The newly elected representatives of the people face a dual challenge in the economic sector improving the economy so that the mass of the people can benefit by that soon enough and helping their party members, supporters and family members get employment immediately. Both are difficult in the present context as the number of the unemployed is too large and job creation is a tough task.

Some of the newly elected have hence begun by exerting pressure on their friends, industrialists and businessmen to provide jobs to their political supporters and party members who helped them win the elections. If their total were small they could be accommodated but their number is large and the expectations of many are high.

The larger national issues will come up whene parties step into office and try to increase employment avenues through official means and try to provide incentives to the private sector.

Their immediate demand on the new government can be stopping or slowing down the process of downsizing the government structure, which employs around four million people in the civilian and defence sectors.

Their second efforts may be to open up government services for new employment which can be a very difficult job when the parties forming the government can be several at the Centre and in the provinces, and each party claims a larger quota of employment.

Their third effort may be slowing down the process of privatization of major public sector units following the anticipated opposition to that process from the public sector employees when the units are as large as the Habib Bank, the KESC and the Pakistan State Oil; the resistance to their privatization can be very strong.

They will also be under pressure from the private sector to come up with sizable incentives to help them expand their enterprises and provide larger employment.

Enlarging the private sector would demand large additional investment along with specific incentives for such investment, including making such investment cheaper by cutting interest rates, particularly for long term investment.

The question is: can the official machinery, accustomed to status quo, be readied quick enough for this every essential transformation? The issue is one of leadership now prevailing over an inert bureaucracy instead of being led by the bureaucracy with its varied objections for any change. That also depends in our context now on the extent to which the international aid agencies and the donor states are cooperative and helpful in over-coming the socio-economic crisis.

The agencies can argue that every few years a new government comes up and asks for deviations from binding agreements, for concessions and reliefs which after they are agreed to do not finally result in a positive betterment of the economy. And that had happened too often until the coming in of the military government. Hence the budget deficits had been getting larger and larger after shrinking a little, and the public debt, including external debt, has been ballooning and debt servicing claiming too much of the tax revenues, leaving too little for education and public health. The donors would not want that to happen again after the period of consolidation of the economy under military rule.

That means the donors will be too reluctant to make large concessions which negates the stabilization of the economy to a considerable extent. Hence there can be a conflict between the donors wanting continuity of the macro-economic stability they are seeking and the micro-economic relief sought by the new leaders. The leaders may be impelled by political considerations and call for relief for the masses, while the approach of the IMF and the World Bank will be economic.

Admittedly the industrial economy cannot grow fast if bank loans are hard to get for investment or they are costly, or both. The State Bank of Pakistan is hence now moving in the right direction both ways. It has come up with a scheme to re-schedule and practically write off old loans for those defaulters who abide by the new three-year agreements. If they repay the agreed sum in three years, after paying ten percent of the debt initially, the rest of the loans can be written off. But that has to be done not by the managers of banks but by the board of directors, and each bank has to make its own rules for such write-off. Many of the sick mills, which at one time total 4,000 can avail this facility from now to April 14.

The central government is now reported to be considering income tax and wealth tax concessions too for the sick mills which are said to have risen to 6,0000 by now. The State Bank has a strong voice in this area too to facilitate early recovery of the mills.

The fact is that industrial expansion has been held up since 1993 by the paucity of investment loans from banks and high interest rates and at the bottom by the 15 per cent sales tax which reduces the demand for many goods produced in Pakistan. The smuggled goods have an edge over Pakistani manufacturers with their high production cost and his taxes which are too varied and afflicted by officers’ corruption as well.

If the government will collect this year Rs206 billion as general sales tax or around 40 per cent of the overall tax revenues, consumption and demand have to go down and industrial production hit hard more so when smugglers are too ready to take advantage of such a situation.

When employment avenues are small and unemployment too widespread, crimes will increase as has been happening in Pakistan, along with a rise in unemployment suicides and attacks on housewives by angry husbands who are unemployed for long or underpaid. The country cannot afford such deterioration of law and order in an environment in which terrorists have been too active.

We have to create conditions in which the unemployed do not swell the ranks of the criminals or join the ranks of terrorists. Instead they should he enabled to be in productive jobs and be paid adequately.

A World Bank report says enough investment is not taking place for want of adequate incentives, because of risky and weak regulatory frame-work and weak financial institutions. It is easy to identify the road-blocks, but difficult to remove them in good time but that has to be done now and effectively.

The banks are getting healthier and making profits. And the State Bank’s regulations are proving more effective then before after the collapse of many banks led by the National Development Finance Institution in the public sector and the Bankers Equity in the private sector. And now the state Bank has come up with prudential regulations for micro-credit banks so that the small banks do not go the way of the big public sector banks.

The fact is whether it is in the area of banking or employment the rich countries have serious problems and they are finding it too tough to solve them for a long time now. If the fact they are very rich does not help them to solve such problems, developing countries like Pakistan with their large populations and small resources naturally find that too tough. And political uncertainties and sudden shifts in policies as the governments change make the solution even more elusive.

In such a context, the talk of Maulana Shah Ahmed Noorani, chairman of the Muttahida Majlis-i-Amal to have complete interest-free economy now after the earlier attempt had too partially succeeded can create new complications. The feeble economy does not lend itself readily to a series of quick drastic change.

A number of leading businessmen and industrialists contested the elections and lost,with few exceptions. The question now is: will they come to help the new government with substantial investment to create jobs and provide employment to the vast mass of the unemployed?

The new rulers have to reach out to the possible investors. They have to revive many of the sick industries and make large new investments. The government and the State Bank of Pakistan are coming out with truly helpful policies for the investors.

The new leaders have to establish cordial relations with trade and industry. Many of them can afford to survive or thrive without making new investments; but the country cannot afford an investment starvation and rely only on the one billion dollars of foreign investment which Shaukat Aziz expects this year over last year’s $480 million.

The Pakistani investors have to lead the way instead of wanting to be led by foreign investors who have a global agenda and are under no compulsion to respond to Pakistan’s urgent needs now for job-creating investment and export-oriented production.