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Of the many things discussed at yesterday’s moot on ‘firms & growth’ jointly organised by the central bank, Pakistan Business Council and IGC Pakistan, labour productivity and a brief mention on federalism particularly stand out – and both warrant attention by the policy community.

World Bank’s economist Gonzalo Varela flagged that labour productivity in Pakistan is not only low compared to her peer economies but is also decelerating, whereas in the case of her competitors it is both high and accelerating. Other studies in the past have shown that even in the case of big-ticket local corporates, labour productivity is not at par with comparable firms in Pakistan’s peer economies. Yet labour as a point of inquiry is left largely unexplored (See also Pakistan's economic stepchild, Jul 22, 2019).

This brings us to an equally under explored area of research and advocacy: national economic management and development reforms in Pakistan’s post-devolution federation.  Finance Minister Hafeez Shaikh, who was at the moot in Karachi yesterday, briefly mentioned that provinces aren’t utilising their newfound resources - after all provinces have been getting the biggest share of taxes revenues since 2010.

Not that the centre was managing its house perfectly well before 2010, so in that sense, the pot is calling the kettle black, but Shaikh’s comment does require deliberation: just because the centre did not do its job well before 2010 does not mean that provinces must perform poorly as well.

The fate of this nation rests with the provinces. Important subjects like labour, education, skill development, agriculture (to which many are pinning their hopes to), mines & minerals, tourism, road infrastructure, law & order and other areas of public service delivery are now to be provided by the provincial government. These efforts are to be made entirely on their own but in close coordination with other provinces and with the centre, which then takes the discussion back to the federal government.

Much like its predecessors, the sitting government also has precious little to show for in terms of strengthening the framework for federalism. Even the PPP that gave this country, the gift or curse of devolution (depending on whose ideology one ascribes to) did not set up effective platform and frameworks of coordination between the centre and provinces and among provinces. Even in the case of taxation, in which both federal and provincial government officials have most interest, the business of coordination is outright poor. (See Is strengthening of federation on PTI’s agenda? Jul 30, 2018 & Strengthening fiscal federalism Jun 5, 2018)

How to ensure that the NFC award leads to provision of public services to the people? Or how to find a possible NFC arrangement to boost export so that provinces have an incentive to develop the sectors that lie in their domain? What should be the role of local government, at least the government of big cities? What are the various models, mechanisms and institutions of coordination between provincial and federal governments in general, and, in particular, various economic sectors that can help streamline growth and development? (See BR Research Exploring NFC to boost exports, Apr 22, 2019 & NFC: toying with tax rearrangements, Feb 11, 2019 & NFC award: delivering on social outcomes, Jan 25, 2019)

How to manage the politics of reforms? How to get the buy-in of those negatively affected by reforms in the immediate term? How to ensure transparency and inclusiveness? Or what kind of reform communication is needed to give legs to reforms since studies have shown that reforms have failed because of poor communication? How to ensure that the media, effectively mediates the debate on economy.

These are not the kind of questions that box standard economists like to grapple with, not in this country. But time and again, the failure to answer these big questions have been a stumbling block, that all the policy research, determinants of XYZ, correlations, causations, RCTs and what not have not been able to remove. And as a result, the conversation remains same old, same old.

This is not to discount the importance of research on business, macroeconomics and policy affairs. But in the absence of a clear direction on the questions posed above, research efforts on economic management affairs end up becoming a cart before the horse.

Perhaps, it is time as Gul Ahmed boss, Bashir Ali Mohammad said at the moot yesterday, that Pakistan uses this very brief window of political opportunity presented by the politics of the army act amendment, and hammer out a Charter of Economy. Not that such a charter is a cure-all, but it’s surely worth a shot. (See also BR Research’s The Fourteen Points of Charter of Economy, BR Research, May 30, 2017 & Charter of Economy: follow up on the 14 Points, Jun 1, 2017)