Economic revival: Can ‘Uraan Pakistan’ and WB’s partnership framework deliver?

The last few weeks have been quite eventful on the economic front. Pakistan launched “Uraan Pakistan” programme, an ambitious initiative that promises to ignite growth and turn around the country’s fate. The World Bank announced it has devised a long-term partnership programme with Pakistan. The programme aims to assist Pakistan in overcoming its challenges of low growth and low human capital development, building resilience against climate change, ensuring a resilient food security system and devising a digitalisation pathway.

These two programmes reignited the debate over Pakistan’s economic revival. The government claims to have developed a recipe for bringing long-standing growth and prosperity to the country. However, the ground realities indicate it would be a gigantic task. Pakistan will have to overcome multiple problems to reignite growth. The World Bank also cautiously mentioned some problems that need policymakers’ attention.

First, the institutional arrangement is quite complex, hindering smooth execution of policies and plans. The 18th Amendment has further complicated the system. It created duplicate institutional layers and added players to policy formulation and implementation. The rulers never implemented it in its true spirit. The devolution process stopped at the provincial level. Local governments were never empowered, which are the basic pillars of democracy, governance, and devolution. The local governments are resourceless, lack autonomy and have limited or no capacity to deliver.

In a democratic system, local governments play an extremely important role. They ensure provision of services like health, education, transportation, etc. They accelerate economic growth by providing basic services and infrastructure at the ground level. The Shenzhen example in China shows how local government plays a pivotal role in implementing the economic agenda. They ensure participation of common citizens in policy-making and implementation.

Second, the governance system is highly inefficient and biased in favour of a few. The governance system is extremely complicated. It does not follow merit or rules; it only understands the language of power and money. This has given birth to corruption and deep-rooted rent-seeking behaviour. It only works for the powerful or those who can afford to offer bribes.

Moreover, public servants, the main pillars of governance, are not interested in serving the people. They are more interested in enjoying lucrative perks and the power of the seat. The World Bank also highlighted the system is overgenerous towards public servants.

Third, the business environment is discouraging and distorted. International institutions and organisations have pointed out this as a major hindrance to economic growth and development. Unfortunately, the powerful people have netted a vicious circle to control the business environment and are dictating the system. In this way, they are abusing the system to extract maximum benefits and capture the economic and productive resources of the country.

To fool people, the powerful keep on blaming each other (bureaucracy blames politicians, politicians blame establishment). However, they do not want to change it, as the system favours them and protects their interests and power.

Fourth, Pakistan’s human capital status is worrisome. It has a very weak human capital development system and lags behind in all human development indicators. It has quite high stunting rate (38 percent) and food insecurity (58.8 pc). The education system further discourages human capital development. Pakistan has one of the highest learning poverty in the world. Unfortunately, the State failed to deliver on its constitutional responsibilities. Instead of fulfilling its responsibility, it paved the way for private education business.

Since the 1980s, private education has flourished at the cost of public education institutions. The Pakistan Education Statistics Report estimated private institutions now comprise 38pc of the total educational institutions and cater to 44pc of children. Most private education institutes teach foreign curricula entirely different from the national curriculum. The weak health system and lower funding further complicate the situation. These factors resulted in a lower score on the human capital index (41 out of 100).

Against this backdrop, one wonders how Pakistan will achieve the goals of “Uraan Pakistan” and implement country partnership framework. It would be extremely difficult, if not impossible. Hence, the system needs to be reformed. A few suggestions have been developed for consideration.

There is a need to find a way to break the dominance and control of ruling class over the system. It would be difficult, as they have developed a comprehensive nexus comprising all power players, including politicians, bureaucrats and big business groups. But, it is necessary because they use their power to deter any reform effort. They only do patchwork; rather, they further strengthen their control with every reform effort.

The 18th Amendment is a classic example of understanding the reform dynamics and control of powerful people. Thus, to do any meaningful reform, Pakistan will have to break their nexus. Otherwise, the reforms would fail again.

Pakistan cannot attract FDI or domestic investment without reforming business environment. There is a need to slash the role of multiple layers of institutions and consolidate the work of service provision and execution of business plans. For example, to register a business company, there should be only one office, and for tax services, there should be single central body. Make the system time-bound; there should be penalties for crossing time-limit. For example, an electricity connection must be provided within seven days.

Pakistan will have to decide whether to implement 18th Amendment in its true spirit or abolish it. If serious about 18th Amendment, it will have to strengthen local government system. Local governments must be autonomous regarding financial resources and execution.

Pakistan will have to revamp its entire human capital development system. Right now, it is in shambles. For example, public expenditures and investments are well below the required levels in the education sector. Moreover, the poor state of teaching staff’s skills and capacity further complicates the situation. The same is true for health sector.

Thus, a comprehensive approach is needed to tackle the issues in human capital development. The government must increase investment in education and health sectors. It must invest in developing the teaching staff’s capacity and skills. The business approach to developing education and health sectors should be discouraged.

It is good to note the World Bank has highlighted education and health sectors as priority areas in the country partnership document. Under the partnership framework, the WB will invest in these sectors. It is advised investment should be made in public institutions, not private sector development.

In conclusion, “Uraan Pakistan” and the country partnership framework agreement with the World Bank seem good initiatives. However, to make them successful, Pakistan will have to reform, rather than revamp its whole governance and business environment. The government will have to cultivate an environment conducive to successfully implementing the cooperation framework and the “Uraan Pakistan” programme.