The President proposes a charter of economy!

The latest exhortation by the President to a visiting business delegation (comprising chief operating officers of around 30 of the biggest industrial units in the country) was to prepare a "charter of economy" in consultation with all political parties. The question is if this is a serious offer on the part of the President and, an equally critical question is if it is, doable given the current political climate of the country?
Many would simply dismiss this latest proposal as yet another ploy to deflect growing criticism against the government's continued mishandling of the economy with some alleging that it is wilfully deliberate (linking poor performance to corruption) with others maintaining it is the outcome of incompetence (sourced to nepotism). The PPP sanctimoniously and not credibly three years down the line continues to blame poor economic performance on the Musharraf era policies. More credibly the PPP also blames external factors like the floods of last year, and other political parties, including the Opposition PML (N) and its own coalition partners notably the MQM for taking a populist approach to economics rather than a pragmatic and necessary approach defined narrowly as consisting of implementing the conditions agreed between the government and the International Monetary Fund (IMF). Its own sustained backing down in the face of such a 'populist' approach by other parties, the PPP dismisses as part of its policy of political consensus premised on reconciliation.
Those supportive of a national consensus on economic reforms are hard-pressed to defend the President's use of the word 'charter' that has become widely associated with periodic accusations of non-compliance hurled by the two signatories to the now much abused charter of democracy: PPP and the PML (N). Others, in a more facetious mood may maintain that President Zardari remains enamoured of the United Nations, with the most widely quoted charter in modern day history, which may account for his invoking the word 'charter' with respect to the economy during his recent meeting with the business community. His pro-UN stance is of course inexplicable as by his own admission on the occasion of Benazir Bhutto's third death anniversary the UN inquiry report into his late wife's assassination that cost this hapless country over 10 million dollars was "incomplete and did not touch certain issues".
A charter of the economy would ideally be a binding treaty between all the political parties - within and outside the parliament - that would set the pace for reforms with no danger of a derailment in case of a change of government. A major problem with a charter at this point in time is the fact that the PPP government signed on the dotted line on November 20, 2008 under the IMF's Stand-By Arrangement (SBA) without consultation with any other political party. Additionally the government continues to issue letters of intent (it has issued six) in which it agrees to a set of policy measures that it has been unable to deliver due to its refusal to go it alone on politically challenging IMF conditions. While there is no doubt that the economy is a federal subject and therefore the prerogative of the federal government to define and implement policies, yet the current state of the economy does indicate to many that there is an urgent need to form a consensus on how to proceed forward. The government's focus today is to bring the deficit to sustainable levels through policies that do not take account of one of the major recommendations of the nine-point agenda of the PML (N) and the 19-point agenda of the MQM: end corruption and appoint heads of state owned entities and autonomous organisations on merit and not on nepotism.
The day the President proposed a charter of economy to the visiting business delegation, his Finance Minister held a press conference where he identified five challenges for the next year's budget: (i) economic stability to protect recovery, (ii) higher growth, (iii) inclusive growth, (iv) protect the weak and the poor, and (v) focus on issues related to energy. There has been a recovery in the external account balance sourced to higher remittances, partly due to historically low interest rates in the West, partly due to the inflationary pressures in Pakistan necessitating higher remittances and partly due to large inflows attributed as assistance from overseas Pakistanis to the flood victims. Thus recovery is one sector specific and unlikely to be sustained unless reforms include a reduction in the cost of borrowing, availability of infrastructure particularly energy and improved law and order situation.
Growth too would remain hostage to these persisting negative trends and inclusive growth as well protecting the weak and the poor remains limited to the Benazir Income Support Programme envisaging 1,000 rupees per month per family. With this amount eroding in value each month due to inflationary pressures the ability of the government to meet objectives (iii) and (iv) mentioned above would of course remain compromised. And finally there is an urgent need to end the energy crisis more than half of which is due to the inter-circular debt for which the government must take the blame. Significantly Dr Sheikh did not mention four overwhelming challenges that are much touted by other political parties, the media and the public: corruption, nepotism, administrative support to those who violate public procurement rules with a civil service unable/unwilling to say no to inappropriate demands by politicians and a focus on privatisation.
The President a while back had urged a visiting PIDE delegation to come up with an out of the box solution. In the box recommendations were made by the panel of economists led by Hafeez Pasha as well as the IMF in 2008 and the government committed to complying with these recommendations under the SBA. It is unfortunate that these in the box solutions have not been implemented by the government leading to a stalled SBA. The government's standpoint is that it has been derailed time and again from implementing these in the box solutions due to political constraints, as reflected by the MQM's periodic refusal to allow the government to raise POL prices in line with the international price and resistance to the implementation of the VAT, as well as the devastating floods.
So what must the government do to get out of the current persistent economic morass that the country finds itself third year running? Is the answer out of the box solutions through a charter of the economy? Out of the box and charter of the economy are catch phrases that are employed whenever the government has opted to back down from making economically unpopular decisions. There is no doubt that which ever government is in power unpopular decisions would have to be taken and that must first be accepted as the price of being in power - be it in the centre or in the provinces.
While the PPP strategy is to take everyone along, by the usual carrot (granting ministries and other perks) and stick (threatening other measures including luring individual party members) approach yet this must be abandoned if the government is serious about the charter of the economy in favour of boldly taking decisions that the party believes are critical. At the same time Shahbaz Sharif like all other chief ministers must accept that Punjab's borrowing has reached unsustainable levels and he simply can no longer blame the centre entirely for failure to deliver.