Improving economy in 2021

Rizwan Ghani

WITH continuous increases in fuel and electricity prices, the economy is under focus once again. Here are some of the measures that can revive it. Government should charge international prices for gas, electricity and fuel to end all kinds of subsidies and levies. It should enforce existing law under which all major industries and commercial users have to generate their own power but due to corrupt practices it is being taken from domestic sector resulting in mega public circular debt, predatory IPP contracts, energy shortages and fuel imports in dollars.

If government can enforce the law, it can cut government energy sector expenses by 42% (industry 27% & commercial 15%) because domestic and agri-sector is only consuming 46% of total energy but government is paying 100% cost. The savings can be used to give free electricity to agriculture sector (12% of total energy output) like India for food security, adopt 80% clean energy by 2030 ( 8% per year to meet 24% emissions cuts), and reduce energy prices by 40% for domestic sector. Country’s 2030 forecast shows sharp expansion in major economic sectors so government will have to take these steps in 2021 to meet the increasing energy demands for next decade to create and sustain economic growth and jobs.

Water and Power Development Authority (WAPDA) was created by an act of Parliament in 1958 as an autonomous and statutory body under the administrative control of the Federal Government. In its presence all other energy setups should stop immediately to end corruption, save billions in non-development charges, and improve services. The renegotiation of 40 IPP contracts out of 47 is opaque and they merit to be scrapped to end energy cartels and return energy sector under government to costs. Privatization was always going to lead to this rip-off cartel. The big six energy providers fleece their customers. The government must act (March 19, 2017, the Guardian).

In tax reforms, there should be simplification of tax structure. According to Hafeez Pasha, ex-finance minister, the current 13 slab systems should be replaced with 4 to 5 slabs and introduce elite taxes to generate another Rs2500bn. In UK there is 45 percent tax on income over £150,000 (zero tax up to £12,500). All income should be taxed starting from Rs25lac (£12,500/) and onwards. Indirect tax should be finished because it is against the poor. CNIC should be made tax number and shown at the time of purchase of Rs 50,000 or more to avoid tax evasion. Other lifestyle indicators including foreign visits, luxury vehicles and property should be judiciously incorporated to avoid corruption, blackmail and victimization.

Our banking sector needs to be reformed to improve economy, serve state, individuals, SMEs, house building, pensioners, small farmers and workers instead of private bankers. Breakup UK’s high street banks, say cross party MPs. They stifle competition and exploit customers (Nov 2019). Bank of England and UK Banking Reforms failed in combating dirty money laundering. Western economies are using dirty money stolen from third world to sustain their economies in exchange for immigration and other such incentives. Reportedly the EU has $4.5 trillion dirty money (Politico, May 19, 2020) and US $2tn (Guardian Sept 20, 2020).

Accordingly, Pakistan needs to scrap 1992 economic reforms act and foreign currency accounts 2020 in its current form to end money laundering and use measures like US Bank Secrecy Act 1970 (FinCEN), FATF, 24/7 Know Your Customer transactions, AML forensic audits reports of financial institution, blacklisting banks and individuals in SBP, SECP and FIA to block, trace and recover looted funds. The “legalization” of dirty money through remittances and disclosure of bank accounts and property ownerships under international AML in Canada, UK, EU, USA and Gulf is critical to control corruption, improve economy and create jobs.

After Queen’s Dec 2019 speech, Dodds, the UK Shadow Chancellor, has asked Johnson to fulfill pledge on money laundering and introduce promised register for foreign owners of UK properties. If you think the UK isn’t corrupt, you haven’t looked hard enough. Fortunes are being made by political favourites, while London’s money laundering fuels corruption across the planet (G. Monbiot Sept. 10, 2020, the Guardian). If UK, Canada, Australia, USA and Gulf States make public foreign owners property register and bank account holders’ names under AML, it will lower house prices for locals, stop parking of stolen funds in prime properties in those countries and help end mega corruption in Pakistan.

Other critical steps include implementations of land reforms, ending sugar plantations in cotton and wheat belts, and reviving Pak Steel to stop import of steel ($3.9bn, 2019) and cotton ($2.7 2019, $3.7 2021) for private mafias and further devaluation of rupee, relocation of 40-50 million population, creation of irrigation water reservoirs and canals in interior Sindh, Southern Punjab and Baluchistan to cut imports of food ($4.7bn 2019), agriculture and other chemicals ($8.3bn 2019), vocational, technical and IT training starting at middle school level to boost SME, agriculture sector with help of free 5G, sustaining 62% agri-sector jobs. The policies of high interest rate, imports in foreign currency ($30bn), subsidies for private businesses and energy cartels merit independent investigation and accountability for economy and jobs.
—The writer is senior political analyst based in Islamabad.