Stocktaking of crucial reforms | Pakistan Today

Stocktaking of crucial reforms

  • Reforms are need to implement the IMF agreement

When the current government took office around a year ago, it vociferously launched many committees for initiating reforms in important areas of the economy, and overall polity. Among them were committee on institutional reform, and committee on civil service reform. Moreover, to reform the state-owned enterprises (SOEs), the then finance minister had pointed towards formulation of a wealth fund, among other governance-related reforms to improve the efficiency of these enterprises.

Yet not much progress can be seen on any of these initiatives. In fact, one hardly heard a single press conference or any progress report even, from any of these committees. There is a deep silence on these fronts. Resultantly, the SOEs still regularly need huge bailouts from the Treasury, remaining one of the bigger sources that feed into keeping the fiscal deficit high. Such expenditure leaves little for development spending. At the same time, it is not that they could be privatised easily, because even selling an old car requires at least that much repair that allows it to create interest in buyers, or bring in some reasonable amount in sale value.

The government indeed has very little to show in terms of progress on reforms. As the first year comes to a close, it is high time that significant progress is made on most of these and other areas where reform is needed

Notwithstanding that, privatisation of important SOEs– like that of the national airlines, or the steel mill, among others– may not in fact be desirable, firstly because, these are strategic assets and such should be under government control. Secondly, private sector may totally take them on the road to earn profits, and not care about welfare aspects that could be instilled by accepting lesser profits through these SOEs. Thirdly, countries following the social democratic model– the Scandinavian countries mainly– have run SOEs successfully in the public sector, and have used their returns to dent poverty and meet equity concerns, along with keeping these strategic assets within the public domain.

It is sad, to say the least, that one of the main crises of the country is virtually the total collapse of institutions. For this reason, the government had rightly formulated a committee on institutional reform. Yet not much transpired. No report as such surfaced on the policy plan being envisaged, nor was any tracking made public with regard to political and economic institutional quality determinants.

Moreover, it is hard to recall any interaction of the committee with media, so as to brief on its findings, and before what were the ideological and methodological underpinnings of the way they viewed the very concept of institutions, and the underlying organisations and markets; along with their inter-relationships. That is to say, what kind of bifurcation they had in mind about institutions and organisations, and was their philosophical lens to view economic institutions grounded in orthodox or heterodox economics, or more specifically based on neoliberal or social democratic philosophies?

Such a reform package was all the more important for providing reforms on the supply-side of the economy, both in terms of the real and financial sector institutions, and underlying organisations and markets. This was and is much needed in balancing the IMF programme, highly tilted in favour of aggregate demand curtailment, which the country is following currently. If some significant progress could be made on such institutional reforms, this would have meant that the effectiveness of policy instruments– like policy rate, taxes, exchange rate, or expenditures– in lowering macroeconomic instability and in enhancing growth in a sustained way, could have been substantially improved.

The same is the performance of the committee on civil service reform. Many a time, the Prime Minister notes in his speeches that the level of civil service was very high during the 1960s, but later on it deteriorated, especially when it started to seriously get politicised since the mid-1980s. Yet, no plan has surfaced to improve the recruitment process of civil servants, the incentive structures– like promotions, benefits, and income- they faced, and the extent of professionalism they needed to gain, among other aspects. Without a sound civil service, an important element of reaching goals remains on weak grounds. Still, the lacklustre interest of the government in making good grounds in terms of bringing this reform is saddening for the masses, to say the least.

Although education is a provincial subject, the political party in majority at the federal government, the PTI, has governments in two of the provinces, Punjab and KPK. This means that a strong reform should have been initiated at the federal level and also in at least these two provinces; focusing in turn at all the levels of education, including the institutional and organisational aspects of this sector. This could have indeed served as a role model for the other two provinces- Sindh and Balochistan; where performance of education sector is overall even worse than these two provinces.

At the same time, not many reforms have surfaced to improve the state of natural disaster management in the country for example. Add to it the lack of reform strategy to deal with the all-important issue of climate change; not much headway seems to be there. Moreover, no urban planning has been initiated at a larger scale, especially for the bigger cities. Reforms of any substance are missing to improve institutions involved in the real sector, for example the two mainstays of the economy in the shape of the agriculture and textile sub-sectors. Overall, reforms have not been introduced to improve the institutional and governance structures of real and financial sector markets, so as to overall lower market failures; to reach in turn greater efficiency and equity gains.

The above can be said in many other areas of the economy; even the reforms of the election commission have taken a somewhat back seat. This is strange given the current government agitated against the election malpractices in the loudest of ways when in opposition. The PM needs to take notice of this; where even the sports ministry has not done much to change the abysmal level of sports in the country.

Having said that, the highest emphasis of the government is about dealing with the twin deficits; which of course is important, but then what are other ministries/departments doing? Even the Ministry of Planning has not come up with any innovative strategy to reform the economy. The government indeed has very little to show in terms of progress on reforms. As the first year comes to a close, it is high time that significant progress is made on most of these and other areas where reform is needed. Such institutional reforms are also critical for the successful implementation of the reform programme negotiated with International Monetary Fund, and also for dealing with its likely negative impacts on economic growth, employment, and equity.

Omer Javed

The writer holds PhD in Economics degree from the University of Barcelona, and previously worked at International Monetary Fund. He tweets @omerjaved