By Riaz Missen.
While appreciating the government for bringing back economy from brink, the World Bank Group (WBG) President Jim Yong Kim, who recently visited Pakistan, has urged on the need to create more space for the private sector.
During his tow-day visit, Mr. Yong insisted on accelerating energy reforms, make improvements at the community level for health and education, and ensure that anti-poverty measures are effective at reaching poor people.
The World Bank has 26 investment lending projects under implementation in Pakistan committing $4.99 billion other than $5.6 billion, including $1.2 billion during the 2015 fiscal year. It wants the government to focus on quickly lifting the people out of poverty and make economic growth widely shared.
What Mr. Yong has suggested is what the spirit of democracy call for. The civilian regimes need to take care of consumers and let the businesses take care of themselves. The development agenda is meaningless if it is not guided by the spirit to advance human rights.
While Pakistan is geared to become a ‘genuine’ democracy and the political parties have to serve its backbone, the focus of economic development has to be the uplift of the teeming millions, who have been left out and marginalized as the country has gone through the process of structural reforms undertaken by the Musharraf regime.
Human indices are falling and incidents of extreme poverty are growing. The newly-born babies and mothers are dying of malnutrition but governments have no idea other than increasing the number of hospitals and enhancing supply of medicines. Thar in lower Sindh is the case in point.
The other issue worth mentioning is the heavy industry contributing to GDP with higher ratio by every passing year but not fulfilling environmental obligations and showing least respect for labour laws.
The Musharraf-led political set up had relied heavily on the international financial institutions (IFIs) to carry out structural reforms. While the fiscal deficit was taken care of, the economic managers undertook the course of economic liberalization, whereby the private sector had to take a leading role.
Alternatively, the government disposed off many public-run entities and its success yielded results with the energy, telecom and banking sector attracting huge foreign direct investment. But the job of privatization has been half-done.
Pakistan annually pumps $ 5 billion into the loss earning public enterprises. The burden is definitely shifted to the consumers. The process of privatization remained virtually stopped during the PPP’s tenure. The PML-N in 2013, when it came into power, undertook to revive process and complete it in three years against $ 6.6 billion loan from IMF.
In the post- structural reforms scenario, the government is not meant to run businesses but to hand over the job to the private sector. Keeping in mind this ‘rule of game’, implementation of environmental regulations and labour laws becomes the major responsibility of the government. The government has to facilitate consumers with the availability of cheap and quality goods; quality controls and regional trade is the key to this end other than bringing down the cost of doing business.
Instead of expanding the tax net and overcoming the losses incurred by the state-run enterprises (SOEs), the civilian regimes have been extracting more and more from kitchen items, energy and telecom products. That the indirect taxes remain the major source of its revenues signifies a criminal assault both on democracy and economy.
Since 2008, there is tendency among the governments to respond the pressure of the IFIs to cut down public expenditure by removing subsidies and enhancing revenues through taxes on goods with non-elastic demands. There should have been introduced austerity measures but look at the number of ministries and the budgetary allocations for presidency and the PM house.
That the GST stands as higher as 17% and the government is taxing petroleum products to the limit of 50% while the tax-to-GDP ratio is merely 10%, it is enough to put democracy and economy into peril. It is definitely not what IFIs like World Bank mean when they emphasize on inclusive and sustainable growth.
The alternative course certainly passes through privatization, expanding the tax net, spending more on social sector development (health and education) and most importantly widening the tax net through registering the unregistered businesses. Whatever the whole exercise yields, it must be kept in the mind that it is the consumer who will judge the performance of the government on the polling day.
For more information on Riaz Rissen: http://missen.blogspot.com
