EDITORIAL: Increased economic cooperation with the world’s sole superpower, its largest economy and Pakistan’s leading trading partner is always welcome, of course, but the Investment Promotion Activity (IPA) – a US-led initiative in honour of Global Entrepreneurship Week – is too vague on details to start celebrating just yet. US ambassador to Pakistan Donald Blome, along with Pakistan’s Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha, launched the five-year programme to “strengthen Pakistan’s business environment, build capacity of Pakistani institutions focused on investment promotion, attract foreign direct investment (FDI) and increase US-Pakistan bilateral trade and investment”.
To be implemented by USAID (United States Agency for International Development), the initiative is also meant to further “streamline business practices, improve governance, promote regulatory reforms and competition with the goal of lowering the cost of doing business and strengthening the investment climate for foreign investors in Pakistan”.
These are all commendable ideas, no doubt, but hasn’t USAID already been working with the government on a number of these ideas for quite a while? And haven’t several former US ambassadors and administrations made the same pledges in the past? The problem, just like this time, was often a very wide description of the goals, which covered just about everything that is lacking in the local economy, with very little information about how they were going to be met.
For example, catchphrases about improving the business environment or promoting regulatory reforms rush to the headlines but they provide no practical roadmap about overcoming on-ground hurdles, like needless bureaucratic red tape, and eventually fizzle out. Similarly, promises about reducing the cost of doing business, etc., are no longer taken seriously because there’s nothing the US can do about local cost-push inflation and a tax structure that disincentivises entrepreneurship. And good luck with assurance of increasing FDI inflow when terrorism is rising once again, contrary to Dr Pasha’s claim at the launch ceremony, and a deepening political cleavage is threatening outright anarchy in the country.
Besides, this is hardly the best time for Uncle Sam to throw more money into suffering third world countries like Pakistan because of America’s own financial troubles. After keeping interest rates too low for too long and triggering inflation not seen in more than four decades, monetary authorities there are in the process of inducing a recession in the economy to stabilise prices; one which will definitely impact Europe and spread through the global economy very quickly. That is why it seems IPA, with its usual rhetoric, is a political exercise more than an economic one.
There’s no doubt that the US-Pakistan relationship suffered because of the extraordinary claims of former Pakistan prime minister Imran Khan of a conspiracy to remove him from power. It gave Washington’s heavyweight opponents like Russia and China a chance to criticise its alleged meddling in other countries’ affairs just when the so-called new cold war was heating up. And, of course, Pakistan needs America’s goodwill whether it likes it or not; for its financial survival more than anything else. So we have something like the IPA – most likely a damage control exercise that improves the overall optics of the situation as well.
If Washington really wants to help Pakistan, then it can do a lot more by leaning on the IMF (International Monetary Fund) to dilute some of its harsh upfront conditions for continuing the EFF (Extended Fund Facility), just like Islamabad has requested time and again. The bailout money is desperately needed, of course, but it would help more if it didn’t come with the condition of strongly contracting fiscal and monetary policies when the economy is on the brink of default. If Dr Pasha had pursued this line with the American ambassador, perhaps we could have squeezed more from various ongoing programmes instead of going through the trouble of working out a whole new one with the same primary goals.
Copyright Business Recorder, 2022