Pakistan's economic performance has been under scrutiny since the IMF Managing Director's visit early this month. Her press conference with the Finance Minister at the conclusion of her visit captured the essence of our situation. She spelt out a 'moment of opportunity' for Pakistan that basically involves putting our economic house in order both in macro and micro senses if we want to compete in the global race of nations and reap the consequential benefits of a growing economy. This will entail carrying out major economy-wide structural reforms starting from the power sector reforms to the business climate reforms.
Given that Pakistan is way behind other nations in this race as reflected in Pakistan's abysmal 'bottom of the pack' ranks in most global indices of economic competitiveness and human development, the effort has to be comprehensive, co-ordinated and determined. To put it in perspective it is like Pakistan cricket team ranking persistently among laggards like Afghanistan, Scotland and Ireland in the various ICC rankings. In the case of the cricket team the public would rightly demand the heads of the lords of Pakistan Cricket Board who manage the affairs of cricket and ultimately bear responsibility for the performance of the cricket team. But what about the responsibility of performance of the economy of Pakistan? Who are the lords who run the economy and whose heads should roll when our expectations are not met?
In this respect on the top of the Totem pole is the Cabinet of Pakistan headed by the Prime Minister that bears collective responsibility for the economic growth and prosperity of the people. The parliament of Pakistan gives unprecedented powers to the Cabinet and the Prime Minister to formulate, implement and administer the economic policy of Pakistan. The cabinet has the entire financial, human and natural resources of Pakistan at its disposal to create wealth and prosperity for the nation. Therefore, when year in and year out Pakistan continues to languish at the bottom of indicators of success while other countries leap frog into the front then Pakistan's Cabinet and Economic managers have a lot of explaining to do.
In last two years under prime minister Narendra Modi, for example, India leap-frogged by thirty two ranks in the Global competitiveness index to attain position of 39 whereas Pakistan under Nawaz Sharif improved its rankings by an anaemic six ranks to achieve 122 position. At the root of this discrepancy is the quality of governance of institutions. If Pakistan has to seize the Christine Lagarde's 'moment of opportunity' it has to catch the bull by its horns and reform the entire range of public institutions of Pakistan.
The State Bank of Pakistan website displays a list with 957 entries of government institutions starting from the Abandoned Properties Organisation and ending with the District Councils of Sindh at 957th. In addition, it displays a list of over 100 nonfinancial Public Sector Enterprises. While some of these institutions may be defunct but most of them are probably a net burden on the people of Pakistan. It is the responsibility of the cabinet to ensure that these institutions work for the betterment and prosperity of Pakistan. Under the Prime Minster there are almost 30 federal ministries with numerous attached departments and public sector enterprises. Similarly, at the provincial level the chief ministers preside over equally large cabinets and departments.
Thus when Pakistan's global rankings are so dismal, it is naturally the ministries and departments that have to bear the brunt of criticism. Basically, the ministries that are in charge of designing the economic governance system of Pakistan have a special responsibility. They are responsible for effectively implementing and administering their respective policies and strategies. These ministries are also linked to the regulatory institutions of Pakistan. Some of these regulatory institutions are supposed to be independent from their mother ministries yet we see them being dictated to various degrees by their administrative ministries.
Almost all segments of Pakistan's economy are highly regulated and the regulator has a mindset which is anti- growth and regularly cripples the segment with onerous regulatory burden. Last year, we witnessed a sharp deterioration in the index measuring intensity of competition in Pakistan's domestic economy. Yet we know that competition at home leads to competitiveness in global markets. The Competition Commission of Pakistan (CCP) is the regulator that promotes competition in the domestic economy. Clearly it is not performing in line with its mandate. But it is helpless when the Parliament of Pakistan defangs its powers through a restrictive legislation.
The Ministry of Finance runs the fiscal policy of the country. It also controls and dominates the central bank and other entities managing the financial and capital markets of Pakistan. The State Bank of Pakistan not only conducts monetary and exchange rate policies but also regulates the banking industry to promote competition and economic development. Yet it is not autonomous in its monetary policy; nor is it delivering a banking sector that is competitive and playing the role of national development and employment generation. The banking sector is perceived to be a cartel with the government mopping upmost of the available credit for its own financing operations.
The other half of the financial markets comprises the capital markets under regulation of the Securities Exchange Commission of Pakistan (SECP). In spite of a long history of capital market institutions pre-dating independence in Pakistan, the capital markets have been unable to play a significant role in economic growth and nation building.
In the critical energy sector, poor policies and mismanagement of the sector are crippling the economic growth of the country. The website of Oil and Gas Regulatory Authority (Ogra) boldly states its mandate to promote competition and efficiency for the benefit of the consumer but has failed to achieve even an iota of competition in the sector or benefit for its downstream industrial and domestic consumers. We are burdened with an oil and gas sector that is highly inefficient, over-priced and subject to frequent irregularities and inadequacies in supply.
The concepts of overwhelming circular debt, contingent liabilities and budgetary support for the inefficiencies of the energy sector have taken root in Pakistan signifying the bankruptcy of public sector management of the sector. Nepra, the electric power regulator, has been unable to create a competitive power market in Pakistan and has delivered Pakistan one of the most expensive powers in the world bedeviled with heavy load-shedding and unreliable supply.
In the water sector the Ministry of Water and Power keeps harping about the impending water crisis in the country but fails to even develop a policy to deal with the emerging disaster. It has Wapda as an implementing body and Irsa as a regulator. The entire chain of water governance at the federal and the provincial levels is gridlocked over creating appropriate storage capacity or improving water management in the system. It is all talk and no action.
The ministries of industry at the federal and provincial levels with their attached departments have been ineffective in ushering in anything resembling industrial development and growth. The food and agriculture development entities have failed to introduce new seeds, new technology or farm practices to fully utilise the vast agricultural potential of the country. The Ministry of Commerce and TDAP have not been able to make any breakthrough on the export front. The board of investment has little to show for its efforts in attracting FDI.
As far as the human resource development of Pakistan is concerned the sector is ubiquitous by the absence of a focused and effective human resource development strategy. While the HEC under Dr Atta-ur-Rehman gained some traction yet we don't have a single university in the top 500 universities of the world. In spite of the involvement of the federal and provincial governments with a huge paraphernalia of education and health ministries with a network of attached departments Pakistan continues to have low achievement standards, inadequate teachers and the largest number of children out of school in the region. Child malnutrition and stunted growth are rampant throughout the country.
It is clear that Pakistan needs to revamp the entire governance structure of Pakistan if it wants to win in the race of nations. It needs to create a meritocracy that is performance-oriented and accountable to the people of Pakistan. So far the government of Prime Minister Nawaz Sharif has shown no inclination to engage in this massive reform and restructuring exercise that is so critical for 'seizing the moment of opportunity'.