KARACHI: “Pakistan is facing a major economic crisis for which we need to take urgent steps. But first we need to take our economic sovereignty back,” said economist Dr Kaiser Bengali, while proposing to ban all non-essential consumer imports in order to promote local industry.
He was speaking at an interactive session on ‘Contemporary Economic and Security Issues in Pakistan’ at the library of the Pakistan Institute of International Affairs on Thursday.
“Pakistan has a lot of internal pressures that are resisting adopting the demands that FATF [Financial Action Task Force] is making. Over the past 40 years, we have created vested interests in this country that think that they are above the law. This is across the board. Today’s news is very interesting. Malik Riaz’s assets of 190 million pounds have been seized. Before that the Supreme Court of Pakistan had said that he would be paying Rs460 billion to the state. Whether he would have paid this or not is another matter. What’s significant is that his assets were seized by the UK’s National Crime Agency.
“And here we have to ask, why is it that Pakistani criminals are always convicted abroad? Why aren’t they ever convicted here? Many decades ago, there was this Pakistani actor who spent five years in a London jail for drugs smuggling. We never caught him here. Similarly, there were some two or three Pakistani cricketers who also did time in UK jails for spot fixing. We didn’t catch them. In 2005’s earthquake there was this building which collapsed in Islamabad, and its owner is comfortably sitting abroad, not convicted. The owners of the Baldia factory, in which 289 workers burnt to death, are also sitting in Dubai. We have created a criminalised state. We don’t catch our criminals,” said Dr Bengali.
“We have also seen how the stock market here was manipulated. And the corrupt people, who earn from insider trading, are the ones who also have access to the corridors of power. Had they been abroad, they would have been in jail but here they dine with VIPs,” he pointed out.
“In 2004, the FATF and International Monetary Fund [IMF] were linked. That was like giving teeth to bite to FATF. In 1993, there was a caretaker government where Moin Qureshi was brought in from Washington DC and made the prime minister of Pakistan. With him came his staff, including Shahid Javed Burki and Dr Mohammad Yaqoob, who became the governor of the State Bank of Pakistan. He was the first person brought here from the IMF to be given the position of SBP’s governor. I think it was testing of the waters with the objective being taking advantage of Pakistan’s weak economy,” he said.
“Then in 1998, Pakistan went nuclear. In 1999, the military coup takes place. Musharraf comes to power. Shaukat Aziz comes in to become finance minister and then the prime minister. He brought with him a team of ‘contractors’ such as Ishrat Hussain from the World Bank who became governor of SBP. Hafeez Shaikh first became finance minister of Sindh and then privatisation minister. More such folks took over key positions which controlled the economy. SBP’s policy played a major role in Shaukat Aziz’s policy,” he said.
“They totally opened the Pakistani economy. Consumer financing was introduced at low interest rates. People who couldn’t afford cars, started buying cars, which were all imported since those assembled here also had their parts imported from abroad. Similarly, the demand for electronics also went up. Everyone was buying televisions, air conditioners, etc. Imports increased to the point that you can’t even find local items in your supermarkets. China came to invest in manufacturing,” he said.
“The other thing that Shaukat Aziz and company did was to start privatising very large entities. And all these entities, most of which belonged to the service sector, were sold to foreigners. Here banks and telecommunication were all privatised and restaurants, chocolate shops, boutiques, were all opened by foreigners in big malls. All these foreign companies earn revenue in rupees and convert it to dollars to send them home. There is no inflow of foreign exchange,” he explained.
“Now this created a huge balance of payments vulnerability. Trade deficit increased. In 2003, for every $100 of export our imports were about $125 so the deficit was 25 per cent. Today for every $100 dollars of export, our imports are $225. The 25pc deficit has now turned to 125pc deficit. Last year our exports were of $24 billion dollars and our imports were of $60bn dollars. This large gap cannot be filled by remittances and we are certainly in crisis. We had to go somewhere or to someone to give us large sums of money. I can say with conviction now that it was the objective of Shaukat Aziz to actually create this vulnerability as he came here with an agenda,” he said.
“They want to bring Pakistan to a point where we would be so caught up economically that we will have no choice but to accept what they say,” he pointed out and added that they could even ask us to give up our key national interests.
“Pakistan needs to take its economic sovereignty back,” he said. “Ban all non-essential consumer imports in order to promote industry. Reduce GST from 17pc to five per cent to improve the industry,” he added, saying that both these efforts will reduce revenues.
On the other hand he also suggested cutting down on non-development expenditures and non-combat expenditures.
“If we look at education, we are sending millions of pounds to universities in the UK as we recognise their examination boards rather than our Matric Board,” he regretted.
Earlier, Dr Nausheen Wasi, assistant professor, Department of International Relations, University of Karachi, gave a presentation about FATF.
“In collaboration with international stakeholders, the FATF works to identify national-level vulnerabilities based on its assessment methodologies,” she said.
Published in Dawn, December 7th, 2019