Truly unlucky
There is a growing recognition amongst economists and political scientists that in many developing countries, an externally guided development effort has not been as effective as hoped. The fact is, the primary onus for prosperity is on the country itself. Development cannot be imposed with a prescription from outside. Pakistan is truly unlucky not to have come to terms with this notion.
Our story is one of gradual deterioration of state capability. This has coincided with an increase in policy complexity and uncertainty. Tackling these challenges requires a certain level of professional expertise which is beyond the prowess of a generalist bureaucracy.
Pakistan has increased its reliance on growing availability of external expertise to complement the administrative set-up. Independent think tanks, nonprofit organisations, consultancy firms, multilateral and bilateral partners have carved their own niche in federal and provincial policy work.
Policy in Pakistan is frequently guided by external counsel as evident in programme loans prescribing good governance and project loans advocating changes to rail, road and energy infrastructure. The country leans on outside resources to give credence to documents like the recent flood assessment or while drafting its laws to meet global standards. Technical assistance and capacity building missions have been frequent. Their focus has been to support prestigious organisations like SBP, FBR, etc.
The strategy of outsourcing research and policy work - as though it would solve our perennial issues - has been misplaced. Numerous tax reform projects have had a marginal impact at best. Pakistan is unable to devise proper capital gains or inter-generational wealth transfer mechanisms. Our worst failing is to willfully keep the retail and agriculture sectors out of the direct tax net.
Overall, the tax-to-GDP ratio for FY22 clocked in at an abysmal 10.2 per cent. Our performance has stayed constant around this unsatisfactory level since decades. A tax-to-GDP ratio of 15pc is considered the minimum threshold for governments to provide basic goods and services to their citizens and meet the Sustainable Development Goals by 2030.
Success, if any, has been viewed narrowly as achieving near-term programmed goals, rather than a meaningful structural change in the economy. Our inability to undertake much-needed surgery to treat underlying issues brings us to the IMF's door every few years - the current predicament being a case in point. Reeling under double-digit inflation, dwindling foreign currency reserves and a weakening rupee, this desperate nation is looking at reviving the stalled IMF programme as the only hope of seeing FY23 through without a default.
The premise that technical input is de rigueur is hard to disagree with. However, that does not absolve a country of its own responsibility to build in-house professional competence in key areas like finance, revenue, energy, privatisation and investment, among others. Pakistan has been unable to achieve this.
As countries outsource more of their functions in the name of specialist input, it leads to a fatal worsening of their governance structures. Such nations lose impetus to upskill their bureaucracy or add local expertise. This seems to have played out in Pakistan. Resultan t ly, waning capability and a low absorption capacity have be come core reasons for poor governance at all tiers in the country.
Decision-makers have had a lazy obsession with 'ideological necrophilia'. Venezuelan journalist and writer Moisés Naím coined this term for ideas that have been tried but found wanting. Del e gating policy work is one such idea.
Good policy is about good human resource. Pakistan needs to roll out a new 'capability playbook', setting out a structure to complement administrative bureaucracy with the right professionals. Some ideas to build expertise include allowing intake at all tiers of bureaucracy, specialised training of civil servants and incentivised pay structures.
The idea of capability building - policymaking in the 21st century - must lead us to wider engagement with multidisciplinary expertise within the country. The government can nurture linkages with universities to encourage research as a source for decision-making. Policymakers' liaising with the private sector can go beyond petty discussions on subsidy and distortionary utility pricing. Involvement of such expertise can have a snowball effect to influence key structural issues. We must not lose faith in our own capability.