Reviving economy: a comprehensive strategy

The strategic location at the crossroads of South Asia and close proximity to the Gulf countries make Pakistan a promising regional market. In order to take advantage of this, Government of Pakistan recently unveiled an elaborated Economic Revival Plan to tackle the economic hardships of the country. The Economic Revival Plan estimates that by 2035, Pakistan can potentially become a trillion-dollar economy. It focuses on making the economy export-oriented by creating job opportunities for around 75 million people, directly and indirectly, and to elevate the export targets up to $70 billion. The plan focuses on Pakistan’s untapped potential in key sectors of defence production, agricultural livestock, minerals/mining, IT and energy through indigenous development as well as investments from friendly countries.

To facilitate quick development of the projects, establishment of Special Investment Facilitation Council (SIFC) has been undertaken to act as a “Single Window” for foreign investors to adopt a unified approach. The setup will help bring precision to the existing clumsy business processes.

It has been envisioned for facilitating timely decision-making; avoiding duplication of effort and ensuring swift project implementation. It will attract foreign funding in agriculture, mining, information technology, defence production and energy as the country is dealing with a balance of payments crisis and requires billions of dollars in foreign exchange to finance its trade deficit and repay its international debts in the current fiscal year.

Pakistan aims to receive $6 billion investment from Saudi Arabia, the United Arab Emirates (UAE), Qatar and Bahrain over the next three to five years for corporate farming, with plans of cultivating 1.5 million acres of previously unfarmed land and mechanising existing 50 million acres of agricultural lands across the country. Pakistan’s corporate farming model envisioned 60 percent of the crops would contribute to the country’s food security, and the remaining 40 percent would be exported mainly to Gulf countries to earn foreign exchange.

Expanding the country’s cultivated area through corporate farming, if excuted rightly, can increase oilseed production to save a huge amount of foreign exchange.

On one hand, Pakistan’s reliance on imports for essential agricultural inputs, such as fertilizers (excluding urea), pesticides and various types of machinery (including harvesters, planters, balers, water pumps, electric motors, etc.) has been on the rise. On the other hand, a significant portion of Pakistan’s agricultural exports comprise commodities (agricultural yield) without any significant value addition through primary, secondary or tertiary processing.

As the premier quotes: “These agricultural resources, lands will be utilised by them (Gulf nations). They will bring their technology and manpower here; millions of jobs will be created; they will take the produce according to their required quality, and we will not have to give the profits in dollars”. Similarly, they can process our mineral resources and produce the final products and the profits will go but not in terms of dollars, but in commodities. Same implies to IT”.

Apart from the investments, the key measures under the economic revival include revenue enhancement strategies, including tax revisions in sectors such as retail, agriculture and real estate, alongside a wealth tax on movable assets, as deemed appropriate. The proposed plan also includes state-owned enterprises (SOEs) reforms including an SOE policy to be enacted while Central Monitoring Unit (CMU) and SOE performance reports will also be prepared with focus on the implementation of a treasury single account (TSA), remittance incentives, energy conservation, and price controls.

The Privatisation Commission will also privatise selected public sector enterprises using various modes. Initiatives include assessing privatisation options for DISCOs, restructuring options for PIA-CL and unbundling studies for SNGPL and SNGPL will also be conducted. Moreover, the short-term initiatives for business facilitation and promoting investment are to be taken by the Board of Investment, including the Asaan Karobar plan (establishing central e-registry, development of Pakistan Business Portal, National Regulatory Delivery Office).

The IT exports are to be boosted through training, a Startup Pakistan Programme, and policy interventions. In telecommunications, reforms aim to foster growth and introduce 5G technology. It is expected the economic revival plan and prudent policies like SIFC and IT policy will attract new investments to create a multiplier effect in the economy for higher and inclusive economic growth in the fiscal year 2024 and further in the medium-term.

It is without a doubt, a great initiative to rejuvenate the economy of Pakistan and a much needed band-aid to the bleeding economy of Pakistan. The focus will be on different untapped sectors of the country to increase revenue by increasing exports. The question arises what is on the table for the already existing export-oriented sectors of Pakistan which are nose diving.

Previously granted subsidies are all abolished along with the tariff rates that have rendered us uncompetitive in the international market. Our basic raw material cost and cost of doing business have escalated due to the exchange rate and abrupt change in policies. Other incentives like TUF or zero-rating all are now exempted.

Millions of rupees get stuck up causing shortage of liquidity for the exporters. Tax targets set by IMF are met by taxing the taxed. Energy tariffs are raised to manage the circular debt instead of addressing the causes such as inadequate transmission, inefficiencies and theft.

Undoubtedly, the government has proposed the plans under these projects to reduce corporate taxes. This will help improve non-bank finance and promote the capital market, implementation of Weighted Average Cost of Gas (WACOG), operationalisation of EXIM bank, and faster clearance of sales tax refund are priority short-term measures.

It needs to be ensured these measures are implemented so that we can rescue our operating export-oriented sectors which contribute a major share to the GDP. Similarly, for agriculture, it is pertinent that SIFC shares an elaborate plan for the inclusion and encouragement of our local investors also. Quota system may help in disbursement of land and funds. It is pertinent to mention here that more of our manpower is involved in this making, it a blessing in disguise.

For this, availability of skilled labour shall be made mandatory by the government. For any such projects that involve foreign interest and foreign funding, our local people should be prioritised to create as many job opportunities as possible. Government, in collaboration with the army, should also create a vital technical curriculum to establish such vocational institutes where the youth of Pakistan is trained in modern technological advancements. This will not only help educate and train the youth but will also help fill the vacuum created by the layoffs due to industry shutdown resulting from recent economic crisis.

It is the need of the hour that not only these sectors should be included in the reforms but also the existing export-oriented sectors like textile, surgical instruments, sports equipment, leather and carpet industries should also be taken aboard. Latest reforms should be introduced or reintroduced which were previously abolished and are now hampering the upward projection of exports like reinstating of zero-rating.

Moreover, focus should be shifted towards regional exports, as we have two of the world’s massive markets with escalating economy, as our neighbours including China and India. If trade is established within these two regions, it will not only save us time and hassle but will potentially reduce our transit cost and import duties as we no longer will have to use sea ports. Trade with India would help draw in cheaper goods from across the border. To name a few such possibilities, Pakistan can substitute imported iron ore from Australia and Brazil with less priced Indian iron ore.

The role of the army is indeed commendable in fighting the skyrocketing inflation during a period of low foreign reserves, taking action to eliminate the illegal dollar trade after the Pakistani rupee hit a record low in September.

Following an army-backed crackdown, country’s dwindling inflows have significantly improved in recent weeks on widespread smuggling and hoarding of dollars. Such efforts are vital in such gloomy times when there was a dire need to have a stable exchange rate. This is the high time where a common man of Pakistan needs relief the most. Incentives such as tax-free provisions of solar panels should be available free for five marls houses and on 50pc for ten marla houses.

It is the middle class that has been crushed in the collapse of economy, the bailout and its aftermath. To quote a World Bank report, Pakistan’s economic model no longer reduces poverty and to quote the World Bank official, there is a lot of stop and go and a lot of policy reversal, which often are correlated with political cycles.

The people of Pakistan have now their fingers crossed and all hopes on the upcoming elections, so that new government comes with potent policies and reforms to further stabilise the economy and implement these initiatives in the best way possible.

Pakistan is facing a serious economic and human development crisis, and it is at a point where major policy shifts and reforms are required. Whosoever comes in power should be able to deliver relief to the common man.