Good governance has been the term thrown around quite often, both in documents and conversations. Governance is an important topic, especially important for developing countries which need guidance and better management not only to deal with their many crises (such as corruption, inflation, political uncertainty, natural disasters and terrorist attacks), but also to increasing their productivity of labor and capital and achieve growth and development. But somehow in Pakistan, “good” governance has been reduced to tax breaks, subsidies to large corporations and arguments about the definitions and measurements of corruption. And since these have been going on for a while, their results (or the lack thereof) are apparent.
While most countries cite market failure as the reason behind inefficiencies, Pakistan is one of those countries in which government failure seems to be the bigger problem. Through corruption and complicated procedures, the government has hurt more than helped the markets in Pakistan. An average of 10 procedures are required just to set up a business spanning an average of 21 days, whereas in Singapore 3 procedures are required spanning 3 days. Given such high time costs and monetary costs of starting a business, a large number of businesses operate informally (i.e. most of the time illegally) which results in lower tax collections for the government which further results in drastic measures such as the RGST which result in further uproar.
How about trying a different approach with governance? With its new growth strategy, the Planning Commission is trying a different way of dealing with growth in Pakistan by trying to get the government out of the functioning of the markets- letting the markets function on their own, with minimal government involvement.
Pakistan has already experimented with privatization and deregulation, and quite successfully. Privatization of PTCL helped reduce costs for businesses by almost 65% through facilitation of communication, trade and contract enforcements. How about trying the same for other important business-related industries and transportation agents, such as PIA and Pakistan Railways? Not only are these the hubs of overstaffing and underachieving, they are monopolies in their sectors stopping other private companies from doing well in these sectors, while also aggregating losses of Rs. 76.6 billion and Rs 86.7 billion respectively,.
And the private sector is more than capable of handling things on its own. Sialkot is an example of a city where private sector has shown that they don’t need a lot of government intervention by showing initiative and taking over the projects that are traditionally government owned and operated. Sialkot entrepreneurs made their mark not only in Pakistan but in the region by constructing the first-ever private-sector Dry Port in Asia in 1984 followed by the first private-sector airport (Sialkot International Airport) in South Asia in 2003. Sialkot also boasts of a private-sector Export Processing Zone (EPZ) and the Sialkot businessmen under the Sialkot Chamber of Commerce are also collaborating with the federal and provincial governments in improvement of roads through provision of half the funds. These entrepreneurs realize that they are the main beneficiaries of such projects and decide to take matters into their own hands rather than waiting for government to help them. Why can’t entrepreneurs in other cities follow Sialkot’s example and collaborate with their Chambers of Commerce to minimize government intervention and carry on projects on their own?
Over the past many years, the government’s tactics of state control and regulation have failed in giving Pakistan the development and growth it needs. Government run companies are regarded as the most corrupt and the public sector has made a reputation for itself in being slow and inefficient. I think it is about time for the government to get out of the markets and let the markets and businesses function mostly on their own. The businesses also need to show some drive and try to take steps themselves rather than waiting for government funding and assistance. The New Development Approach of the Planning Commission is seeking to build a synergy between better markets and better governance to deliver productivity, growth and better public service to the people of Pakistan. It hopes to promote reform and foster efficiency in the government itself as well as in cities, markets and communities. Maybe this kind of new focus is what the economy and the country need. After all, we couldn’t possibly do worse than what we are already doing.
An edited version of this article was published in Dawn, February 7th, 2011
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