By Saad Hafiz
Prime Minister Nawaz Sharif restated his dream recently to turn Pakistan into an ‘Asian Tiger’. This title became synonymous with some East Asian nations that achieved high growth by pursuing an export-driven economic strategy. On the surface, Mr Sharif’s desire appears more like a pipedream and less a realistic goal. For a brief period in the 1960s, Pakistan did enjoy a higher level of economic growth and wealth creation like the Asian Tigers but that can offer little comfort today. In fact, the present economic fundamentals support the view that Pakistan is the sick man of the region with little prospect of being transformed into a rising economic tiger. The basic rules of competition remain heavily skewed in favour of a tiny elite led by the military, whose businesses enjoy special privileges and monopoly concessions. It is hard to fathom how Pakistan’s stagnating economy and corruption-ridden elitist society can emulate the Asian Tigers and start to lift millions out of the vicious poverty cycle and into economic prosperity.
The original East Asian economic tigers in South Korea, Taiwan, Hong Kong and Singapore benefited from fast industrialisation between the 1960s and 1990s. They were also committed to egalitarianism in the form of land reform. These countries had an abundance of cheap labour as they were relatively poor during the 1960s. They singled out education and training as a means of improving productivity. They focused on improving the education system at all levels. Heavy weightings were placed on ensuring that all children attended elementary education and obligatory high school education. Money was also spent on improving the college and university system. They were able to maintain high growth rates through a rapid export-led growth strategy tapping into global demand. These countries also promoted inclusive growth and created jobs that focused on uplifting the people from poverty. Domestic consumption was discouraged through government policies such as high tariffs.
The Asian Tigers adopted pro-business, pro-foreign investment, export-oriented economic policies ensuring stable prices and high savings rates, and were able to dramatically increase their Gross Domestic Product (GDP) per capita. Instituting a 50-hour workweek, South Korea transformed itself from a recipient of US aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Taiwan’s makeover from an underdeveloped, agricultural island to an economic power that became a leading producer of high technology goods was equally impressive. Singapore was able to convert its strategic location on major sea-lanes and industrious population, giving the country an economic importance in Southeast Asia disproportionate to its small size. Hong Kong’s economic growth is attributed to the pursuit of non-ideological economic policies that galvanised its strong manufacturing and service sectors. All these countries were able to manage their vulnerability to periodic downturns in the world economy and dependence on an open world trade regime.
The Asian Tiger experience certainly provides a valuable roadmap for economic success for countries like Pakistan to pull themselves out of a mean phase of low growth, high inflation, low investment and heavy dependence on foreign aid. As a prerequisite, Pakistan must attain a level of macroeconomic stability, and demonstrate progress towards a sound and improving fiscal situation. The country has to boldly tackle high and rising debt, which constitutes a serious threat to economic stability and prosperity. The spiralling debt acts as a major impediment to growth and hence to employment generation and poverty alleviation.
Pakistan will also have to wage a determined fight against rampant corruption and improve government transparency to attract investment funds on a large-scale. The country will need to adopt a foreign policy approach that is active, non-threatening, and generally aligned with the economic and security interests of the region. In addition, crony capitalism, where loans are made on the basis of political connections rather than on the merits of projects, will have to give way to much better risk management. Mr Sharif himself could set the example by adopting a consensual approach to governing free of ideological stridency. Terrorism and law and order issues have to be dealt with on a war footing without fear or favour. The tax net has to be widened to include even those with political connections.
However, the government can only provide the framework for economic progress by instituting the necessary financial and regulatory reforms that will make the economy more competitive in the long run. Private businesses remain the primary drivers of technological growth and innovation and serve as the engines of economic growth. They invest in and deploy technology in a way that seeks to get the most productivity out of scarce resources. Pakistan’s moribund private sector, particularly exports and labour-intensive light industries, must be reignited to serve as the catalyst of economic growth. Foreign investment and greater competition particularly in the higher value-added manufacturing and services sectors should be encouraged to help contribute to the economy. Perhaps not an Asian Tiger but Pakistan does have a chance to reverse its slide by making tough choices and fundamental reforms that could put it back on the path to relative prosperity.