Re-engaging the Economy
The year 1995 has been a hard year for Pakistan. On the receiving end for most of it, the bad news in cricket and hockey has only been exceeded by the economy turning from bad to worse. While we pulled back a few winners in spite of the best efforts of the ruling regime in the last few days of the year, things are grim. Our investment in Afghanistan has become a major foreign policy disaster and we may have lost our special relationship with Iran in the process. Despite spectacular success in dealing urban terrorism crippling blows in Karachi, the lack of serious political initiatives has alienated the core of Mohajirs from the national mainstream. While she remains a great political fighter, the PM stands alone in her manhood among the shambles of an inept, inefficient and corrupt administration. Surrounded by atrocious advisors who overwhelm the few dedicated ones around her by doses of outrageous flattery and public displays of adulation, the Head of Government has only shown flashes of the brilliance she is capable of, and that too when her own survival is threatened. From time to time, she has come perilously close to going off the deep end, particularly because of histrionic displays at some public meetings. She has compounded her own problems by not carrying out a ruthless purge of her economic team, choosing loyalty to some rather questionable bureaucratic ability in super-session to the vital economic interests of the nation.
While Mr VA Jaffery remains a staid and steady manager without new ideas the only one of the PM’s economic management advisors who deserves plaudits is Dr Mohammad Yaqub, the Governor State Bank of Pakistan (SBP) and he is due to retire in a few months. His cautionary notes of advice have been repeatedly spurned by a cabal of bureaucrats and technocrats engaged in tinkering with the economy, he has shrugged off this non-cooperation and has cushioned somewhat the strict regimen proposed by the IMF for the country. To a senior eye-witness who saw him in action recently in Washington during the talks, he was the rock that stood between Pakistan and IMF retribution. In one quotable outburst he told the stunned IMF negotiating team, “Are you trying to destroy my country? In my many years in World Bank and IMF I have never come across more strict conditions than you are proposing!” One should build on the strong foundations that such individuals give to Pakistan, curbing the excess employed by those favourites who because they have ambitions for prized appointments like Governor SBP and President First Women Bank pay media hands payable money to undermine their credibility. As Euromoney and other knowledgeable financial publications have repeatedly noted, “the PM would do well by heeding the advice of the Governor SBP as he has no vested interest during his counsel.”
The economy requires short-term and long-term measures, among them (1) curbing expenditure (2) increasing revenue generation (3) prioritising expenditures (4) ruthlessly stamping out nepotism and corruption (5) reducing subsidy to Provinces and (6) positive management of available cash flow. One of the ways of curbing expenditures is for every government department and/or organisation to cut down on utilities such as use of (a) electricity (b) fuel (c) gas (d) telephone (e) travel and (f) unnecessary celebrations. Every small department must be given a stringent budget and the Head of that department made responsible for exceeding that budget. It is normal to walk into empty rooms having all the lights and fans on, the office occupant may only inhabit the office for a 2 hour period, the airconditioner remains on, so does the heater (g) The way Sui gas is burnt with abandon in our country is reflective of the mood for waste (h) The misuse of government transport has reached epidemic proportions. Every individual authorised a vehicle should be given a fuel ration depending upon projected official use, any excess should be paid for by the individual. A most unwelcome sight is official transport being used for families e.g children to school, wives for shopping, etc. The finest symbolic act on reducing expenditures was the Suzuki-isation of Pakistan by late PM Junejo. For a long time, the Army was the only institution that carried on the austerity programme. Perhaps it is time for the Army to again give a symbolic lead. Nowadays the name of the game is to go the whole hog in excess by possessing Pajeros, BMWs and Mercedes Benz, the impression given is that of an oil-rich kingdom overflowing with wealth instead of an impoverished nation determined to make every penny pay for its poor citizens. Excess must not only be curbed, it must seem to have been curbed in the public perception for any campaign to be truly successful (d) one of the greatest misuse is that of telephones for personal purposes or for unnecessary dialogue during official conversations. With the advent of Electronic (E) Mail, most telephonic conversations should be replaced by E Mail, regular audit should be carried out to focus on personal misuse (e) for unnecessary travel one should just look at either Lahore or Karachi and their wedding receptions etc on weekends. Most official luminaries will be seen “on duty” in attendance at these functions (f) as regarding unnecessary celebrations, these are self-explanatory, how many millions everyday are spent to “glorify” whoever are the rulers, many times a day, everyday of the year, somewhere? Unless we make every individual accountable for the excesses incurred on his/her behalf at (or without) his/her behest we shall remain a victim of excessive non-development expenditure.
We have to increase revenue generation, the obvious weak area is income tax, wealth tax, excise duty and customs duties. For the short-term, the focus should be on excise and customs duties. The best method is to appoint monitors from the private sector that have nothing to do with import or export to check malpractice. There is tremendous leakage of revenue collection at the airports and seaports on a daily basis, this can only be controlled by independent checking by outside agencies. It is necessary to streamline such an operation so that attempts to avoid customs and excise duties is minimized if not altogether curtailed. At the moment the campaign for revenue generation is only benefiting the corrupt officials as this gives them a Sword of Damocles in lining their pockets at the expense of the government. Private sector companies must be tasked to locate illegal wealth of these unscrupulous salaried class who have accumulated enormous assets (and make them pay tax for starters). Only vitally necessary development should be carried out, priority must be spelled out for non-development expenditure. We have also to cut out inefficiency and corruption, this is self-explanatory and needs no elucidation. Only by having honest, dedicated managers driven upwards by the merit system will we have a sound system of budget control, making every penny pay. e.g Horse and Cattle Shows do not need the Defence Services in Lahore to act as midwife and choreographer, that is NOT part of the Army’s mission, it is demeaning besides being counter-productive. For that matter the Navy organised water show in the DHA Marina Club was only done as an exercise in flattery at public expense, besides being a disgrace to the uniform it was a flat waste of money. The provinces must be made to increase their revenue generation so as to balance their budgets. Unfortunately our cash management at every level is atrocious with the result that at least one Province is in the red with the Treasury. The advent of computers should give us some control over day-to-day control of our liquidity position so as to give full value for money.
One of the major problems facing Pakistan’s economy is the flight of capital, most of it money “collected” illegally. A conservative estimate puts the amount of these illegal funds at almost US $ 5 billion over the past 2 years. For the economy this is a devastating loss. While accountability remains a pipedream, those who are really concerned about the crumbling of the economy should resort to sophisticated methods to ensure accountability. We should employ private investigation companies to unearth foreign assets and bank accounts but more than this we could find out the means through which the funds are sent abroad. Such huge volumes of money can only be transmitted regularly through conventional means, such means can be unearthed and interdicted. Obviously, if it is a bank it cannot be a nationalised bank, the foreign banks would also be loath to get involved in this as a regular exercise. So the particular financial institution has to be a privately owned bank or the “Hundi” route. Like money-laundering, this is the domain of drug-smugglers so we are close to a nether world. SBP can interdict to an extent but does it have the courage to do so out of fear that the enquiries may unearth big names? The economy cannot take anymore of this haemorrhaging, somebody has to bring in accountability or our national security will be permanently compromised. Such actions require courage and conviction, it is usually a lonely road strewn with landmines. Those who are interested that we seriously re-engage the economy have no choice, they have to stand up and be counted for the sake of accountability.
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