A different playbook

Over the last two months, the PTI cabinet has been busy showcasing its performance over the last two years. In his meeting with Overseas Investors Chamber of Commerce and Industry last week, Hafeez Shaikh echoed similar sentiments when he emphasized that Pakistan’s economy was on the right track.

Seen from a particular kind of lens, PTI, Hafeez and their fan boys at the stock market are right. There has been an improvement in current account; interest rates are substantially lower; inflation is tamed for now; and positive news flows on the privatisation front and Roshan Accounts, stuff which stock market boys always get excited about. There have also been handouts in the form of Ehsaas; rudimentary changes in IPPs arrangements, which is as yet an unresolved can of worms; uptick in auto and cement numbers - latter of which is also banking on construction-led growth - which is arguably the only pillar of growth that the government seems to be banking on aside from oil refinery and marketing policy currently in the works.

But this kind of so-called improvements come from the standard playbook that Pakistan has had for the last two decades to say the least. Focus on macroeconomic indicators, improve ratings, excite the stock market, announce a big package, and one or two policy announcements that are half-baked and poorly implemented, and viola claim recovery – only to go back to square one a few years later.

Such clerical lens of economics ought to be dispensed with. The fall of macroeconomics – the idea that economic growth and stability can be had solely by focusing on interest rates, taxes, government spending, exchange rate and other macros – is increasingly becoming evident in the US, EU and other developed economies as well. For developing economies like Pakistan this idea was a myth in the past and will remain so for at least foreseeable future.

What is needed is a change in playbook, the realisation and execution of which is missing. Two years on, and tax reforms remain elusive, whereas execution of the construction and housing package – an agenda which the PTI was quite clear about since the start – has been announced with much fanfare but hasn’t been put into swift action. Need one remind that the software aspect of these packages, rental laws, foreclosures, land titles, and other aspects that govern urban planning and infrastructure are missing.

Also missing is reforms in power sector, pharma, agriculture, livestock, and value added thereof, and the other critical areas. Assessment of competitive landscapes, assessment of regulatory environment and other studies needed to bring out reforms in these and other sectors, including construction/housing, oil refining/marketing haven’t been done as well. Without looking at the broader picture, policies run the risk of poor implementation, as was the fate of axle load policy.

And whilst looking at reforms, there is a need to bear in mind the existing structure of employment. For instance, agriculture reforms are critical not only because of food security but also because it is the biggest employer of women. Ergo, there is need to focus on sectors that currently employ a lot of people for positive spill over to various occupation groups, or otherwise invest in skill training to help transition of workers in new sectors, which makes vocational training and productivity equally important agenda items that has been given a backseat whilst focus on macro continues.

Lastly, can growth be ever possible in 21st century without a great leap forward in the digital space. Two years on, Pakistan hasn’t yet had an action plan for Digital Pakistan with agreed upon deliverables assigned to federal and provincial actors.

Percentage of households with access to internet is less than 35 percent; even in urban areas the number stands at 51 percent, whereas only 8 percent of individuals (older than ten years of age) use computer/laptop/tablets, whereas the number of urban Pakistan is 16 percent. And it doesn’t speak well about a country’s economy when the reason for not using computer/laptop/tablets is not affordability: the latest round of PSLM survey reveals that one-fourth of Pakistanis don’t use these technologies because it’s not useful, they are not interested, because of cultural reasons, whereas about half (53 percent) don’t know how to use it.

Be assured that with these kinds of metrics, tweaking with price signals, taxes, subsidies, or coming up with packages can achieve truly little. The government would do well to pull up its socks. Time is not on Pakistan’s side: the youth bulge will soon be turning into a tidal wave, and amid climate change and changing geo-political headwinds, Pakistan must not be left with a demographic liability.