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Correct diagnosis of economic problem of Pakistan | By Dr Atiq ur Rehman

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Correct diagnosis of economic problem of Pakistan

TO me, correct understanding of problems is half of the solution. The first step towards solving a problem is to understand why it happened. Let’s study the Middle East economies to understand the problem with Pakistan’s economy. All governments in the Middle East are autocracies, yet prosperous. They don’t bow their heads before the IMF and their public isn’t worried about the necessities of life. Despite having a dictatorship, there is no cry for democracy. Their society is so satisfied that our people also want to be there to get peace and prosperity. These countries are far better than Pakistan in the global transparency ranking. What is the reason that these countries have reached the peak of prosperity?

One probable answer that most people will have in their minds is that these countries are rich in oil, and thanks to this, these people have reached the height of development. We also have resources but they utilized the available resources, and we could not. According to official estimates, Pakistan has the potential of generating 60,000 MW of hydroelectricity. The oil equivalent of this generation capacity is 526 million barrels annually with a value of about $42 billion. The annual oil exports of the UAE are also $42 billion. This means, the petroleum resources of UAE are roughly the same as that of hydropower resources of Pakistan. In addition, Pakistan also has abundant resources of solar and other forms of renewable energy.

Whenever electricity is generated from petrol, it will destroy the environment while electricity generated from water will not cause such hazard. This means that the claim of not having resources is futile and we have relatively high quality resources. The above arguments disprove two popular theories about our backwardness, namely the corruption theory and the resource scarcity theory. So, what is the reason that these neighbouring countries, which were built by our own workers, have gone many steps ahead of us in development? In my view, corruption is a secondary issue which arises due to deprivation of basic necessities of life. If provision of basic necessities of life is facilitated, corruption will automatically reduce.

When there are so many candidates for a job, the struggle for a job will give rise to opportunities for bribery. If cheap loans are provided to the youth to start a business, many will prefer to start their own business instead of running for a job and the competition to get a job will reduce, leading to a reduction in chances of bribes. The people starting their own business will employ more people, if the business is not based on real estate. Therefore, the overall number of people struggling for jobs will decrease and the supply of bribes will also decrease. Assuming that the corrupt nature of bureaucracy remains intact, even then the supply of bribes will decrease leading to a reduction in bribes. But if employment opportunities are not easily available, everyone will consider a government job as a last resort for livelihood and will strive for it. In such a situation, dozens of institutions like NAB and FBI will not be able to control bribery.

We are bestowed with an unimaginable abundance of resources compared to many other countries. The solution to the economic problems is to provide awareness, training and necessary financial resources to the people to utilize these resources. Unfortunately, we are moving in the exact opposite direction. An interest rate of 20% is a message that people should not expect any facilitation from the government for business; people should put business out of their mind and should focus only on pakkinaukri. One of the most important steps for better utilization of resources is to protect producers from the exploitation of middlemen and to ensure that the producers are getting due rewards for their efforts. If a farmer is unable to get due price in the market, the government should ensure adequate compensation for the products.

For example, it happened many times that the tomato producers plowed the crop in the field when they did not get a due price. As a result, in some parts of the year, the price of tomatoes reaches up to 300 and sometimes producers cannot sell the output for 10 rupees. A farmer can grow tomatoes but storing them for a longer time is out of his capabilities. When the middleman gets involved, he will want the price differential to be even greater because a larger difference will give him more profit. If the government buys the crops at a reasonable rate and stores it, then by supplying the same crop at the right time, the government can get reasonable profit along with the recovery of cost.

On the other hand, if the market is left to the middleman, he will want half of the produce to be wasted so that he can make many multiples of the profit on the remaining crop. Because of such issues, Pakistan had to import the tomato, onion and cotton. Disappointed by the markets, the farmer would want his land to be bought by the DHA for a few millions, because when he does farming, he is not able to recover the cost. Instead of increasing production, we are running behind the illusion of corruption. In fact, corruption cannot be eliminated unless the new economic resources are included into the economy. In the past, the industry was destroyed in the name of labour rights and by creating conflict between the worker and factory owner. The more we run behind this mirage, the worse it will go.

 

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