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Money Drain, Brain Drain

Now that the Governor of the State Bank of Pakistan (SBP) has come clean and conceded to what was widely known, that there are no US dollars left in the kitty, the freeze on May 28 begins to make much more sense. Having invited our expatriates abroad to send their foreign exchange earnings to Pakistan, our government used up that money to live in a life of luxury that we could ill-afford. When Shahid Javed Burki took over as Caretaker Advisor on Finance in November 1996, Ms Benazir and company had cleaned out more than US$ 7 billion during their tenure. To stay afloat the Mian Nawaz Sharif regime has probably seen through the balance, as much as US$ 2 billion of the US$ 9 billion in Foreign Currency Accounts.

In the circumstances May 28 was a God-sent opportunity to appeal to Pakistani patriotism and rectify a gross dereliction of responsibility. On that day Pakistanis were bursting with pride, Nawaz Sharif had only to ask. In the circumstances, the Finance Minister and the SBP Governor proposed that (1) all foreign currency accounts of local Pakistanis be converted into Pakistani Rupees at the official rate of exchange (2) non-resident Pakistanis to continue their accounts but requested not to take more than 10-15% out of their accounts for a short period of time and (3) all foreign exchange money changers to be banned. This was a plan that would have possibly worked, freezing the accounts backfired and has resulted in serious loss of credibility. Net result has been that a panic was created in the country that has seen the Rupee tumble against the US dollar.

It is estimated that US$ 2 billion has gone out of the country in the past two months, net inflow has been less than US$ 250 million. In the presence of the money changers, the outward haemorrhage continues and there is no let-up in the flood. Instead of trying to stop the flow by eliminating the mechanism of money-changers, we are encouraging their continuity. These patriots fully participated in the slaughter of the Rupee and in exchange for having moved out Rs. 100 billion plus they have given Rs. 5 million to the PM National Self-Reliance Fund (NSRF), a 0.25% fee for the outrage committed by them. If Pakistan is to survive the money changers must be closed down immediately so that foreign exchange movement becomes possible only through the banking system. As for demonetisation, it will happen sooner than later, that is the only way to sop up illegal/black money and get people into the system. One must keep appealing about these eliminations ad nauseum and hope that other responsible people will join in  as otherwise we are doomed economically.

While money can be replaced, the exodus of skilled manpower is extremely alarming. A brain drain saps the vitals of the country’s present and the future. Unfortunately what is happening to Pakistan in the recent past is reason for concern. Even at the best of times, Third World countries are usually under pressure because (1) the skilled executive manpower is employed by either world institutions and (2) multinationals, particularly financial institutions, in various parts of the world. In the case of doctors and engineers it is more direct as there is shortage in their numbers. Nowadays there is inordinate demand for computer software specialists, particularly in the US and UK. Coupled with this is the need to earn more foreign exchange in remittances from our expatriates. With this net outflow of human capital any Third World country is virtually besieged intellectually even during routine periods. Our professionals cut across a broad spectrum of technical skills and disciplines, in most categories there are already glaring deficiencies that cannot be made up from the available manpower. At the same time a majority percentage of our youth who go abroad for studies find work there. While sometimes it is necessary for them to stay 5-6 years beyond their graduation to get a good enough work experience in their field before returning home, both the lack of jobs and incentives makes it impossible for them to come home to commensurate jobs. And if they do come home, the basic lack of socio-economic facilities, as well as the business and management tools taken for granted abroad leads to job frustration. For Pakistan this is a losing battle but not more than the skilled executives from business families choosing to go abroad to search their fortunes rather than face the vagaries at home. A vacuum is being created at a critical age-period in various important disciplines and sectors as the cream of our youth as well as the experienced executives opt out to safer, greener pastures.

While all this is bad enough, the recent exodus of the business community is truly alarming. While we can always manage to fill the gaps in various sectors the loss of entrepreneurial skills is a disaster for this country. This cannot be substituted as this is an inherent quality in individuals. Jobs can be substituted but business enterprises cannot be and that in turn means loss of commensurate jobs.

To reinvigorate the economy and infuse modern management skills the Mian Nawaz Sharif Government reached out to Pakistani expatriates abroad and persuaded them to return for a limited period of time, interrupting their careers in mid-stream. Except for a few notable exceptions almost all were considered high-powered executives by their respective companies, “upwardly mobile” in business slang. It took considerable persuasion by the PM himself to get them to return home to serve their country. All of them took a drastic reduction in salary despite the fact that in many cases they now have had to maintain two homes thereby increasing their expenditures. Since their children were in schools and colleges abroad, the cost of education remains at an exorbitant level. Since the equivalent of US dollars in Pakistani Rupees becomes a tremendous amount, their salaries in Pakistan even with 50% or more cut comes to a hefty amount by Pakistani standards. This has allowed a host of recalcitrants to cause a hue and cry in Pakistan for a variety of reasons, the prime being that they are not allowing the usual practice of nepotism and favouritism in the institutions they control. In the financial institutions their crime is not only to stop the easy credit without collateral that our business community was used to but also to go after loan defaulters. Obviously this has hit vested and motivated interest who are going after them all guns blasting, all knives sharpened, ready and willing to stab, cut and thrust.

For the record, our expatriate executives who have been brought back in have done a tremendous job mainly in the three nationalised banks, Habib Bank, UBL and National Bank of Pakistan. Also affected have been the bureaucrats who enjoyed perks at the expense of the banks. Taking advantage of the currency crisis, a conspiracy was hatched by a cabal of serving bureaucrats, failed bankers and loan defaulters to try and unseat one or two key senior executives in the banks in order to start a chain reaction. They knew very well that this would cause turmoil in the commercial banking circles, thereby achieving for each of the cabal their own nefarious objectives. However the main aim was more sinister, to topple the Mian Nawaz Sharif regime. Luckily this conspiracy was nipped in the bud at the last possible moment. However there were long-term consequences to this, these executives had returned to serve their country unselfishly for patriotic reasons, if they are going to be treated in this manner after they have successfully negotiated the hard period, would others ever venture to come back in the future knowing they may be similarly treated? This despicable ploy was a  deliberately connived brain drain to go with the money drain, it would have caused irretrievable damage to the economic fabric of the nation.

We Pakistanis are cynical about our lot. Given that things could have been managed far better and given that we had great expectations in Mian Nawaz Sharif, are we better or worse off than other countries in Asia? It has taken IMF/World Bank almost US$ 150 billion to bail out South Korea, Thailand and Indonesia and yet their currencies have depreciated by hundreds of percentage points. On the other hand, even beset by wholesale sanctions, the maximum depreciation of the Rupee against the US dollar in the unofficial market has been less than 20%. It is high time we learnt to be content with our lot and thank God that we have been spared the economic disaster that the common citizen has had to face elsewhere. We may go on criticising Senator Sartaj Aziz and SBP Governor Dr. Mohammad Yaqub  ad nauseum. If it were not for these two patriotic, unassuming government functionaries who are loyally taking the flak we would be where Ms Benazir Bhutto loudly wishes this country to be (and her husband tried his hardest to do while in power) at Rs. 100 to the US dollar.


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