Priorities for 2021 and Beyond

Eliminating disruptions in supply-chains, reforming the energy sector, and a national literacy program should be the priority.

Over the last couple of weeks, I have been thinking through all the conversations I have had for Pakistonomy. After talking to experts about all sorts of economic issues, ranging from water scarcity to property rights, the list of things that need resolution is enormous.

At the same time, there has been talk about a “national dialogue” between the government, opposition parties, and other institutions, including the judiciary and establishment.

Here’s Mosharraf Zaidi writing about why this is important:

The alternative to a grand national dialogue is to muddle along, continuing to allow the Pakistani people to stew in a potpourri of post Covid-19 economic stasis and internecine Pakistani elite warfare. An exit ramp that allows the system to cool down and restart with a new compact for how to keep it going is really the only way forward.

Ejaz Haider shared his thoughts on the topic as well:

In this country, several factors have created the power relations we currently have and which are the reason for the current experimentation and disharmony. Combine that with entrenched interests and the wheel comes full circle on the problem we began with: how is a grand national dialogue in the interests of those who wield power even as it might be in the interest of those who currently don’t. And how will such a dialogue materialise if the only ticket back in for those who currently are on the outside is to agree to the power configuration that exists and to which the problem can be traced back?

If you’ve been a regular reader of this newsletter, then you know that my view is that the status quo benefits the elite across political parties and institutions.

Given this reality, there is no meaningful incentive for elites to structurally and meaningfully alter the status quo, because doing so would go against their own interests.

Which is why even if such a dialog were to happen, the outcome would be changes on the margins and nothing transformative, which is what Pakistan needs.

There is a narrower path forward.

But I do see areas of cooperation, particularly in the economic domain, where parties and institutions can work together even under the current status quo. There are folks across all major political parties who agree that the following are issues that need to be addressed:

1. Supply-chain disruptions, particularly in the food sector;

2. The energy sector’s burgeoning debt; and

3. Literacy, particularly youth literacy, across Pakistan.

For me, the most immediate priority should be to eliminate supply-chain disruptions that have become the norm in Pakistan. From wheat and sugar to poultry and LNG, Pakistanis face unnecessary shortages of key products. Yes, collusion in the food sector is a major problem, but it isn’t the end all be all. Pakistan’s markets need reforms and deregulation, and political parties must work together to push through these reforms.

Just think about it: recently, Pakistan was unable to get a decent response for LNG purchases in the spot market because it was a late entrant into the market. I have friends who work in trading natural gas, and if one of them made such a mistake, they’d be fired immediately. But for some reason, in Pakistan you have bureaucrats and ministries controlling the process by which LNG in procured. This needs to end, and folks inside and outside the government agree that this needs to happen.

The medium-term priority should be reform the energy sector and deal with its gargantuan debt, which is over Rs. 2,000 billion. Doing so requires reforming and privatizing distribution companies, further empowering NEPRA, and allowing tariffs to be set in a rationalized manner. Additionally, a long-term policy to reduce dependence on foreign energy sources by increasing the share of renewables is needed. Again, political leaders across parties agree that this is needed, so they should sit together, hammer out their differences, and push through the necessary reforms. Doing so would unlock financial resources that can be deployed to meet other human development needs.

Finally, no society can grow in the 21st century with an undereducated workforce. Today, Pakistan’s youth literacy metrics are the lowest in the subcontinent, which gained independence at the same time. In fact, Pakistan fares worse than Rwanda, a country ravaged by a brutal civil war and genocide only recently.

This is unacceptable.

You will find all political leaders agree that investments need to be made in educating the country’s youth, which represents a demographic dividend (but is turning into a ticking time bomb).

A national education emergency is the path forward, and I firmly believe that Pakistan should have a national “Teach for Pakistan” corps made up of educated youth from across the country.

This corps should be sent to villages and towns across the country to provide basic literacy and math skills. Corps members should be paid decent wages for their work and the members ought to be treated as patriots playing a role for the country.

From a long list of major issues, I have shared the three things I would prioritize. If you think there is something else that needs urgent attention, do share it in the comments.

See you in 2021.

Thank you for being a subscriber and for reading my thoughts on Pakistan’s economy. I will be back in January 2021. Stay safe, take care of your family, and if you have the ability, be generous and donate to help the countless people who have been devastated by the pandemic.