In times of severe economic down-turn resource short countries like Pakistan need to practice punishing austerity - punishing specially for the haves as the have-nots have been already going through such austerity for ages - to enhance rates of savings and investment to levels never ever achieved and in due course of time crash into an extended phase of higher growth rates, ensuring at the same time distributive justice.
But no country has ever done this by implementing IMF conditionalities even in letter and spirit. In fact, the IMF conditionalities have invariably pushed recipient countries in an extended phase of low growth rates, low savings and investment rates, higher unemployment rates, ever mounting interest rates, and stagflation degenerating, more often than not, into what is called IMF riots caused by even essentials getting out of reach of the middle classes as well.
The first step towards achieving the punishing austerity is to impose complete ban from the next budget on the practice of allocating development funds to members of elected houses. This practice was started by President General Ziaul Haq to bribe big business and feudal aristocracy to continue supporting his pseudo Islamic regime.
This one single step will not only save billions of official exchequer but also close down a major avenue of corruption.
To digress a little here, it is time now for the new government to focus solely on governance and at the same time, using the usual social controls to prevent as far as possible future occurrence of mega corruption cases while leaving it to the relevant law and order agencies and courts to pursue the past corruption cases.
The second step is to thoroughly reform the source of mother of all corruption - the electoral system. The reform should ensure that even members from lower middle classes and poorer sections could contest and win elections. This can happen only if the system does not remain an exclusive affair of the millionaires and billionaires.
The ruling elite after having spent their billions in contesting and winning elections spend most of their time during their tenure of five years using all kinds of corrupt practices to not only get their investments back but also add a billion or so by way of profits. As pointed out earlier, the practice of granting development funds to legislators serves as one of the major sources of corruption.
As per the Constitution, legislators enter the elected houses to legislate and not to waste their time on undertaking the implementation of development projects in their constituencies. In truly democratic societies constituency development work is undertaken mostly by the local governments. Therefore, the new government needs to hold local bodies' elections at the earliest to be followed immediately by each province setting up its Provincial Finance Commission (PFC) for equitable distribution among the local bodies province's revenue income plus the allocations guaranteed under the National Finance Commission (NFC) formula.
Pakistan is a highly water stressed country. Therefore, we need to conserve every drop of available water by strictly preventing all water intensive activities like growing sugarcane - the feed stock for sugar industry. Known as sun-set industry it is but one of the major sources of wealth accumulation by the ruling elite. On close observation of the proliferation of sugar manufacturing units over the years one finds that with one year's profit from one single sugar factory the owners make enough to set up a new one. This is done by ensuring that the prices of the commodity are kept increasing regularly by frequently creating artificial shortages as it is happening currently. Today we produce world's costliest sugar. And when we produce more than the demand, which we do regularly, we export it by subsidizing the export prices with taxpayers' money.
Also, excessive use of sugar (which our richer classes try to promote through costly advertisements of sweets and chocolates etc.), is known to be one of the main sources (besides excessive use of salt) of many ailments, more often than not, fatal ones. It is, therefore, time for us to get rid of this sun-set industry by resorting to cheap imports. And in order to curb its consumption, the government can take a decisive first step by strictly banning serving of tea in government offices. This will not only save millions of tax-payers' money being spent annually on sugar purchases by government offices but also save millions of dollars as well because this move would drastically curtail tea import also.
And since the rich and mighty would see no financial future in contesting and winning elections because of the strict official curbs on future mega corruption and also because of drastic reduction in income of easy billions owing to reforms in sugar sector, they would perhaps decide to leave the job of politics to deserving and honest lawmakers.
The new government has already achieved stunning success regarding the crises of current account deficit by curbing non-essential imports. However, some of these curbs seem to have adversely affected the export sector. We need, therefore, to take a second look at these curbs and make them more export friendly.
These import curbs, in the meanwhile, have opened up a number of import substitution sectors for Foreign Direct Investments (FDI) as cheaper rupee and cheaper labour promise lucrative profits for foreign investor in setting up local import substitution manufacturing units for a market of 200 million people. But this kind of investment should be strictly discouraged because such investments result in the much needed dollars getting repatriated as profits.
However, the government could help set up such import substitution industries by providing the required technical and financial facilities to local entrepreneurs or even arranging public-private partnership for domestic production of such items.
The new government should, instead, frame the right kind of policies to attract the badly needed FDIs in the export sector. An initiative can be taken in this direction by probing the possibility of promoting trans-shipment economy or what is called the warehouse economy. Under this system raw materials and intermediaries or equipment in knock-down conditions are imported, warehoused and then exported to final destination after the necessary value addition. This way we can earn export dollars and at the same time improve our productivity skills.
And in order to discipline our wayward private sector who has become a rentier rather than a true entrepreneur and who does not pay taxes and pilfers utilities like power, gas, and water and does not pay the rightful wages to his employees, the government needs to liberate all the 18 or so regulatory bodies that are in operation, like the Competition Commission, State Bank of Pakistan, the SECP, NEPRA, OGRA, PEMRA etc. from their 'mother' ministries and turn them into autonomous, statutory bodies so that the government of the day does not misuse them for some short term political gain at the long term cost of the nation.
It is about time the new government undertook the necessary reforms in the Federal Bureau of Revenue (FBR) which has become corrupt to the core and accumulated more than enough political and other powers to resist such reforms. The best way to go about doing this is to make use of the new technologies so as to keep the taxpayer and tax collector at arm's length and simplify the rules so as to enable even the not so literate corner shop keeper to file his/her return without the help of the tax advisor who has been known to be the real culprit behind massive corruption indulged in by the FBR officers and the rich taxpayers combine as he is said to have created non-existence holes in the already hole-filled tax system, especially in the income tax laws.
While at it, the new government needs to set up the needed infrastructure to facilitate the expansion of the physical social infrastructure for establishing an industrial base as well as enable the educated and skilled manpower in the country take full advantage of the new technologies that have already brought about drastic changes in value-chains in production and trading.
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