How do the political parties in Pakistan propose to deliver an economic miracle
The general elections in Pakistan are only days away. The results of the economic policies pursued by previous administrations leave a lot to be desired, and so voters are genuinely concerned about a number of issues: Who can provide a sustainable solution for the ongoing energy deficit in the country; how the tax and regulatory regime for the private sector can be eased; how Pakistan be made a more attractive destination for foreign direct investment; and, ultimately, how jobs can be created for the lowest income group.
These issues are such basic demands that Pakistani voters, even if they want to, cannot dare ask about the more strategic needs that affect the long-term future of the country’s economy, along with their livelihoods and welfare: Water security, environmental challenges, health services and food security, for example.
Regarding education and skills development, there are some donor-led efforts to demand improved quality in human-resource development, but opinion polls suggest that most voters still do not regard this as a priority.
The political parties eventually published their election manifestos after much delay. While that did not leave much time for a comprehensive debate on which party offers the most in-depth understanding of the economic issues, it is certainly interesting to compare their priorities.
As part of their economic-growth plans, all three of the main parties attach a lot of importance to the agriculture sector. Of course, highlighting this sector also helps them to win support in rural communities. The end goal for agricultural policies defined in the manifestos is to effectively reduce the costs faced by farmers.
A lack of direction is evident when it comes to presenting an agenda for supporting the manufacturing industries. The outgoing Pakistan Muslim League-Nawaz (PML-N) government intends to persevere with the policies it has been implementing since mid-2013, but plans to supplement these with: Stronger links between industry and academia through the provision of grants for applied research; regulations to provide incentives for green growth and discourage the use of unclean fuels; and promotion of the mineral industry.
The most pressing requirement in the Pakistani economy is an increase in foreign-exchange reserves, which in turn could sustain large infrastructure-development programs and enhanced import requirements.
Dr. Vaqar Ahmed
The cornerstone of the industrial-development strategy from Pakistan Tehreek-e-Insaaf (PTI) is the establishment of small- and medium-enterprise incubators with a focus on improving access to funding, supporting the use of advanced technology to encourage innovation, providing more efficient transport and logistics facilities, and a long-term incentive plan that includes tax holidays. An overhaul of the tax and customs-duty regime is also proposed to help exports and investment in the industrial sector.
The Pakistan People's Party (PPP), which ruled for five years prior to the 2013 elections, bases its solution for industry on the rehabilitation and revival of “sick units,” in other words, businesses that are financially struggling. The party believes that this is possible through an accommodative monetary policy that could keep interest rates low to help meet the credit requirements of sick units. Furthermore, it proposes that energy costs for industry be reduced. Subsidies that would cut production costs are proposed but only based on the achievement of performance targets.
All three of the main parties promise a brighter future for industry in Pakistan. However, none offer any explanations as to why the above-mentioned remedies did not work in the past, or why we should expect new, successful results from policies that have already been tried and failed.
Perhaps the greatest lack of imagination by the parties is evident in the plans for development of the services sector. The majority of the proposals focus on information and communication technologies, while ignoring the developments desired in other service sub-sectors, such as transport and logistics, banking and insurance, education and healthcare.
The most pressing requirement in the Pakistani economy is an increase in foreign-exchange reserves, which in turn could sustain large infrastructure-development programs and enhanced import requirements. One way to achieve this, in the medium to long-term, is to develop policies that boost exports. This, unfortunately, is another area in which the mainstream parties need to show greater imagination. For example, the outgoing PML-N administration was unable to boost dwindling exports during four of its five years in power, yet the party’s manifesto still proposes many of the same policies that simply did not produce results.
PPP’s manifesto talks about broadening the export base to enhance the country’s share of non-textile exports but fails to tell voters what action it would take to bring about such a change.
PTI proposes transforming export-processing zones with upgraded infrastructure but, again, does not tell voters what key measures would be put in place to achieve this.
If the teams drafting the manifestos seem to lack a deeper understanding of the economic issues, one can only hope that the party leadership is aware of the desires of their voters and the economic challenges facing Pakistan.
— Dr. Vaqar Ahmed is joint executive director of the Sustainable Development Policy Institute, Pakistan. His book ‘Pakistan’s Agenda for Economic Reforms’ was recently published by the Oxford University Press.
Twitter: @vaqarahmed
