Whither Pakistan- Can we be another economic miracle?

  • Pakistan is one of the very poor countries in the world with per capita income of merely $1200. In the midst of 1960’s it was called a model developing economy, but faced with poor economic decisions of subsequent governments and as a result of Afghan war, overall growth of economy remained slow and it still remains a poor country. Several Asian countries that were poorer than Pakistan 25 years ago are far richer than Pakistan and cited as examples of economic miracles today.

    Question is, ‘Can Pakistan become another Asian economic miracle’? The answer as I see is in reserved affirmative. If we can show vision in choosing a path of our economic development and take the right decisions as demanded by our current situation, we can certainly build a modern and prosperous economy. On the other hand, if we do not take appropriate steps to spur growth and economic development, our future as a nation might become bleak forever. This might be the critical time for the people of Pakistan to take the right decisions, seize the moment and build a modern Pakistan that in coming times excels as a country and build a prosperous nation that its inhabitants love to call their homeland with sheer pride.

    Such miracles are known to happen in recent human history and several nations that had the vision and acted in the right time became the symbol of economic might. Some examples of these miracles are Japan of Meiji era, postwar Germany, South Korea, and may be even Egypt at the times of Muhammad Ali Pasha.

    Let me briefly describe how these nations showed vision and acted in ways that was unprecedented and built strong economies. For example, one of the tenets of Japanese revolution of Meiji era was exploration of knowledge, science and technology. Part of the oath of Meiji era said 'Knowledge shall be sought throughout the world so as to strengthen the foundations of Imperial rule.' Japan invited three thousand foreign scholars to teach modern sciences of that time to Japanese people. Thousands of Japanese students were sent to western countries to pursue higher education in scientific disciplines. Through fast import of western technology, Japan had already transformed itself from a rural economy into the only economically developed country in Asia by the end of 19th century. Second postwar economic miracle of Japan that built its war torn economy into great and mighty industrial country had its roots in the development it had seen in the Meiji era.

    Similarly Postwar Germany also achieved a miracle by taking the right decisions at the proper time. Government restored faith in currency by introducing a new strong Deutsche Mark. It emphasized four pillars of economy that were strong economic growth, stability of currency, trade surplus and low unemployment rate. These were the four guiding principles for economic governance for a long time. As a result, average income of Germans increased by three times in a decade. Slowly Germany became a symbol of economic might that is hard to challenge by any other country.

    We, as a country, can develop very fast as well if we can take the right steps and synchronize efforts in different areas that include good governance, right direction for the economy, proper trade policies, industrial stimulus, and acquiring modern technology in different areas. We have to know that any efforts and incentives to improve economy will work only if there is peace in the country, writ of law is maintained everywhere, property rights are respected and we avoid any internal or external conflicts. We also have to understand that economic miracles can happen only if we change the mindset of people, making them innovative, readily learning new things with zeal and implementing new technologies in a way that it benefits the society. It happens only when the society encourages a culture of excellence where every individual tries to excel in his sphere of influence. As a result, people as a whole become a progressive, modern and fast developing society. We really have to encourage and respect innovation and excellence in every domain of our society including industry, academia, governance and technological expertise.

    Government has to target important areas of industry and technology for growth. For example, these areas could be public sector infrastructure projects, advanced agricultural technology, value added textiles, modern railways, large scale manufacturing, information technology, steel and heavy machinery, and semiconductors.

    When thinking about growth strategy, the government has to divide the economy into two large areas. One that could be developed easily within a short period of time and where some infrastructure for growth and a developed domestic or export market already exists. These areas could be easily developed with right governance, good policies and proper incentives. Innovation and technological advances have to be encouraged by reduction of tax levy and trade benefits.

    Second set of areas of economy should be identified looking and planning for fifteen years ahead in time. It should be decided which areas of industry and technology we want to see flourish in our country and a totally comprehensive program has to be implemented for growth of these designated areas. A decisive policy that would develop human capital and intellectual expertise in those areas, and ensure development of public and private sector entities that employ this human capital in innovative ways would be worked out. Industry experts and technocrats would identify hurdles for implementing these plans and foresee ways of overcoming problems in developing these areas of economy. They would also identify potential advantages Pakistani companies could have in these areas and how to leverage those advantages and what incentives have to be given to spur growth in these areas. Some of these might initially be built with state capital to overcome initial risk averseness that private sector investors could have to start into these sectors.

    There is some false sense in our country that foreign capital will come, build industry and somehow rescue our economy. Instead of waiting for the time that foreign investors acting as messiahs will flock to rescue our economy, we have to put our house in order and leverage our own resources. Foreign investors will invest in our country only if our economy is relatively developed, economies of scale have been established, technologically developed human capital is abundant, good infrastructure is present in the country and right economic policies have been implemented. Only when we have prepared grounds for large scale economic development that foreign capital will come to our country and invest in any serious industry.

    This is in tradition of Japan of Meiji era where they invited thousands of scholars to teach modern sciences of that time. In order to promote scientific and technological expertise in our country, create a culture of excellence and innovation, we have to lure back thousands of talented Pakistanis working in academia and high tech industries in foreign countries. They have to be paid by state grants at par with what they were earning abroad. They should be encouraged to make small technology companies in cooperation with Pakistani universities, seeded by public sector funding and employing university talent. These companies should be housed in technology parks built in each large city. Cooperation between large industrial groups and technology companies should also flourish so industry experts in universities can find capital and support for their innovative ideas and cutting-edge research. Again, every effort has to be made to repatriate the Pakistani talent working in advanced technological sectors in the developed world so they can train others and start work in parts of the economy where it is difficult to find talent in our own country. We would have to give huge incentives and extreme respect to talented Pakistanis working abroad so they choose to work in their own homeland.

    I can definitely say if we can maintain strict law and order in our country, maintain fiscal discipline, low inflation, currency stability, and continue to work towards an excellence in appropriate areas of economy, sciences and technology, we can also be the Asian miracle that might surpass the miracles the world has yet seen.

    Thank you

    Ahsan Amin

  • Amin, very well written and I agree with almost all the points, however I don't agree with government intervention to set the wages and prices. The other problem is government financial discipline would be hard to achieve unless a single party get majority in the parliament and then works on law and justice, tax and expenditure balance. If that can be achieved, it would be a tremendous boost to the economy. It should be noted that these things are strongly related to war in Afghanistan also.

    Thanks for good write up.