If there is one global ranking that Pakistan will surely top hands down, than it is the one for most potatoes in a year; due credit to an anonymous chap on Tweeter, and to understand what the ranking is all about, translate potato into Urdu.
Unfortunately, that is a ranking which we need to avoid at all cost, but curiously we as a nation seem to have a penchant for potatoes; if fate does not deliver us one, we jolly well create one! What no one seems to understand is that if we do not get the real economy moving soon, all the economic indicators and potatoes will not matter.
But seriously, the title today is not about not growing potatoes, albeit by accident it now appears to be spot on! Last week was all about how there was no singular recipe for growing the real economy which could be adopted by Pakistan, with the conclusion being that growth will require dedicated hard work with a variety of strategies depending on the sector and complexities of individual hurdles thereto. And my favorite punch line, neo-liberalism will not ensure growth!
The lonely mercantilist seems to be on a roll! Albeit, the conclusion was that grow the real economy we have to; which is now up in the air!
A paper recently published by Asian Development Bank (ADB), "Why Pakistan's Economic Growth Continues to be Balance-of-Payments Constrained" authored by Kristian Rosbach and Lilia Alekysanyan, concludes that the long-term structural balance of payment (BoP) constrained GDP growth rate for Pakistan is 3.77%.
"Periods of GDP growth rates that are higher than the BoP-constrained growth rate tend to result in foreign exchange reserve depletion, followed by periods of fiscal and monetary policy-led suppressed growth", ADB report.
In simple English, what this means is that every time Pakistan will grow by more than 3.8%, the economy will go bust. So all those who claim to have grown the economy by more than 3.8% in the past, did a disservice to the nation! Which is fine, but if the real economy does not grow, how do you create jobs for the ever increasing population?
Damned if we do and damned if we don't. On a related note, perhaps the Government may consider restricting engaging with opposition and media to only core economic issues, ignoring all other provocations, and acknowledging where things need to be done and the related strategy; rather than this endless confounding conflict where everyone tries to prove they did better, based on selected indicators. Such a strategy may greatly improve economic polarity at least, and may even generate ideas for betterment.
And more to the point we need to focus more on economic analysis which points out that the Emperor is naked; rather than only celebrate praise from non-friends. Hardly anyone seems to have latched onto this particular ADB paper.
Ignoring the mathematical workings which are only there to create confusion, since economics always get the math wrong in the real world, some of the findings and statements in the paper are worrying.
According to the paper, economic reforms, the kind IMF wants us to pursue every time we sign an agreement with them, have never worked; and this is based on growth performance during the period 1980-2017. So can it be concluded that it aintgonna work this time too?!
After 72 years, ADB finds Pakistan is still "semi-industrialized" relying heavily on agriculture (Textile and food products are also agriculture); with the economy increasingly dominated by the service sector. Pakistan did not produce machinery crucial for manufacturing and infrastructure development. Come on, we still import most of the cars we assemble here, when were we ever going to produce machinery!
ADB attests that export industries were affected by an overvalued exchange rate which, together with high energy prices, reduced price competitiveness of exports. Had always argued, our problem was never electricity at all costs, it was always cheap electricity!
So what is the solution?
This is where it starts getting hilarious; a focus on import substituting and export oriented manufacturing. Note not service sector, not IT, but industry!
And since ADB is constrained to publicly criticize neoliberal policies, the policy recommendations in the report are for more reforms; which laughably, is contradictory to its own findings that reforms have never worked in Pakistan!
Okay, fine, that was a bit unfair; the paper does talk about a diagnostic review for identifying why exports went down, exploring options for new export products, after which it elapses into the realm of fiction; the point being, like everyone else ADB suggests we increase our exports, in fact goes one step further that we decrease imports too, but the "How" seemingly eludes them as well.
You see, the problem is that neoliberals and the free market cheerleaders cannot even speak about planned industrialization through state capitalism, tariff hikes and protectionism; for that you need a mercantilist!
So either you listen to a mercantilist, or, don't grow!
(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are not necessarily those of the newspaper)
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