Mon. Sep 23rd, 2019

Misfortune of Country

By Shahzada Ahsan Ashraf

There are glaring aspects of Pakistan’s economic negatives that despite repeated rejoinders constantly go unnoticed. Why is it that from 2005 onwards, Pakistan’s economy suddenly began to become non-productive and in reds?_ This is despite the fact that astronomical amounts in local and foreign currency have been injected into the system. This includes over 30,000 billion in public and nearly 70 billion dollars in external debt. Factories the losses incurred by private sector enterprises and circular debt to end up in a state of affairs that defies economic logic and good governance. _Is it because the economy is being deliberately manipulated to meet some other objectives? I reckon it is deliberate.

To understand how Pakistan’s economy was transformed from growth to consumerism, it is important to appraise the entire history of manipulation. The unraveling would also help in identifying important ministries, organisations and individuals who held these daggers, either for lust or on behalf of outside actors. The most shocking aspect is that most actors are still at helm and call shots. _They are all-weather birds; rather vultures that perch where eagles dare.

The political linkages of economic decisions cannot be overlooked. Strong nation states are built around solid economic foundation. Unless small groups of communities do not build complementary economic alliances, cohesion is society is not possible. Deliberately perpetuated poverty and social inequality breeds a thousand ills.

In the obtaining international environments, the international order does not want a strong and reliant Pakistan. If it has its way, not a moment would be wasted in stripping Pakistan of its spurs. This is Pakistan’s ultimate battlefield and all threats whether military, societal, terrorism, economic or hybrids are part of the offensive package. Despite any concerted effort at nation building, Pakistan has survived these challenges thus far. The country that has not invested in its citizens is fast reaching a tipping point.

When Richard Armitage alleged to bomb Pakistan to Stone Age, economic managers in Pakistan were quietly engaged to perform the last rites. In times to come, agriculture, industries and foreign remittances were to be the major casualties.

Introducing a regressive and consumptive tax regime like Sales Tax instead of Value Added Tax (VAT) was a step to cut productivity and boost import based consumerism. President Musharraf despite his best intentions was surrounded by concentric circles of advisors. Anyone who identified and spoke against these pincers was sidelined. By 2002, riding a wave of consumerism, Pakistan’s GDP was growing like a thin walled balloon that could burst anytime. It did burst in 2008 but was replaced by bigger balloons. The consumer GDP of 2017-18 is a mirage to fool statistics.

Lal Masjid was manipulated as President Musharraf’s first step to instability. It was followed by the Chief Justice controversy, political agitations, Benazir Bhutto’s assassination and finally, towards end of 2007, the economic collapse. An NRO sponsored by outside powers through the powerful military chief ensured that the downslide would continue. He realised the gravity of the situation and what hit him but very belatedly. His time had passed.

Those in PPPP privy to what happened at Muhammad Latif Khosa’s house during her house arrest in 2007 are also aware why she ran out of favour. By then President Musharraf had realised that he had been cheated by his trusted loyalists. Because President Musharraf solicited Benazir Bhutto’s support; both had to go. Soon after her assassination,_

The drain plug on Pakistan’s economy was opened. Some reckoned it would be a quick one but Pakistan survived the crises.

The ballooning effect of circular debt began after reorganization of PSO during the times of Prime Minister Shaukat Aziz. This reorganization had an opposite effect complicating the whole system. Over the past 13 years, this insignificant debt till 2007 is phenomenally ballooning to over 1.6 trillion. The mechanism of 1994 is still in place. After 2003, when most IPPS were already remitting profits, this should have been revised. Yet nothing has been done to address the key issues with IPPs sitting on top of the pricing mechanism.

The absence of any proactive investment policy since 1994 discouraged industrial growth that could have consumed electricity Pakistan pays without consuming. Add the line losses, rusty transmission and opaque pricing mechanisms of PSO to see a dragon that devours most of national resources. The worst fears of skeptics since 1994-98 have come true. In December 2007 when Pakistan’s economy was deliberately bled a template was set for subsequent government to continue the economic decapitation for international geo strategic objectives. The fact that one of the top IPP man sits as energy advisor raises issues of conflict.

In 2007-8 Pakistan also underwent a rapid and deliberate deindustrialisation to make way for consumer goods in services and imports. Consumerism snowballed and Pakistan’s deindustrialisation plummeted from 19% of manufacturing sector to 11% of GDP today. A case in point is Pakistan Steel that made profits of 20 billion in 2007 but has since plummeted to a loss of 225 billion. This deindustrialisation evidences why many top businesses of Pakistan shifted their industries to Thailand, Bangladesh, Sri Lanka, India and Middle East. Other industries changed track and switched to services in consumer goods.

Also do not ignore that State Bank declared itself devoid of sterilisation of foreign remittances in 2003, leaving private banks free to play around with interest rates of dollars and rupee accounts. Not only did banks proliferate, they also gave away collateral loans for the consumer bubble making windfalls. This also led to deindustrialisation and promoting consumerism.

Interestingly, this is also the period that Pakistan’s public sector debt ballooned sixty fold to over 30,000 billion in ten years. Foreign borrowing without increasing productivity is now a major retardant. External debt has already ballooned to over 100 billion dollars. Constant devaluations add to the domestic burden. It’s a one way traffic in which the snowball can only grow and grow. There are no deflationary policies.

Where this rip-off go? Certainly, it was not invested in sustainable development? This is purely a case of bad economic management and corruption. Pakistan is under siege by economic hitmen and no one seems to recognise or hold them accountable for this daylight heist.

But hope is not forlorn. Pakistan’s resilience in the informal home led growth during thirteen years of economic quarantine is noteworthy. It is also significant that despite all odds, Pakistan’s middle and poor classes continue to subsist without state intervention. The informal sector remains the biggest contributor to public welfare. The import to export imbalance, balance of payments, loans and constant devaluations cripple the economy while agriculture, small industries and foreign remittances account for Pakistan’s rescue.

With the manufacturing sector coming to a standstill, the agriculture sector is now at the mercy of chemical industry, Seed Corporation, agriculture research centres and upstream agriculture industries.

To be continued.

The writer is former federal minister for industries and Chairman and Managing Director PIA

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