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Issues & Analysis


Pakistan’s potential as a key South Asian nation
By Mahrukh A. Mughal

Pakistan’s potential as a key South Asian nation:-Pakissan.comIN the South Asian context, Pakistan is the second largest country.

It is a pity therefore that while other nations in the region are achieving goals of progress and development, Pakistan is fast becoming a country that can be likened to a patient afflicted by multiple diseases.

The ogre of terrorism does not impact any other country in the region as seriously as Pakistan and the country’s economy is a serious cause for concern.

In fact, Pakistan’s progress has been brought to a naught and the country now faces serious problems concerning its future as it continues to face a worsening economic crisis – the mother of all problems.

The country’s forward momentum seems to have come to a complete halt due to the lack of a stable economy and the various indicators emanating from it.

South Asia is home to well over one fifth of the world’s population, making it one of the most populous geographical region in the world. While Pakistan is the second biggest country in this region, it is also the one fraught with the most problems and it is still one of the poorest countries in the world with many of its citizens living in abject poverty.

Pakistan is, in fact, so prone to malfunction that it faces almost every problem that restricts its progress – law and order situation, energy crisis, economic woes, corruption, deteriorating educational and health system, inflation, bad governance, nepotism, etc.

Whenever a new political leadership comes into power in Pakistan, the first thing it does is go around begging for loans to the IMF and the World Bank and to other lending institutions.

The crisis faced today is because of the fiscal indiscipline that has been practiced over the past years. Previous governments did not do what they had promised to do and, as a result,

Pakistan continues to depend on foreign aid which increases the national debt and this severely aggravates the economic crisis. Today, Pakistan faces an internal loan of more than 14000 billion rupees and an external loan of more than 60 billion dollars.

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Pakistan may be one of the richest countries in the world in terms of natural resources such as coal, oil, gas, minerals, agriculture, labour, skilled manpower, energy, geography, etc. but it is also one of the poorest countries in terms of management of these resources. Efficient management of resources is vital to achieving national prosperity.

The country’s political leaders should learn how to use their resources so that the country may prosper and does not have to depend on heavy loans from the world’s financial bodies.

Today, the country’s economic development is stunted because foreign direct investment is discouraged from coming into the country due to the prevailing law and order situation and small businesses find it impossible to fend with the ‘’start-up-cost’’ because of corruption.

The importance of an infrastructure is imperative for sustained growth. It plays a pivotal role in development and is a major contributor to the growth of a country. Pakistan is ideally located and while it can use its infrastructure for its own growth, it can also help other countries in this and adjacent regions.

Investment is very important for any country’s economic stability. But it is very unfortunate for both local and foreign investors that they find the infrastructure very poor in Pakistan.

Besides the severe crisis in terms of prime inputs like electricity, gas and water, the justice system is bad in the country, corruption is rampant and there is no end to the worsening law and order situation.

In these circumstances, local entrepreneurs are moving their businesses to various regional countries such as Bangladesh, China, Sri Lanka, etc. Similarly, foreign investors do not find a favorable environment to put their billions in the country. This reduction in infrastructure investment in turn causes more poverty and leads to economic instability.

Another factor that adds to the country’s economic problems is that of foreign remittances from overseas Pakistaniswhich is a very important source of capital for a developing economy.

Unfortunately, the country provides hardly any or no incentive to remittance senders. Whatever incentives are given are misused by institutions and individuals which adds to the economic instability.

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Tax is the backbone of any economy. While Pakistan is an agriculture-based country, there is no tax here on agricultural production. Seen in the economic backdrop, it is important to state here that the country has the lowest tax-to-GDP ratio in the world, with only 0.9% of the people paying taxes.

The taxation system is characterized as being unjust and discriminatory and is unable to generate enough revenues to break free from the shackles of the IMF and other donors. The amount of tax evasion in the country as estimated by the NAB (National Accountability Bureau) as being Rs. 7 billion per day.

The corruption figure comes at a heady Rs. 12 billion per day and is growing at an unchecked pace. The Federal Board of Revenue has miserably failed in its duty to deliver and it is really unfortunate that the country has such a corrupt, incompetent and incapable FBR with a weak tax collection machinery and its inability to collect taxes from agriculture.

This is a country of over 18 crores where only 27 lakh people actually pay income tax. According to the new taxation policies, only those earning Rs. 3 lakhs or more annually are taxed.

Agriculture is the dominant sector and contributes 21.4 percent to the GDP, while it employs 45 percent of the country’s labour force and contributes in the growth of other sectors of the economy but it is not taxed. In these circumstances, economic stability would not surely be a far cry.

The import and export sector too is adversely affecting the country’s economic health. Pakistan needs to greatly increase its exports through utilization of all available resources. In fact, exporters are using legal channels for money laundering as they receive money through formal banking channels against export orders of less worth and for tax exempted consignments.

 According to an official, this mafia is so strong and involves such influential personalities that the relevant departments and authorities are unable to enforce money laundering laws against them.

The country is importing goods of high worth and paying the cost in dollars since these goods come under the exemption regime. As a result, Pakistan is facing a heavy trade loss of 20 billion dollars. The trade deficit only in July 2013 was PKR 172,754 million.

The factor of corruption is a complex one and though corruption is present in all other South Asia countries but inPakistan it is an especially hurtful social, political and economic phenomenon that undermines democratic institutions, slows economic development and contributes to governmental instability.

Many big loan defaulters exist in Pakistan who borrow billions from banks and then default. The Public Accounts Committee estimates that the number of loan defaulters has reached more than 1500. According to the Constitution of Pakistan, a financial dispute cannot be stayed by a court for more than six months.

There are a large number of financial cases in Pakistan that have been stayed by the courts since the 1990s, pending decision.

Pakistan is a major South Asian country and a proud member of SAARC but it is also a country where corruption, terrorism, nepotism, injustice, robbery, murder and gambling are social evils with no answers.

The country must find the right answers if it is to rise above its economic and social ills and move forward as a modern and progressive nation – something that it is completely capable of.

December, 2013

Source:  Pakistan Observer;


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