Published Date: Feb 26, 2018
Book Review: Pakistan’s agenda for economic reforms
The utility of ‘Pakistan’s Agenda for Economic Reforms’, a book recently published by the Oxford University Press, has been described as providing a ‘non-technical understanding of weak economic growth and performance of the public sector in Pakistan relative to that of peer countries’.
The write-up goes on to suggest that the book ‘serves as an interesting introduction to policymakers, journalists and civil society organisations interested in carrying out research and advocacy work as part of their social accountability efforts and attempts to improve economic governance in the country’.
According to the author, Dr. Vaqar Ahmed, a key point the book advocates is that the dividends from infrastructure and related developments under the China-Pakistan Economic Corridor (CPEC) programme will remain unrealised if Pakistan does not move towards expediting macro-level reforms that help competitiveness of private enterprise. Some pending structural reforms in the areas of economic governance are the key to growth and sustainability of micro, small and medium enterprises in Pakistan.
Once our private enterprises grow, it will be immensely important to enable them in becoming exporting entities. Pakistan’s export growth has been one of the lowest across South-Asia. This, however, also depends on improved trade relations with neighbours including Afghanistan, India and Iran
He goes on to say that once our private enterprises grow, it will be immensely important to enable them in becoming exporting entities. Pakistan’s export growth has been one of the lowest across South-Asia. This, however, also depends on improved trade relations with neighbours including Afghanistan, India and Iran.
The book says a lot more than what the publishers and the author have succeeded in encapsulating in their brief narratives. Indeed, it is a comprehensive anthology of the ailments that Pakistan’s economy has routinely suffered from through decades and the ways out of the quagmire. More specifically, it is in the area of coming up with solutions that the author has so meritoriously used both the strength of his research and his vast understanding of the economic complexities which have traditionally hampered Pakistan’s growth, helping us heave a sigh of relief that, after all, there could be a way out.
The broad issues covered in the book include reform, macroeconomic policy governance, tax policy and administration, public expenditure management, export competitiveness and economic corridors, and investment diplomacy and transit cooperation.
The key recommendations of the book encompass, among others, the following:
Reforming of sub-national public administration for improved service delivery in social sectors. This will help in improving Pakistan’s human development profile;
Strengthening the working relationship between the federal and provincial governments through a more strengthened Council of Common Interests (CCI) where the Planning Commission could act as the Secretariat to CCI;
Decentralizing non-relevant tasks managed by the economic ministries and attached departments at the federal level;
Restructuring and enhancing the role of trade promotion institutions in implementing policies for (export) competitiveness;
Expediting reforms for energy sector generation and distribution companies;
Undertaking administrative reforms at the Federal Board of Revenue (FBR);
Establishing a more strengthened relationship between the Federal Planning Commission (PC) and the provincial Planning and Development Departments so that bottom-up development planning and administration can be institutionalised;
Deepening the administrative and fiscal decentralisation at sub-province level;
Undertaking regular economy-wise regulatory impact assessment to rationalise (regulatory) burden on businesses, and
Implementing judicial reforms that facilitate businesses and dispute resolution.
If undertaken in earnest, these reforms would yield substantive dividends, including, but not limited to, the following:
Introduction of a progressive tax regime in Pakistan which is fair and just;
Improved efficiency and effectiveness of public expenditure in infrastructure and social sectors;
Focus on competitiveness alongside export promotion;
Improved trade and investment cooperation with neighbouring economies which, in turn, could also enhance dividends from CPEC, and
Generating productive employment and decent work for all.
In more specific terms, two critical issues which have been highlighted in detail in the book under review, among a host of others, include low tax collection and weak public accountability institutions in the country.
The tax collection in Pakistan as percentage of GDP is lower than Bangladesh, China, India and Indonesia. There has been no significant improvement in this regard in the past decade. The picture is further vitiated by a lopsided share of indirect taxes in the overall tax collection mechanism which reflects a weak effort to broaden the direct tax base.
This is also indicative of a phenomenon of the elites not used to paying taxes which is borne out by sequential figures made public from time to time. There has also been no effort to bring down taxes on international trade and phase out exorbitant excise duties.
Another factor which further proves the regressive nature of the overall tax collection effort is the rising share of revenues coming from imposition of various surcharges.
The other critical factor which has stymied the prospect of growth in the country is the weakness of public accountability institutions. A tenuous link between the accountability institutions and the regulators has also led to gross public exploitation.
The independence and integrity of most accountability bodies also stands compromised and there have been various complaints of interference in their working from government quarters including the interior ministry.
Similarly, weak support provided to accountability institutions by various national intelligence agencies has resulted in poor preparation of cases against perpetrators.
Like I said at the beginning, the book goes far beyond the usual plaudits that such work may customarily garner. It is like a concise history of Pakistan’s economy encompassing its past, present and future. But, it is for its future that the author, investing his commendable expertise and understanding, has outlined a corrective course that could bring it out of the chaos it has endured for decades. From institutional reform to structural adjustments, Dr. Ahmed has touched on a variety of components that could cure Pakistan’s economy and make it inclusive and vibrant over a short period of time.
Pakistan’s economy has been in shambles for a very long time, thus effectively thwarting efforts to attain any substantive level of relevance in regional and international domains. The author has come forth with a credible prognosis for curing a bulk of grave belittlements and put the country on course to attaining economic potency. A shift in the critical fundamentals, as very ably and professionally enunciated in the book, will constitute the ground on which could be raised a sustainable edifice of economic stability, progress and development.