It’s always the economy, stupid

Shakir Husain

It’s August and finally Mr Musharraf has called it a day and decided to spare the nation and himself a drawn-out impeachment drama which would have gone through. On Wednesday the deadline for the judges’ issue comes up and hopefully, one way or the other, even that will be resolved. And now to the hard work – the economy, inflation, the power crisis, the food crisis, unemployment, infrastructure, education, and all the problems that average Pakistanis are facing and hope their elected representatives will address for them. For the past six months they have been patient, resilient, and supportive, but that patience is running thin. The PPP and PML-N have a responsibility to their constituents and to the 160 million people of Pakistan to address these issues. In a populous country like Pakistan the “core” issue is, and always has been, the economy, and while the people may get temporarily distracted by secondary issues, the bottom line will always be roti, kapra and makan as Zulfikar Bhutto astutely understood early on in the game.

To manage an economy like Pakistan cannot be an easy thing, given the fissures in our economic structure, the huge undocumented economy, and a small tax base as being some of the highlights. But nobody ever said governance was going to be an easy thing. Managing an economy like Pakistan requires an academic understanding of the issues and having a deep grasp of “real world” dynamics – not one or the other. In addition, the finance minister needs to be able to speak the language of the donor agencies and nations. It’s a game with high stakes and you have to know how to play it. Investors, donors, and the business community like continuity, maturity, and stability – if not all three then even the perception that the three exist will do. The scorecard for the past six months hasn’t been all that good. Ishaq Dar, the first finance minister, went to a donor conference in New York and declared that the books had been cooked by Shaukat Aziz & Company. And while that might be true and good for domestic consumption it’s not something you want to tell people outside the proverbial house because the losers weren’t Shaukat Aziz and his cohorts but the people of Pakistan. When Palaniappan Chidambaram was appointed finance minister in India’s UPA coalition government he chose his words very carefully so as to not alarm investors and donors. Rather than rubbish the previous BJP government, he merely said that the UPA government would change direction – nothing more and nothing less. The message was delivered, yet there was no drama, no hysterics, and, to the benefit of the Indian people, no negative reaction.

Between Ishaq Dar and Naveed Qamar, neither has inspired confidence for local or foreign investors/businesses. What’s sorely missing from the whole equation is the cunning plan. What’s the roadmap? What’s the strategy? What’s the Government going to do and more importantly how will they finance the “plan”? The free-fall of the US dollar is largely due to the perception that the government is sitting on its behind and not doing anything. Rumours of removing the State Bank governor because she is not doing as she is being told do not help matters. State Bank governors need to be impartial and independent for there to be confidence in the financial sector, so it would be best to leave her alone. Massive capital flight is being cited and we can see it, but it should be kept in perspective. Over the past ten years, $15 billion has flowed from Pakistan to the real estate industry in Dubai – and, yes, that’s billion. So it’s not something which started just now – recent events and uncertainty may be accelerating the process, which is not a good thing at all. Ridiculous steps like setting a lower lock at the Karachi Stock Exchange did nothing to boost investor confidence and everyone rushed to sell and cash out of the market. If the powers that be had just let the market fall in a few trading sessions it would have found its feet. Alas, a harebrained scheme was introduced which was completely bizarre and every local and foreign punter wanted to cash out and run. Who lost out? Not the chairman of the SECP but the small investors, shareholders, and corporations of Pakistan. Reactive kneejerk measures are counterproductive and show a lack of imagination, experience and maturity. None of which helps the perception of stability, opportunity, and potential profit.

Pakistan’s business community is one of the least effective pressure groups known to mankind. Rather than collectively bargain and take positions to promote a better business environment for the entire economy, most choose to bargain individually and act as sycophants to the rulers of the day. A delegation of the Chambers of Commerce is off to see Asif Zardari this week and I hope that they will be able to let him know just how critical things are for the business community at this stage. It is amazing to see just how far those who are sitting in the government currently have let things slide, and how quickly. What is more disturbing is the absence of any sort of cohesive plan which can be shared with the people. It’s not enough to keep repeating that international food and fuel prices are at an all-time high; rather, what are we going to do and how will we pay for everything? Rather than letting rumours run the economy, it is time to get down to some serious work and building an economic team which inspires confidence. Politicians should be aware that a flailing economy means flailing kickbacks. No deals equate to no tasty treats. And after paying 60 to 100 million on the election campaign that just seems like a bum deal to me.

The writer is an entrepreneur and business consultant. Email:

Source: The News, 25/8/2008

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