LAHORE - Economy, the main challenge being faced by the country, continues to be managed without any real vision and professional strategy.
This was stated by Dr. Kamal Mannoo in his newly-written book “Economic Management in Pakistan. He observed that the solutions to the economic problems being faced by Pakistan lie more in ‘management’ than in hasty economic fixes. Bureaucrats and economists can offer a lot of answers to important economic questions relating to government deficits, printing money, inequality, environmental issues and so on, but unfortunately cannot solve them on their own, he added.
“If we look back to the 19th century, to the origins of the modern capitalist system, we can see bureaucracy and economists playing their legitimate role in areas like, establishing respect for private property, competition, free trade and contracts for mutually beneficial exchange, but not in successful real life implementation of these concepts.”
Dr. Mannoo is a widely acknowledged and read writer with a very impressive academic record. His articles and papers have been published both in Pakistan’s and international journals. He is also a renowned industrialist possessing visionary commercial and business acumen that makes him a national treasure and pride.
In this major work, Dr. Mannoo puts across his perspective with the help of sound arguments and data, giving a very incisive and critical look into the micro and macro economic challenges facing Pakistan in today’s emerging global scenario. His viewpoint and proposed solutions may not convince everyone, but they are surely forceful enough to merit a serious thought. His friendly style and narrative is as economical as a message on a post card, making it easy for everyone to read and comprehend and the arguments are invariably supported by real-world examples.
The 178 pages book, published by Bookland, has three sections, including General economic management, Industrial revival and MFN & Trade liberalization with India.
The author of the book says that people cannot be fooled easily now, as they are impatient for a solution to energy woes but at the same time they also want to be assured that the menace of circular debt once temporarily finished by printing money (an ultimate burden on the people anyway through inflation) will not reemerge to haunt them again.
He stated that the past 20 years of neo-liberal market fundamentalism and self-proclaiming global prosperity has left more than 40 percent of our world’s population still living in poverty and one sixth of our planet living in extreme poverty. Pakistan has been one of the hardest hit in terms of persistent poverty, greater gaps between rich and poor, and resultantly a disenfranchised middle class. This is something that our new economic team will need to understand carefully, because if they just blindly follow the course of ‘market based system’, embark on an aggressive selling of the public sector enterprises and naïvely diminish the role of governmental oversight, the results of such policies over the long term in economic environments such as ours can be disastrous.
He suggested that pragmatism demands a middle way and the story of this pragmatic behavior began in China with the evolution of fusion economics.
“China despite all of its problems, demonstrated that an alternative is possible by unabashedly using both tools of market and planning to transform their economy from scarcity to over-supply, from poverty to conspicuous consumption wealth. China’ s experience is not a model but a set of experiments. Some worked extraordinarily, while failings of others are hotly debated even in Beijing itself. China’s experience cannot necessarily be repeated in Pakistan; nor should it. However, in our context what we have to learn is that the real ‘China take-away’ is: ideologically premised economics is impractical and sometimes it is advisable to dump theory and instead do what works. Eyeing the China experiment, other countries across Asia began adopting their own version of fusion economics, mixing tools of market and central planning, sometimes more, sometimes less. Vietnam, Laos, Mongolia and Malaysia have been examples of mixed economies.”
“Energy being at the heart of the economic revival plan, perhaps it will be a good idea to transparently share short, medium and long term plans and again make use professional management structures to implement tough short-term decisions that government on its own may otherwise find hard to exercise. Also, with this sector already laden with numerous scandals in the recent past, it is advisable to avoid at any cost the element of ‘conflict of interest’ for people working on the ‘forward plan’ in the energy sector; the stock exchange may be booming but it does not necessarily spell a ‘good’ for the economy.”
Dr. Manoo said that this Shaukat Aziz yardstick for economic revival proved to be terribly wrong as in our case what it meant was that it mostly represented a bubble, a piling up of mere paper capital and too in a very few select hands, productive funds going into unproductive use represented through untaxed transactional profits while no real value creation was taking place, and it primarily served as a conduit to whitening money.
“Is it prudent at this stage to be even talking about FBR’s direct access to personal bank accounts, which could mean flight of capital, a partial run on the banks and an erosion of an already thin savings base in an environment where the banks struggle to keep up with their deposit to lending ratios: not mere lip service but disclosure of real plans on how the government intends to stop using the SBP as a fiscal source in order to allow it return to its basic primary function of managing the monetary policy; why are the sizes of the all budgetary outlays growing much more than the bench mark inflation and growth percentages in a period when the country is extremely cash strapped; does there exist enough elasticity at present between the interest rate & investment correlation to justify another reduction of 100 basis Points announced in June 2013? Meaning, will it bring in enough new investment to justify the negative effects on savings, pressure on the Pak Rupee and resultant inflation; and last but not least, given that our present economic impasse to a large extent is stemmed in the prevailing security situation, is it wise for a mature government to even try and link GST increases to outlays on defense/security requirements?”
“If this new government is to truly serve the people then it will need to stop thinking only capital markets and return to basics, supporting small and community-based businesses. Meaning, it will require a shift from monolithic globalization to diversified localization. Further, while austerity within its own ranks may be a good ploy to improve the perception of good governance, its implications on the other hand in state’s public sector spending requirements need to be carefully evaluated. It is time that we evolved a more practical growth model based on finding ways to save energy and primarily making ‘existing’ resources more efficient - A model that is effective yet not capital intensive.”