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“Post 1980, there is no vision or policy vis-à-vis the economy”

Interview of Dr Kaiser Bengali

“Post 1980, there is no vision or policy vis-à-vis the economy”

Dr Kaiser Bengali has recently written a report titled Economy on a Roller Coaster – And Stuck in the Mud! An important document, the report covers and analyses the performance of the country’s economy over a period of 25 years, starting from 1990 and ending at 2015, and identifies problem areas that need to be addressed on an urgent basis.

The News on Sunday talks to Dr Bengali, a renowned economist and currently Dean, Faculty of Management Science at Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), on the findings of the report and the scope of the study in question. Excerpts follow:

The News on Sunday: You have painted a very bleak picture of Pakistan’s economy in your report that some quarters term exaggeration of facts. What would you say?

Kaiser Bengali: I have not exaggerated any facts and reached these conclusions purely on the basis of credible historical data. The 25-year averages and the graphs given in the report show the picture as it is. If anyone can draw a positive conclusion out of these, I will be willing to change my views. Over this period, every indicator relating to the basic sectors of the economy such as agriculture, large scale manufacturing and external trade reports low growth and high levels of volatility.

Similarly, budget deficit and unfavourable balance of trade and balance of payments etc. have remained major concerns and the country has become chronically dependent on borrowings from international organisations and so-called friendly countries. The worst part of the story is that there is little effort in the right direction to reverse the situation. The intention here is not to cause alarm but to sound an alert to the serious problems of the country and stress the need for corrective policymaking without any further delay.

TNS: Some sectors have achieved good average growth rates during the study period (1990 to 2015) but you have termed these not reflective of the real situation. Why?

KB: I have raised this point in the report and explained that averages are sometimes misleading because these are influenced by outliers. Outliers are very high or low numbers occurring in a few years. I would give the example of a class of 5 students with ages between 20 years to 25 years. If you add the teacher to the group and calculate the average age of its members, the figure will be higher than the one that is truly reflective of their age group. Outliers show vulnerabilities in the economy. The average annual growth rate of major crops sector for these 25 years falls from 2.8 per cent to 1 per cent, minor crops sector from 1.9 per cent to 1.5 per cent and large scale manufacturing from 5 per cent to 3.5 per cent if outliers are removed from calculations. The fact that high growth in any one or two years cannot be sustained is precisely my point about the crises the economy is facing.

TNS: What are the major flaws in the economic policies framed from time to time? And how do you think these have stifled our growth?

KB: I think things were not always the same and the country started its journey with great promise. During the first 30 years or so, it was a development state with its focus on seeking political legitimacy through economic development. Both the eras of Ayub and Bhutto saw heavy investments in large scale manufacturing and creation of sizeable economic assets. In 1977, the development state gave way to security state and development expenditure plummeted. Post 1980, there is no vision or policy direction vis-à-vis the economy, which is lurching in any course the events take it: weather, international practices etc. There is no concrete long-term industrial policy, human resource policy, agricultural policy etc.

Unfortunately, policies here are formed by thaikedars and aim at serving the interests of few. A relevant example is the recent reduction in General Sales Tax (GST) rate from 17 to 10 per cent on imported Liquid Petroleum Gas (LPG) and scrapping of regulatory duty altogether. This has made imported LPG cheaper than the locally produced ones. It is an open secret that this has been done to give benefit to a particular lobby.

TNS: How do you rate the performance of manufacturing and agriculture sectors that you term real engines of growth?

KB: Manufacturing and agriculture sectors are the main focus of this study because these are the legs on which the economy stands. They determine the fate of a country’s economy in terms of output, exports and employment. Unfortunately, these sectors have not performed well over the years. Large-scale manufacturing has grown at just about 5 per cent, major crops sector at less than 3 per cent and minor crops sector a mere 3 per cent. Out of the sample of 15 industries, 11 appear to be in deep trouble. Of these six including bicycles, chemicals, sewing machines, steel, textiles and vegetable ghee have exhibited zero to negative growth over the last decade.

The growth of crops sector is also skewed. For years the crop sector has been performing well (all crops are not reporting high growth). In fact, during these years one crop can be seen performing exceptionally well and making up for poor or even negative growth of other crops. And one major reason for this dismal situation is that the state’s focus has shifted from these sectors to non-performing and unproductive ones like real estate, stocks etc.

TNS: Despite the poor economic performance of the country, you have mentioned in the report that wealth here is aplenty? How would you define this phenomenon?

KB: Yes, it is so. No doubt wealth is aplenty even if it is not produced in fields, factories and offices. This wealth is concentrated in a few hands. My observation is that though the production side of the economy may be on the decline, wealth is being made through parallel economies. One is the government economy, distributing patronage among its constituencies of bureaucrats, landlords, industrialists etc; the second is the military economy, distributing patronage among its members; the third is the donor economy, with donor funding breeding a class of development consultants and NGO-crats; and the fourth is the casino economy that generates windfall profits through manipulated speculation in capital, land and commodity markets. The casino economy is the most damaging as it has minimal income and employment multiplier impact.

TNS: What immediate measures should the government take to improve the situation?

KB: There are no short-cut solutions; however, course correction can begin. For example, it can take revenue measures such as fixing GST on goods at 5 per cent, to be levied at single stage basis, with no adjustments and no refunds, fix gasoline price equivalent to $150 per barrel and cease periodic changes in this price, abolish spurious administrative divisions and reduce non-combat defence expenditure by 20 per cent. The government must also eliminate all indirect subsidies, except those targeted at lower income groups and underdeveloped districts, ban all non-essential consumer imports, adopt policy to generate electricity almost exclusively from hydel, domestic coal and off-grid solar.

Another suggestion is that it must introduce the principle of ‘Right of First Purchase’ in land and property transactions and commodity import to curb speculative investment and under invoicing. Under this principle, a third party may buy the property and commodity by paying 20 per cent more than the stated transaction price.


The writer may be reached at [email protected]

Shahzada Irfan Ahmed

shahzada irfan
The author is a staff reporter and can be reached at [email protected]

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