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Our manifesto for making Pakistan great
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.

Pakistan's status in the World as 6th biggest country in terms of population, 28th biggest economy in terms of purchasing power parity, and 7th biggest military power, is by no means small. However, it faces following embarrassing challenges that need addressing on revolutionary basis:

  1. Fourty million or 25% of its 160 million people live below poverty line, defined as income of PRs 840 per month, per person. This has increased from 23% in 1987-88. There was an increase of 8.6m people in the rank of poor during period 1999-2002.
  2. Fifty percent rural population is land less and thus 60% poor are concentrated in rural areas. The issue of land distribution other than 2.7 million acres of State land is frozen since 1977. The implementation of 1977 reform law calling for reduction in land owning ceiling to 100 acres has remained suspended.
  3. Only 1% of the population pays direct taxes while rest manage to keep away,    forcing government to rely on indirect taxes or printing of notes which impacts the poor section heavily.
  4. Since 1985, Non-development expenditure on General Administrative, Defense and Debt Service has exceeded Total Tax Revenue. Government is helpless.
  5. Unemployment rate reached 10% in 2002 compared to 2.7% in 1975.
  6. Real wages have declined 6% between 1989 and 2003.
  7. Inflation rate is now double digits up from 4.5% in 2002.
  8. Private investment in the country has remained constant at around 8% during period 1973-2003. Efforts of pro business regimes had little impact, so far.
  9. Literacy rate is still only 50%. Poor cannot afford to send their children to normal schools. They send their children to completely free boarding and   lodging Madrasas, which take care of 600,000 students. These students cannot find job and are easy prey for terrorist organizations.  
  10. Most people do not have access to safe drinking water, even in major cities. Death from contaminated drinking water is a common occurrence.
  1. Most people do not have access to medical facility. There are only 2.2 beds and 2.5 doctors for every 1000 people. 
  1.  Child labour is wide spread. Often children are the only wage earners in the family.
  2. Economic infra structure is so weak that electricity supply, even to industries is cut off on regular basis, due to under generation or distribution problems. People are forced to use generators.
  3.  There is no quality high way linking the north and south of the Country. Large sums were wasted on building luxuries Motorways in less busy segments while the main busy artery of the country has remained neglected.
  4. Pakistan was rated 2nd most corrupt country in the World by Transparency International, some years ago. The impression lives.
  5. Police is ineffective in protecting live and property of citizen. They rely on private security agencies.

There can be three possible responses to the above challenges:

1. We let things continue as it is and hope that things will improve gradually with the passage of time. The current growth rate is impressive 6-7% and thus with tickle down effect these problems will get resolved. However, current economic data show contrary to be true. Poverty has increased while economy has done quit well overall.  

2. The massive 50 million people rise up under a great leader and with an armed struggle over throw the current system and distribute the existing wealth and flatten social structure as done in China and Iran.

3. Following countries like South Korea, Hong Kong, Singapore, Malaysia, Indonesia pursue a very rapid growth path with the active help of Multinational Cos. Aiming to increase exports from current 11-12 billion dollars to say 100-150. While following unbridled  free economic policy and letting the market forces play its role in poverty elevation, in partnership with MNCs, state also intervene with specific poverty reduction plans covering all,  like:

  1. Provision of Safe Drinking Water,
  2. Basic healthcare-preventive and free medicine,   
  3. Completely free education upto 10th,
  4. Subsidized basic food-wheat, rice, pulses
  5. Subsidized small houses in cities on 60 yards
  6. Provision of small farms for all rural landless people by implementing 1977 reform without BTU measure.

 These initiatives will require large amounts of money far beyond present state resources and thus seems like wishful thinking. However, when the economic cake gets many time bigger with export led growth and additional production by land less peasants this may not look like a dream. By then the value of land will become such that each new auction of state land will bring huge sums of money to help achieve these noble targets. Besides, by then major MNCs like Microsoft, HSBC may be pursued to take over one task each in the name of Humanity, and having a stable, much extended consumer market.
MNCs have a stake in seeing Pakistan open up for them as a major market. They are also keen to see Pakistan as a peaceful country not exporting terrorism. Although traditionally MNCs have not involved directly in such initiatives in the past, people like Bill Gates of Microsoft are changing this trend with major fund donation for specific cause like Aids. Recently World Bank decided to top up 15% increase in education budget by Punjab Government.  
Based on my 25 years experience, as an International  Commercial Lending Banker, during which I closely observed Asian Tigers, Iran, UAE, Bahrain and Chine I, recommend we try the third option.
Following this set of economic and social policies, I believe the poverty level will reduce to 3-5% during next 15-20 years and Pakistan will become the seventh biggest economy of the world in next 30-40 years.
The main task in this approach is establishment of unbridled capitalism and attracting MNCs in a big way. This is by no means an easy task It will entail a number of tough decisions by the nation.
Unbridled capitalism will involve removal of barriers to the free working of market forces, a very small government, perfect justice and security system. This will hurt many people.
To attract MNCs in full force we will have to remove all barriers, which so far have stopped them from entering our market, except for few.
In the recent past, a number of them have in fact left the country example: Chase Manhattan Bank, Bank of America, Emirates Bank etc. Where as ones who have opted to stay like HSBC, ABN AMRO are maintaining very low profile in terms of injection of capital and loans into the country. They are restricting themselves to small scale lending against deposits generated within the country.   
We need to reverse the process for large scale development to take place.
Most of the world resources are with MNCs. Governments and Semi Government organizations like World Bank and Asian Development Bank comparatively command very samll resources. Therefore, unless a country is able to attract MNCs it cannot rapidly grow.
World economy is dominated by some 3000 Multi National Cos. The interest of these Cos determine the course of history. It is believed that Western Governments particularly that of USA does what these Cos want. Like if they say  go open the Iraqi market for us, the country is invaded, regardless of other considerations. 
Major MNCs include Microsoft, Cisco, IBM, GM, GE, Toyota,  Mitsubishi, Hyundie, Samsung etc.  Major Oil Companies like Exxomobile (3rd quarter 05, profit $10b) , Shell (3rd quarter 05, profit $7.5 b), BP, Total, Major Banks like HSBC (total assets USD 550 billion), CITI Bank (total assets USD 600 billion), ABN AMRO and CHASE.
The above listed Banks alone command billions of dollars of invest able funds. These Banks can invest 100-500 billion into Pakistan within a short span of time, as they did in S. Korea, Malaysia, Thailand, in recent past.
These amounts are far greater   than what World Bank or Asian Development Bank can ever invest.  Our rapid growth can only happen when we are able to attract these large funds at reasonable rate besides attracting Equity investment from operating Cos.
The overall attitude of these companies determines how much they invest in any particular country. Their positive view can rapidly change the fate of nations and lift a country out of poverty. We need to create condusive atmosphere for investment by these Cos.
 After 9/11, things have changed for better but still Pakistan is not a favoured destination of these Cos. However the current efforts of Pakistan in fighting international terrorism and changing attitude of Pakistani masses towards Western world following the Earth quake, gives me hope that things will change for good in coming years.

To put a solid foundation for the large economy, we hope to develop us need to fix the following weaknesses:

  1. Lack of strong moral system.

Reinforce our Moral system to bring it at par with the rest of the world. The large developed economics of the world from Europe to Japan have a common moral value that places very heavy emphasis on loyalty to the Co. Which entails high integrity of its officials to protect the interest of the employer be it a private Co or a government institution. These officials are almost impossible to bribe. They refuse any favor even when posted far away. That how they add value to their Co and are satisfied with their legitimate compensation. Pakistan is considered as one of the most corrupt countries of the world where giving and taking bribe is a norm. This is a big hindrance to investment by MNCs. They find it difficult to find trust worthy employees and thus do not invest or keep their presence low and supervised by expatriate staffs who not understanding the market keep their activity at low level.
It is a national challenge to bring a sea change in our moral teaching from childhood from home to teachers to emphasis self respect, integrity and loyalty to the employer under all circumstances. It should be ingrained that no matter how much poverty one should not steal and not accept bribe. Taking bribe may be seen as getting your soul raped by the briber and thus unthinkable in all circumstances. It should be emphasized that there was no avenue of cleaning one self once tarnished by stealing or bribing. No religious process can clean the strain. People known to be taking bribes should be shunned by all as outcast. Very severe punishment should be given by state for offenders, like death penalty in China.

  1. Lack of strong institutions:

Strong economy needs to be protected by strong institutions like truly representative assembly, an independent election commission, impertial and honest judiciary, transparent civil administration, pro active financial regulators, strong and honest police force protecting life of all citizens. Unfortunately, these are perceived to be missing by international community.
Pakistan is considered a Dictatorship and thus shunned by many MNCs and they think that such a system of governance is prone to corruption no matter how good intentioned the Dictator is. Establishment of true democracy without interference of the Army is prerequisite for involvement of many large MNCs.
Pakistan's judiciary has been coerced into taking decisions against the law of the land and thus has earned a bad name in the world. It is not trusted for imparting justice to MNCs if they go to court.
Civil administration of Pakistan is reputed to be corrupt and inefficient. Nothing seems to move through the system without bribe. MNCs find it difficult to cope with these situations, as they are not supposed to bribe by their own moral guidelines.
The security forces in Pakistan struggle to protect the life and property of its inhabitants. Local and international Cos relies on private forces and yet do not feel safe and thus are reluctant to come to Pakistan.
Financial regulators like State Bank of Pakistan easily accept political pressure and allow governments to run budget deficits financed by printing of notes or borrowing form the market. Leading to inflation and high interest rates.

  1. Lack of a relaxed society:

 MNCs tend to avoid investing in Counties where the social life of their employees would be difficult. If they have a choice of investing the same amount in two countries with equal returns, they would investment in a country, which is more relaxed and westernized than a country, which lacks nightlife and entertainment.
 Pakistan is considered a boring, difficult placed to work by MNCs, and thus they find it difficult to send in their best staff that could expand their business. The low caliber staff who are sent out are not aggressive and do not push for bigger involvement. Either thus, MNCs do not come to Pakistan or their presence remains low-keyed.
Therefore the need is that we allow western style entertainments, remove ban on consumption of alcohol etc as is practiced in other Islamic societies like UAE, Bahrain and Malaysia. I believe these things will not tempt a good Pakistani Muslim, as we are not tempted by availability of food and water during Ramzan. Personally, I lived most of my life with family in UAE and Bahrain where these things were available, yet was able to avoid them.
Essentially these things necessary for visitors and people under distress living away from families and dear ones.

  1. Lack of technological and rationale bend of mind.

For scientific and economic progress, it is essential that people should have a strong believe in scientific principles. They should not believe in unproven things and superstitions.
From the dawn of history people in Indo Pak subcontinent have given too much weight to childish and  wishful thinking and attribute most of the happenings to super nature forces. They tend to ignore hard proven facts and keep daydreaming and expecting miracles, which never happens.  At the same time, they do not give enough attention the miracles of science and appreciate fully the positive changes that it brings in their lives. 
In this connection, most of the thinkers and leaders have been intellectually weak and have avoided telling the hard truth to the people, which can really bring them out of poverty and ignorance.
The largest concentration of poor in the world in this part- 600 million in India,50 million in Pakistan and another 100 million in Bangladesh, Sri Lanka and Nepal may be attributed to this negative and irrational way of thinking.
Western nations and countries like Russia, China were able to get rid of old way of thinking and adopt rationale methods for explaining causes of  misery and than adopted practical steps to get rid of them.   
We in Pakistan with our strong faith in the last and most scientific religion Islam can rapidly move out of these wooly ways of thinking which mainly originates from India. For example, Hindus believe that they are miserable and sick because of sins committed in previous life thus nothing can be done about it. Buddhists believe the source of all misery and ills is our worldly desires and thus by curtailing them, we can get Nirvana –eternal peace. We as Muslims do not and should not believe any shade of this negative way of thinkingd strive for higher and better quality of life by adopting all proven scientific and rational principles none of which contradicts with what ALLAH has said in Quran. If any believe in our system is unscientific it is surely not coming out of Quran.
From childhood, we should teach our children the principles of science as an explanation of the way ALLAH, runs this Universe.  Earthly Scientists have managed to learn may be 10 out of 1000 principles, which govern and regulate the universe. In Saudi Arabia where I lived for more than 10 years, I did find any conflict between science and Islam.  

  1. Lack of a just society:

Pakistan with 33% population under poverty line, a regressive tax system, rising and high unemployment rate, high inflation rate, a large number of landless peasants, is a cruel and unjust society. There is wide spread resentment among the poor masses who do not see any sign of an improvement in their circumstances. This gives rise to crime that hampers economic growth. MNCs try to avoid such potential trouble spots.
Pakistan can do better and act to quickly bring down poverty by providing all its citizen, safe drinking water, basic health care, subsidized basic food,  free compulsory education to all children with provision of free books, lunch and pocket money and small houses with amenities.
Punjab government resolved to increase its education budget by 15%, this was immediately matched by World Bank, which enabled it to provide its school children free books, lunch and 200 pocket money, bringing a sea change with huge impact for the future.
This shows that if our intentions are good help will come from many sources.  As Corporate Citizens,  MNCs have a stake in seeing Pakistan as a just and crime free market, therefore they will invest when asked for in projects like above. Twenty-thirty billion dollars from MNCs can change Pakistan's poverty level considerable and such amount is not large for them. 
  Allowing one out of three Pakistani to live under extreme poverty is wrong, immoral and un Islamic.
 The poverty take the form of large extended families of upto 22 persons living in one room in  unauthorized colonies in big cities. These areas do not have proper water, sanitation, hospitals, roads, any sports facilities.  Most of the children in these localities do not go to school, wonder about whole day, and get involved in drug and other vices. Their moral character, particularly when it comes to sex is very weak, as they witness private acts daily at night, in their homes.   
In the rural area a large number of peasants, are living just under a shed of a cloth fully exposed to elements of nature. Woman in such communities walk miles to get water of whatever quality. These people do not enjoy any facility at all. They do not know what a drainage and sanitation system is, they do not know what electricity or gas means, and there are no schools or hospitals for them. Generations after generations pass life in these conditions apparently not complaining much.

6.  Lack of believe in working of market forces of demand and supply.

Like pure scientific principles, people in Pakistan including Leaders and Administrator do not understand and believe in the price system. We often see them making futile attempts to regulate/control price, as we see these days during Ramadan, imposing harsh punishments for offenders.
This amuses MNCs and besides making fun of these people, they feel uncomfortable in dealing with such irrational Leaders and Administrators.
When I was in University, we conducted study to see if the vegetable and fruit market worked without any cartel and manipulations and arrived at the conclusion that they were perfect markets marked by large number of players each acting in his own self-interest. We saw forces of demand and supply having full sway over the market. Soon after that the Government started a campaign against the so called hoarders and Profiteers.
On this our American professor, jokingly  wrote in a national daily that if the Prime Minister is so concerned with the huge profits being made by the small traders, he should leave his post and open a shop himself, as  a rational person. The Prime Minister was very angry but could no do anything.
All developed economies are governed by forces of demand and supply. With enormous pain ex Soviet, states have adopted price system as regulator of the economy away from earlier interventions and government controls.
We in Pakistan are lucky to have market forces governing most economic activity with few distortions here and there. As a nation, we should start a campaign to teach basic economics to all citizens, so that they can stop any distortion by Leaders/administrator. Any Leader promising to bring down price by force, should be discredited by masses, instead of gaining political mileage.

  1. Lack of simplified code of conduct governing businesses.

 With a weak moral base, the existing laws governing industry and commerce give rise to enormous opportunity for corruption and harassment by different government agencies. They say one has to bribe 11 agencies to keep running a business/industry. This is a major cause why even Pakistanis avoid doing business in Pakistan let alone MNCs. Pakistanis with  means have moved to Hong Kong, Singapore, Dubai and Bahrain were the laws are simple and often one window service is available.
 Pakistan should consider removing existing out dated British laws governing industry and commerce and introduce a simplified code of conduct drafted in consultation with concerned parties. The Laws of Hong Kong and Dubai may be used as starting point and amended according to our needs.  Surely, such simplification will reduce income of corrupt officials but in no way reduce government revenue. Such measure will increase the value of government land/ rent many fold within a short span of time.

  1. Lack of a hospitability culture.

Contrary to the fact, Pakistanis are considered rude and inhospitable people, particularly, when it comes to dealing with non-Muslims, by the World. This is very big hurdle in the development of international trade in general and Tourism in particular.
With Tourism as a major growing industry, Pakistan not able to attract substantial number of tourist is loosing out on many job opportunities that can dramatically change the fate of many deprived and poor Areas of Pakistan thus reducing poverty.
Given that, we Muslims have nothing to fear from the influx of aliens in our land we should welcome these tourists. This will not only bring in lots of dollars but also help us understand other nations thus improving overall social and business relationships.  Muslims societies of Indonesia, Malaysia, UAE, Egypt, Jordon, Bahrain etc, are earning large sums out this industry without any impact of the faith in Islam.
Based on my experience in Kenya and UAE I know that huge tourism infrastructure can be built rapidly with the help of major Travel Agents and Tour Operators of the world. Encouraging them to build facilities and bring in large number of family Tourists to enjoy the sandy beaches, high mountains and very old historical places of Pakistan. Competitive Package deals may be offered as a joint effort of Airlines and hotels.  Potential foreign exchange income of USD 3-5 bio can change the structure of Pakistan's balance of payment. This activity will also create a very large number of well paying employment in places were it needed the most. For example in Makran coast and Northern Area.  

  1. Lack of respect for private property due to confused laws.

People in Pakistan are afraid to give property on rent fearing non-payment of rent and even loosing the property, due to old-fashioned laws giving too much right to tenants.
This is a major hindrance in capital formation and job creation. Countries like US and Saudi Arabia give full protection to property owners and thus people make properties with confidence.
This factor also deters MNCs to come to Pakistan.
After 1954 in the USA, building activities picked up sharply after Federal Mortgage Agency (FMA) was formed with power to evict any defaulter of mortgage installment after 3 months. The special power helped mobilize huge deposits from all over the world at very competitive rate and refinance housing loans. This helped average American improve their standard of life very rapidly. With 5-10%, down payment people were able to afford very nice houses with loans repayable in 30-40 years. Housing industry has been booming since.
If a similar Agency could be created in Pakistan, very large sums of money can flow in from large international Banks to build large number of houses required here urgently. Overseas Pakistanis can be persuaded to invest heavily in this secured lending product.
Besides the internationally financed construction, locally financed construction will take a leap jump creating very large number of jobs on a continuing basis.

  1. Lack of security due to tension with India.

Up to recently (2002) MNCs worried about a nuclear exchange between India and Pakistan and thus worried about their personnel and investment in these countries.
Thankfully, both countries have realized their folly and are working to avoid such horrible war, which cannot be justified for any thing including our honour or our claim on Kashmir.
However, for stable long term investments to come in permanent resolution of conflicts should come about. Both countries interest demand that with some give and take Kashmir issue be resolved in the interest of 650 million poor in both the countries.
Personally, I think for Pakistan, well being of its 50 million people under poverty line takes precedent over the small number of people in Kashmir.
Peace with India will also bring about a massive increase in Regional trade and benefit all countries from Afganistan to Burma. During British rule this was one market and thus a natural trading zone with immense potential.  This will help elevate poverty in the Region as a whole.  
Generally, I think Pakistan should adopt an 'Isolationist' foreign policy. Shying away from Regional and Global conflicts with a view to focus all energy on internal matters. Accept that we are a poor country trying very hard to keep our large population alive. We are not a Regional or a Super Power and therefore should act accordingly. Our Embassies all over the world should become low keyed and comprise of only essential staff to protect Pakistan's economic interests.  

11.   Lack of 'Free Economic Zones' in the country.

China although still a Communist country has created free economic zones which are run on completely capitalist system. One Country two system was an economic necessity and as a rationale party, Communist Party did not object on ideological grounds.
Numbers of FEZs in China have emerged as powerful engines of the economy that has transformed China beyond recognition in the last twenty years. Countries like Jordan, UAE and Bahrain have also created free zones with One Window operation that have proved very successful.
Pakistan should consider creation of one 'Free Economic Zone' in each province of the country, which would be independent of Pakistani laws, and be governed by independent Boards of Investment. Such zones will have very low taxes and one windows service for all needs.
MNCs will find it much convenient to invest in such zones rather than in the rest of the Country. FEZs would attract large investment and create a big number of job opportunity. Security concerns if any should be ruled out.

 

Conclusion:

Keeping  in mind, the unbearable misery of 50 million Pakistanis, the rank of which was added by another 500,000, by the Earthquake. All Pakistanis including Army should resolve before ALLAH, that we would get rid of the above obstructions to flow of investment, to very rapidly lift our people out of poverty.
The national spirit, which exists following the earthquake, may be used for the larger purpose. Turkey did this following death of 17,000 of their people in Earthquake in 1999. Why Pakistanis cannot do the same with death of above 75,000. 
Once we are able to collectively take care of the 11 hindrances explained above we should see a quantum jump in Pakistan's economic activity leading to  low poverty rate, low unemployment, stable prices, higher real wages. high property values, improved standard of living, high government revenue and improved current account balance.
Granted that many of these barriers are linked with our culture and religion and will be difficult to remove, however the mere realization of the fact these barriers need to be removed, one way or the other will start having positive impact. No matter how much time it takes, we need to work on these issues.
 One practical way to do this is form a political party with above agenda and try to win popular mandate on this plan and then implement it. The name of such a party could be Liberal Party of Pakistan (LPP) to make it distinct from others and to indicate major liberalization agenda it is going to follow.