Dr. Nadeem Ul Haque, Deputy Chairman, Planning Commission, is a well-known Pakistani economist with extensive experience in the international policy and research environment. In a 27-year career at the IMF, he served as Advisor in the Research Department and the IMF Institute and also as IMF Resident Representative in Sri Lanka and Egypt.
"Government intervention beyond policy and regulation kills the market," Nadeem spells out at the outset while outlining his agenda as Deputy Chairman Planning Commission. Talking to BR Research in an exclusive interview in Lahore, Nadeem stressed that the governments role in the market has to be refined to remain at policy and regulation level sooner rather than later. He is quick to add that the core function of the government is to maintain law and order, ensure property rights and provide justice to all and opportunity especially to the poor.
"Currently the government policy of providing easy subsidies and protection has led to the development of non-competitive markets and a lazy businessman who is looking to the government for making a profit. Moreover, too many government agencies are involved in markets where bureaucrats are engaged in buying and selling commodities or in actual production of things. Such activities impede growth and create monopoly in this country. So when the government is in every industry, the markets cannot be formed properly," says Nadeem.
And Haques argument makes sense: there is a time tested economic principle that wherever you have a monopoly you will have inefficiencies and wastage of resources. But Mr. Nadeem, Planning Commission is in a bad shape too; isn it? "Even if I concur, tell me which ministry is doing well," he retorts.
He laments that every ministry is making policies, including industrial policy, textile policy, wheat policy, sugar policy and so and so forth, without adequate research and debate to establish clearly how these policies will contribute to growth and development if at all.
"If each ministry is thinking on long term growth in isolation then that will not work," says Nadeem adding that its the job of the Planning Commission to think about the policies. "Policies should be clear, well researched and coordinated. Mere vision is not enough". Speaking from his more than two decade of experience in research and government advisory, Nadeem is a keen advocate of good policy.
"Lots of research is required, lots of thinking is required, before the government should act. And it should act slowly without distorting the market," he says. "The crises hit the US in 2007 and they passed the financial reform bill in 2010. They took three years to think and debate. It is not enough to form policy in some meeting without background research to inform policy."
So how does this hinking-strategy fit in the case of Pepco, BR Research inquired. "To date, (Jan 12, 2011) we have taken the decision to dissolve Pepco, but it has not dissolved in essence yet," says Nadeem, "we had identified 10-15 steps to dissolve Pepco".
Briefing about the contours of the multi-step dissolution of Pepco, Nadeem explains that the independence of all the discos and gencos has to be ensured. "Along with the dissolution of Pepco, Nepra has to be strengthened; it has to perform tariff rationalisation....in the absence of a strong Nepra, power tariffs can go haywire at the expense of the consumer and anti-competitive practices can prevail," he said.
With Pepcos dissolution, which Nadeem wants to be completed by July 2011, autonomy is planned to go to the gencos and the discos shall buy from the central purchasing power authority, by virtue of which "the power market will start developing".
INCENTIVISING INDUSTRY Just as Nadeem minces no words in rebuking the governments failures, he is equally vocal about developing a new business culture. While acknowledging that all over the world "the industry is doing design and Research & Development", Nadeem says that facilitating R&D not is the job of the government. "Its for the private sector to do it on its own".
"Engineering clusters have formed in Wazirabad; sports good and medical equipment clusters have formed in Sialkot. Faisalabad is the hub of textiles. What is lacking is design and essential services for product development and marketing! Many of them are still copying old from the West," Nadeem points out. But he is quick to add that "incentivising or subsidising R&D has never reaped fruits here". So it is not a matter of subsidies!
"There are serious downsides of incentivising. We have protected our automobile manufacturing industry but they didn develop an R&D culture." However, today removing protection will not be easy, as all the money you spent on the industry in past decades will be a sunk cost. So, its a prisoners dilemma - a loss-loss situation.
TOWARDS A SOLUTION "The problem is that in Pakistan everybody wearing a suit has a solution. How can you give a solution, when you have rarely read or deliberated on the problems," says Nadeem. Sharing his views on the quality of research in Pakistan, Nadeem highlights that the countrys intelligentsia has been holding conferences, seminars and publishing policy papers for decades and highlighting the same issues year after year.
"During this period, we were under IMF programmes for 20 out of the last 25 years. This situation has arisen because of a chronic fiscal problem. This is clearly serious economic indiscipline". Clearly this record calls into question the quality of research and policymaking.
And perhaps he is right, when he rhetorically asks "how many thinkers and economists do we have?....too few to even fill a serious meeting room." Commenting on the state of Pakistani universities, Nadeem says they are making buildings and huge campuses but not hiring quality professors. "I have studied at the London School of Economics; their campus is smaller than the house I am residing in. There are just few buildings with no green space whatsoever but they have hosted so many noble laureates".
So what would be Nadeems biggest achievement? "Well, currently growth and development are forgotten subjects. I would like to bring growth and development to the centre-stage. Second, our current approach to growth is to think of it as an outcome of a myriad of poorly-run and conceived projects. This approach has led to incoherent and projectised governance! And third, I hope I can help develop a new narrative of growth. The old model of projects and PSDP-based development has now become too politicised and fragmented to deliver growth and development."
THE NEW APPROACH "Like the rest of the world, we must seek to put productivity front and centre. We have assets; we must use them more wisely to get a higher rate of return." In order to ensure productivity, Nadeem focuses on serious economic reform for the next few years. This reform must seek to build better governance to support vibrant markets.
"We must build a productive and technocratic government to underpin fluid, transparent and globalised markets where competition, innovation and entrepreneurship are the norm!" For this, we must enter a period of reform for "professional government based on well researched and clear policy, deregulated markets and lots of privatisation to get the government out of business!"
The role of government in the 21st century must be clearly articulated and professionally delivered. "Please do not confuse it with the old and naïve "markets vs government" debate. Nor is it "market fundamentalism," he added.
"It is a government and market solution we are looking for. However, it must be effective and clearly defined government and effectively and clearly defined markets, both of which complement each other."
Interview by Ali Khizar Aslam