Good omens

Some of the economic policymaking over the last two weeks has been quite heartening. Finally, it seems that people at the helm of the affairs not only seem to be serious about an economic revival but also have realised that if the economy tanks, they go down with it. For the likes of us who have been advising all along on the possible solutions, the following steps recently undertaken come as a breath of fresh air: State Bank resisting another interest rate hike, which if taken would have exacerbated rather than taming inflation, in addition to hurting the government itself in its continuous struggle of debt servicing; a plain refusal to again bail out PIA and instead moving towards its privatisation, a state owned operation which on its own is no longer self-sustainable; passing on a fuel cost increase instead of a foolhardy populist approach of subsidising it and also at the same time clamping on energy theft to give a clear message that honest consumers would no longer be made to pay for the crime of the actual culprits; apprehending the currency exchange racketeers indulgent in supporting illegal Afghan Transit Trade at the expense of national currency; clamping down on border smuggling, be it be oil from Iran or contraband items finding a market in Pakistan instead of moving across the border; and last but not least, in giving a strong message to the Sugar mafia that the old ways will no longer be tolerated.
In many ways, it has been an exercise of introspection, because the real underlying damage to the economy was ironically being inflicted by the powerful quarters themselves. Whether it was a case of complicit corruption, border controls, vested interests of bureaucracy and rulers, faulty prudence on security compromises or some outright self-serving rent seeking. One always knew that unless the initiatives come from within, results would never be achieved.
However, the important thing now is that this drive should remain earnest and more importantly should not get stalled. Unless the footprint of the government is reduced and the capital starts changing hands from the state to the efficient and innovative hands of the private sector, sustainable recovery will remain elusive. The never ending debate on the role and share of the government in an economy is a long one and there is no one single fit for every country. We have seen some key state owned enterprises work wonders in the cases of UAE, China, Brazil, Russia and even India and in fact have been the mainstay of their growth, development and in achieving for them some breakthrough technological innovations. Interestingly, even the reality in perhaps the most laissez-faire economy, the USA, may not also be very different. We see that the Pentagon & NASA, both run some very successful business enterprises, and in fact, the world owes a significant part of its modern day development to the Pentagon’s breakthrough innovations. At home, one often comes across a lot of criticism of our own military establishment and its business enterprises and how they cause market distortion through some embedded powerplay and rent-seeking. My argument would be that in many ways, this on the contrary, helps the country and its economy, as not only does it allow the institution to generate a part of its own financial requirements, but also it invariably tends to be the key to building our own indigenous defence capabilities.
However, the entire conglomerate needs to be managed completely and strictly on market principles. One reckons this is where the weakness lies that needs to be candidly looked into and addressed and this where criticism, if any, should be directed to; the thing to remember is that the one thing always common in the truly sustainable and contributing SOEs around the globe is the adherence to the mandatory benchmarks of transparency and corporate governance.
Now this very notion leads us towards the necessity of developing a basic understanding that although these current ad hoc measures being taken by the government are quite positive and much needed, they in themselves are merely short-term by nature. Knee-jerk reactions, crackdowns and coercive corrections tend to be short lived and mainly point towards a state’s own bureaucratic flaws and failures. At best, they create that small window for a ‘change’, both in economic policy direction and assembling a management structure that leads to real economic revival.
Economic Management tends to be starkly different from the military or a bureaucratic one, because the former entails tangible resource generation prior to its spending and that too on a sustainable basis, whereby it does not merely touch a specific lot or an institution, but instead responsibly spreads the benefits across the entire nation to spur equitable growth.
The clawback is going to be neither easy nor simple, as the course correction encompasses a multi-faceted approach right down to revisiting the very bilateral or multilateral trading agreements that we have at present and redevising a mechanism for implementing market oversight and global compliance arrangements that in essence determine how a country effectively conducts its business–an exercise, one reckons, better left to reputable field experts and professionals.

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