Pakistan’s economy is again going through a rough patch. Policymakers of Pakistan are unfortunately unable to put the economy and country on the right path even after 75 years of independence. Pakistan somehow missed its George Washington moment; post-independence, a nation could have been made, the rule of law could have been implemented and people could have been groomed like a nation. All missed. It is almost impossible to do this after 75 years of independence with 260 million people. It wouldn’t be wrong to say that Pakistan’s economic and social fabric is full of paradoxes. Over the years, things have deteriorated, be it the legal framework, law and order situation, social values, economic growth, or global reputation.
There is a myth that leaders bring respect to the passport of a country. In fact, respect for a country’s passport is only and only dependent on the behavior and attitude of the people of a country. If people of a country go and create unrest, get involved in unnecessary protests, disturb the traffic, make local people’s lives uncomfortable, and indulge in unethical activities, then the host country will obviously discourage the people of that country from entering into their country. This is the case in Pakistan; we prefer to create scenes in other countries just to get fame and publicity. As a matter of fact, we don’t even want to listen to these things or to improve or refine ourselves.
In the fiscal year 2021-22 and 2022-23, the GDP growth rate was 6.1 and less than 1 percent respectively, the GDP growth rate swings from one pool to another, which is hardly justifiable. Political unrest has shaken the foundations of the country where it seems that no one is willing to mend its ways and political heat is continuously increasing thus the people of Pakistan are the biggest casualty of all this drama and action.
Politically motivated initiative
Pakistan is undoubtedly the biggest social welfare state in the world. For decades, the state of Pakistan is giving huge subsidies to almost everyone in the country, some are getting more while some are getting less. The beauty of this welfare state is that it gives more financial support to those who can afford, yes, who can afford it. Free electricity units to WAPDA employees, retired bureaucrats, judges, army officers and many others. Even if their pension or salary from a post-retirement job is in the millions per month, they can get hundreds and thousands of free electricity units. Likewise, free medical insurance of Rs. 1 million per person, regardless of financial ability, is another politically motivated initiative. It could be an excellent initiative if it remains limited to a certain income group.
As a matter of fact, everywhere in the world, such medical health insurance comes with a matching concept. The government gives x percentage and a citizen also pays a certain portion of the insurance premium, then the government negotiates with the insurance companies on health coverage matters, thus government tries to get maximum medical coverage and facilities under the insurance scheme. Obamacare is just one such example.
Here, in Pakistan, it is just a government contribution of Rs. 1 million without any contribution from a citizen. Thus, insurance companies and hospitals are making millions from insurance policies, otherwise a useful facility and initiative. Then comes the sick state-owned enterprises, people working in those organisations are being fed by taxpayers of the country and loans the government is taking. Is it logical to support max 200,000 employees of state-owned enterprises by squeezing taxpayers and 260 million people with heavy taxes? There is no doubt that the country’s financial position is so compromised that it is now difficult to fund this level of subsidies.
In Pakistan, transitions from one political regime to another is always difficult, causing uncertainty and reductions in the speed of economic growth. Most of the time, we even see macroeconomic instability, a slowdown in economic activities, rising unemployment and inflation and the adoption of a wait-and-see attitude by investors.
An economic crisis comes around after every few years, where spending disproportionally increases while the economy doesn’t generate enough cash. Thus reliance on debt increases manifold. Every successive crisis is worse than earlier as the debt gets larger, and payments become due. This vicious cycle still continues like never before and we can say that it will continue like this.
Despite all the challenges, Pakistan has a huge potential to bounce back. Some say it’s too late now to revive the economy, but one should not forget that Pakistan is one of the most resilient nations in the world. Pakistan has successfully controlled homegrown terrorism and now when the focus is diverted to managing a few other things, some isolated terrorism instances can be witnessed. It is expected that in the coming weeks and months, Pakistan will take full control of the troubled areas and terrorism will be controlled fully. One must not forget that there is no other country in the world, which has controlled terrorism like Pakistan has.
Mineral resources
Recently, Pakistan conducted a mineral conference in Islamabad, which was a wonderful idea to showcase Pakistan’s mineral potential to the world. Mineral export of Pakistan is quite nominal if it is compared with other neighboring countries, even the mineral resource of Pakistan is similar or somewhere greater by these countries but unfortunately due to lack of planning and execution it is far behind in mineral extraction and export.
Saindak gold mine was a good opportunity for Pakistan, but it was wasted as the country effectively didn’t get anything material from it. It is clearly visible that the difference between mineral import and export of Pakistan in the last 10-11 years is quite high, which can easily be reduced by better planning and development of the mineral mining sector.
Despite having huge reserves of high-demand and marketable minerals, Pakistan’s mineral industry is still lagging far behind as compared to the global mineral market. This lag is due to some interrelated issues in the mineral mining sector such as bottlenecks in mineral policies, law or order situation, insufficient infrastructure, outdated technology, low financial investment, marketing issues and geo-political conditions.
Succeeding services sector
The service sector of Pakistan is another important sector which is progressing. In recent years, the services sector has grown at a considerably faster rate than the commodity-producing sector of the Pakistani economy. It is emerging as the most significant driver of economic growth. This sector has the potential for further growth as well.
Students are inclined towards IT-related degrees and courses. A new trend has emerged among IT students where two or three software developers develop some application or software, make it presentable and unique in nature and then sell that app to some international investors or companies. Their ask price in most cases remains a few lakhs only because they don’t have enough financial support thus, they sell their product for a few lakh rupees only, whereas one can find better investors in India or in some other country who invest while continuing working with the original developers and thereafter take the product to a different level. If the service sector including the IT sector, is properly groomed and patronized then the potential of the service and the IT sector can be multiplied.
Favoring agriculture
Pakistan has a rich and vast natural resource base covering various ecological and climate zones. It also has one of the largest canal water irrigation systems in the world, though water flow has significantly been compromised and a large quantity of river water is thrown in the sea. Pakistan has one of the best soils, which is being destroyed by real estate developers, who are acquiring agricultural land at a higher price from the farmers and thereafter converting that into a housing society.
The level of amount real estate developers are making can be gauged from the width of the roads within a housing society. The space used for making the roads is basically a sunk cost for the real estate developer, so how the developer is making money to compensate for the cost of the land used for roads, markets/commercial buildings and other monuments, obviously from the high sale price of the plots and low purchase price of the land or grabbing the state land or grabbing it from the poor people.
In either case, Pakistan has a huge potential for the agricultural sector and steps should be taken to increase the annual yield. The Pakistan Army has taken the initiative to work with the government for the improvement of the agriculture sector. There are examples in the world, where the army supported their governments in the agriculture sector (China is an example to be followed). During the Imran Khan government, the Army was actively involved in managing locusts, which was unprecedented. Likewise, Pakistan has a huge potential in dairy, livestock, poultry and fishery sectors as well.
To strengthen the mineral mining and other sectors and increase their contribution to the economic balance of Pakistan, a high-level national focus is required to inculcate a conducive environment for new companies. It is important to provide better policies for these high-impact sectors so as to snub delays and hurdles for the new market players.