The Pakistan Business Council’s agenda for economic reforms, calling for reducing public finance deficits and increasing education, health and income support expenditures and revamping the energy sector closely, echo voice of the nation as also reflected in the demands made by various political parties.
By listening to the PBC leadership, the president has given the clear signal that without taking private sector on board, no economic reforms can be successful.
In order to be successful, the dialogues of the government with the business community at various levels must, however, make a quantum leap from the way in which similar talks have been conducted in the past, when political quarrels prevented any substantive debate on economic issues.
This time, the government, along with its coalition partners, should present its case as one unified body by bringing to the table seasoned and credible policymakers with deep knowledge of economic issues. The message to the business community and to the people should be clear: it is time to keep politics out of economics.
Despite past shortcomings, a consensus is not completely implausible. A quick review of the agendas of the stakeholders reveals a great deal of overlap and sufficient room for finding common ground among all of the participants. For instance, the business community says its objection to the Reformed General Sales Tax (RGST) is directed at the way it will be implemented, giving a greater role to the inept Federal Board of Revenue (FBR) in processing and calculating tax refunds for businesses.
Moreover, the private sector has called for austerity measures and lambasted colossal government borrowing of nearly Rs1.17 trillion which has led to literal crowding-out of private borrowing. From 2005-07 to 2008-10, government borrowing increased by 400 per cent, while private domestic borrowing fell 83 per cent from Rs768 billion to Rs132 billion.
The business community has also criticised state-owned enterprises (SOEs) for swallowing a whopping Rs350 billion from the treasury, and called for the recovery of, and accountability for written-off loans to SOEs.
The economic reform proposals contained in the ten-point agenda generated by the opposition Pakistan Muslim League-Nawaz (PML-N) are not too different.
PML-N has asked for the implementation of the Supreme Court decisions, a return of defaulted loans, immediate restructuring of SOEs, and relief for price increases on common consumer goods in order to curb inflation, and a 30 per cent reduction in government expenditures.
Likewise, the Muttahida Qaumi Movement, to steer the country out of the current fiscal and economic crisis, recommends imposition of an agricultural tax, withdrawal of support prices for wheat, reform of agricultural land holdings, revamping of SOEs, recovery of loans, and reform of the FBR.
Yet, there has been progress in the major political parties’ understanding of the urgent need for economic reforms. They are unanimous in their calls to restructure, dissolve or sell off SOEs, reduce the size of the government, and impose taxation across the board.
It is very clear that a political consensus has already evolved toward the core agenda of strengthening the market economy. PBC’s economic agenda also suggests that the business community has come of age, by advocating for concrete economic reforms rather than more concessions.
This emerging consensus calls for a series of high-level consultative dialogues between parliamentarians, government and the business community at all levels. Its need has become imminent as the government prepares its fourth budget. With each passing day, the economy is becoming increasingly unsustainable, and if it continues on its present trajectory, it will soon be on the brink of collapse.
The writer is Pakistan Country Director at the Center for International Private Enterprise.