A Key South Asian Na­tion

Southasia - - GUEST COLUMN - By Mahrukh A. Mughal

In the South Asian con­text, Pak­istan is the sec­ond largest coun­try. It is a pity there­fore that while other na­tions in the re­gion are achiev­ing goals of progress and de­vel­op­ment, Pak­istan is fast be­com­ing a coun­try that can be likened to a pa­tient af­flicted by mul­ti­ple dis­eases. The ogre of ter­ror­ism does not im­pact any other coun­try in the re­gion as se­ri­ously as Pak­istan and the coun­try’s econ­omy is a se­ri­ous cause for con­cern.

In fact, Pak­istan’s progress has been brought to a naught and the coun­try now faces se­ri­ous prob­lems con­cern­ing its fu­ture as it continues to face a wors­en­ing eco­nomic cri­sis – the mother of all prob­lems. The coun­try’s for­ward mo­men­tum seems to have come to a com­plete halt due to the

lack of a sta­ble econ­omy and the var­i­ous in­di­ca­tors em­a­nat­ing from it.

South Asia is home to well over one fifth of the world's pop­u­la­tion, mak­ing it one of the most pop­u­lous geo­graph­i­cal re­gion in the world. While Pak­istan is the sec­ond big­gest coun­try in this re­gion, it is also the one fraught with the most prob­lems and it is still one of the poor­est coun­tries in the world with many of its ci­ti­zens liv­ing in ab­ject poverty.

Pak­istan is, in fact, so prone to mal­func­tion that it faces al­most ev­ery prob­lem that re­stricts its progress – law and or­der sit­u­a­tion, en­ergy cri­sis, eco­nomic woes, cor­rup­tion, de­te­ri­o­rat­ing ed­u­ca­tional and health sys­tem, in­fla­tion, bad gov­er­nance, nepo­tism, etc.

When­ever a new po­lit­i­cal lead­er­ship comes into power in Pak­istan, the first thing it does is go around beg­ging for loans to the IMF and the World Bank and to other lend­ing in­sti­tu­tions. The cri­sis faced today is be­cause of the fis­cal in­dis­ci­pline that has been prac­ticed over the past years. Pre­vi­ous gov­ern­ments did not do what they had promised to do and, as a re­sult, Pak­istan continues to de­pend on for­eign aid which in­creases the na­tional debt and this se­verely ag­gra­vates the eco­nomic cri­sis. Today, Pak­istan faces an in­ter­nal loan of more than 14000 bil­lion ru­pees and an ex­ter­nal loan of more than 60 bil­lion dol­lars.

Pak­istan may be one of the rich­est coun­tries in the world in terms of

nat­u­ral re­sources such as coal, oil, gas, min­er­als, agri­cul­ture, la­bor, skilled man­power, en­ergy, ge­og­ra­phy, etc. but it is also one of the poor­est coun­tries in terms of man­age­ment of these re­sources. Ef­fi­cient man­age­ment of re­sources is vi­tal to achiev­ing na­tional pros­per­ity. The coun­try’s po­lit­i­cal lead­ers should learn how to use their re­sources so that the coun­try may pros­per and does not have to de­pend on heavy loans from the world’s fi­nan­cial bod­ies.

Today, the coun­try’s eco­nomic de­vel­op­ment is stunted be­cause for­eign direct in­vest­ment is dis­cour­aged from com­ing into the coun­try due to the pre­vail­ing law and or­der sit­u­a­tion and small busi­nesses find it im­pos­si­ble to fend with the ''start-up-cost'' be­cause of cor­rup­tion. The im­por­tance of an in­fra­struc­ture is im­per­a­tive for sus­tained growth. It plays a piv­otal role in de­vel­op­ment and is a ma­jor con­trib­u­tor to the growth of a coun­try. Pak­istan is ideally lo­cated and while it can use its in­fra­struc­ture for its own growth, it can also help other coun­tries in this and ad­ja­cent re­gions.

In­vest­ment is very im­por­tant for any coun­try’s eco­nomic sta­bil­ity. But it is very un­for­tu­nate for both lo­cal and for­eign in­vestors that they find the in­fra­struc­ture very poor in Pak­istan. Be­sides the se­vere cri­sis in terms of prime in­puts like elec­tric­ity, gas and wa­ter, the jus­tice sys­tem is bad in the coun­try, cor­rup­tion is ram­pant and there is no end to the wors­en­ing law and or­der sit­u­a­tion. In these cir­cum­stances, lo­cal en­trepreneurs are mov­ing their busi­nesses to var­i­ous re­gional coun­tries such as Bangladesh, China, Sri Lanka, etc. Sim­i­larly, for­eign in­vestors do not find a fa­vor­able en­vi­ron­ment to put their bil­lions in the coun­try. This re­duc­tion in in­fra­struc­ture in­vest­ment in turn causes more poverty and leads to eco­nomic in­sta­bil­ity.

Another fac­tor that adds to the coun­try’s eco­nomic prob­lems is that of for­eign re­mit­tances from over­seas Pak­ista­nis which is a very im­por­tant

source of cap­i­tal for a de­vel­op­ing econ­omy. Un­for­tu­nately, the coun­try pro­vides hardly any or no in­cen­tive to re­mit­tance senders. What­ever in­cen­tives are given are mis­used by in­sti­tu­tions and in­di­vid­u­als which adds to the eco­nomic in­sta­bil­ity.

Tax is the back­bone of any econ­omy. While Pak­istan is an agri­cul­ture-based coun­try, there is no tax here on agri­cul­tural pro­duc­tion. Seen in the eco­nomic back­drop, it is im­por­tant to state here that the coun­try has the low­est tax-to-GDP ra­tio in the world, with only 0.9% of the peo­ple pay­ing taxes. The tax­a­tion sys­tem is char­ac­ter­ized as be­ing un­just and dis­crim­i­na­tory and is un­able to gen­er­ate enough rev­enues to break free from the shack­les of the IMF and other donors. The amount of tax eva­sion in the coun­try as es­ti­mated by the NAB (Na­tional Ac­count­abil­ity Bureau) as be­ing Rs. 7 bil­lion per day. The cor­rup­tion fig­ure comes at a heady Rs. 12 bil­lion per day and is grow­ing at an unchecked pace. The Fed­eral Board of Rev­enue has mis­er­ably failed in its duty to de­liver and it is re­ally un­for­tu­nate that the coun­try has such a cor­rupt, in­com­pe­tent and in­ca­pable FBR with a weak tax col­lec­tion ma­chin­ery and its in­abil­ity to col­lect taxes from agri­cul­ture.

This is a coun­try of over 18 crores where only 27 lakh peo­ple ac­tu­ally pay in­come tax. Ac­cord­ing to the new tax­a­tion poli­cies, only those earn­ing Rs. 3 lakhs or more an­nu­ally are taxed. Agri­cul­ture is the dom­i­nant sec­tor and con­trib­utes 21.4 per­cent to the GDP, while it em­ploys 45 per­cent of the coun­try's labour force and con­trib­utes in the growth of other sec­tors of the econ­omy but it is not taxed. In these cir­cum­stances, eco­nomic sta­bil­ity would not surely be a far cry.

The im­port and ex­port sec­tor too is ad­versely af­fect­ing the coun­try’s eco­nomic health. Pak­istan needs to greatly in­crease its ex­ports through uti­liza­tion of all available re­sources. In fact, ex­porters are us­ing le­gal chan­nels for money laun­der­ing as

they re­ceive money through for­mal bank­ing chan­nels against ex­port or­ders of less worth and for tax ex­empted con­sign­ments. Ac­cord­ing to an of­fi­cial, this mafia is so strong and in­volves such in­flu­en­tial per­son­al­i­ties that the rel­e­vant de­part­ments and au­thor­i­ties are un­able to en­force money laun­der­ing laws against them. The coun­try is im­port­ing goods of high worth and pay­ing the cost in dol­lars since these goods come under the ex­emp­tion regime. As a re­sult, Pak­istan is fac­ing a heavy trade loss of 20 bil­lion dol­lars. The trade deficit only in July 2013 was PKR 172,754 mil­lion.

The fac­tor of cor­rup­tion is a com­plex one and though cor­rup­tion is present in all other South Asia coun­tries but in Pak­istan it is an es­pe­cially hurt­ful so­cial, po­lit­i­cal and eco­nomic phe­nom­e­non that un­der­mines demo­cratic in­sti­tu­tions, slows eco­nomic de­vel­op­ment and con­trib­utes to gov­ern­men­tal in­sta­bil­ity. Many big loan de­fault­ers ex­ist in Pak­istan who bor­row bil­lions from banks and then de­fault. The Pub­lic Ac­counts Com­mit­tee es­ti­mates that the num­ber of loan de­fault­ers has reached more than 1500. Ac­cord­ing to the Con­sti­tu­tion of Pak­istan, a fi­nan­cial dis­pute can­not be stayed by a court for more than six months. There are a large num­ber of fi­nan­cial cases in Pak­istan that have been stayed by the courts since the 1990s, pend­ing de­ci­sion.

Pak­istan is a ma­jor South Asian coun­try and a proud mem­ber of SAARC but it is also a coun­try where cor­rup­tion, ter­ror­ism, nepo­tism, in­jus­tice, rob­bery, murder and gam­bling are so­cial evils with no answers. The coun­try must find the right answers if it is to rise above its eco­nomic and so­cial ills and move for­ward as a mod­ern and pro­gres­sive na­tion – some­thing that it is com­pletely ca­pa­ble of.

The writer ap­pears reg­u­larly on TV talk shows. She writes on pol­i­tics and eco­nom­ics in lead­ing pub­li­ca­tions.

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