Probably Pakistan's Biggest Need: Charter of Economy

[Goenitz]

have started to build institutional memory that is vital to deal with long-term challenges such as the economy of Pakistan.

That is a good point. With a democracy facade and crying always for it, the focus is shifting now at least.

As you have said we need to think about what kind of SMEs? We want SMEs that involve:
1. Medium-to-high skill jobs
2. Manufacturing
3. IP Creation.

I think of agriculture now as it is our forte and in other sectors, we can't compete Chinese. We can be a forefront of Chinese products to rest of the world through Karachi and Gawadar, with some of their production units installed in Pak.
Add garments and other goods too. I also added, if we do research (Agri Uni Fsb) we can produce HQ mangoes, grapes, beef, with price 1000$/kg. Like wagyu beef.

Also, with SMEs I mean local business with providing better services and not products like electricians/plumbers.

Agricultural economy > manufacturing economy > services economy

Yes, as it is again a colonial era trend when we started providing services. too much babus, we produced for Sarakri naukri.

Agreed again. We wanted shortcut and leapfrogged in education just like we did in industry (by skipping manufacturing phases).

Good point. As our graduates are being wasted anyway due to low quality education and no local consumption. I again put forward my old argument that prepare our secondary students for cheap western/eastern universities. At least they would not get wasted.

 

[OldenWisdom...قول بزرگ]

What majority of Pakistanis assume a great economy is more of smokes and mirrors. It has more to do with aesthetics and consumption. That done on the backs of indentured labor working long hours on factory floors without much fanfare... dying early deaths and suffering a lifetime of pain, health concerns and broken dreams. The road is paved in pain and called rust belt in today's America... only too keenly farmed out to east Asians... who as it happens took it just as swiftly and keenly. Perhaps something to do with a culture of collective work and authoritarian states.
What Pakistan lacks is an ecosystem of servitude and by the time an autonomous state Bank is done with it... you'll have a consumption driven economy with indentured labor. The freedoms, futilities and aimless youth will be rueing the days when they could have raw emotions, small homes but a loving family and people they could call friends!

But this is a game of optics and it is only natural that all are attracted to, what is apparent/manifest.

 

[Goenitz]

He tells me his contact in Germany explained to him that the people who work with this cement have passed at least 12th grade. As part of their training, they learn about various chemical bonds and atomic structures that the cement forms.

Yes, I already said that basic education improves our understanding, quality, hygiene, work ethics.. Like, if you try to teach the work force in Pak that every step/break/delay you take cost money to entire country, people cannot grasp it.

dying early deaths and suffering a lifetime of pain,

basic education would improve that too. Health and safety, law/civic sense understanding etc.

 

[CriticalThinker02]

Can someone tag Imran Khan to this thread and video ?

 

[Indos]

You guys can learn a lot from this member about economy

Emerging and Frontier Markets: Economic and Geopolitical Analysis

After conferring with @Nihonjin1051 , I am opening this thread to discuss geopolitical and economic issues that do not fit well into the existing specialized forums that already exist on PDF. I will start the conversation with a topical article from a few days ago...

defence.pk

I hope it can be made sticky again in Far East Section @waz

 

[Patriot forever]

I have been saying for years that this big country called Pakistan can only be governed by COLLECTIVE WISDOM. Any party who thinks they can manage it on their own is either stupid or dwells in a cuckoo la la land. Govts or alliances should be given full support and not uprooted on a regular basis. What's the point of planting a SAPLING and uprooting it in few years, need to wait for it to grow into a full fruit-bearing tree. Unfortunately, our country has been in an EXPERIMENTAL phase since its inception. Time to act like a mature nation and stop constant leg pullings and medalling.

That is the conclusion one reaches when seeing things retrospectively. The actual problem is when the sapling turns out to be a weed sucking the land dry, what is your solution? You uproot the weed from roots.
We know whose policies are the root cause of economic mess, the real problem is the rule of law where the culprits run free and are given NRO's safe exists.
The perceived notion of us being a democracy is false, it's dynastic politics. The difference between democracy and dynasty is dynasties claim ownership of land and consider themselves above the rule of law. When you factor in this fact entire hypothesis goes down the drain.

 

[Death Professor]

Ishaq dar's 100 to a dollar was also a sapling, look the beautiful flower it has grown into.

 

[Patriot forever]

@JamD we need a chart for education, not a charter for economy. Our economic woes go back to lack of education. In an educated society, enlightened people strike back at inflation by strategically reducing consumption. There are civilian watchdogs and price commissions/associations that unite consumers and use organized boycotts against rising prices.

And the reason why people are uneducated is because our leaders come to power on the back of support from uneducated masses. A large part of your population is in bonded slavery in remote villages where they are carted to election booths and required to elect a specific person.

Even a so called progressive leader such as Imran Khan has shown his true intentions by creating a 'Sufi University'. Masses are being controlled through superstitions.

The real groundbase for a modern economy is an educated population that can use modern advancements and apply creativity and ingenuity to increase exports. That's one more thing that is missing from your chart above and probably the video as well. Today, entire countries have shaped themselves as a virtual Inc., for example, China Inc., Japan Inc. The country's government tries to structure society itself around exports. But when you have IMF dictating, you will keep struggling with cyclic debt.

I have this from someone here in Australia who has worked with the World Bank that Pakistan and Venezuela are the main revenue generators for IMF. These world powers intend to keep you subjugated. And they do this through compliant leaders.

This is the source of your troubles.

Bro you hit the nail with education part.

I would like to add one more thing, rule of law.

The only way to educate our politicians is to hang them in public for their wrongdoings, not give them NRO's. Make them pay for their wrong doings so that others don't commit the same mistakes.

The only way to educate the people is to make them take responsibility for their choices. For example people who voted for Plmn should be charged for the premium for IPP's with rates and agreements written on their bills. Distribute the transmission losses in proportion to their relative terms in government for all political parties.
Make them accountable, so that they do not try to scape goat others for ones mistakes to satisfy their political inclination.

Dynasties want complete ownership of land and it's people transferred to successive generations, close this path by limiting one to 2 terms with their family automatically not eligible at all levels.

The only other solution is to pack up this system and introduce an authoritarian regime like China and Bangladesh.

 

[Indus Pakistan]

Let me preface

Much credit for your effort. But let me make it simple. If your car engine is frigged you can maybe extract few percentage points by having oil changed and get parts replaced. Maybe you can squeeze a bit more by using quality fuel and additives. Pull teeny weeny more by having the engine managment remapped.

But after all that effort you still will be left with a frigged up engine. Only solution is replacing with a new engine or better just buy another car. This is the case with Pakistan.

The economy of the country is hostage to a politico-economic mafia. Meaning politicians who have no business abilitry at all have used their power to gain portions of the economy. You will have brother or relative in power whose family will have interests in chunks of the economy. These industries they own are inefficient and only survive by using monopoly provided by govedrnments to rape the Pakistani consumer. You see this in sugar, autos, housing etc etc.They are all mafias.

No elected or even military government is strong enough to uproot this entrenched mafia. Even retire military officers are part of this racket or one serving general will have his brother running a racket. The serving general will use his influence to make sure his brother keeps his business afloat. This applies across the entire elite today in Pakistan.

All this prevents the rise of real businessmen as they get pushed out by the system. The present PTI government is no differant despite IK's clean credentials. You see how Tarin was caught up in the sugar mafia along with Sharifs/Zardari.

The only thing PTI can do is bring improvement in social indicators. Literacy, health and housing. Also bring developmemt to underdeveloped regions. Then maybe in 20 years time there will be enough population stock to demand change and bring it about.

 

[Robbie]

Much credit for your effort. But let me make it simple. If your car engine is frigged you can maybe extract few percentage points by having oil changed and get parts replaced. Maybe you can squeeze a bit more by using quality fuel and additives. Pull teeny weeny more by having the engine managment remapped.

But after all that effort you still will be left with a frigged up engine. Only solution is replacing with a new engine or better just buy another car. This is the case with Pakistan.

The economy of the country is hostage to a politico-economic mafia. Meaning politicians who have no business abilitry at all have used their power to gain portions of the economy. You will have brother or relative in power whose family will have interests in chunks of the economy. These industries they own are inefficient and only survive by using monopoly provided by govedrnments to rape the Pakistani consumer. You see this in sugar, autos, housing etc etc.They are all mafias.

No elected or even military government is strong enough to uproot this entrenched mafia. Even retire military officers are part of this racket or one serving general will have his brother running a racket. The serving general will use his influence to make sure his brother keeps his business afloat. This applies across the entire elite today in Pakistan.

All this prevents the rise of real businessmen as they get pushed out by the system. The present PTI government is no differant despite IK's clean credentials. You see how Tarin was caught up in the sugar mafia along with Sharifs/Zardari.

The only thing PTI can do is bring improvement in social indicators. Literacy, health and housing. Also bring developmemt to underdeveloped regions. Then maybe in 20 years time there will be enough population stock to demand change and bring it about.

Your post has a lot of great points but I believe you are mistaken on one count. The largest and most diversified conglomerate of Pakistan is the Military. Not individual businesses run by relatives of Generals but the military as an institution itself through its various arms (for example Fauji Foundation).

 

[Bilal Khan (Quwa)]

i think before building cars we should concentrate on making power tools then upgrade to making cars.

You have to understand the point here isn't to try and develop cars on our own.

The point is to prevent some foreign car manufacturer from selling cars to Pakistanis unless 70% of the value of that car is sourced from Pakistan. It's a strict market access rule that puts the country spending its money in the driver's seat with big investors.

So, if Toyota tells us, "well you should learn to make power tools, then talk cars," we can tell them to either show us how to make cars, or GTFO. With a 200 million market -- of which tens of millions can access hard or foreign currency via remittances -- someone will play by your rules to access your market. It might not be the Japanese, but perhaps the South Koreans or Chinese.

In the worst case scenario, you create incentive for the local market to develop its own solutions, which then necessitates domestic investment (which we lack) and the rise of local businesses. This is the hardest and longest route, but it generates most of the rewards in the long-run. However, in most cases, someone will crack and agree to your terms.

@JamD one thing I'd caution about the agriculture-to-manufacturing-to-services continuum is that it's actually investor-centric -- that viewpoint (ultimately) benefits the person trying to maximize ROI. That's why the US 1% pushed for outsourcing (to make manufacturing cheaper), but the US transitioning to a service-based economy hasn't been beneficial in microeconomic terms, and it's starting to impact human development in the US.

IMHO the 'balance' the Germans and French had achieved is likely closer to where we want Pakistan to wherein the % output of your GDP favours services, but without causing decline in real agriculture and manufacturing output. Basically, you grow the economic pie with services, but you don't reduce your agriculture or manufacturing in real terms.

Let's say in 2021 Pakistan is $100 B (all fake numbers, just an example):

• 50% agriculture ($50B)
• 25% services ($25B)
• 25% manufacturing ($25B)

By 2031 you want to be at $200 B, but like this:

• 40% agriculture ($80 B)
• 30% manufacturing ($60 B)
• 30% services ($60 B)

By 2041 you want to be at $300 B:

• 30% agriculture ($90 B)
• 30% manufacturing $90 B)
• 40% services ($120 B)

Basically, all sectors should grow, it's just that the majority of your growth in the long-run could come from services. This is natural if your agriculture and manufacturing are also growing because those sectors need services. E.g., a car manufacturing plant will need an eco-system of retail, banking, education, real estate, etc.

One issue we have right now is that our services growth wasn't supported by manufacturing or agriculture growth, but by the injection of liquidity via aid (Musharraf-era) or loans (Nawaz Sharif-era).

 

[Goenitz]

So, if Toyota tells us, "well you should learn to make power tools, then talk cars," we can tell them to either show us how to make cars, or GTFO. With a 200 million market -- of which tens of millions can access hard or foreign currency via remittances -- someone will play by your rules to access your market. It might not be the Japanese, but perhaps the South Koreans or Chinese.

I think it is easy as there are so many car manufacturers right now, matching with Japan quality. I always think Italy for that, be it car/truck/train engines or vehicles. Plus, as our students go there and can learn Italian easily than Japanese, so many of our students can work in Italian industry, as many end users will be Pakistanis. Plus, they have a lot to offer. Be it pharma, defence, agriculture, cosmetics, garments, architecture, city planning etc. In short, we can learn a lot from Italian.

 

[Patriot forever]

You have to understand the point here isn't to try and develop cars on our own.

The point is to prevent some foreign car manufacturer from selling cars to Pakistanis unless 70% of the value of that car is sourced from Pakistan. It's a strict market access rule that puts the country spending its money in the driver's seat with big investors.

So, if Toyota tells us, "well you should learn to make power tools, then talk cars," we can tell them to either show us how to make cars, or GTFO. With a 200 million market -- of which tens of millions can access hard or foreign currency via remittances -- someone will play by your rules to access your market. It might not be the Japanese, but perhaps the South Koreans or Chinese.

In the worst case scenario, you create incentive for the local market to develop its own solutions, which then necessitates domestic investment (which we lack) and the rise of local businesses. This is the hardest and longest route, but it generates most of the rewards in the long-run. However, in most cases, someone will crack and agree to your terms.

The points raised are on point. It's a step wise approach, can't do that when there is monopoly of just 2 automakers in market. This is changing with the introduction of multiple brands in the market now who are gaining share day by day. Once there is strong competition, than tax incentives are the appropriate tools, cars which are just assembled in Pakistan using foreign parts cars with 40% local components, cars with 60% locally manufactured components all can be segregated under step wise tax regime.

The current government has facilitated this process, unlike in the previous governments which just flooded the market with 2nd hand imported cars. They were good cars but does not serve the economy at all except increase consumption to inflate GDP. This along with new car imports under the current tax regime is being made hard and expensive that has created room for other manufactures to enter market with local assembly. (This was not possible previously with overvalued currency and tax structure which made even local assembly seem less economically attractive). Once this process of multiple brands assembly matures we can stimulate the next phase of incentivizing them for local parts manufacturing by using a supportive tax structure based on % of parts being locally manufactured.

The same policy of taxes and curbing illegal smuggling has propelled our cell phone industry. Next step is local mother board manufacturing.

All these things take time and can not be achieved overnight (2-3 years in economic term).

Master tiles has expanded and is now manufacturing e.g. 3ft by 5ft tiles, a segment which was completely dominated by imports (because now they are more expensive). Rolled steel plant is in the process of being setup locally by its largest importer in Pakistan. This trend is creeping in all sectors slowly.

The OP shared beautifully what was wrong with our economy. Over valued currency does not allow productivity, it only facilitates borrowed consumption which is the main achievement Plmn advertises. It does not create wealth generation in an economy, at a basic level your income is the same but you are able to buy more goods because natural inflation trajectory is subdued artificially. As soon as BoP crisis develops rupee depreciates suddenly resulting in all that suppressed inflation catching up with rupee but your basic income ( productivity/output) remains the same along with the added debt which was driving consumption/GDP growth.

An overvalued currency negates the economic viability of local production, (labour, electricity tariff, investment cost etc). The preferred mode of business becomes import and sell locally even for foreign companies.

 

[Bilal Khan (Quwa)]

The points raised are on point. It's a step wise approach, can't do that when there is monopoly of just 2 automakers in market. This is changing with the introduction of multiple brands in the market now who are gaining share day by day. Once there is strong competition, than tax incentives are the appropriate tools, cars which are just assembled in Pakistan using foreign parts cars with 40% local components, cars with 60% locally manufactured components all can be segregated under step wise tax regime.

The current government has facilitated this process, unlike in the previous governments which just flooded the market with 2nd hand imported cars. They were good cars but does not serve the economy at all except increase consumption to inflate GDP. This along with new car imports under the current tax regime is being made hard and expensive that has created room for other manufactures to enter market with local assembly. (This was not possible previously with overvalued currency and tax structure which made even local assembly seem less economically attractive). Once this process of multiple brands assembly matures we can stimulate the next phase of incentivizing them for local parts manufacturing by using a supportive tax structure based on % of parts being locally manufactured.

The same policy of taxes and curbing illegal smuggling has propelled our cell phone industry. Next step is local mother board manufacturing.

All these things take time and can not be achieved overnight (2-3 years in economic term).

Master tiles has expanded and is now manufacturing e.g. 3ft by 5ft tiles, a segment which was completely dominated by imports (because now they are more expensive). Rolled steel plant is in the process of being setup locally by its largest importer in Pakistan. This trend is creeping in all sectors slowly.

The OP shared beautifully what was wrong with our economy. Over valued currency does not allow productivity, it only facilitates borrowed consumption which is the main achievement Plmn advertises. It does not create wealth generation in an economy, at a basic level your income is the same but you are able to buy more goods because natural inflation trajectory is subdued artificially. As soon as BoP crisis develops rupee depreciates suddenly resulting in all that suppressed I clarion catching up with rupee but your basic income ( productivity/output) remains the same along with the added debt which was driving consumption/GDP growth.

An overvalued currency negates the economic viability of local production, (labour, electricity tariff, investment cost etc). The preferred mode of business becomes import and sell locally even for foreign companies.

Yep and that's the main "business class" in Pakistan right now. No one cares about local manufacturers or suppliers, but the fronts that sell imported goods. Unfortunately, I don't know how many of these guys are willing to pivot to production work; it's capital intensive, higher-risk, and requires more work (everything a pure import trading business is not). Perhaps if there are more local production outfits, the import traders will pivot to finding low-cost raw materials from overseas to feed manufacturing?

 

[Goenitz]

Yep and that's the main "business class" in Pakistan right now. No one cares about local manufacturers or suppliers, but the fronts that sell imported goods. Unfortunately, I don't know how many of these guys are willing to pivot to production work; it's capital intensive, higher-risk, and requires more work (everything a pure import trading business is not). Perhaps if there are more local production outfits, the import traders will pivot to finding low-cost raw materials from overseas to feed manufacturing?

The way China progressed was manufacturing products for non-Chinese users like iPhones, nikes, etc . IDK whether such things can be replicated now but it was popular to move industry to economical countries. So it avoids high risk, expensive HQ products for rich countries so eliminates the local market fear as public is poor (it will help more). Overall, we need to provide, cheap land/labour/power so that locals can learn/produce but for foreign market. In summary some good collaboration is required.