I have generally been convinced since quite some time now that what Pakistan’s economy needs is good managers and not economists or bankers or imported personnel, who may have done very well in a Western environment, but unsuccessfully struggle to deliver in the peculiar Pakistani environment. Sound, prudent, innovative, efficient and professional management is what has gone missing and it is primarily poor governance that has brought us to the brink of an economic collapse; whereas, countries around us have not only overtaken us by a big margin, but have also become the envy of the world. China and India have a few economic lessons to give to the developed world and even the smaller Sri Lanka and Bangladesh are attracting foreign direct investment like never before. Public sector enterprises, who, in essence, play a much wider role in any national scheme than mere financial number crunching, are failing to hold their own in Pakistan while they continue to add value in other regional economies, For example, the Indian Railways is the cheapest mode of transport and travel, and is their largest employment provider, and the Lankan Railways that once imported its bogeys from Pakistan, today exports them.
Also, a lot of management gurus will tell you that visionary and entrepreneurial management cannot be held hostage to qualifications, expertise and experience, but can be successfully imparted through instinct and sheer leadership qualities. Raja Pervaiz Ashraf has, perhaps, surprised many of us by displaying this trait to perfection. Wasting no time in following his ‘gut instinct’ and leadership prowess, he seems to have identified what (one only assumes) in his opinion was the root cause of all the problems during the Gilani government: That is Mr Gilani himself. Surely, he thinks that the woes of the previous government mainly emanated from bad management at the very top because, after all, he has retained the entire staff and Cabinet of Mr Gilani. Once in his new capacity as the Prime Minister, he can set right the management at the CEO (Chief Executive Officer) level, the rest will automatically fall in place. Now we can argue that underlying the malaise in this government is much wider spread than a single individual, but at least one can’t grudge him for not having a plan!
Anyway, for our sake one prays that the Prime Minster understands the challenges facing him and the responsibility he has taken upon himself. He has 180 million people to answer to who are looking up him to captain the ship in a manner that gives them hope, provides them opportunities and makes them stand respectably in the comity of nations. On the international front, Pakistan seems to be drifting into this ‘isolation mode’ that is not only politically dangerous, but also very damaging for our long-term economic prospects.
‘Domestic focus’ and ‘markets closer to home’ policies are welcome supplements; however, let’s make no mistake that our real economic interests still lie in the Western world. They are our main markets for exports and any significant increase in market access is also likely to come from these quarters. The major international financing institutions (IFI) are still dominated by them and we need the IFI support in undertaking key developmental projects at home in order to provide for our people and to keep Pakistan on the growth track.
On the economic front, the new Prime Minister will have to grapple with complex trends that are emerging, both at home and globally. Capitalism is under threat and the entire culture of big businesses is being reworked and redesigned. Countries like Germany have emerged as the new economic champion, who learnt to master the art of balancing big business practices with small and medium sized family owned niche businesses. Pakistan with its crashing economy and rising extremism has to be careful that its economic downturn is not capitalised by the extremists to expand their influence and needs to evolve its own economic and business equilibriums. An important thing to remember is that the new corporate success stories have shown that capitalism, environment friendliness and social responsibility are not mutually exclusive. The new look Unilevers of this world are setting new benchmarks that still call for increased revenues, but only through ventures that reduce adverse environmental and social impacts.
Further, post-2008 financial crisis and a resultant ongoing recessionary cycle, the regulators and the regulated across the world have started indulging in self-cleansing exercises. Pakistan also needs to follow suit. The risk and innovation equations are being aggressively explored with support from powers that be, to set new trends of growth and spark a conscious effort by corporations to keep hedge funds and fly by night investors out of their board rooms. This way they can concentrate on their core business and its long-term sustainability. If Pakistan is not to be left behind, then the PM will also have to inspire his economic team to come out of its present ‘day to day’ survival mode and start keeping pace with these fast evolving new global trends.
Banking or the financial industry has been a strong point of the Pakistani economy over the last two decades. Ever since some prudent banking reforms made under Sartaj Aziz, the sector has never looked back. However, the developments over the last five years are raising alarm bells in the banking industry of Pakistan. Big banks are eating up the smaller ones, domestic savings per se are going down partly due to inflation and partly due to unattractive returns, private sector is being crowded out, the banking balance sheets carry an unhealthy level of sovereign debt on their assets side that can no longer simply be assumed as ‘safe’, and last but not least, the foreign banks (especially Western) are exiting Pakistan. And these we know are the hallmarks of unhealthy signals coming from this once robust sector. The regulator, the State Bank of Pakistan, has a huge responsibility on its shoulders. It has to adjust its policies keeping in mind the fact that the banking industry not just at home but across the globe is going through revolutionary changes.
We just need to keep an eye on these new developments and adopt the ones that are in our interest and keep us in sync with the global banking industry. To name a few:
a) Bank management rules are being redefined;
b) Remuneration is no longer just stock based, but the level of debt and, more importantly, the quality of debt is being built into the pay calculating formulas;
c) Payouts to stockholders or ‘owners’ (as we call them) have been mandated to be linked to ‘real’ earnings and cannot simply be a historically preset amount;
d) New focus areas are being targeted where customer/consumer satisfaction takes precedence over net interest income; and
e) The regulator controlling these institutions now maintains a strong gaze at not merely the troubled businesses of a bank, but also at areas that are taking up or using most of its capital.
The above are all very complex and critical phenomena that need to be carefully evaluated and firmly pursued. And now that democracy has finally been saved one hopes that our Prime Minister will concentrate on the real challenges that face Pakistan. The challenges of providing good and honest governance and of ensuring that in the process of statehood, the lines separating the tool and the object don’t get blurred and reach a point where the hunter becomes the hunted or the slave becomes the master. Because if this happens, then though we may end up saving democracy, we might deal a serious blow to the country in the bargain!
n The writer is an entrepreneur and economic analyst.