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An oversupply of emotion

Publication Date : 24-05-2012

 

To those of us who follow Pakistan’s economy, the embarrassment suffered by the country at the Nato summit in Chicago came as no surprise.

Too often we have seen important matters fail because there are too many decision-makers, too many veto points in our country. The kind of bluster that usually accompanies these affairs is also familiar stuff, especially the kind of bluster where we know the person creating the din doesn’t really have the mettle to stand by it.

Of course the question of opening Nato supply lines is the most important political and economic issue facing the country now. And it’s no secret that all players now want to see the supply lines opened and the dispute to be unwound. But nobody is willing to own the consequences.

Critical economic decisions have often found themselves in this very same cul-de-sac, although nobody has attached to them the kind of importance that is being given to the Nato supply issue. This is a pity because those decisions, if made when they needed to be made, would have meant less dependence on foreign inflows today.

Take the example of tax reform — although one could pluck examples from other areas too. Every government that has been in power since 1990 has tried to advance the cause of tax reform, of documentation of the economy, of implementing a value added tax. And every government has found that the opposition loves to deploy the same arguments against the effort. When the opposition comes to power, they try to take the same decisions, and find themselves stymied by those who held power before them.

Remember when the government was trying to pass what they called the "Reformed GST" (reformed general sales tax) legislation? Remember the outcry, even from the coalition partners? None of that had anything to do with taxes, inflation, or any such.

To some extent, the parties opposing the measure were reacting to the concerns of their constituencies, which were small shopkeepers. But the same constituency has been screaming itself hoarse over the issue of extortion rackets and a deteriorating law and order situation, yet none of the parties are willing to pick up that flag and fight that fight.

For the coalition partner, this was an opportunity to renegotiate the terms of its entry into the coalition. For the opposition, it was opposition for the sake of it. They knew if this legislation passes, the IMF could release the next tranche of its facility, and that would help the government by giving them a little more breathing room with the reserves and the budgetary support they indirectly provide. The only game for them was to deny the government this opportunity.

Everybody got their way. The reform measure failed miserably, and our tax-to-GDP ratio has continued to fall, and our dependence on foreign inflows has continued to rise. Whenever the next government comes into power, whether it’s composed of the PPP or the Pakistan Muslim League-Nawaz, it will have to try one more time to make the move to a value added tax.

And rest assured, whoever is in opposition will resist the move.

Something similar is happening with the attempt to reopen the Nato supply lines. I hope it is easy enough to see how these two stories are linked. The question of opening Nato supply lines is intimately linked to the issue of foreign inflows in our aid-dependent economy.

The dependence on aid grows in large part out of our inability to generate sufficient taxes to pay for the government’s most basic expenses. And both ends of this chain, taxes and aid, which feed into the long-term viability of this country, are held hostage by a politics that grows out of an infantile and emotional populism.

There is some irony in the fact that the question of restoring Nato supply lines is coming to a head at the same time as the government is preparing to present an election year budget.

To give credit where credit is due, in both cases the ruling party made its fair share of effort to reach out and get everyone on board. But here the credit ends. When the time has come to translate words into actions, they have failed totally.

It was during the RGST episode that the government formulated its "plans" for the restructuring of the public-sector enterprises, in some cases giving “a time frame of four to six months for implementation”. We can see where those plans stand today, almost two years down the road.

But the other parties to the whole power struggle have played an even more destructive role. Nawaz Sharif sorely needs wise counsel at this time, to teach him how to play the part of an opposition leader. During the RGST episode, for instance, he complained that if he cooperates with the government, “they call me the friendly opposition”.

Elsewhere he said that he has cooperated with the government in the National Finance Commission award and the 18th Amendment, and enough is enough, now the time has come to oppose them. What sort of reasoning is that to bring to the table when matters of the long-term stability of the country are being discussed? Politics is no place to be acting like a jilted lover.

Then there is the military, fanning the flames of emotionalism on a number of occasions in the aftermath of Salala, then going on to issue a report titled "Pakistan’s perspective on [Nato] investigation report…" Now with all due respect, isn’t it the job of the civilian government to be issuing "Pakistan’s perspective" on anything?

What’s getting us killed every time, what’s keeping this country from going round and round in circles, unable to punch its way out of this paper bag it’s stuck in, is this: too many people who think they have the right to hold issues of national significance hostage to their particular interests.

It’s what is killing us in the strategic sense, and it’s killing us in the economic arena too. The best laid plans will inevitably come to grief if people don’t get a handle on their emotions, and if people don’t stop holding the national agenda hostage to their particular interests.

The writer is a Karachi-based journalist covering business and economic policy.

 

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