There are cogent reasons why we are where we are today.
The national budget for 2017/2018 announced by Finance Minister Ishaq Dar last month is expected to lead the economy towards an increased trade deficit and current account gap, and a decline in the manufacturing industry and private investment, at the expense of jobs.
Today’s Pakistan is one of the top ‘most liberal import economies’ in the world. We have signed one Free Trade Agreement (FTA) after another because our policymakers believe it is ‘the fashionable and modern’ way of operating an economy.
As of today there is no effective policy or interest to diversify and encourage manufacturing. All proposals for diversification of the manufacturing industry have been viewed and approved but none have been fully implemented
Hence they have pulled down tariffs to near zero levels to allow other countries to virtually sweep Pakistan’s consumer and capital goods industry and create a heavily import reliant society.
A status quo mindset of both our bureaucracy and business class are responsible for our perpetual balance-of-payment troubles and weak export sector. Our export spread is negligible in the global basket and our continued reliance on basic textiles, commodities and low value-added products have held us hostage to a constant downwards trend.
As of today there is no effective policy or interest to diversify and encourage manufacturing. All proposals for diversification of the manufacturing industry have been viewed and approved over and over again but none have been fully implemented. The commerce ministry’s continued reliance on civil bureaucracy to reverse the decline in exports has further exacerbated the problem.
Our civil servants are expected to be a Jack of all trades. The bureaucrats who are assigned the task of boosting exports never had anything to do with commerce, industry, international trade, etc. Untrained civil servants with no knowledge of modern world economies or their own domestic industries can never bring any change or innovation.
Countries which have turned into global export powerhouses have shifted themselves to knowledge- and technology-based products because of their long-term vision and inbuilt engineering and innovation strengths.
Sadly, the budget for the next financial year does nothing to address the real challenges holding back the economy.
Pakistan needs to urgently change its mindset if it is to integrate itself into the global economy and prosper. We must revisit our FTAs to create a conducive domestic environment that may kick-start the local value-added capital goods industry, start producing our own raw materials with indigenous resources, and build up machinery and equipment for the manufacturing industry.
Our tariffs need to be competitively reversed to create space and nurture the growth of the domestic value-added industry.
We must create sectoral export promotion institutions (SEPI’s) with private sector boards to plan and implement export programmes. These proposed boards must be provided with adequate funding to analyse the gaps and find solutions to boost the value chain of a specific sector with an international marketing plan.
We also need to invest heavily in our human resource. Trained human resource is required for new industries. Future growth needs to be balanced with promotion of services sector export as well as the capital goods engineering sector.
A large population of 200 million affords us with an opportunity to become an industrial powerhouse. Unless we move in the right direction we will continue to face budget deficits and balance-of-payments problems resulting in further borrowing from world institutions in order to survive.
—The writer is a founding chairman of the All Pakistan Business Forum and a former chairman of PAAPAM.
Published in Dawn, The Business and Finance Weekly, June 19th, 2017