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Pakistan’s economic challenges and solutions

By Dr Ishtiaq Ahmed

Ultimately the economic or material base of a society determines its politics and other societal forms and manifestations. Most certainly this adage is as true today as it was in the past, and nobody put it better than Bulleh Shah:

Panj rukan Islam de te cheyaan tukk/Cheyaan jai na hovey te panje jaande mukk.

(Islam comprises five pillars of faith, but the sixth is food/If the sixth is not available the five pillars crumble.)
Two of Pakistan’s senior most economists, Rashid Amjad and Shahid Javed Burki, have in cooperation with a galaxy of respected experts — Parvez Hasan, Afia Malik, Hamna Ahmed, Naved Hamid, Mahreen Mahmud, Hafiz A Pasha, Aisha Ghaus-Pasha, Ehtisham Ahmad, Shahid Amjad Chaudhry, Ishrat Husain, Khalil Hamdani, M Irfan, G M Arif, Muhammad Imran, Sara Hayat, Eric Manes, Azam Chaudhry, Theresa Chaudhry, Muhammad Haseeb, Uzma Afzal, Akmal Hussain and Khalid Ikram — taken up cudgels on behalf of the citizens of Pakistan for a programme of change and transformation. This if pursued with sincerity and discipline can help Pakistan achieve the necessary break with the sordid past of missed opportunities and spoilt chances of the last 66 years. No doubt Pakistan is in dire straits at present.

The book under review is a comprehensive, all-round evaluation of the Pakistani economy. It identifies its weaknesses and bottlenecks as well as proposes practical solutions imperative for sustainable recovery. The clarion call is for fundamental structural change. I have yet to see something comparable in terms of quality scholarship assembled in a brief that favours the primacy of economics over vain ideological state building.

I was pleasantly surprised to learn that even in the worst of circumstances the Pakistani economy had been growing at 5.2 percent annually during 1960-2010. The situation is bad since then but there are some impressive developments. Pakistan is performing better than even Bangladesh when it comes to microfinance while private initiative is helping education go forward significantly.

However, investment has fallen dismally. Therefore, the investment climate and the constraints imposed by a woefully bad energy crisis have to be tackled with determination in order to attract foreign and domestic investment. The article on energy is rigorous and informative, but the need to tap alternative renewable energy sources is not sufficiently emphasised. Pakistan should be ideally suitable for solar energy technology. Needless to say, proverbial corruption and mismanagement of our meagre resources are a great shame. Defence expenditure has to be reduced. It is a huge drain on national resources. A very strong emphasis is laid by the experts on the rule of law, transparency and institution building. Equally, a very powerful argument is developed in favour of inclusive growth by Akmal Hussain.

Attention is also given to the menace of unbridled population growth. Strong emphasis on an effective taxation policy is also made. Regional disparities need to be addressed in the light of the 18th Constitutional Amendment, which presupposes a greater role of provincial economic managers, argues Khalid Ikram. Shahid Amjad Chaudhry highlights the urgent need to tackle the issue of water scarcity and replenish the Indus Water Irrigation System, the “heartthrob of the Pakistan economy”. This is a most timely intervention indeed.

With regard to Pakistan’s external economic interactions there are several interesting articles. One deals with Pakistan-IMF relations from which current policy makers can learn a lot. An interesting article by Rashid Amjad, M Irfan and G M Arif highlights the prominent role of the Pakistani diaspora in keeping the Pakistani economy ticking. We learn why a 10-fold increase in remittances from overseas Pakistanis has taken place. Naved Hamid and Sarah Hayat review trade with Pakistan’s neighbours and a strong case is made for developing export items of high value rather than traditional agricultural goods. An interesting argument is made by Ijaz Nabi for putting to use Pakistan’s strategic location for economic benefit instead of the hitherto self-destructive military adventures of the past.

With regard to the prospects for Indo-Pakistan trade, Hafiz A Pasha and Muhammad Imran assert that the potential for mutual benefit is simply enormous. Some important steps have been taken by both countries to facilitate trade but as long as Pakistan does not confer MFN status on India (which the latter has done in 1995), there are problems of finding export items since many products are similar and India definitely has a clear advantage but such obstacles can be overcome. Besides the concerns of Pakistani industrialists who have enjoyed protection in the past, Indian textile and clothing producers may also have objections to free trade. Then, of course, right-wing forces in both countries would do anything to obstruct trade between the two countries.

On the role of the state and the private sector the editors, Rashid Amjad and Shahid Javed Burki observe succinctly:

Having alternated between the ascendency of the state and the private sector for decades, the country needs to settle into a mutually supportive relationship between these two components of the economy. The private sector should play the leading role in all economic activity but within a well-functioning regulatory environment developed by the government. The government’s primary role should be to provide social and physical infrastructure, support for cutting-edge research, and affordable social protection and safety nets for the poor.
Having lived in Singapore for three years (2007-2010) I am witness to the Singapore miracle in particular and the South East Asian miracle in general. Peace within the ASEAN region and a domestic compact between the state and the private sector in these countries to work complementarily have transformed them into the famous Asian Tigers.

The overall message Pakistan: Moving the Economy Forward conveys to the stakeholders in the Pakistani state project is to seize the historical moment: history does not wait forever. Now is the time for enlightened pragmatists to step forward while those lost in the heady mist of delusional shortcuts to greatness through warfare and delirious utopianism should be sent into retirement. This is precisely the moral of the story I tell in my new book, Pakistan: The Garrison State, Origins, Evolution, Consequences (1947-2011). This cannot simply be coincidental: it has to be a self-evident truth that has eluded the ruling class because of its flawed priorities and choices.

The writer is a visiting professor, LUMS, Pakistan; Professor Emeritus of Political Science, Stockholm University; and Honorary Senior Fellow, Institute of South Asian Studies, National University of Singapore. Latest publications: Winner of the Best Non-Fiction Book award at the Karachi Literature Festival: The Punjab Bloodied, Partitioned and Cleansed, Oxford, 2012; and Pakistan: The Garrison State, Origins, Evolution, Consequences (1947-2011), Oxford, 2013. He can be reached

Pakistan: Moving the Economy Forward
Publisher: Lahore School of Economics, 2013
Edited by Rashid Amjad and Shahid Javed Burki

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posted by S A J Shirazi @ 8/19/2013 09:57:00 AM,

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