Pakistan: Economic Challenges and Solutions
By Ishrat Husain
Vanguard Books (Pvt) Ltd
“The experience of Pakistan shows that living on borrowed money, indulging in conspicuous consumption rather than saving and investment, financing huge losses of state-owned enterprises, protecting domestic industries at the expense of exports, failing to expand the productive capacity to match the growing demand, neglecting human capital formation, science and technology, [and] accumulating circular debt on energy because of inefficiencies in the system, would lead repeatedly to the recurrence of fiscal and balance of payment [crises] at regular intervals. Pakistan’s ambitions to have a prosperous economy would remain an elusive goal.”
These couple of sentences from the book Pakistan: Economic Challenges and Solutions summarise where we are very well. What has brought us here and what keeps us here are good questions to ask then.
Dr Ishrat Husain, the book’s author, shares his answers to these as well. Another set of questions has to do with working out what needs to be done to get out of the situation, and most of the book is about answering these questions.
Dr Husain has spent decades thinking about and working on these and similar issues. He has written extensively about them, too. The latest book, a collection of his published articles and speeches is a continuation of the earlier conversations.
Dr Ishrat Husain’s hefty tome of collected writings primarily looks at the reasons of Pakistan’s recurring economic quagmire and suggests reforms in various sectors as solutions
Though a number of other factors are also mentioned, Dr Husain says: “This lack of political courage and inability to stick to reforms in the face of adverse sections, is the main explanatory factor for the booms and busts of Pakistan’s economy in the last 30 years.”
With weak governance and dysfunctional institutions, the lack of ability to oppose the interests of the organised minorities, according to Dr Husain, explains where we are and also why it is so hard to move from this equilibrium.
The political (electoral) cycles here are short to medium term, and policy change requires a longer period to show results. So the party that introduces the needed changes, though it will bear the political cost of tough decisions, will not be able to reap electoral benefits from it as these benefits will come, if they do, much later. Knowing this, no party would want to bear the cost of such reforms.
Still, many countries have successfully introduced reforms and have been able to stay on course. Why is this problem so unique to Pakistan? The answer given above, clearly, is not a full explanation.
The weaknesses of our political system, weak governance and dysfunctional institutions, have a part to play here as well. Even if the interests of the politicians might be tied to the electoral cycle, the interests of the bureaucracy and judiciary, as individuals and as institutions, tend to be for much longer terms. This could, potentially, provide a balance. But bureaucratic governance, in Pakistan, has declined in quality over time, as has the efficacy and credibility of the judicial system.
Dr Husain does not dwell too much on the reasons for the decline of management practices and the effectiveness of institutions and there is no discussion on the role of the establishment in all this as well.
Chapters 2 to 14 of the book gather writings around a number of important areas and there is detailed discussion of the reforms that need to be implemented in these areas in order for Pakistan to get out of the economic, political and governance troubles that it is currently mired in.
The reforms have to do with devolution, the civil service, management and regulatory regimes, education and vocational training, financial inclusion, state-owned enterprises, taxation, ‘rent’ reduction in certain sectors such as real estate, export promotion, foreign investment, industrial policy, science and technology.
All of these discussions are enlightening and most of the suggested reforms, coming from Dr Husain’s decades of engagement with these policy areas, make eminent sense. The readers, if they have interest in any specific area, can pick relevant chapters to read as well. All chapters read well as standalone pieces.
But Dr Husain does not answer the bigger question that he himself raised in the beginning of the book. The reforms are fine. But if we are in an equilibrium where the political parties cannot think beyond the electoral cycle and are not willing to bear the cost for deeper and longer term reforms and the institutions do not have the depth and credibility to change the calculus for the political parties, and even the military and non-representative regimes of the past have not been able to do that, then how will these reforms be implemented?
Though Dr Husain does praise the first three years of the Musharraf regime for implementing some of the needed reforms, he does not say that a non-representative government is a solution, or the solution. In fact he is quite explicit that the way forward has to be through dialogue, where all political parties discuss reforms and then agree on the needed steps, irrespective of who comes into power.
He also realises, given the political divisions and fragmentation that we are seeing right now, that this is not going to be easy or straightforward. And hence, the issue of how to move forward remains unresolved.
When it comes to individual areas and reforms suggested for them, there is a lot of wisdom in the book. Dr Husain has been involved in reforms, as a thinker as well as a doer, for decades now. He was governor of the State Bank of Pakistan. He has chaired a number of commissions that have looked at specific sectors in detail. These experiences come through in his writing quite clearly.
For the areas he has worked a lot in, such as macro/monetary policy management or civil-service reforms, the recommendations tend to be more grounded and granular. For areas Dr Husain has thought about but has not worked in explicitly, such as school education, foundational learning and vocational/skill training, the recommendations tend to be more general and lack specificity. This is to be expected: one person cannot possibly have worked in all areas where we need reforms.
One way of reading and benefitting from this collection is to read the chapters on specific areas of interest. Since a lot of the writing is about the reforms needed, a person needs to have deep sector level appreciation to be able to engage with the debate on the merits or demerits of the reforms that have been proposed. But, for sure, there is a lot here for people who want to understand and discuss what needs to be done, in specific areas, if we are to get out of the economic mess we are in right now.
The book could have been put together in a much better way though. Right now it seems that Dr Husain just put together what he has written, in the form of newspaper articles, keynote speeches, magazine pieces and other such writings, over the last five-odd years, under various chapters. So a typical chapter, say Chapter 6: ‘Trade, Investment and Private Sector’, consists of five articles from The News published in 2022, a keynote address from 2017, a 2017 piece from Narratives, an article from a Dawn supplement and one article from the Dawn op-ed pages.
Though all of these pieces are related to the area of trade, investment and the private sector, they have a high level of repetition and, going from piece to piece, there is no coherence of narrative. Some effort to blend the pieces together, re-write them a little, give them an introduction and conclusion, though a lot of effort for Dr Husain, would have made the life of the reader a lot easier. And it would have increased the book’s readability substantially as well.
There are no references in the book. This makes sense when you are writing a newspaper article. But it does not make sense in a book. There are a number of places where Dr Husain says “research shows” or “recent literature points out” but then there are no references to this literature in the narrative or in the footnotes.
Similarly, there is no glossary or index in the book either. As mentioned already, there is a fair bit of repetition in the book. If the same topic and/or reforms are being discussed in multiple places, a good index would have helped the reader a lot. Without it the reader has to go through the book to figure out where the same or similar topics are being discussed. And it is a thick, 441-page, book. Navigating though it is not an easy task. The publisher has not done any work on the book in terms of creating the needed front and back material.
Dr Husain has been a prolific author. This book collects writings that have been written for a wider audience, so the discussion is more accessible and is focused a lot more on solutions. This should appeal to many who keep looking for ideas about what needs to be done. Hopefully, the book will spark some debates in these areas.
The reviewer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums. X: @BariFaisal
Published in Dawn, Books & Authors, October 1st, 2023