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Sparking the Economy

There is nothing more important for re-vitalizing the economy than increasing employment opportunities, the increased cash flow in the economy has a snowball effect that in turn creates more jobs and so on. Maximum emphasis must also be put on population control, with population growth at nearly 3% the highest in the world we have diminishing job slots in Pakistan. Besides 3 million more hungry mouths to feed, we have to create at least 3 million more jobs, impossible even for the most vibrant of economies. That’s why we are playing “catch-up” all the time!

The two modern indicators of economy are “housing starts” and “automobile” sales, but the real “gravy” is increased consumer sales of a wide range of products and a full catalogue of “Services”, acting as ”after-burners” for a resurging economy. Pre-occupied with necessary macro-economics reforms we sometimes lose sight of the fact that micro-economics measures can be done simultaneously within the parameters of those reforms. As a great supporter of various freedoms, that of speech, of religion, of work (and free enterprise), etc one realizes that liberal initiatives in third world countries need to be force-fed and channelized, like we do with domestic politics in the name of “doctrine of necessity”. Pragmatic idealism accepts that everything can’t be pure as snow. The Finance Ministry and the State Bank of Pakistan (SBP) must give clear guidelines for loans/credits to be directed towards igniting those “fuels” that drive the local economy.

A fair amount of economic activity takes place in the making of the house or an apartment, starting with the wages for the labour workforce that builds the property. Cement, steel, brick, stone crush, sand, wood, aluminum, etc are the materials needed to erect a structure, providing work for various factories, that in turn increases both blue-collar and white-collar job slots. Add to this, wiring, plumbing, painting, etc with their related material and labour thereof, then there are furniture and fixtures including refrigerators, TV, air conditioners, washing machines, gas cookers, micro-wave ovens, etc. Material and labour being indigenous and not imported, the economy will grow. For imported goods, the local gain is limited only to wages for labour and services provided. Household electrical appliances and electronic gadgets are available in Pakistan on easy “consumer financing”, when we lease imported goods we are actually supporting the manufacturing entities of the various foreign economies. In the US and other western economies, a fair percentage of the credit available is reserved for purchase of properties by potential landowners. Except for the ridiculously rich, very few buyers buy property outright, putting down as little as 5-10% as down payment, the balance in easy monthly installments over 25-30 years. In many cases there is no requirement of down payment also. A committee of commercial bankers has recently recommended changes in the Housing Act to reflect (1) debt equity ratio to be 80:20 and (2) “bridge-financing” for Builders through SBP’s Housing Re-Finance Facility, these are still not bold enough to re-vitalize the housing sector. Mortgage financing is a huge business sector in the US, even though “Savings and Loans” outfits have come to grief because of lack of checks and balances. Those who can afford to pay easy instalments from their salaries, and that comprises almost the whole of the working middle class, depending upon the size and quality of property to be bought, will invariably strive for a permanent roof over their heads.

In the name of automobile manufacturing and assembly thereof we have in theory a clear “deletion programmes” meant to build up the vendor industry. In actual practice this is a joke. In the US, Europe, Japan and South Korea, etc the automobile manufacturing is the engine that pulls the economy forward. Millions of workers are employed directly in the assembly plants, many millions more comprise the vendor industry making parts for the automobiles. Given our great expertise of hand-crafting eg manufacture of surgical instruments, cutlery, sports goods, etc, machinery and equipment, etc and gun manufacturing at Darra etc no country in the world is better equipped, both labour and expertise-wise, than Pakistan to have a huge vendor industry for the automobile industry. Why do not our bureaucrats enforce the rules and regulations on foreign manufacturers and their local collaborators with the same enthusiasm they impose on all Pakistanis below the elite-level? Lease financing should not be allowed for automobiles that do not meet deletion programmes agreed to when their manufactures/assemblies initially signed the agreement for local car assembly/manufacturing. Everyone knows what methods they use to get these agreements “suitably” amended by unscrupulous bureaucrats later.

In place of large grandiose projects, only the necessary ones should be pursued, such as dams, canals, etc restricting road-building to repair and widening of older roads, etc. Concepts like that used by Governor Huey Long of Louisiana, and incidentally copied both by US President Franklin D. Roosevelt and Chancellor Adolf Hitler of Germany in the early 1930s, to force-feeding the economy by major public spending in socio-economic infra-structure facilities, cannot be applied blindly in the present world economics environment. It can work only in conjunction with micro-financing of locally manufactured goods.

“Services” industry in Pakistan is virtually ignored despite being one of the most important “tractors” that pull/push the economy forward. The blue-collar workforce is only recognized in the manufacturing sector even though in modern economies the ratio of a manufacturing sector blue-collar worker ratio is 1:2 with that of the “Services” sector. The “Services” sector worker uses his skill without using up scarce infra-structure facilities like electricity, gas, water, etc in the same quantum used by the worker in the manufacturing sector. Moreover the State spends much less in creating a job in the Services sector (US $ 1000-1500) than it does for commensurate slot in manufacturing (US $ 50000-60000). For countries with large population bases such as Pakistan, our incentive-oriented “Services” industry is a dire-necessity, they are presently heavily taxed and the present Prudential regulations does not allow virtually any loans/credits from financial institutions. Unfortunately our only really well developed “Services” sector is in smuggling, in that it props up Dubai’s economy.

Some banks have been falling over themselves in promoting consumer financing. National Bank of Pakistan (NBP), flush with liquid capital because of its affiliations/access to government and semi-government accounts, payment of public sector salaries, etc announced a “consumer financing” venture, following it up with sales promotion of a product that is mostly foreign in origin. In a manner NBP is thus supporting the economies of countries like Japan, Malaysia, South Korea, Taiwan, Hong Kong, etc almost directly. SBP should lay down clear guidelines for consumer products, anything not wholly or mostly manufactured in Pakistan should not get consumer financing, any automobile below a certain deletion level should not be given lease financing, etc. Similarly SBP should ensure that every bank has a significant percentage of its retail loan portfolio for house-building financing, particularly for apartment flats for the middle class.

But housing, automobiles, consumer goods, and services are not the only areas for concentration. Let’s concentrate in other areas where we have expertise, eg. Aviation. One is a proposed National Aviation Academy, why not a National Aviation University (NAU) with the Army Aviation School, Gujranwala Cantt as the core. One can use the airfields at Nawabshah, Hyderabad, Sukkur, Sibi, Rahimyar Khan, Faisalabad, etc, at least 10 different locations as aviation colleges, each equipped with 15-20 fixed wing aircraft, all manufactured at PAF Aeronautical Complex, Kamra. Those students who clear the flying aptitude test should go to the National Aviation University (NAU) at Gujranwala for 8 weeks of basic theoretical classes and on qualifying proceed back to various colleges for actual flying. With 30-40 flying instructors in each location, 300-500 flying instructor slots would be created country-wide, alongwith 5000 other aviation-related jobs in aviation education, engineering, communications, aviation safety, air traffic control, administration etc. And what about socio-economic support infrastructure? We have the instructors, we have the airfields, we can manufacture the aircraft, and students will also come from abroad, at least three for every local student who applies. We have the potential, do we have imagination to see what this economic activity will achieve? This represents but one example of what we lose by default because of our lack of imagination and innovation at the planning and/or implementation level.

For sustained economic revival there is no substitute to job creation, the sooner we get down to it, the better for Pakistan.


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