It’s the economy, stupid!

It’s the economy, stupid!

As the elections 2018 loom, the single most important issue that should command priority attention should be the economy

A slogan first pinned on a wall by the Clinton campaign team, during the presidential elections of 1992, has surely passed into history. The phrase, “It’s the economy, stupid,” is no longer limited to the American elections anymore and also has been a truism of Pakistani politics since long. The economy has served as a constant reminder that when it comes to winning elections, everyone should ignore the mudslinging, and the personalities, and remain focused on how the economy is faring. Unfortunately, the politicking that happens on the topic of economy remains an ill-informed and a mere shot-in-the-dark argument, although every political party’s manifesto agrees to grasp the economic reality faced by the country.

The economic landscape shows a grim reminder of what the country has been doing wrong for the past couple of years. With the census results coming out last year revealing the country to be two hundred and seven million people indicate a very high fertility and birth rate since the last census of 1998. In the given scenario Pakistan needs to grow at the rate of 8 to 9 per cent to create the number of jobs needed for the future. The UNDP also published its index report on the youth in Pakistan, and if we take these two together we know that Pakistan has an acute demographic boom and youth bulge — everyone knows about it, everyone speaks about it.

Two-third of the population is under the age of sixteen and therefore the country is looking at creating jobs at the tune of two to three million per year on a sustained basis for the next thirty years or so. If the population growth is not curtailed, Pakistan is possibly looking at a scenario of four hundred million people by 2047 when the country turns hundred; an apocalyptic situation for a country already starving on resources. So, 8 per cent growth rate is a minimum that Pakistan has to start achieving on a year on year basis, from now onwards till 2047, if you want to see per capita income rising from US $1680 to around US $2000.

Now the question that pops in everyone’s minds is how the country will achieve an 8 per cent growth rate. The World Bank suggests Pakistan considers working on the following two aspects:

1) Improve the investment to GDP or the investment rate, which stands at 15 per cent, up to 25 to 30 per cent.

2) Increase the Productivity rate, which is around 1 per cent, to 2 per cent. The productivity rate is the total manufacturing productivity that measures output, labour and capital.

To achieve these two goals, Pakistan needs to attract investments. Unfortunately, the uncertainty that looms within the country has given Pakistan the reputation of not being an investment destination. Everyone wants predictability, especially the private sector, who doesn’t want to be surprised with changes in the legislation, regulations and policy shifts that suddenly create uncertainty which then makes doing business challenging. This is part of the reason why Pakistan fell down three slots in the ‘ease of doing business’ index, which the World Bank conducts annually, from about 144 to 147.

The government of the Punjab and the government of Sindh, under the auspices of the Board of Investment, undertook some 70 plus reform actions, about 37 in Punjab alone, indicating that things can be done if only there is a will to achieve targets. Some of these reforms actions have been pending for almost six to seven years. It is to be understood that other countries in the world are also reforming their ease of doing business, so it’s a sort of a relative worldwide race which doesn’t mean that if a country achieves 70 reform actions it gets to the top. It has to continue doing it since the investment climate is a very dynamic field.

The next point about doubling the productivity is of critical importance, clearly affecting the Human Development Index of Pakistan, which needs an upgrade on a fast track basis. And this is not only about finding skilled people to be able to get the jobs and so on. This takes across an entire lifecycle, and for Pakistan, to compete in the 4th industrialisation process where automation and mechanisation is going to drive economies, not having skills to take advantage of it will be a disadvantage for the country. So, investing in the human capital will need urgent attention.

Second, is how to bring more women not only to the labour force but also as contributors. The gender disparity between men and women in the labour force is huge. There are 25 per cent of women in the labour force compared to 82 per cent men in Pakistan, and Pakistan is among the countries with the lowest female labour force participation. Similarly, in the field of entrepreneurship only 1 per cent of men do business in Pakistan and that pales in comparison with other countries. The only positive that can be gathered from the opportunities offered in the startup ecosystem over the past couple of years is that a lot of women have come forward and sort of broke through the proverbial glass ceiling. So this is something which if managed properly can provide more opportunities in the future.

The third is trading across borders which is critically important. Pakistan has yet to take full advantage of its geopolitical location and its neighbourhood to see how agriculture and agri-business could be expanded and modernised because China can take advantage of the agri-business in Pakistan.

Finally, while all the investment climate reforms and ease of doing business is happening, let’s not forget that Pakistan has a healthy 7 million diaspora around the world and are a major source of foreign capital inflows into the country. If we look at some of the countries that have done well in recent years, whether it’s China or the fast growing economy of Malaysia, diaspora has been an integral part of inbound investment.

So there are three broad investment clienteles that Pakistan has to look out for; the country’s own home-grown local businesses by giving them opportunities to expand, attracting the diaspora to invest in the country and last would be to attract large corporates from the world to invest in the country by providing them a conducive environment to grow. To attract them the country needs to create an enabling business environment with a predictable investment climate for the private sector. The country needs to boost investment to GDP, doubling it as quickly as it can. A productivity gain is needed to happen to which human capital is central. And finally look at re-imaging the whole country from the viewpoint of an investor.

As the elections 2018 loom, the single most important issue that should command priority attention should be the economy. Millions are under-employed and working people are barely holding their own. Surveys show the majority of Pakistani feels the country is moving in the wrong direction. We have never gained a competitive edge in global competition and this weakness is reflected in anaemic economic growth. It is time to ask the candidates to tell us how their policies will spur growth and empower working people.

“It’s the economy, stupid,” should become a mantra and part of the country’s political lexicon.

By: Khan Shehram Eusufzye

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