Pakistan is battered by recurrent financial crises and its real economy has shown an inability to achieve sustained high growth in per capita incomes. Consequently mass poverty persists. At the same time armed extremist groups have emerged as rival powers to the state within its territorial domain and are engaged in creating widespread violence. Under these circumstances many think that Pakistan not only has dismal economic prospects but the very existence of the state is threatened. So two questions arise: Can Pakistan ever prosper and if so, how?
The answer to the first question is yes. After all Pakistan has the world's largest integrated irrigation system in the world, the largest copper deposits and along with it the second largest gold deposits in the world with considerable but as yet un-quantified coal and gas deposits. At the same time it has a large and predominantly young population that has great potential talent occasionally demonstrated by outstanding individuals in the social, political, cultural, intellectual and scientific fields. This is not surprising because the Pakistan area has had flourishing urban centres for seven thousand years. It has also been a crucible of diverse civilisations through immigration from Central Asia, West Asia, the Middle East, Africa and Europe. As a consequence of the associated genetic diversity, the people of this country have not only considerable cerebral capabilities but also have a cultural diversity that if nurtured can enrich its intellectual, political and economic life.
The question of how to place Pakistan on the path of prosperity can be addressed by rethinking prosperity in terms of providing opportunities to all of the people rather than only a few, to develop their capabilities. In so doing, the vast human resources would be brought into play for the economic, social and cultural development of the country. So the idea of prosperity must be made inseparable from the idea of equity.
The pursuit of this goal involves understanding development as transformation. This has five dimensions: First, an honest leadership that can articulate a transformative development strategy and pursue it with single minded determination.
Second as the experience of the “rise of the South” shows, the state has a key role to play. But this cannot be done by incompetent and grabbing hand kind of state organisations. The bureaucracy has to be reformed to ensure professionalism, efficient performance, carefully aligned incentives, systematic evaluation and clear, time bound goals.
Third, a change in the institutional structure must be undertaken to enable the middle classes and the poor rather than just the elite, to engage in investment, high wage employment and innovation. Thus equity can be built into the growth process. I have indicated the required policy measures for this in some detail in my earlier articles in this newspaper and academic papers elsewhere.
Fourth the universal provisioning of education, health care and social protection should become a top priority. An educated, healthy and socially secure labour force is the key to productivity increase and economic growth. Universal provisioning of basic services will also give citizens a stake in citizenship and help achieve social cohesion. Recent research shows that a more cohesive society can achieve higher long term GDP growth than a less cohesive society. The financing of these basic services for the people can be done by saving public resources presently being wasted in three areas: (a) financing the losses of public sector entities amounting to about Rs 500 billion annually. These need to be privatized on a fast track. (b) the funds generated through these asset sales can be used to retire some of the short term debt, and thereby save on debt servicing costs every year.(c) the government should move out of grain trading in which another Rs. 500 billion are locked up.
Finally the most important prerequisite for prosperity is to control violence and re-establish order in the country. All aspects of state power must be brought to bear for this objective: military, political and ideological. Now is the time to chart a new course so that Pakistan can survive and prosper.