The current crisis could be an opportunity for Pakistan — but can it take advantage?

Pakistan’s problems may seem complicated, but the solution to them is actually quite ordinary. The issue at hand is the sustained irrationality of Pakistan’s ruling elites.
Published January 10, 2023

Pakistan is in the midst of perhaps the most serious crisis it has faced since 1971. The political economy has been ripped to shreds through self-inflicted wounds, its international stature is down in the dumps, and if the country was listed in the stock market, its stock would be categorised as a penny stock.

But crises are opportunities and amidst the doom and gloom, it is important to recognise that societies that have experienced much more turbulence and destruction have not only recovered, but become powerful, influential nations in the international community.

The plethora of challenges faced by Pakistan today do not require rocket science or significant innovation to resolve. The ongoing crisis is a result of years of irrational policies pursued across the political, economic and foreign policy domains.

The solution then is to fundamentally alter the status quo in three key domains: foreign policy, economy, and governance.

Punching above its weight

The first and perhaps most important pivot that must be made is in the domain of foreign policy. For far too long, Pakistani elites have tried to punch above their weight in the international arena, not recognising that Pakistan is, at the best of times, a middle-power. This bravado has led the country’s elites, particularly its military establishment, to develop and execute a foreign policy that is fundamentally at odds with the hard and soft power capabilities it possesses.

Given the ongoing crisis, Pakistan must adopt strategic patience in foreign policy, where the country’s elites accept that they will be unable to, at least for the foreseeable future, achieve core foreign policy and strategic goals.

This policy is similar to what Pakistan’s strategic ally China followed for decades, with the term “hide your strength, bide your time” summing up the country’s foreign policy approach. During this period, Chinese elites focused on building their domestic economic, technological and human capital capabilities, even if it meant building closer ties with Taiwan — a country China does not even formally recognise.

Pakistan must follow a similar approach, focusing on the task at hand at home and adopting a pragmatic posture with India, its archrival. In the near-term, the country must make concerted attempts to normalise ties with Delhi, even as it gets overtaken by a far-right Hindutva ideology.

Trade, investment, and integration with India provide significant near-term benefits to Pakistan and while Kashmir remains a core dispute, Pakistan’s elites must recognise that they are in no position to make headway on this issue given the decline of Pakistan’s own capabilities and standing.

Breaking the economic status quo

While Pakistan adopts a policy of strategic patience in foreign policy, it must aggressively pursue a restructuring of its own economy. Patience on the foreign policy front, paired with a slow and steady normalisation of ties with India, is unlikely to yield any positives so long as the economic status quo holds.

To survive and thrive for the next 75 years, Pakistan must abandon reckless and irrational economic policies its elites have adopted for decades. This means ending the real estate casino economy, getting rid of policies that distort markets, incentivising investment in productive, export-oriented sectors, and redirecting resources to benefit the many, not the few.

This process must begin first and foremost by getting rid of the disastrous Dar Peg, reforming the energy sector to reduce the cost of electricity, and consistently following a prudent macroeconomic framework that seeks to run balanced budgets, even if that comes at the expense of low, but sustainable levels of economic growth. In addition, the military’s role in the economy, overt and covert, must be systematically reversed, both in terms of its influence in policy making and the plethora of corporations it runs.

In addition, the country’s elites must go back to the basics in terms of economic modernisation — improving agricultural productivity and value addition must be priority number one. An example is Gwadar, where the elites have desired to build oil refineries instead of leveraging local fishermen to build a labour-intensive, world-class seafood cluster focused on exports.

Focus on governance

Such a realignment, however, requires governance improvements in Pakistan’s cities, towns, and villages. Systemic decentralisation of governance must be the final pillar of this reorientation. For far too long, Pakistan’s elites have tried to centralise power, believing that a strong central government can deliver sustainable growth.

Evidence from around the world, including Pakistan, shows that decentralised governance is the most effective way to improve outcomes in terms of security, social welfare, and economic development. While power has been devolved to the provinces, Pakistan continues to lack a robust system of local governance where communities make decisions about their own taxes, development, education, and security.

Decentralisation will not only empower local communities and create competition across the country for better delivery, it will also create a pipeline of talent in the political domain. Over time, such a process would bring to the forefront leaders who have experience in governance from the ground up — this is sorely needed in a country that continues to recycle old faces in new parties, expecting different results.

To most readers, the above suggestions may read as obvious. And that is the whole point. Pakistan’s problems may seem complicated, but the solution to them is actually quite ordinary. The issue at hand is the sustained irrationality of Pakistan’s ruling elites. If they continue to ignore obvious solutions, Pakistan’s survival over the next 75 years will require a miracle.