Pulls and pushes

The Pak Banker - - 4EDITORIAL - Af­shan Subohi

THE gov­ern­ment has cre­ated a fo­rum com­pris­ing four key eco­nomic min­istries to co­or­di­nate and unify ef­forts to boost slug­gish pro­duc­tion and fall­ing ex­ports. The growth trends in these base ar­eas of the econ­omy are not aligned with what the Pak­istan Eco­nomic Sur­vey has de­scribed as 're­mark­able achieve­ments of FY14-15'.

The Cab­i­net Com­mit­tee on Pro­duc­tion and Ex­ports will be headed by Fi­nance Min­is­ter Ishaq Dar and in­clude the min­is­ters for com­merce, plan­ning, tex­tiles, in­dus­tries and pro­duc­tion, and na­tional food se­cu­rity. The par­lia­men­tary sec­re­taries of these min­istries are also the com­mit­tee's mem­bers.

Fed­eral Fi­nance Sec­re­tary Dr Waqar Ma­sood dis­missed ap­pre­hen­sions re­gard­ing the cen­tral­i­sa­tion of the de­ci­sion­mak­ing process as base­less

When con­tacted, Fed­eral Fi­nance Sec­re­tary Dr Waqar Ma­sood, who has served in var­i­ous lead­ing po­si­tions in the eco­nomic team of mul­ti­ple gov­ern­ments over the past 20 years, was quick to re­spond: "the com­mit­tee will co­or­di­nate the work of all the in­cluded min­istries, and pre­pare and co­or­di­nate their plans for pre­sen­ta­tion to the prime min­is­ter. It is in­tended to give a new fo­cus to pro­duc­tion and ex­ports.

He dis­missed ap­pre­hen­sions re­gard­ing the cen­tral­i­sa­tion of the de­ci­sion­mak­ing process as base­less and re­it­er­ated that "it is a fo­cused at­tempt to tackle some of the emerg­ing chal­lenges in the in­dus­trial and ex­ports sec­tors".

Kam­ran Mirza, who leads the Pak­istan Busi­ness Coun­cil (a busi­ness pol­icy ad­vo­cacy plat­form), termed the cre­ation of the new fo­rum a step in the right di­rec­tion.

"We at the PBC are con­cerned about the stag­nant eco­nomic base and the lag­ging ex­ports. The coun­try needs a co­he­sive eco­nomic pol­icy that gels, as the pulls and pushes be­tween gov­ern­ment de­part­ments and min­istries do not bode well for progress. The gap be­tween the po­ten­tial and per­for­mance of the econ­omy is huge. It is an is­sue that needs spe­cial at­ten­tion of the pol­i­cy­mak­ers," his re­sponse was gen­er­alised.

The re­newed fo­cus on ex­ports and pro­duc­tion comes af­ter the tardy per­for­mance of agri­cul­ture and in­dus­try dur­ing FY15. The lack of in­vestors' en­thu­si­asm con­tained agri­cul­tural growth to 2.9pc and in­dus­trial growth to 3.6pc, while large-scale man­u­fac­tur­ing went up 2.5pc against the tar­geted 7pc.

The busi­ness com­mu­nity ended up ac­tu­ally ex­port­ing less than be­fore. The coun­try's ex­ports pro­ceeds fell by 3.6pc to $24.2bn, against $25.1bn in 2013-14.

Nonethe­less, there were some pos­i­tives as well. Of­fi­cial data for FY15 de­picts in­fla­tion to have reached a 12year low (6pc), while the in­ter­est rate de­cel­er­ated to a 42-year low (7pc) and the cap­i­tal mar­ket cre­ated new records of ro­bust per­for­mance; the KSE-100 In­dex gained al­most 4,700 points to shoot up to over 34,000 points.

The coun­try also struck a land­mark deal on the China-Pak­istan Eco­nomic Cor­ri­dor in the last fis­cal, while the IMF is­sued favourable eco­nomic health re­ports. Un­em­ploy­ment dropped to 6.2pc and the cur­rent ac­count deficit nar­rowed 27pc to $2.28bn on the strength of re­mit­tance in­flows and the drop in the cost of oil im­ports. As for­eign ex­change re­serves im­proved, the ex­change rate achieved rel­a­tive sta­bil­ity.

But the con­ver­gence of these pos­i­tive fac­tors seems to have failed to con­vince lo­cal busi­nesses to in­vest in ca­pac­ity ex­pan­sion and new projects to widen the pro­duc­tion base of the econ­omy.For­eign in­vest­ment also de­clined.

Busi­ness­men and cor­po­rate ex­ec­u­tives blamed the gov­ern­ment's poli­cies and their in­ef­fec­tive im­ple­men­ta­tion for the down­ward trend in man­u­fac­tur­ing and ex­ports. The dis­jointed agenda of mul­ti­ple over­lap­ping min­istries and de­part­ments fur­ther com­pro­mises the qual­ity of gov­er­nance. But the big­gest is­sue that many busi­ness lead­ers point out is the rul- ing party's ap­proach to re­solv­ing prob­lems.

"They are al­ler­gic to the idea of de­vo­lu­tion of au­thor­ity. When the de­ci­sion on ev­ery sum­mary has to be ap­proved by Ishaq Dar him­self, de­lay is the nat­u­ral out­come. The cur­rent fast-paced world can­not wait for the fi­nance min­is­ter, so the de­ci­sions are ei­ther de­layed or ap­proved di­rectly by Prime Min­is­ter Nawaz Sharif if the rel­e­vant fed­eral sec­re­tary has di­rect ac­cess," a textile ty­coon of Punjab said.

"I don't see how the cre­ation of another com­mit­tee, headed again by the fi­nance min­is­ter, can help. And it would be re­duced to a mere de­bat­ing fo­rum un­less he chooses to al­low his col­leagues to fully par­tic­i­pate in the eco­nomic de­ci­sion-mak­ing.

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