New economic agenda
By Naeem ul Haque
THE primary objective of the new government in the economic sphere should be to change the way the government works and to reorganise its administrative structure with a view to achieving maximum efficiency and productivity.
A lean, new, administrative and dynamic economic decision-making structure is required in Islamabad. The ministries dealing with economic issues need to be reduced, realigned and streamlined. The following suggestions are made towards that end.
The Ministry of Finance has become too large and powerful and its very size often drags down the decision-making process as it is involved in formulating policy for virtually every aspect of the government where money is required and spent. Its functions should be restricted to raising revenues through the Federal Bureau of Revenue, providing funds for running the government and preparing budgetary recommendations for parliament. These functions alone would require an extensive and renewed focus as we enter a very crucial and difficult financial year.
The lopsided economic growth of the last few years has been singularly characterised by a lack of strategic economic planning resulting in the emergence of various crises the country is confronted with today. The need for a full-fledged Ministry of Planning and Development has never been greater. A full-time Minister for Planning & Development who shall be responsible for planning and overseeing the development of the economy must be appointed. The Economic Affairs Division, BOI and PIDC should also be placed under this ministry. After a prolonged gap in our economic planning it is time to prepare immediately a dynamic plan aimed at achieving strong industrial and agricultural growth annually. All non-revenue funds meant for development should be under the direct control of this ministry. Development is the key to a prosperous future and needs to take place at maximum speed with minimal hiccups. Financial control is important and crucial to its success.
A new Ministry of Economic Affairs should be created comprising the ministries of commerce, textiles, industry and production to coordinate their activities more closely with a view to achieving their objectives more efficiently. The Trade Development Authority and the Privatisation Commission should also be under the control of this ministry. These are important ministries and organisations and their activities are quite closely intertwined.
A centralised focus on their activities would create the necessary momentum for dynamic growth. These measures are radical and bold in nature and if implemented properly would substantially improve the functioning of the government and help achieve growth targets. To be sure there would be stiff bureaucratic resistance but these reforms are long overdue and necessary. A singular decision-making structure covering the functions of these ministries would speed up the much-needed reforms.
The Ministry of Communications needs to be strengthened to manage the Railways, National Shipping Corporation, National Highway Authority as well as PIA and Civil Aviation which must be taken away from the Ministry of Defence. To develop a modern economy, an efficient and comprehensive communications system needs to be formulated, streamlined, modernised and strengthened. A bold and dynamic policy in this respect is essential.
The budget-making exercise has already started and it will be important for the government to set up a budget committee in the National Assembly to preview all budgetary recommendations and allocations before their submission to the National Assembly. The preview should not be conducted by the bureaucrats but by the people’s representatives who can and should determine national priorities. Instead of the budget being announced in mid-June and only two weeks of discussion in the National Assembly, the budget should be announced in early June and one month’s national debate should be allowed before the National Assembly approves the document. For too long our budget-making process has been controlled by the bureaucrats and the politicians have hardly been involved. It is time to change that.
The above-mentioned reforms would create a dynamic infrastructure for expediting growth and development. Fewer decision-making levels and firmer policy control by the people’s representatives would eliminate the time-wasting exercises so often seen in Islamabad’s bureaucratic corridors. The next step would be to tackle the multifaceted crises which have been inherited from the myopic policies of the PML-Q.
The massive trade deficit and the current account deficit would need to be tackled immediately. The already obvious decline in exports calls for placing of restrictions on the unbridled growth of imports. The trade gap can and should be reduced from the current high of $15bn to less than $5bn in fiscal year 2008-2009 by cutting down on unnecessary and non-priority imports at least for the next year. The current account deficit will need to be cleared as soon as possible — a really tough task in view of declining exports, pressure on foreign exchange reserves and other fiscal priorities.
At the same time, to ensure the long-term stability of the rupee, a ‘permanent’ foreign exchange reserves target equal to at least one year’s average imports needs to be set. This can be done by regularly setting aside at least 10 per cent of all our foreign exchange earnings, including home remittances, into that reserve.
The new government will also have to give top priority to evolving an investment policy designed to not only encourage but give a big boost to new industrial activity in the country. Apart from reducing the corporate income tax rate, the measures could include providing free land to serious and qualified investors as has been very successfully done in China and Turkey. The PML-Q government’s industrial parks initiative has been a big flop in Sindh where Textile City, Garments City and other similar plans have remained stuck in interdepartmental disputes for the last three years, exposing the flaws in the scheme.
A planned reduction of at least 5-10 per cent per annum in non-development expenditure for the next three years is a must. This would be essential to reduce the budgetary gap and save the poor people of Pakistan from getting taxed more and more to meet the needs of unplanned growth in government expenditure. The first target in this respect must be the VIP culture which continued to flourish unashamedly during the last few years. The massive perks to VIPs, the endless security details and pointless foreign tours need to be checked and brought under control.
A fundamental review of the privatisation programme is required immediately and the ‘sell-off’ approach needs to be replaced with the concept of ‘public-private’ partnership. With this approach, in which the government shares the ownership of national assets with thousands of investors, the closing down of the Privatisation Commission may become desirable and its responsibilities passed on to the boards of the units requiring more broad-based ownership.
Lastly, as Mr Zardari has already indicated, we need to open up full trade relations with India. This would open a very big market for Pakistani goods and products and could benefit the economy substantially.

