mr.robot
FULL MEMBER
- Joined
- Sep 16, 2014
- Messages
- 976
- Reaction score
- 1
- Country
- Location
Any time I have doubts about PTI, this person reduces them.
Abid Suleri: Pakistan suffers from what I call the ‘Six F Crisis’: fiscal crisis, fuel crisis, food crisis, frontier crisis, a crisis of functional democracy and, lastly, fragility of climate. I also believe that the only way to tackle these crises is by solving them simultaneously. If, for instance, we just address the food crisis and forget environmental preservation, we may be able to reduce poverty but will destroy our environment in the process. Has the PTI ever thought of these crises as being interlinked, all requiring a simultaneous solution?
Asad Umar: You have homed in on the heart of [PTI’s] economic agenda. [My party] wants to redirect Pakistan away from the elite and towards the masses. [We know] where we are supposed to generate additional resources from, where we have to curtail unnecessary expenditure as well as how to spend these savings and additional resources. The bottom line is that the underprivileged people in Pakistan are over-taxed. A recent study has shown that the effective tax rate – including direct and indirect taxes – for someone earning 12,000 rupees a month is 16 per cent but the effective tax rate for someone earning a million rupees a month is five per cent. Tax burden is thrice as much on the poor as it is on the rich.
We used to talk about economy in the context of equity versus growth. Now, the [focus] has changed. The International Monetary Fund (IMF) says if you increase inequity, your growth will slow down. So, if you want to increase growth, you need to increase equity. Last year, the government increased electricity prices by 78 per cent and increased General Sales Tax (GST) even though it had said it would cut it. Every form of indirect taxation increased across the board, but tax exemptions [to corporate entities and individuals] doubled from 239 billion rupees to 477 billion rupees in the same year. This is criminal.
Our tax policy is anti-growth — if the government depends on indirect taxation, it is going to cut into consumption [and therefore] purchasing power is going to be limited. If the government moves to a more equitable taxation structure, that will aid growth.
The other manifestation of inequity is that society is not rewarding people with the best ideas, who are willing to take risks, work hard and innovate. It is rewarding those who are good at networking. This is directly resulting in increasing non-competitiveness of Pakistan’s economy. The other part of the problem is that you cannot ignore Pakistan’s very high population growth rate.
AS: I should put down my seventh F as fertility…
AU: It has been a serious issue for a very long time. The number of new entrants in the job market is increasing by two million every year. With the average economic growth rate at 3.5 per cent, we are driving one million people to unemployment every year. This is a ticking social time bomb.
The second part of the growth problem is utilising indigenous resources. There is no reason that Pakistan should have an energy crisis. Pakistan is one of those rare countries which have surplus natural resources of energy — massive coal resources, massive hydroelectric resources and reasonably good gas resources. People need to be flogged in public, the way they are running things.
AS: Will the use of coal not adversely affect the environment? What is your solution to the energy crisis?
AU: We have made an energy sector policy without price increases. [By setting up coal-based power plants] the government is doing exactly what we have suggested and that is why I fundamentally support it but the problem is in the execution. Decisions are being compromised due to vested interests. The environmental pollution can be tackled by using modern technology.
AS: You mean critical coal-generation plants? Can we afford them in Pakistan?
AU: It is again about prioritisation. If we prioritise, we can — but here the opposite is happening. I filed a review petition on July 4 this year [in the Supreme Court on the 50 per cent tariff increase that the government is offering to investors for setting up coal-based power plants]. The government has dropped the allowed efficiency [of coal-based power plants] from 41 per cent to 39 per cent. This will implicitly allow older technology to come into Pakistan and will increase per unit cost of electricity.
AS: What magic wand do you have to change the economy?
AU: There can be no overnight changes. Most of the structural [reforms] you are looking at will start showing results in three to four years. I will, however, tell you about the magic wand. There is an iron grill of vested interests. The economy will not transform until we break the grip of vested interests. We need political changes. In every government, you will have advisers who know all these things and may know them better than I do. It is the political decisions that are not taking place; that is why you are stuck with your economic problems.
AS: Why blame others, then? They may say the same thing: Give us three to four years and we shall show results…
AU: Sure, why not. [Some steps taken by the government] are fundamentally in the right direction but sequence in the reform process is critical. The government is starting the reform process from the wrong end by, for instance, raising the price of electricity before anything else. That should have been the last action. By raising prices, the government has turned the entire country against it and its reform agenda is now suspended.
Look at any of the underlying fundamentals [in the energy sector]. There was so much to be done. Restructuring, management changes, market incentives for investors — none of it has happened.
AS: As I understand, your primary focus is on governance. If governance is fixed, everything else – including the economy – will take care of itself.
AU: [Governance] is the source. At a personal level, that is why I came into politics.
AS: But governance relies greatly on bureaucracy — and bureaucracy in Pakistan has its own inherent problems as well as inefficiencies.
AU: This is one of the core dilemmas of Pakistan’s democracy. If you don’t fix the medium
through which service delivery has to take place, you will never have real, lasting, meaningful reforms. Civil service reform is absolutely essential for long-term success but [this] reform will give you a lot of problems initially. There is so much resistance [to civil service reform]. Take the example of the private sector. All academic literature says that resistance [to reform in a private company] comes from your existing teams. Some will resist because they are the beneficiaries of the flaws in the system, others will resist out of insecurity and fear of the unknown. Political incentive for civil service reform is very low. Only somebody really, really committed to reform can accomplish this.
There is something even more important. The decline of the bureaucracy has been caused by its politicisation. Bureaucrats serve their political masters and not the nation. Yet, in spite of the decline, there are people who still get motivated to join civil service for the right reasons. The classic example of that is Khyber Pakhtunkhwa Police, which even the strongest critics of the PTI have lauded. It is simply because the guy at the top said, “I will not use this police for my own personal and political ends”. That is an important step that can quite literally be taken overnight.
AS: That may be because of an individual. Do you see any change in other sections of the Khyber Pakhtunkhwa bureaucracy?
AU: There is some change, but it is not as rapid as the one in police. We saw significant changes in the energy sector. The man who heads the energy sector bureaucracy in the province has been a principal agent for change.
We initially had some problems at the top of the administration [in Khyber Pakhtunkhwa]. There were relationship issues between the people at the top. Since we have made some administrative changes [in the province], things are improving, although I haven’t seen a very significant impact there.
AS: So, essentially, we are talking about reforming the system from within, not bringing about an alternative system.
AU: See, these are two different things. Let us take the example of the education system. You have to reform the existing system. I strongly believe that the state has the responsibility to provide primary- and secondary-level education, which means you need to fix the system hosting hundreds of thousands of government teachers.
I think the most important priority here is to retrieve the quality of the government schools. I have done 16 years of schooling in government institutions, paying a fee of one rupee per month. That was quality education. We have destroyed that. Why? Because of inequality.
You have to fix the health system. Studies show that health shocks and natural disasters are the reasons that make people fall below the poverty line. Pakistan’s health indicators are worse than those of Rwanda. The third thing is social protection. People don’t have enough to eat today. Half of Pakistan’s population doesn’t get minimum health facilities. In a situation such as this, you have to provide social safety nets to people through targeted subsidies, as we are providing in Khyber Pakhtunkhwa by subsidising flour and cooking oil.
Then there are other sectors — for instance, energy. There are two principal areas in the sector: hydroelectricity and oil and gas. We have changed the top personnel in both. The private sector is brought into both, the chief executive officers are professionals and not from the civil service. We have made bureaucracy in charge at the policy level and have completely removed politicians from there.
AS: So, it is all about right person for the right job?
AU: There were right people for right jobs during General (retd) Pervez Musharraf’s government. Pakistan Steel Mills [under Musharraf] was profitable six years in a row. Lack of governance messed it up.
AS: If you look at the budget figures, 75 per cent of the national revenue is spent on debt repayment and defence. The remaining 25 per cent is spent on day-to-day running of the government. Very little is left for development. Money for the Public Sector Development Programme is often borrowed from abroad. How can you bring about a paradigm shift?
AU: The first thing is priority. We give priority to social-sector services over infrastructure projects. People keep on asking us about Khyber Pakhtunkhwa. They ask, “Where is your metro bus?” In our view, reforming the judicial system is far more critical than anything else. Unlocking the potential of the province’s energy resources is equally critical.
AS: How would you do things differently at the federal level?
AU: In terms of generating money, Pakistan should move from a 10 per cent tax-GDP ratio to a 15 per cent tax-GDP ratio, except that the ratio has decreased by 0.1 per cent in the first year [of the current government] because it is just not willing to tax the rich and the powerful. The government has committed itself to eliminating tax exemptions but, instead, it has increased exemptions.
We have cut GST in Khyber Pakhtunkhwa to 15 per cent and we will continue to do so every year. We increased the agricultural tax on large landowners by 400 per cent. Similarly, we are finding other revenue sources that aren’t derived from indirect taxation.
AS: One gap I find in the policies is that we put all the pressure on growth and forget about distribution. Don’t you think we ought to have two strategies — one for increasing the size of the economy and the other for an equitable distribution of national wealth?
AU: In the end, there is nothing done about growth either. In the last seven years, all we have been doing is fiscal stabilisation because that is the only thing the IMF is interested in.
AS: Every incoming government blames the outgoing one as far as Pakistan’s interactions with the IMF are concerned. How do you propose to change this?
AU: A country that is borrowing money for debt servicing is spending 48 billion rupees on running a bus service for the residents of Islamabad and Rawalpindi. This is happening when 65,000 children are out of school in Islamabad alone, and when there is no access to safe drinking water in the city since 27 filtration plants out of 31 are not functional. Libraries have been shut down; health care is devastated. We, on the other hand, are renovating airports and remodelling highways. This is a complete capture of the policy framework by the elite.
AS: Should Pakistan not maintain any relationship with the IMF?
AU: The IMF stays mum on policies which are devastating for Pakistan’s economy. Please introduce me to one economist who says that the metro bus project makes sense in Pakistan’s current economic situation. Why does the IMF not talk about such issues?
AS: In my opinion, the IMF does not intervene directly in internal policy matters. It is more concerned about retrieving the loans that it has made to Pakistan. It is more concerned about fiscal deficit than anything else.
AU: It does intervene. Who said it doesn’t? Your electricity tariff restructuring is part of the agreement with the IMF. I, however, never criticise the IMF for Pakistan’s economic problems. I always direct my criticism towards the government of Pakistan. The problem is that the IMF signs agreements with Pakistan which are prescriptive in nature. Secondary blame, therefore, goes to the IMF.
AS: Secondary blame?
AU: The IMF is letting the government off the hook. But I didn’t elect the IMF — I elected the government of Pakistan. I elected the parliament. They are supposed to protect my interest, not the IMF.
AS: As a former corporate leader, what is your opinion on deficit financing? Can Pakistan ever achieve self-sufficiency to the extent where it does not need to borrow from outsiders?
AU: You cannot run your country today without foreign aid and loans. Borrowing to finance growth is fine — but you are borrowing to survive today. This needs to change. You need to make fiscal adjustments. But, yes, Pakistan is in a classic debt trap and we need to break that.
AS: If the PTI comes to power, how long will it take to break that debt trap? Five years?
AU: Yes, I believe in five years you can get to a situation where your economy is at a sustainable level.
AS: What is your take on centre-province relations?
AU: The 18th amendment with regards to centre-province relations was a step in the right direction. Devolving power from the centre and giving it to the provinces was commendable. It was, however, insufficient. Firstly, it lacked homework. For instance, it did not provide for a drug regulatory authority. Suddenly drug regulation stopped. It is insufficient also because it has empowered Karachi and Lahore more than they were in the past but how is it impacting the lives of the residents of Jamshoro and Layyah? Until, you introduce local governments, with fiscal devolution down to the local level, you will not be able to solve the core issues.
The PTI does not oppose new provinces created on an administrative basis. My personal view is that the question of additional provinces is a question for the political elite. It is not of the masses. If you want to empower the masses you have to go to local governments and fiscally empower local governments. In my opinion, the more fiscal centralisation there is in the system, the more misallocation of funds will happen in accordance with the perceived priorities of the elite.
AS: So the PTI does not want to reverse the 18th amendment?
AU: As far as provincial empowerment is concerned, we support the 18th amendment.
AS: We can look at the issue in a different way. The Provincial Disaster Management Authority is working well in Punjab but its performance in Balochistan is way below average. Giving Balochistan control of disaster management does not seem to have worked.
AU: The same argument is used for not having local governments — that they do not have the capacity to run themselves. The efficiency, however, will only come after provinces get their rights. It is unimaginable that they will not improve their capacity. Look, for example, at the Sindh Revenue Board. What the Sindh Revenue Board is able to accomplish, the Federal Board of Revenue was unable to do in collecting GST on services. I believe there should be more devolution. There is still room for it.
AS: There is a vast structural imbalance in civil-military relations. Look at disaster management, for instance, where 22 civil agencies are operating but not one of them is well-equipped and that is why the civil administration frequently calls in the military to do relief work.
AU: It is okay to bring in the army because they are better equipped and their level of preparedness is really high. During, the recent floods even in the United States, the army was called in. Maligning the army is not the answer. If you want to fix the imbalance then you have to increase the capacity of the civilian institutions and increase the level of their acceptance in society. Today the approval rating of the Pakistan Army is 85 per cent whereas the approval rating for the prime minister is 19 per cent.
AS: Can we then say that the army will stop interfering in politics the day people stop seeing it as an alternative?
AU: When, compared to a civilian, a soldier is sounder on an issue — that is where the imbalance comes in. The army is far more organised, knowledgeable and strategic in policy formation. If you have to minimise the civil-military imbalance, do it by raising the standard of civil administration, not by taking down the army.
AS: Some people argue that the army’s footprint in business and industry should be minimised to curtail its political influence. What do you think?
AU: I think that it is a severely overstated case. The military can run businesses if it doesn’t form cartels. [The military businesses] should be made to compete. Maybe they have enjoyed special privileges in martial-law regimes but not now. If they all were running on the largesse of the state, then they all should have been successful. In the same military system, where Fauji Fertilizers is making good money, other companies have gone bankrupt even though they had the military’s support.
AS: Uncertainty is considered a death knell for business but it is rampant in Pakistan’s politics. Don’t you think protests, processions and rallies add to that uncertainty?
AU: The argument that political stability is essential for economic stability is a nonsensical argument. Take, for example, Japan. For 50 years, it boomed. It was a miracle economy. But the average prime ministerial tenure in Japan was only 13 or 14 months. The system needs to keep running. Political instability shouldn’t weaken the system.
AS: Don’t you think that the protests in Islamabad give the impression that Pakistan is a country where state has no writ?
AU: Now that is what the government needs to think about. The protesters were not seizing Pakistan’s exports. They were not threatening parliament. It was the government which hyped up such threats. If the government is going to propagate such negativity what else would be the outcome?
Abid Suleri: Pakistan suffers from what I call the ‘Six F Crisis’: fiscal crisis, fuel crisis, food crisis, frontier crisis, a crisis of functional democracy and, lastly, fragility of climate. I also believe that the only way to tackle these crises is by solving them simultaneously. If, for instance, we just address the food crisis and forget environmental preservation, we may be able to reduce poverty but will destroy our environment in the process. Has the PTI ever thought of these crises as being interlinked, all requiring a simultaneous solution?
Asad Umar: You have homed in on the heart of [PTI’s] economic agenda. [My party] wants to redirect Pakistan away from the elite and towards the masses. [We know] where we are supposed to generate additional resources from, where we have to curtail unnecessary expenditure as well as how to spend these savings and additional resources. The bottom line is that the underprivileged people in Pakistan are over-taxed. A recent study has shown that the effective tax rate – including direct and indirect taxes – for someone earning 12,000 rupees a month is 16 per cent but the effective tax rate for someone earning a million rupees a month is five per cent. Tax burden is thrice as much on the poor as it is on the rich.
We used to talk about economy in the context of equity versus growth. Now, the [focus] has changed. The International Monetary Fund (IMF) says if you increase inequity, your growth will slow down. So, if you want to increase growth, you need to increase equity. Last year, the government increased electricity prices by 78 per cent and increased General Sales Tax (GST) even though it had said it would cut it. Every form of indirect taxation increased across the board, but tax exemptions [to corporate entities and individuals] doubled from 239 billion rupees to 477 billion rupees in the same year. This is criminal.
Our tax policy is anti-growth — if the government depends on indirect taxation, it is going to cut into consumption [and therefore] purchasing power is going to be limited. If the government moves to a more equitable taxation structure, that will aid growth.
The other manifestation of inequity is that society is not rewarding people with the best ideas, who are willing to take risks, work hard and innovate. It is rewarding those who are good at networking. This is directly resulting in increasing non-competitiveness of Pakistan’s economy. The other part of the problem is that you cannot ignore Pakistan’s very high population growth rate.
AS: I should put down my seventh F as fertility…
AU: It has been a serious issue for a very long time. The number of new entrants in the job market is increasing by two million every year. With the average economic growth rate at 3.5 per cent, we are driving one million people to unemployment every year. This is a ticking social time bomb.
The second part of the growth problem is utilising indigenous resources. There is no reason that Pakistan should have an energy crisis. Pakistan is one of those rare countries which have surplus natural resources of energy — massive coal resources, massive hydroelectric resources and reasonably good gas resources. People need to be flogged in public, the way they are running things.
AS: Will the use of coal not adversely affect the environment? What is your solution to the energy crisis?
AU: We have made an energy sector policy without price increases. [By setting up coal-based power plants] the government is doing exactly what we have suggested and that is why I fundamentally support it but the problem is in the execution. Decisions are being compromised due to vested interests. The environmental pollution can be tackled by using modern technology.
AS: You mean critical coal-generation plants? Can we afford them in Pakistan?
AU: It is again about prioritisation. If we prioritise, we can — but here the opposite is happening. I filed a review petition on July 4 this year [in the Supreme Court on the 50 per cent tariff increase that the government is offering to investors for setting up coal-based power plants]. The government has dropped the allowed efficiency [of coal-based power plants] from 41 per cent to 39 per cent. This will implicitly allow older technology to come into Pakistan and will increase per unit cost of electricity.
AS: What magic wand do you have to change the economy?
AU: There can be no overnight changes. Most of the structural [reforms] you are looking at will start showing results in three to four years. I will, however, tell you about the magic wand. There is an iron grill of vested interests. The economy will not transform until we break the grip of vested interests. We need political changes. In every government, you will have advisers who know all these things and may know them better than I do. It is the political decisions that are not taking place; that is why you are stuck with your economic problems.
AS: Why blame others, then? They may say the same thing: Give us three to four years and we shall show results…
AU: Sure, why not. [Some steps taken by the government] are fundamentally in the right direction but sequence in the reform process is critical. The government is starting the reform process from the wrong end by, for instance, raising the price of electricity before anything else. That should have been the last action. By raising prices, the government has turned the entire country against it and its reform agenda is now suspended.
Look at any of the underlying fundamentals [in the energy sector]. There was so much to be done. Restructuring, management changes, market incentives for investors — none of it has happened.
AS: As I understand, your primary focus is on governance. If governance is fixed, everything else – including the economy – will take care of itself.
AU: [Governance] is the source. At a personal level, that is why I came into politics.
AS: But governance relies greatly on bureaucracy — and bureaucracy in Pakistan has its own inherent problems as well as inefficiencies.
AU: This is one of the core dilemmas of Pakistan’s democracy. If you don’t fix the medium
through which service delivery has to take place, you will never have real, lasting, meaningful reforms. Civil service reform is absolutely essential for long-term success but [this] reform will give you a lot of problems initially. There is so much resistance [to civil service reform]. Take the example of the private sector. All academic literature says that resistance [to reform in a private company] comes from your existing teams. Some will resist because they are the beneficiaries of the flaws in the system, others will resist out of insecurity and fear of the unknown. Political incentive for civil service reform is very low. Only somebody really, really committed to reform can accomplish this.
There is something even more important. The decline of the bureaucracy has been caused by its politicisation. Bureaucrats serve their political masters and not the nation. Yet, in spite of the decline, there are people who still get motivated to join civil service for the right reasons. The classic example of that is Khyber Pakhtunkhwa Police, which even the strongest critics of the PTI have lauded. It is simply because the guy at the top said, “I will not use this police for my own personal and political ends”. That is an important step that can quite literally be taken overnight.
AS: That may be because of an individual. Do you see any change in other sections of the Khyber Pakhtunkhwa bureaucracy?
AU: There is some change, but it is not as rapid as the one in police. We saw significant changes in the energy sector. The man who heads the energy sector bureaucracy in the province has been a principal agent for change.
We initially had some problems at the top of the administration [in Khyber Pakhtunkhwa]. There were relationship issues between the people at the top. Since we have made some administrative changes [in the province], things are improving, although I haven’t seen a very significant impact there.
AS: So, essentially, we are talking about reforming the system from within, not bringing about an alternative system.
AU: See, these are two different things. Let us take the example of the education system. You have to reform the existing system. I strongly believe that the state has the responsibility to provide primary- and secondary-level education, which means you need to fix the system hosting hundreds of thousands of government teachers.
I think the most important priority here is to retrieve the quality of the government schools. I have done 16 years of schooling in government institutions, paying a fee of one rupee per month. That was quality education. We have destroyed that. Why? Because of inequality.
You have to fix the health system. Studies show that health shocks and natural disasters are the reasons that make people fall below the poverty line. Pakistan’s health indicators are worse than those of Rwanda. The third thing is social protection. People don’t have enough to eat today. Half of Pakistan’s population doesn’t get minimum health facilities. In a situation such as this, you have to provide social safety nets to people through targeted subsidies, as we are providing in Khyber Pakhtunkhwa by subsidising flour and cooking oil.
Then there are other sectors — for instance, energy. There are two principal areas in the sector: hydroelectricity and oil and gas. We have changed the top personnel in both. The private sector is brought into both, the chief executive officers are professionals and not from the civil service. We have made bureaucracy in charge at the policy level and have completely removed politicians from there.
AS: So, it is all about right person for the right job?
AU: There were right people for right jobs during General (retd) Pervez Musharraf’s government. Pakistan Steel Mills [under Musharraf] was profitable six years in a row. Lack of governance messed it up.
AS: If you look at the budget figures, 75 per cent of the national revenue is spent on debt repayment and defence. The remaining 25 per cent is spent on day-to-day running of the government. Very little is left for development. Money for the Public Sector Development Programme is often borrowed from abroad. How can you bring about a paradigm shift?
AU: The first thing is priority. We give priority to social-sector services over infrastructure projects. People keep on asking us about Khyber Pakhtunkhwa. They ask, “Where is your metro bus?” In our view, reforming the judicial system is far more critical than anything else. Unlocking the potential of the province’s energy resources is equally critical.
AS: How would you do things differently at the federal level?
AU: In terms of generating money, Pakistan should move from a 10 per cent tax-GDP ratio to a 15 per cent tax-GDP ratio, except that the ratio has decreased by 0.1 per cent in the first year [of the current government] because it is just not willing to tax the rich and the powerful. The government has committed itself to eliminating tax exemptions but, instead, it has increased exemptions.
We have cut GST in Khyber Pakhtunkhwa to 15 per cent and we will continue to do so every year. We increased the agricultural tax on large landowners by 400 per cent. Similarly, we are finding other revenue sources that aren’t derived from indirect taxation.
AS: One gap I find in the policies is that we put all the pressure on growth and forget about distribution. Don’t you think we ought to have two strategies — one for increasing the size of the economy and the other for an equitable distribution of national wealth?
AU: In the end, there is nothing done about growth either. In the last seven years, all we have been doing is fiscal stabilisation because that is the only thing the IMF is interested in.
AS: Every incoming government blames the outgoing one as far as Pakistan’s interactions with the IMF are concerned. How do you propose to change this?
AU: A country that is borrowing money for debt servicing is spending 48 billion rupees on running a bus service for the residents of Islamabad and Rawalpindi. This is happening when 65,000 children are out of school in Islamabad alone, and when there is no access to safe drinking water in the city since 27 filtration plants out of 31 are not functional. Libraries have been shut down; health care is devastated. We, on the other hand, are renovating airports and remodelling highways. This is a complete capture of the policy framework by the elite.
AS: Should Pakistan not maintain any relationship with the IMF?
AU: The IMF stays mum on policies which are devastating for Pakistan’s economy. Please introduce me to one economist who says that the metro bus project makes sense in Pakistan’s current economic situation. Why does the IMF not talk about such issues?
AS: In my opinion, the IMF does not intervene directly in internal policy matters. It is more concerned about retrieving the loans that it has made to Pakistan. It is more concerned about fiscal deficit than anything else.
AU: It does intervene. Who said it doesn’t? Your electricity tariff restructuring is part of the agreement with the IMF. I, however, never criticise the IMF for Pakistan’s economic problems. I always direct my criticism towards the government of Pakistan. The problem is that the IMF signs agreements with Pakistan which are prescriptive in nature. Secondary blame, therefore, goes to the IMF.
AS: Secondary blame?
AU: The IMF is letting the government off the hook. But I didn’t elect the IMF — I elected the government of Pakistan. I elected the parliament. They are supposed to protect my interest, not the IMF.
AS: As a former corporate leader, what is your opinion on deficit financing? Can Pakistan ever achieve self-sufficiency to the extent where it does not need to borrow from outsiders?
AU: You cannot run your country today without foreign aid and loans. Borrowing to finance growth is fine — but you are borrowing to survive today. This needs to change. You need to make fiscal adjustments. But, yes, Pakistan is in a classic debt trap and we need to break that.
AS: If the PTI comes to power, how long will it take to break that debt trap? Five years?
AU: Yes, I believe in five years you can get to a situation where your economy is at a sustainable level.
AS: What is your take on centre-province relations?
AU: The 18th amendment with regards to centre-province relations was a step in the right direction. Devolving power from the centre and giving it to the provinces was commendable. It was, however, insufficient. Firstly, it lacked homework. For instance, it did not provide for a drug regulatory authority. Suddenly drug regulation stopped. It is insufficient also because it has empowered Karachi and Lahore more than they were in the past but how is it impacting the lives of the residents of Jamshoro and Layyah? Until, you introduce local governments, with fiscal devolution down to the local level, you will not be able to solve the core issues.
The PTI does not oppose new provinces created on an administrative basis. My personal view is that the question of additional provinces is a question for the political elite. It is not of the masses. If you want to empower the masses you have to go to local governments and fiscally empower local governments. In my opinion, the more fiscal centralisation there is in the system, the more misallocation of funds will happen in accordance with the perceived priorities of the elite.
AS: So the PTI does not want to reverse the 18th amendment?
AU: As far as provincial empowerment is concerned, we support the 18th amendment.
AS: We can look at the issue in a different way. The Provincial Disaster Management Authority is working well in Punjab but its performance in Balochistan is way below average. Giving Balochistan control of disaster management does not seem to have worked.
AU: The same argument is used for not having local governments — that they do not have the capacity to run themselves. The efficiency, however, will only come after provinces get their rights. It is unimaginable that they will not improve their capacity. Look, for example, at the Sindh Revenue Board. What the Sindh Revenue Board is able to accomplish, the Federal Board of Revenue was unable to do in collecting GST on services. I believe there should be more devolution. There is still room for it.
AS: There is a vast structural imbalance in civil-military relations. Look at disaster management, for instance, where 22 civil agencies are operating but not one of them is well-equipped and that is why the civil administration frequently calls in the military to do relief work.
AU: It is okay to bring in the army because they are better equipped and their level of preparedness is really high. During, the recent floods even in the United States, the army was called in. Maligning the army is not the answer. If you want to fix the imbalance then you have to increase the capacity of the civilian institutions and increase the level of their acceptance in society. Today the approval rating of the Pakistan Army is 85 per cent whereas the approval rating for the prime minister is 19 per cent.
AS: Can we then say that the army will stop interfering in politics the day people stop seeing it as an alternative?
AU: When, compared to a civilian, a soldier is sounder on an issue — that is where the imbalance comes in. The army is far more organised, knowledgeable and strategic in policy formation. If you have to minimise the civil-military imbalance, do it by raising the standard of civil administration, not by taking down the army.
AS: Some people argue that the army’s footprint in business and industry should be minimised to curtail its political influence. What do you think?
AU: I think that it is a severely overstated case. The military can run businesses if it doesn’t form cartels. [The military businesses] should be made to compete. Maybe they have enjoyed special privileges in martial-law regimes but not now. If they all were running on the largesse of the state, then they all should have been successful. In the same military system, where Fauji Fertilizers is making good money, other companies have gone bankrupt even though they had the military’s support.
AS: Uncertainty is considered a death knell for business but it is rampant in Pakistan’s politics. Don’t you think protests, processions and rallies add to that uncertainty?
AU: The argument that political stability is essential for economic stability is a nonsensical argument. Take, for example, Japan. For 50 years, it boomed. It was a miracle economy. But the average prime ministerial tenure in Japan was only 13 or 14 months. The system needs to keep running. Political instability shouldn’t weaken the system.
AS: Don’t you think that the protests in Islamabad give the impression that Pakistan is a country where state has no writ?
AU: Now that is what the government needs to think about. The protesters were not seizing Pakistan’s exports. They were not threatening parliament. It was the government which hyped up such threats. If the government is going to propagate such negativity what else would be the outcome?
