The scope for improving productivity, fostering innovation and ensuring better pricing is narrow in Pakistan owing to the absence of free, fair and open competition and the lack of drive to fix the problem.

The burden of imperfect and often dysfunctional markets (product, property, services, currency and capital) rests with the government. But Corporate Pakistan, known for its myopic outlook and addiction to patronage, can’t be absolved of its share of the blame.

Political expediency often takes precedence and the government bends rules to appease the vested interests. The recent declaration by the National Accountability Bureau (NAB) that it would offer special treatment to the members of the elite business fraternity suspected of financial irregularities is one example. The inclusion of mafia-like characters, penalised by the Supreme Court for fraud, in the group of businessmen that met the civil and military leadership earlier this month is another instance that exposed the so-called rule-based clean governance.

‘The archaic mindset is too deep-rooted in society. Government officers are control freaks. They are choking investment’

“If wealth and right connections are sufficient to secure a seat at the high table, this is what the business will aspire to. It shouldn’t surprise you when businessmen adopt extra-market behaviour to amass wealth instead of opting for the challenging path of capital formation in Pakistan,” remarked a market watcher.

This partially explains why Pakistan’s exports are still miniscule ($24.2 billion in 2018-19). Instead of advancing, the country has actually been slipping on global indexes of efficiency and equity. The root of the problem is a lack of open competition that compromises the nation’s competitiveness.

When reached for comments, relevant officers were either dismissive or in denial whereas the tycoons habitually held the government responsible for anything and everything wrong under the sun, including the performance of their own companies. Leading economists either skip the issue or throw their hands up in the air while blaming history, culture and society along with the ‘populist’ media and judiciary.

Last week, the World Economic Forum (WEF) in its annual assessment report of 141 nations demoted Pakistan to the 110th rank from 107th a year ago. The Global Competitiveness Index gauges a country’s performance on 103 indicators that it assumes drive productivity and prosperity. Details are given in the attached table. The complete report is available online.

Everyone remotely interested in the topic is aware of the might of the market and its role in development. The market, however, only delivers productivity and prosperity when open competition is ensured, which is not an auto-driven process and needs a regulatory framework and consistent oversight to check distortions. Too much or too little control can rig the market.

“In Pakistan, sadly the value of striking the right degree of check and balance has yet to dawn on policymakers who are guided more by politics than by the long-term national interest. They care little about institution-building,” a retired competition expert remarked.

There is no dearth of state bodies that aim at creating an enabling market environment. Prominent amongst these are the Competition Commission of Pakistan (CCP) and the National Productivity Organisation (NPO). Their expressed mandate is to implement and improve the regulatory framework to remove barriers to competition. They are also mandated to nudge private firms into investing in skills and technology for improving productivity to compete better. Their response to Pakistan’s ranking by the WEF sheds light on the dominating mindset.

When reached by phone for comment, NPO CEO Abdul Ghaffar Khattak shared his doubts about WEF findings. In a long message, he stated: “Since Pakistan does not have a dedicated data centre for providing information to international rating agencies, the information... can be manoeuvred... the showing of others can also alter a nation’s ranking.”

He also blamed the economic slowdown and confrontational politics for the poor ranking. “The lack of a congenial environment in legislative assemblies could not yield productive economic policies.

“Similarly, the executive branch needs professional training or changes in the administrative system to accommodate professionals in decision-making. Moreover, the general attitude is to shift responsibility… the legislative and executive branches need to sit around and not across the table to improve the ranking.”

The CCP promised to send comments, but did not get back to Dawn until the filing of this report.

Zubair Tufail, former president of the Federation of Pakistan Chambers of Commerce and Industry, shared his opinion from China. In his message, he said: “The private sector is responsible, but the situation is beyond its control. The economy is slowing down owing to the Federal Board of Revenue (FBR) regulations, especially the CNIC condition for sales of more than Rs50,000, delayed refund payments, high interest rates and low investment in manufacturing.

“Several firms have not been able to sell owing to the customers’ refusal to give CNICs. The auto sector is operating at 50 per cent of its capacity. Who will invest to improve productivity in such an environment?” he asserted.

Amir Jehangir, CEO of Mishal Pakistan, which is the WEF partner in Pakistan, said that the private sector could not be absolved of its share of responsibility. “They need to anticipate the emerging challenges to guide their long-term thinking. For better outcomes, public and private sectors need to evolve a collective thinking,” he said.

“For the most part, businesses in Pakistan tend to look up to the government for leadership and inspiration, which poses limits to their imagination. The risk-averse attitude of the business leadership in Pakistan and a lack of focus on innovation limit business growth beyond a certain point,” he wrote in response to Dawn’s query.

Dr Nadeem Ul Haque, former deputy chairman of the Planning Commission, sounded bitter as he believed that the archaic mindset was too deep-rooted in society to support advancement. Talking over the phone from Lahore, he was harsh not just towards the government but also the private sector that, he said, acted more like a mafia.

He termed government officers ‘control freaks’ choking investment and named brokers and property tycoons who, he said, were playing the market. He lamented a lack of seriousness in the policymaking circles. “Wherever some semblance of market existed, the current government is bent on destroying even that,” he said, mentioning Jodia Bazaar, the oldest wholesale market of Karachi.

“When the majority is struggling for the bare sustenance, the need for a productivity-enhancing growth strategy is absolutely critical,” noted an analyst.

Published in Dawn, The Business and Finance Weekly, October 14th, 2019