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Charter of Economy: follow up on the 14 Points

The Fourteen Points of Charter of Economy, published earlier this week in these columns, invited a host of individu
Updated 01 Jun 2017

The Fourteen Points of Charter of Economy, published earlier this week in these columns, invited a host of individual comments and reflections from Pakistan’s economics community. These voices can be classified into three broad categories (a) the skeptics who don’t ever expect Dar to walk the talk and therefore see the whole discourse as an exercise in futility; (b) the outliers who don’t think the Charter of Economy is a good idea to begin with; and (c) the enthusiasts who demand specific policy level details to be incorporated in the economic charter. This piece attempts to address those concerns.

Let’s take the skeptics first. They argue that Dar or the PML-N has no incentive to invite political parties – or at least the leading ones – to hammer out a consensus, and therefore why make the Charter of Economy a part of national discourse. If greater national interest was really close to PML-N’s heart, it would have called a moot much earlier in its tenure rather than paying lip service all these years. That point is duly noted and today’s column would not make conjectures on political incentives; though who knows what incentives might emerge in the ensuing next twelve months when even a week is a long time in politics.

Regardless, the lack of will or incentives in the political stream has never prevented the civil society from working towards a reform agenda; nor should it. For example, political parties do not have economic manifesto or provincial manifestos, but should that prevent the likes of SDPI and CIPE to prepare a model manifesto. Or because there seems to be little political incentive in government circles for an integrated energy ministry, should that prevent business advocacy groups from preparing baseline documents for the same. Or because the centre and provinces may lack incentives to fix the revenue distribution formula via the NFC Award, should that prevent think tanks such as Prime Institute to pursue research-based advocacy on the subject. Clearly not. Lack of incentives or political motivation should not prevent the civil society from developing a discourse on any subject.

Let’s now take on the outliers who don’t think the Charter of Economy is a good idea in the first place. One critic argued that it’s neither possible nor good for democracy because politics need to be issue based. Another observer said that political parties have different positions on different issues and people choose a party or a candidate that take a position close to their preferred choice. If all parties take a common position, how will the voters distinguish among parties? “Charter of Economy means fighting elections on a common economic manifesto so people would have only personalities and dynasties to make a distinction between parties - this is exactly what needs to be avoided,” he said.

This is exactly the view we flagged in the prelude to our list of Fourteen Points (published May 30, 2017). “This column understands that drafting a meaningful charter of economy would be a complicated affair since political parties may have different priorities for economic policies, and as such no law or charter should exist to take away their democratic right to hold independent views. Nor do the vagaries of local and global economic environment allow the fixing of economic policies across time and space.” This is why the Fourteen Points are drafted in light of this very view.

The Charter of Economy is not supposed to be a charter of precise economic policies but a charter of economic governance. Save for two exceptions, most of the points we proposed to form the Charter of Economy ‘explicitly’ revolve around accountability, transparency, documentation, governance, institutional framework or other measures to improve the performance of incumbent governments. The two exceptions that are not so explicit in that sense are regionalism; and minimum framework on seven key areas, namely (a) energy, (b) taxation, (c) water, (d) environment, (e) domestic savings, (f) social protection, and (g) labour. Both exceptions warrant explanation.

In the case of regionalism, we are not saying that parties should agree which goods and services to open for trade and which not; and at what tariffs. That is something political choices are made up of, dictated often by changing local/global economic environment. We are only saying that opening up regional trade should not be sacrificed at the altar of petty politics and national security; security and trade can go hand in hand. All we want is for the parties to collectively understand that Pakistan’s failure to tap regional trade is costing her growth and development opportunities, and agree they will not politicize over trade openness within the region. Which sectors should be opened, what tariffs are applied should not be a part of the charter because that would be infringing on democratic sentiments, and indeed these are the matters to politicize on. Likewise in the case of seven key areas of economy, we are only arguing for a minimum framework of governance. For instance, developing an integrated social protection database for various federal and provincial projects in the case of social protection. Whether any party canvases for huge social disbursements or no disbursements, and which demographic or SEC profile to target, and their mechanisms, should be left out of the charter because that would be clamping on political choices. And these are the very reasons why the call of the enthusiasts who demand specific policy level details to be incorporated in the economic charter should be ignored.

In a way, having a broad consensus is not entirely strange to this country. Is it not so that the BISP started by the PPP has been followed through by the PML-N? In fact it is currently headed by a person who was once its most vociferous critic. The BISP may have its problems in terms of policy, implementation or database accuracy; and corruption may still be visible in some of its departments, but even the KP government is using BISP database for its provincial social programmes. Ergo, instead of having an implicit consensus many years later and wasting time, an upfront explicit consensus on having strong nationwide social protection database would only strengthen the institution, and should not be construed as parties agreeing on the scope and nature of social spending.

At the end of the day, charters like these are not written in stone. Brexit is a sufficient example that even those that seem to be written in stone are not. If say, in twenty years, the economy is on track or circumstances are such that we don’t need a charter, then so be it. Just because charters, agreements, contracts are not eternal in nature does not mean that one shan’t make hay while the sun shines. Pakistan stands at a critical juncture in its history, the geopolitical repositioning, the CPEC, the youth bulge at home and what not. Failure to put the economy first risks pushing the country into a lost century, when in fact it is still reeling from the ‘lost decade’. The Charter of Economy may not be a panacea but it can be a step towards long term economic betterment. The worst outcome of the charter is that it might fail in its outcomes, which is surely better than not trying.

Copyright Business Recorder, 2017