Once again the budget is being drawn up in the middle of a political storm. Dawn asked former finance minister Shaukat Tarin to reflect on how politics and economic policy mix.

PAKISTAN has had a chequered economic history since the sixties when we were about to take off courtesy better planning and consistency in our economic policies. Since then we have relegated the Planning Commission to a secondary role and have made it subservient to the Ministry of Finance and Economic Affairs. During the days of M. M. Ahmed and Dr Mahbub ul Haq, not only did our country witness impressive economic growth, but other countries such as South Korea successfully cloned our experiences. Today, our per capita is around US$1,500 whereas that of South Korea is in excess of US$27,500.

We should ask ourselves: what went wrong?

To start with we abandoned the five-year plans when Zulfikar Ali Bhutto came to power and switched to annual plans. This virtually made the Planning Commission redundant. Annual plans were prepared by the Ministry of Finance along with the fiscal plan and slowly the latter assumed greater significance. With all of institutionalised thinking and research embedded into it, this annual exercise became a fractured and fragmented approach in the larger effort to push the economy of the country towards sustainable and equitable growth. This coupled with frequent political changes resulted in sub optimal economic performance by Pakistan.

In contrast, countries such as South Korea, China, Thailand, India, Turkey and others used medium- to long-term economic planning and consistency in execution to propel their countries into mid income economies.

Therefore the way these countries have evolved should be emulated by us and we should create a consensus on key economic priorities amongst all major political parties in parliament and call it “the charter of economy”. The key priorities on which we must create consensus are:

a) Broad basing of tax reforms to tax all incomes and consumption. Our aim should be to reach the 20% tax to GDP ratio within ten years.

b) Restructure and privatise the public sector businesses to convert the Rs500-600bn annual losses into profits over the next 10-15 years, thus adding a cool 3-4% to our GDP. In 1997 the then government of Nawaz Sharif introduced reforms for the public sector banks. I was asked to fix HBL. It had an annual operating loss of Rs6.5bn. It took us five years to restructure and privatise it. Today, it makes an after tax profit of Rs35bn.

The way to do this is to create a holding company which should take over all these public sector entities. Its board should be autonomous and run by tested and tried technocrats. They should not succumb to political or bureaucratic pressures and professionally replicate for the larger public sector companies the success that was achieved in the banking industry in the late 1990s.

c) Create complete consensus on the internal security narrative. There should be no room for playing politics with it. This effort should tackle terrorism and religious extremism.

d) Social sector reforms should be the priority of all the key political stakeholders of the country. We spend less than 3% of our GDP on health and education whereas other developing countries spend upwards of 10%. We should aim to increase the spend by 1% of GDP every year till we reach 10%.

e) A fair and uncompromising accountability should be one of our core priorities. Rampant corruption and then incompetent handling of the accountability process has not only resulted in loss of valuable resources of the state but has also deterred international investors. This must stop. Accountability, if pursued objectively, will face no opposition from parliament.

f) Nothing can be achieved if we do not fix our governance in which our bureaucracy plays a huge part. Administrative reforms are a must as our bureaucracy over a period of time has been politicised and thus compromised. Government is no longer “an employer of choice”. Dr Ishrat Hussain has recommended a way forward in his well researched and thoughtful “National Administrative Reforms” package. We should use it to good effect.

Once the charter of economy is approved by parliament, we should also pay attention to revitalisation of our Planning Commission and make it the mother of all the ministries. Let it become the official think tank and clearing house of the Government of Pakistan. Similarly all provincial governments should have their own planning commissions. These should have strong representation of intellectuals and the private sector. Moreover, these forums should also be used to review the economic performance of the federal and provincial governments against their annual and long-term plans.

No institution or country has progressed in the absence of a “vision” and a thought process and no plan can be effectively and optimally implemented without the buy-in of all the stakeholders. Thus the need for a “charter of economy” and a strong planning process is indispensable to pull the country out of its constant fire-fighting mode. Until policymaking is given more durable rails, and envisioned over a longer time horizon than just one year, we will continue muddling through our difficulties rather than lifting ourselves up.

Published in Dawn, May 30th, 2016



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