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Realism, what s that?

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The Federal Commerce Minister predicts that in FY12, Pakistan s exports will touch $40 billion. Export growth of over 29 percent in FY11 builds his hope that in FY12, exports could grow by 60 percent despite the US and European economies heading for a second meltdown and courtesy that, the global economy.

The minister attributed the FY11 export growth to the guidance of President Zardari and Prime Minister Gilani. Such disclosures build the impression that our politicians are brilliant watchers and predictors of global economic trends, which isn t the reality.

Export growth in FY11 - one of the worst years for Pakistan s economy - had little to do with politicians guidance, but much more with global shortage of cotton and the resultant rise in its price; government s sole contribution was multifaceted chaos. Remember the row between cotton growers hell-bent on exporting raw cotton and textile sector demanding its export in value-added forms to optimise export proceeds? Government s acceding to cotton growers demand diluted the chances of maximising export earnings from cotton.

Government s conduct can be explained only in one way; having messed up the power sector and law and order, and squeezed liquidity out of the banking sector, it knew that chances of the textile sector exporting larger quantities of value-added goods were grim.

This time the minister expects improved performance by Pakistan s economy because multilateral talks are on to promote trade with China, Central Asian states and other countries an indicator thereof being that, for the first time, Pakistan got a good response to non-traditional exports such as mangoes.

The minister also says that preferential trade agreements (PTAs) with many states are on the table to promote exports. Indeed exporting mangoes was good, but it wasn t for the first time. Besides, how much will export of mangoes contribute to the targeted 60 percent rise in exports? Pakistan needs to do much more. If the PTAs being negotiated do materialise they could bolster the chances of exports on confessional terms, but the key issue is ensuring that Pakistan s industrial and commercial sectors deliver (on time) on their export commitments.

This requires stopping the violence that is slowing economic activity, ensuring reduced power loadshedding to let factories operate at a capacity imperative for timely production of the volumes they must export, and repaying government borrowing from the banking sector to increase credit supply to the private sector.

The Commerce Minister said nothing in these contexts; apparently they don t worry him, which makes his hopes of higher exports seem unrealistic. But why blame him; did he ever before head the Commerce Ministry to know what the assignment calls for? With zero pressure from the Commerce Ministry to check escalating violence, the Interior Minister isn t bothered about it either; violence keeps spreading while law enforcers standby. Neither minister realises that doing so, the law enforcers (and the state) build doubts about their intentions.

Interior ministries - federal and provincial - don t disclose the origin of the weapons the terrorists use which exposes their concern for disclosing who is behind the ongoing carnage. If no foreign hand is involved, who are these elements? Are these the militant wings of the coalition partners?

The latest attack on a factory in Karachi, wherein over 150 motorbikes of the factory employees were set ablaze, proves that terrorists are not robbers; their aim is to destroy peace and all varieties of productive assets. Who wants to inflict such damage; the bhatta collectors, or somebody else?

SBP s latest Monetary Policy Statement too reflected misplaced hopes the most amazing of them being the hope that in FY12, inflation will range between 12 and 11 percent ie nearly 3 to 4 percent lower than its current level. The logic offered was that lower trade deficit reflected falling demand and hence reduced pressure on prices. This textbook approach sidelines ground realities. Is Pakistan s population growth slowing down? If not, have we boosted import-substitution, and will withdrawal of subsidies bring prices down?

While SBP admits that foreign direct investment is falling rapidly, isn t flight of capital also on? Even with stagnant demand and lower imports, does this investment scenario foretell higher output and export growth, higher reserves (despite repaying the IMF), and a stronger rupee?

The Monetary Policy Statement itself belies these hopes by projecting 6 percent growth in exports in FY12 (one-tenth of what the Commerce Minister predicts) given the woes of the economy, the trend in oil price, and refusal of Pakistan s strategic allies to come to its rescue.

With its tax collection abilities remaining as flawed as they are, and continued jugglery with tax collection figures, can the state cut its real (not SBP-estimated Rs 1. 127 trillion) fiscal deficit and begin repaying bank borrowing and let credit to the private sector to grow at higher than its current 4 percent pace?

If not, will supply of broad money actually contract? According to SBP, in FY11 state borrowing formed 56 percent of the 15. 9 percent growth in broad money. Can the regime cut its expenses to reduce the circular debt? Did it show any such inclination in the past three years?

No policy-maker realises that poverty driven by mismanagement of the state and unchecked greed of the market players is pushing Pakistan into a bottomless pit. Anarchy is no longer a likely scenario; it is now well-entrenched, as eventually accepted by Rehman Malik. Misfortunes of nations grow out of the loss of realism among their leaders; hopes of the Commerce Minister and the Monetary Policy prove that reality. It seems that self-delusion, not realism, now rules the roost. Should this go on, or should the deluded in high places be shown the door?

Pakistan needs a quantum leap in the governance of the state, and a radical revision of the importance assigned to optimal resource use and real growth, but above all, to realism and to telling the truth, but the present regime can t implement any of these imperatives. What is likely is fresh borrowing from the IMF on harsher terms and another failure to fulfil them.

We need a regime that can contain violence to revive economic activity, reduce power shortfall so that factories operate at capacities imperative for producing higher volumes to plug the expanding supply-demand gap, and cut state borrowing via strict austerity measures. But the democracy-lovers won t let that happen till the system collapses fully.

 

 

Courtesy: Business Recorder


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