Stuck in Low Economic Growth By Dr Qaisar Rashid
Issued at the beginning of this year, the United Nations World Economic Situation and Prospects report for 2024 outlines a grim economic outlook for Pakistan. The report projects a modest GDP growth of 2 percent in 2024 and a slightly improved 2.4 percent in 2025.
The report is both alarming and challenging. Alarming in the sense that, given the population growth rate of around 2 percent per year, the projected net economic growth would be almost zero. That is, population growth would be offsetting economic growth. Challenging in the sense that Pakistan has to stand aware of the economic challenges coming ahead before Pakistan can claim that it was caught unprepared.
To come out of the shackles of affording debt-incurring public enterprises, Pakistan is on the path to privatization. The Pakistan International Airline (PIA) is on the way out. Retrospectively, politics devastated the PIA. Political workers joined the PIA and introduced the culture of strikes, whereas professional pilots and technicians left the PIA for greener pastures available somewhere else. Nevertheless, the privatization of the PIA would herald the process of disowning overpopulated and underperformed public organizations, which are several around. It is understandable that the exclusion of the PIA is important to convey a message to the International Monetary Fund (IMF) that Pakistan is serious in implementing structural reforms to improve its economy and to qualify for securing more financial help. Pakistan wants to disengage the PIA or at least Pakistan wants to start the process of disengagement before seeking the next loan program, the 24th one, under the rubric, the IMF’s Extended Fund Facility, for three years.
Privatization may be a solution, but the privatization of the PIA would be remembered as a national tragedy thereby indicating the way Pakistan failed to preserve its national asset. Though Pakistan has been trying to sell the PIA to a friendly Arab country under a partial privatization plan (at 51 percent share) perhaps in the hope that retrieval would be possible one day, it would be like hoping against hope. Capitalism is ruthless. Nevertheless, the PIA has served the Pakistanis, especially the lower-middle class working in the Middle East as laborers and the upper-middle class working in English-speaking countries as professionals by offering them affordable travel. That facility is about to end. The turn of other national assets would be on the cards. A trodden way will become an adopted way.
Low economic growth means low business facilities and low local investment. This is why Pakistan is inviting foreign direct investment to break the vicious cycle of low economic growth. It is known that foreign direct investment has done wonders in South Asian countries (such as Hong Kong, Singapore, South Korea, and Taiwan) which became economic islands to overcome their low economic growth after the 1960s. Keys to their model of high economic growth were rapid industrialization, high exports, and high saving rates. The sequence is important. Pakistan disrespects the sequence and suffers. Pakistan thinks that high exports come first whereas industrialization and high savings come later. This is not the case.
Without industrialization, exports are not possible, and money cannot be earned to be saved. Pakistan’s current preference to consider agriculture a way out solidifies the doubt that Pakistan has accepted its defeat in industrialization. The past decade recorded the flight of capital to Dubai for investment in real estate and to neighbouring Asian countries (such as Bangladesh, Sri Lanka, and Indonesia) which have been offering a consummate industrial base. In a way, some industries in Pakistan were relocated. Pakistan is still failing to realize that perpetual political unrest, the rising cost of running industry, and the inflow of smuggled goods have ruined the local industry. If Pakistan is taking its eyes off industrialization, the sector of agriculture may not serve the purpose of economic recovery, though it is understandable that Pakistan is inviting foreign direct investment in the agriculture sector to earn some pennies.
Certain developing countries of Asia and East Europe have utilized the Internet to earn foreign exchange. Selling vlogs to earn cash in dollars is now a recognized strategy. The Pakistani youth, mostly with degrees having little relevance in the modern scientific world, are also inclined to replicate the experiment of vlogs – to help Pakistan dismantle the low economic growth model. However, they are fearful of the restrictions imposed. Vlogs cannot work in isolation from social media, which are informal, but terrify the powerful. Even private Tv channels are selling their news and talk shows on social media not only to stay relevant but also to earn money. One’s choice to watch what has overwhelmed the domain of media. The same choice is subjecting even the government sector to make short videos to promote a cause and project its performance. This is where Pakistan is ambivalent: on the one hand, Pakistan wants to promote vlogging to let foreign exchange join national income, whereas on the other hand, Pakistan wants to keep social media under its watch – means restricted. Both wishes cannot fly together.
Nonetheless, the area where Pakistan is lagging behind is that selling soft wares is more lucrative than selling comments, retorts, jokes, and songs through vlogs. The Pakistani youth are still shying away from venturing into the domain of constructing and selling soft wares. The world is entering the phase of robots that run on soft wares installed. Artificial Intelligence is bound to dictate the world, as did the dot com phenomenon after 1991. The present is a make or break moment for the Pakistani youth to enter the field of software making in order to be part of the robotic world and to ensure the sustained supply of foreign exchange.
With its meagre resources, Pakistan may not manufacture robots anytime soon, but Pakistan can prod its youth in the direction of being part of the robotic age, which will help the country achieve the goal of high economic growth.
Dr Qaisar Rashid
The writer is a freelance columnist. He can be reached at qaisarrashid@yahoo.com
Stuck in Low Economic Growth By Dr Qaisar Rashid
Source: https://www.nation.com.pk/12-May-2024/stuck-in-low-economic-growth