London plan or no London plan, if the Prime Minister truly wants a way out of the prevalent political impasse, then his government has to start performing. And rather quickly at that. It may do him some good to reflect on the big management debate of the 1990s (set off by an article in the Harvard Business Review) on why in management/governance, the element of Operational Effectiveness (OE) cannot be taken as a strategy but must be regarded a ‘given’. Put simply, this means that PML(N) needs to get to work and in turn get its government to work. Given their present team (riddled with mediocrity and kinship blues) and an apparent mindset that lacks the will to lead from the front, the likelihood of any substantive turnaround looks to be a distant cry, at least in the near future. For example, after the havoc and tragic losses caused by recent floods in Pakistan, any thinking leader would have opted to display reserve and austerity over pomp and aplomb when choosing where to stay during the just concluded conference at the United Nations and especially when Pakistan must have been looking to the global community to extend a generous hand to its flood victims.
Here at home, with the persistent dharnas and protests by the opposition parties may have caused some economic uncertainty at best, the underlying reason for the failure on the economic front can be attributed to two things: a) lack of understanding of key issues affecting growth and b) wrong prioritization in policy-making and allocation of resources. Clearly, the model of a family leadership both at the Centre and in Punjab is not working. In an era where provinces or states need to compete in a healthy manner in the quest for investment and growth, the largest province Punjab is too often seen to sacrifice its provincial interests to rescue the leadership in Islamabad. The recent turnaround stories of Indian States like Gujarat, Bihar and UP are all based on the commitment of respective state leaderships to lure investment by dispensing good governance and competing with each other on providing incentives to potential investors. Pakistani Punjab over the last six years has sadly been an opposite story. The once thriving industry stands completely ruined owing to the foolhardy allocation of energy supplies favoring cheap popularity over endeavors involving long-term employment generation and by making a complete hash of decision-making on key industrial-competitiveness trade-offs relating to green-house emissions, labor reforms, property rights, and prudence in procedures on state oversight. The latest World Bank Global Index (WBGI) indicator states that out of a total of 189 global economies, Pakistan ranked as low as 175 in being able to supply a reasonable level of electricity to its business and industry. Punjab, the most industrialized province, is the worst sufferer where large scale manufacturing stands choked due to power shut downs amounting to 10 hours a day or more. Even in simple economic terms this makes no sense, as it means diverting power away from most efficient, transparent and productive sectors to the one where revenue recoveries are problematic. Also, given the high percentage of youth in our population mix, the country needs 3 million new jobs every year which is only possible if investment in manufacturing thrives.
Ironically at the centre, Mr. Dar is in effect counting on growth in LSM (large scale manufacturing) to be the main driver of the nation’s GDP growth. His aim is to cross the 5% GDP growth mark in 2014- 15. This, he must realize, can only happen if Punjab is firing on all cylinders, since it is in the Punjab where the chunk of our LSM is located! With all the negativity hurled at the Musharraf period, Punjab actually thrived the most during his tenure and under Pervez Elahi’s Chief Ministership. It grew between 10-12% per annum at the time and naturally being the largest province/contributor to the national economic pool, it was also largely instrumental in helping overall GDP to grow at 6-7% in corresponding periods. Ignoring ‘competitiveness,’ or in other words ignoring the emphasis on a country’s ability to compete in the global arena is the worst mistake any government can make, more so if that country faces external account challenges. Pakistan has almost always been a country with a current account deficit (CAD), meaning our imports have invariably exceeded our exports. Also, the bulk of our imports are inelastic in nature - since they constitute essentials like fuel oil, edible oils, food items and pharmaceuticals – which in-turn means that only by increasing our exports or manufacturing competitiveness can the pressure on our CAD be eased. And to do this, the industry needs to be encouraged so that it can add value by resorting to economies of scale, innovation and entrepreneurship. This government has to give priority to addressing energy issues facing manufacturing and at the same time also undertake some basic structural reforms: cutting down on red tape, facilitating human resource development, minimizing contact between businesses and the regulator, improving industrial relations and reducing unnecessary barriers to private initiatives on facilitating productivity in work places.
The belief of the PML(N)’s leadership should be that getting government machinery working and focusing on efficiencies will help revive economic growth. A self belief is required, that being a democratic dispensation, operationally they can dispense better governance than a dictator. And if indeed they can, then there is no reason why the economy under them should not be growing at 7% or more. A focus on OE will not by any means reflect that the government lacks strategic vision. It will only signal that for the moment, it rather not dwell on strategies since it is in execution where Pakistan has been failing. Pakistan finds itself languishing, largely on account of its investment cycle not reviving – both domestic and foreign. If the PML(N) can improve its government’s operational effectiveness over the next 18-24 months and avoid repeated mis-steps, the investment cycle should revive as it will give more bang to the investor for his buck. PPP’s government, as we all know, especially in its last two years was distracted to the point of inaction by a raft of scandals associated with its high offices. Though they may cite structural and global economic reasons for the decline in growth to as low as 3% under their economic management, the real reasons for their failure tends to be a general policy-paralysis and their sheer inability to assemble an honest, competent team. Sadly, it seems no real lessons have since been learnt.
The writer is an entrepreneur and economic analyst.