable, transparent, speedy and provable. These records put an end to decades of infighting over evidence since the records can neither be tampered nor ever be incorrect. Smart contracts that are self-executing remove the countless intermediaries in these contracts to ensure unparalleled speed in business. All deals and actions are transparent and provable so there is no requirement for lengthy investigations to prove or disprove events that will be easily available for anyone to see. With evidence and forensic disputes having been sorted, the work for the courts only be to interpret law rather than conducting extensive fact finding missions resulting in incredible reductions in litigation times. These decentralized ledgers would be essential in rebuilding trust of the public with the government and judiciary by ensuring honesty and transparency across all arms of the state.
I mentioned a plan for adding a trillion dollars, but that was a pessimistic figure. If carried out successfully even a singular component of the plan can add several trillions to the economy. India despite its abysmal growth and inequality is predicting the addition of $5 Trillion to their economy in the next 3 years using some of these technological changes. Pakistan is the world’s 5th largest population and is blessed with incredible human resource. Many of the worlds best minds are betting on Pakistan to succeed and all that is required is responsible policies from the government and the players themselves to change the fate of this country.