Interview with Pakistan Today
Pakistan needs Imagination and Reform
We Need to Move to a New System that Promotes Competition and merit
- You have long advocated better management of cities to lead growth. Why? And why did the government not heed your advice?
Answer: We must
recognize that the government is seriously depleted of talent to make
a development agenda. Such an agenda requires serious research,
thinking and debate. When we had such an agenda, there were people
like Mahbub ul Haq, Burki and Parvez Hasan charged with this
responsibility and they had the ear of the leadership. Today the
system has no room for such people. And the leadership is distracted
from development.
All our think
tanks universities work for donors on their consulting agendas which
are always following some fads. Today it is trade with India where
donors are spending millions of dollars and everyone is focused on
that issue. Planning Commission needs to put up some funding for
research to allow a domestic policy agenda to emerge and liberate our
intellectuals from being mere research assistants to donors.
On cities, my view
is the real powerhouse of growth is deregulation of cities. Powerful
well organized cities naturally reach out to their supply lines even
if they are across borders. But such cities create entrepreneurs,
innovation and creativity. They will lead to high inclusive growth
and transform Pakistan.
- Why is it that military governments seem to achieve better production and growth than our more democratic setups?
Answer: Military
dictatorships have been lucky that a neighborhood crisis sends money
into their laps and therefore growth picks up. But let us also review
their performance. The increase supply of aid gives them an
opportunity which they waste on populist ideas like giving their MNAs
development funds, building without clear thought, and pursuing
agendas that are anti-development. Sadly our military has never had a
vision for reform and restructuring society for development.
Both military and
democratic governments suffer from a common problem that they lack
the imagination and capacity to think through the reform that is
needed. Both rely on an outmoded and a rentseeking civil service.
They pick up “hearsay” agendas and do not have the attention span
to make serious considered policy.
Protocol, perks
and foreign trips take up all their time. This method of governance
is such that there is not time of process for serious thought.
Does heavy feudal
representation in democratic parties, eventually, make for policies
that are not working-class friendly?
It is surprising
how many cabinet members, parliamentarians and senior officials (both
army and civilian) claim to have connections with agriculture and
argue for higher support prices and subsidies. This is at odds with
the situation where the majority of Pakistan now lives in urban
areas. The lack of a census and proper redistricting seems long
overdue.
It is also
surprising how many are beneficiaries of the perk/plot system. The
incentive system at decision-making seems to perpetuate rural
subsidies and the plot/perk culture. And this is a drag on
development.
- Do we have a way out of repeated structural adjustment programs of the Fund?
Answer: Fund
programs are not to blame. Our policy is. I certainly do not share
the common perception that policy should worry only about tax/GDP
ratio or only about exports. Policy is about getting a right mix of
interventions towards a clear goal. We have a confused and outdated
agenda. We are continually chasing aid and trying to please people
with ill-thought out populist schemes.
My view which I
put in the Framework for Economic growth (FEG), (which was approved
by The National Economic Council in 2011 and 12, was that we have to
be clear that we are going to be growth driven and that growth is
going to come from deep structural reform. We pointed to several
areas where reform could be made to generate quick wins and achieve
sustained economic growth. Urban reform and openness would boost our
growth and investment very quickly by a few percentage points. If we
develop a serious government through civil service reform many of our
governance problems will begin to be addressed. If we follow the FEG
approach, we can unlock a virtuous cycle of growth investment and
reform.
- You have been a champion of civil service reform. Can you explain why and what kind of reform do you have in mind?
Answer: The human
enterprise, from the pyramids to the modern day capitalism has always
been maintained and developed by a bureaucracy. I argue for a civil
service reform not to rid us of bureaucracy but to develop a strong
and modern bureaucracy that we need.
Building a
bureaucracy for the 21st century will require a continuous
process of reengineering. The principles, however are clear. 1. More
decentralization; 2. Increased competitive recruiting especially at
senior levels; 3. Merit as opposed to seniority; 4. Monetization for
transparent compensation and to end “enclave mentality” 5. Modern
technology based work processes.
As argued in the
FEG we need to move to a results based system of management rather
than the current input based system. Movement to that system will
allow a much more open and decentralized system to emerge. Currently
the economy and all decision-making is being destroyed by the
secretaries in Islamabad controlling everything from the power sector
to railways to PIA through what is known as the Principal Accounting
Officer. Their grip on government must be loosened. The current mess
has been made by this over-centralized system. It creates large
incentives for corruption rentseeking and maladministration.
- Why do you think your Framework for Economic Growth (FEG) has been, discarded even though it had been appreciated in several circles?
Answer: Let us not
fool ourselves into thinking that our government is based on
sustained hard work or sound considered policymaking. We would not be
in this mess if that were the case. Everything is now done on a whim.
Work is considered to be ill-prepared meetings where hasty decisions
are taken by pointing to an impending crisis or the urgency to
deliver to people. No one Islamabad reads or has time to read a
complex document like the FEG.
Ministries like to
operate in silos and arbitrarily. No one wants the discipline of a
plan. Collaboration and teamwork requires effort and seriousness. It
happens in an atmosphere of professionalism and not in a
plot/perk/protocol culture.
We arranged many
meetings conferences and other activities for the FEG. Sadly none of
the ministers, MNAs and secretaries had the time to come to them.
Sadly they go to no learning events or seek knowledge. We have to rid
ourselves of the arrogance of all knowledge residing in powerful
people. That is not a modern concept. It harks back to feudalism.
Aid supplied
consultants have made government lazy. Policy is handed to ministers
like fast food to ministers in donor conferences where announcements
are made and loans signed without adequate thought or ownership.
- Remembering the good times of the dictatorship era, people question the ability of democracy to arrest our economic slide?
Answer: I have
already told you I am no fan of dictatorships and I do not think they
have performed better. They frittered away opportunity through
arrogance, lack of knowledge or sheer adventurism.
I can make a case
for better decision-making by democratic governments by pointing to
financial sector reform, accepting openness, moving to
decentralization etc. But I do not want to make it a dictatorship v
democracy debate.
Remember both
dictators and democrats have maintained colonial institutions without
much updating. And those institutions have atrophied over time and
are impeding development. Lots of international data—cost of doing
business, governance indicators—point to this. This is the major
failing of our system.
However, this is
not to say that our democratic system cannot be improved through
reform. We should be thinking and evolving ideas for framing better
democracy. But unfortunately all types of government, our bureaucracy
and our society has not thought along those lines. And we have
starved the thinking sector so that they are incapable of giving us
ideas. But as I said earlier the thinking sector needs funds and
support by the government to liberate it from being totally beholden
to donors.
- Why are we still confused about merits, or otherwise, of privatization? Can you please explain the economic rationale of hanging onto Public Sector Enterprises that hemorrhage hundreds of billions every year?
Answer: I think
privatization is no longer opposed anywhere in Pakistan. People are
suspicions of the process expecting some form of cronyism. Without
reform the most common term I hear about the government is “trust
deficit”. This is why I think we should make reform a central
process of governance for many years to come.
PSEs are very
lucrative to those who control them. They are slush funds with no
accountability. Board members, mostly civil servants and friends of
incumbent governments get large perks and payments. Those who have
influence can get comfortable and lucrative lifetime jobs. All these
people will fight tooth and nail to preserve this system. It is up to
the rest of us to break this nexus.
But for good
privatization we need good government and regulation.
- How can entrepreneurship be encouraged when the government is crowding out the private secor form credit?
Answer: FEG argued
for entrepreneurship as one important engine of growth. But please
remember that there is a difference between and entrepreneur, an
investor and a businessman. An entrepreneur is and passionate
innovator with ideas and is willing to take his risks without resort
to subsidy or government support. They seldom use credit. Venture
capital markets support them.
Governments cannot
create entrepreneurs. They can only create a framework in which
entrepreneurs can flourish and then let things happen. FEG was based
on developing such a framework. It consists of vibrant markets backed
by an efficient regulatory and legal system and a strong state
providing security of life and property. Entrepreneurship happens in
dense people centered cities. Such cities put commerce before
privilege of peks/plots and kothis. In short such cities allow for
density, high rise, mixed use and walkability.
- Considering the trajectory of the last 10 years, what is the most optimistic expectation for the decade down the road?
Answer: Without
reform and a change of mindset, we will muddle along. We have a
youthful population, large and rich diaspora and there is a large
informal economy beyond the pale of government. I think these things
will keep us afloat. There will be no major crisis. However we will
not break out like India China and Korea. For that reform has to
accelerate. And that reform must build institutions of the 21st
century.
The current
SRO/perk/plot culture promotes rent-seeking and discourages
entrepreneurship. We need to move to a new system that promotes
competition and merit.
I spelt it out in the FEG. That course will be followed. It takes
time for complex ideas to be understood. I knew it will not be
immediately implemented or understood. My desire was to change the
narrative of growth. It will take time but the seed has been planted
and the narrative will change. They can deny me a citation or credit
for my ideas, which are based on years of research, but they cannot
rid themselves of the idea.
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