It doesn’t take a genius to fix the economy
In the late 17th century, Swiss mathematician Johann Bernoulli presented a formidable challenge to his contemporaries: solve the intricate brachistochrone problem within six months.
Due to its complexity, none were able to solve it within the given time frame. At the request of esteemed figures, including the German polymath Gottfried Leibniz, Bernoulli extended the deadline to eighteen months. Then, one fateful evening, by 4 PM, the challenge reached Isaac Newton. Astoundingly, Newton solved the brachistochrone problem and sent the solution by post the very next morning.
Do Pakistan’s economic challenges rival the intricacy of the brachistochrone problem, necessitating a genius for resolution? Is the convoluted nature of the nation’s economy beyond the grasp of the average citizen, requiring an intellectual giant akin to Newton for its unravelling? Unquestionably, the answer is no.
Engage any well-informed Pakistani in conversation, and they will pinpoint the issues at hand, even in the absence of formal economic training. Approach anyone with some professional experience and a rudimentary grasp of economics, and they will likely offer solutions as well. Indeed, practically every reader of this publication is probably well-acquainted with the country’s economic woes and will have ideas on how to put Pakistan on the right track.
It’s well known that a major issue in Pakistan is the country’s struggle to collect enough taxes. A report from the World Bank revealed that the tax-to-GDP ratio in Pakistan fell to a disappointing nine per cent in June 2023, down from 13pc five years ago, indicating that the situation is deteriorating.
The answers to our economic issues are well within public knowledge but what is needed is a strong political will and administrative transparency
Ask any salaried individual, likely having recently filed their annual tax returns with the Federal Board of Revenue, and they’ll provide a clear picture of the issues at hand. They’d likely share their frustration about consistently paying their fair share while many others don’t.
In the last financial year, the salaried class contributed 200pc more in taxes than both exporters and retailers combined. They’d argue for expanding the tax base to boost revenue rather than overburdening the already compliant.
The troubles of state-owned enterprises such as Pakistan International Airlines (PIA), Steel mills, and power distribution companies are widely known. It’s clear to everyone that these loss-making organisations are draining the country’s financial resources. The situation with PIA has become particularly dire, resulting in the cancellation of over 500 flights in just about two weeks due to unpaid fuel bills. Clearly, privatisation or innovative financial strategies are needed to lift this burden from the taxpayers.
Talk to business owners who rely on imports from China due to our country’s limited industrial capacity, and they will likely bring another important issue to light. They’ll point out that for decades, successive governments have neglected serious efforts towards industrialisation.
The existing business climate, far from being supportive, poses formidable challenges to several industries, including oil refining, pharmaceuticals, and telecommunications.
A stringent and backward regulatory framework, price controls, bureaucratic obstacles, unfavourable policies, and unjust competitive practices have hindered the performance of sectors like these. Such conditions have not only hampered growth but also deterred potential investors.
The oil refining sector, for instance, has been a long and painful tale of governmental neglect and policy inertia. This sector has spent years trapped under the weight of obsolete policies, desperately needing strategic direction and revitalisation from the government.
It took the influence of Saudi Arabia, keen on developing an oil refinery in Pakistan, to finally jolt the policymakers into action, culminating in the recent roll-out of an updated oil refinery policy.
Unsurprisingly, under these circumstances, the existing manufacturing base has dwindled. According to data from the Finance Ministry’s latest Economic Survey, the manufacturing sector’s contribution to Pakistan’s GDP fell from 13.6pc five years ago to 12.01pc in the last financial year.
Despite a growing labour force, increased urbanisation, and improved connectivity, policymakers have struggled to cultivate a conducive environment for the manufacturing sector’s growth.
Pakistan’s manufacturing sector predominantly churns out low-value-added products, heavily dependent on imported inputs. For building a thriving industrial landscape, there’s a pressing need for enhanced infrastructure, stronger support and better services from the banking sector, a more skilled workforce, and policies that promote a diversified manufacturing base.
Policies are also needed that encourage investments in research and development, adoption of advanced technologies, and a shift towards producing higher-value products. Numerous business owners, professionals, industry experts, analysts, and economists have reiterated these solutions on various platforms, underlining that this insight is not a new revelation.
Several issues hamper the country’s economic landscape, but these are not insurmountable problems requiring a genius for resolution. Unlike the brachistochrone problem that demanded Newton’s brilliance, the answers to our economic issues are well within public knowledge.
What is needed are strong political will and administrative transparency. Addressing these areas with determination and consistency could pave the way for a more stable and prosperous economic future for Pakistan.
The writer is a corporate consultant specialising in business and economic issues.
Email: sarfarazis@yahoo.com.
X (formerly Twitter): @sa_cubes
Published in Dawn, The Business and Finance Weekly, November 6th, 2023