Unlike dividends from peace and cooperation, war and confrontation are costly and destructive. Europe’s ‘peace dividend’ is stated to have ‘disappeared’ because of the war in Ukraine.
As political temperature surges in Pakistan, business leaders are stepping up to persuade squabbling politicians to take a path of political reconciliation. Political instability is stated to be threatening business survival.
Unbridled, unabated power politics is triggering uncertainties that are inimical to political and economic stability. While businesses can adjust to tough circumstances, it abhors uncertainties, says Arif Habib, head of a business group. Thus most investment decisions are put on hold.
Echoing the unanimous views of the country’s entire business community, expressed more frequently now, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Irfan Iqbal Sheikh says that all political parties must sign a national economic agenda and plan for the next 15 years to ensure the continuity of economic policies.
From the persisting political stalemate, it is becoming clear that no single institution or leader can pull the country out of the deepening economic quagmire
Renewed political confrontation has disrupted a brief engagement of political adversaries for resolving conflicting interests and views that bring mutual gains on the basis of give and take and facilitate national reconstruction.
From a persisting political stalemate, it is becoming clear that no single institution or leader can pull the country out of the deepening economic quagmire. The predominant role of the core establishment in the failed hybrid democracy has begun to yield space for the parliament to assert its sovereignty through a broad-based coalition of various parties with otherwise divergent views. But it will still take time for all democratic norms to prevail.
Devoid of guiding principles and embedded with pragmatism, power politics based on ‘my side and the wrong side’ exposes the incompetence of the country’s political stalwarts in tackling the daunting challenges facing the economy. No political party, says eminent scholar Pervez Hoodbhoy, has a positive agenda for the country.
His views are shared at least by a segment of the business. Former FPCCI president Mian Anjum Nisar says, “People in our circles have started discussing overseas investment options.”
Furthermore, “no country can borrow its way to prosperity” says the Chairman of the Nishat Chunian Group Shahzad Saleem. He adds: “You cannot grow the economy through borrowed money or public spending. At the end of the day, the only option is to encourage private investment.”
Interest payments on domestic debt are estimated to equal 70 per cent of the Federal Board of Revenue’s tax collection, with the key policy rate at a record of 21pc.
In the current regressive phase, finance capital is stifling economic growth and is the primary factor in creating inequality on an unprecedented scale. That contributes to divisive domestic and international politics, unlike progressive industrial capitalism that creates self-sufficiency and tends to nurture national cohesion.
Analysts at The Economist warn developed countries that public debts are in danger of becoming unmanageable, especially if interest rates remain high. Moreover, every step in borrowing hampers the government’s ability to address the crisis, painting a forbidding picture.
World Bank President David Malpass recently said global growth was slated to fall below 2pc in 2023 and could stay low for several years. One of the big challenges was that advanced countries have taken on so much debt that it would take a lot of capital to service it, leaving too little investment for developing countries.
With domestic factors also contributing, Pakistan’s foreign direct investment plunged almost 29pc year-on-year to $121 million in April and by 23pc in the 10 months of this fiscal year.
Business leaders also lament that politics have completely taken over economic discourse while the economy is in a terrible state due to bad decisions over the past many decades.
It can be argued that the continuing downward slide of the economy, with its widespread fallout on society, has triggered a corresponding political crisis. Both the economic and political crises have to be simultaneously addressed step by step, with the most critical issues on the top of the agenda.
“We have the most ineffective governance in the world,” says former finance minister and PML-N leader Miftah Ismail.
For any charter of the economy to succeed, a charter of governance based on the wide dispersal of rights and responsibilities becomes imperative.
Policymaking is currently in a state of flux. The usual pre-budget consultations have not been initiated with the country’s trade bodies so far, raising fears that the next budget would be dictated by the International Monetary Fund (IMF) but there is uncertainty in this regard too.
The Ministry of Finance officials argue that the draft budget can only be shared with the IMF, as desired by the Fund, if the international lender agrees to merge the 10th review and give more than $1.2bn. Of the $6.5b bailout, $2.6bn remains to be disbursed under the current IMF programme, ending in June.
The controlled imports have helped to post a current account surplus of $654m in March and $18m in April. Currency dealers state that to have lent support to the exchange rate.
Because of import curbs, large-scale manufacturing declined by 25pc in March over the same month last year. And political economist Niaz Murtaza says the current coalition government can run the elite system until it collapses under the weight of its own unproductivity.
FPCCI has asked the government to announce a business-friendly and pro-growth budget for the next fiscal year to put the economy back on track. But the private sector has also to redefine its own role in the economy’s revival. A new study by the Asian Development Bank noted that the high-growth industries in Pakistan lack industry-specific action plans that set a long-term growth vision.
The study titled ‘Harnessing the Fourth Industrial Revolution through Skills Development (4IR) in High Growth Industries in Central and West Asia – Pakistan’ states that only 35pc of textile and garment manufacturing firms in Punjab reported a good understanding of 4IR technologies and their applications.
Published in Dawn, The Business and Finance Weekly, May 22nd, 2023