Finance sector’s key role
JAVED Burki, in his article, ‘Finance sector’s key role’ (Jan 21), has described lack of simultaneous development of “regulatory mechanism” as a major contributory factor that dogged our financial sector. This conclusion is not supported by facts.
As contemporary economic history would bear out, regulations usually follow developments that are in need of regulations. In fact, the US where the writer now lives is replete with several such examples. For instance, for the regulation of monopolies that once raged the US economy, the Congress enacted the first anti-trust law in 1890 that was named after its author as the Sherman Act. Thus, it is difficult to preconceive regulatory requirements of any of the social sectors, including financial sector, with any amount of meaningful accuracy. Besides, regulatory skills cannot be developed in a void.
Furthermore, the writer has not fully appreciated the remarkable achievements of the pre-Ayub era, particularly of the 1947-55 period which, perhaps, was the most difficult period of our history. Problems arising from mass exodus of skilled manpower, specially from the financial sector of the country, while millions of destitute people poured into its borders, division of treasury assets between India and Pakistan and the war in Kashmir, to name a few, were tackled with brilliance and foresight.
The level of economic dislocation in the country in this respect can be measured from the decline in the number of bank branch networks from 223 in 1947 to 65 in 1949. In this period, vital national institutions such as SBP, NBP, PICIC and PIDC, mentioned by the writer, were formed under public-private partnership in which private investors were participants to the extent of 49 per cent in their equity and management.
The Ayub era had its fine moments as well, though its achievements in the promotion of a healthy financial sector were deficient in many respects, some of which the writer has himself identified. At the end of this era, our financial sector was in doldrums: out of 14 banks in operation at the time of their nationalization in 1974, only three could claim to fulfil adequately their obligations to their depositors.
ABU SAEED A. ISLAHI
Former President, NBP,
Lahore

