The favourite statements or slogans to divert attention from real issues and woo people during the election period to vote for this party or that: “We will bring the growth in double digits. We will bring in FDIs. We will create employment opportunities. We will provide housing for poor. We will develop a tolerant and talented society. We will alleviate poverty.” By now it is obvious; it very much sounds like a manifesto of a political party. Those who will cry these words out in a more enthusiastic way will surely win the elections. Fair enough! This is how elections are fought. But what is not fair is that our policy makers have also relied on similar statements without feeling the need to explain one critical question: how will they make all this happen?
Well some might already be thinking of ways the government can bring this change. Many would know for sure that all this can not happen in the parliament’s lifetime. Or some may be thinking that some of these may be possible probably by initiating various mega projects, focusing on trade and not aid, giving subsidies to lets say textile sector, and so on. Unfortunately we do not have enough money for the mega projects, developed countries prefer to give aid than removing trade barriers to foreign goods and we have been giving subsidies to various sectors for the last six decades, but they have still not developed enough to sustain themselves without needing financial help.
In recent conferences organised by the Planning Commission to debate on the New Development Approach (NDA) being developed internally, some many interesting questions were raised by civil society, donor agencies and the Planning Commission itself. Just to give you a taste of it let me state a few over here:
Everyone talks about promoting public-private partnership but has anyone pondered on what does it mean? Or do we have set rules defining public-private partnership necessary to send some sort of a signal to the private sector?
We often say that the government should do this and that. But who is the government and what exactly should its role be?
One way is to keep looking for all these answers which we might never find given inefficient bureaucracy, frequent changes in political setup and deficit of constructive thinking. Second is to get the government out of all the sectors through deregulation and privatisation and let the markets work on competitive basis. At least going with the latter option, we would not have to waste time in finding incomplete answers.
To ponder a bit more, let’s focus on our current growth cycle. We get foreign aid which gets spent on fiscal incentives leading to rapid growth. Now when we should introduce market reforms we prefer to relax and wait for the fiscal pressure to build up, which when gets coupled with some external shock bringing us back to where we started from. Making foreign trips to look for financial aid! Honestly, it sounds more like our CRISIS CYCLE? I will leave it to the readers to decide.
YES, some of you are right. If we replace aid with more consistent investment, we might manage to move out of this low level equilibrium trap. But why should anyone invest in our market which is marked by government presence in all the sectors? This is not all, inefficient infrastructure and law and order, unskilled workers and acute energy shortage are enough to keep the investors away. Furthermore, would you like to compete against Pakistan Railways which is also responsible for devising rules governing railway business in Pakistan? Or what about the aviation industry where the national carrier gets preference in route allocation? In energy sector, we have been trying to resolve circular debt for last three years. How is it even possible to achieve that when the sector is not being allowed to charge enough to cover its cost? Similarly, why shouldn’t our refineries decide the price themselves? Can our government determine the prices more efficiently than the markets? Looking at our history, governments have always been quite determined to outsmart the market. So far the results have been a bit disappointing for the public but perhaps stock brokers can learn a trick or few.
These are some of the important issues which NDA tries to resolve. It offers private sector led growth through well functioning deregulated markets, software development, rezoning cities, community participation and useful connectivity. But before we move towards implementation, we really need to make our mind if this is what we want or are we better off sticking with the old model?
and what's the strategy? I personally feel insecure when my government talks about deregulation. We try to hide our ills by burdening the private sector and expect them to do the welfare of the people knowing that private sector is always driven by the desire of greed and money. We see in our education sector, there are several universities which are giving degrees for peanuts....even they have a regulator like HEC.
ReplyDeleteWe all know how MNCs come into our land, exploit our resources and run away, why don't we glance at what is happening in Central Asia (The New Great Game), where a host of powers including regional are vying for the precious resources and these Central Asians remain uneducated and under developed even though they have all the resources.......
well the strategy does not talk about deregulation as per your understanding. yes there needs to be regulation but that regulation has to be development friendly. it should not become an obstacle but play a supportive role. One example is that of telecom sector. were the consumers better off before privatization or afterwards? looking at the telecom prices, I would say now.
ReplyDeleteas per dealing with cartels/monopolies, you need not be a market player but require a strong regulator in the form of regulatory bodies such as competition commission, PTA etc.
why do we still have cartels despite having numerous regulatory bodies? well simple answer is that we never strengthened them and sometimes their own organisational structure is contrary to promoting competition and fighting cartels.
about your argument against MNCs coming and stealing national wealth. it is a valid argument depending on the terms of contract. but if you do sign a creative contract and ultimately secure transfer of technology along with skill development, direct and indirect employment creation, royalty, taxes, and value added products then by all means its a worthy contract.
I agree with Ahmed. When the private sector is willing to take on the burden, why should the government unneccessarily burden the poor tax payers?
ReplyDeleteThat's a pretty idealistic approach regarding private sector. You can't invite them here without giving them some concessions. By the way I never say that before privatization of telecom sector, everything was great, it never was and yes it got a boom after privatization. But one thing we always forget that we have sold our strategic assets to foreign companies. Etisalat and other companies can tap all our conversations including our influentials, where is my privacy?
ReplyDeleteWhat we need to discuss here is that the sole purpose of the state is welfare of its nationals. It is only a government which can provide the relief rather than private sector (remember IPPs tariff etc). If a government is unable to fulfill that duty then there is no need to stay in charge. I pay my tax to government, not to any capitalist.
Let's put it that way, curb the corruption and minimize the expenditures, you save loads of money and then pull your socks off to strengthen the public sector corporations. If a government can regulate then it can also do business.
@Saqib
ReplyDeleteStrategic asset if not serving the people will ultimately loose its relevance. may be PTCL was strategic but what if it would have died its own death due to in-efficiency?
About IPPs charging higher rate: well if you go back to 2007, government was paying 30% of your electricity bill through subsidies. one cant expect the same from the private sector. similarly one cant expect such an approach from the government either. After all who in this country pay 30% of his/her overall income in taxes (direct + indirect).
its much easier to say that the govt should reduce expenditure. but how? following are the possible ways:
- remove the subsidies (higher oil/gas/electricity prices).
- fire additional staff in government offices.
- privatize loss making state enterprises.
- reduce corruption (please look at my following post to know my views on how to reduce corruption)
I have tried answering your other questions in one of the posts under the following article: http://growpak.blogspot.com/2011/02/answering-critics-new-growth-strategy.html
lets keep our discussion there.