How Can Pakistan Reinvigorate Its Economy?

| Fahad Farooq

1- Introduction
 ✓Economy is one of the most critical player in a country.
 ✓Pakistan, like other developing countries, is struggling with its unstable
economy.
 ✓The country can reinvigorate its economy by taking some pragmatic steps.
2- Current situation of Pakistan’s economy
 ✓Currently, Pakistan is facing a serious threat of economic default as its
foreign exchange reserves are depleting exponentially.
3- Pakistan can reinvigorate its economy by
 ✓Investing in human capital
o Case in point: Human capital development policy of Singapore

 ✓Creatingan equity based tax policy

o Case in point:The tax system of China

 ✓Increasing competition among localproducers

o Case in point:Competition with foreign products can improve the quality
of local products and save them from extinction, HarvardBusiness Review

 ✓Developing small scale industries

o Case in point:Great contribution of small scale industries in the economy
of India, University of Wollongong Research Centre

 ✓Privatising state owned enterprises

o Case in point:Privatisation of energy sector in Denmark

 ✓Promoting digitalisation
o Case in point:Digital economy has the potential to radically change the
social environment and economic activities of Asia, Asian
DevelopmentBank

4- Critical Analysis
5- Conclusion

1- Introduction
Economyis one of the most critical player in a country that can even make or break its
foundations. If a country’s economy is flourishing, then the whole situation of its
international image, society, and politics start moving in thepositivedirection. The countries
with biggest economies, like US, Japan, China, and Russia are ruling the world due to their
economic might. However, Pakistan, like other developing countries, is struggling with its
unstable economy since inception. Moreover, the reliance of the country on the foreign
assistance has proved to be a curse as the country has never tried to strengthen its
economy without the blessing of West. Nonetheless, the country can still reinvigorate its
economy to achieve the dream of positivegrowth by taking some pragmatic steps, such as
investment in human capital to incorporate the skills important for economic prosperity,
digitalisation of economy, and privatisation of state owned enterprises. Also, the
development of small scale industries should also be encouraged to empower the local
economy. Moreover, equity based tax policy should be generated to avoid the exploitation
of poor people and collecting much amount from the elites. Thus, if these measures are
taken seriously, Pakistan will be able to reviveits economy. This article is endeavoured to
explain the measures, which Pakistan can take to reinvigorate its economy.

2- Current situation of Pakistan’s economy

Currently, Pakistanis facing a serious threat of economic default as its foreign exchange
reserves are depletingexponentially.In addition, the exports of the country has fallendown 9
percent since last July. Moving further, the destructive floods of last summer have also
caused much damage to already staggering economy. Consequently, these floods have
wiped out crops in hundreds of acres of land, which has made the country to spend $2
billion on the import of crops.To make the situation even more worse, the trust of investors
have also declined due to political instability in the country. Besides this, Pakistani currency
is continuously getting weaker against the US dollar and the later is on one of the highest
point in the history. To avoid this catastrophic situation of default, Pakistan, even after
accepting the threatening condition, isstill looking towards the IMF to finalise the deal and
restore its program to support the economy.

3- Pakistan can reinvigorate its economy by

 Investing in human capital

First, Pakistan should focus on developing its human capital so that the skills and knowledge
of people can help the country’s economy to flourish. Human capital allowsa country’s
economy to growas the qualitative education helps promote innovation, social well being,
and increased productivity. An example of Singapore is worth mentioning here as the
country transformed itself from low income to high income developed country by spending
much on human capital. Its main focus was on aligning the educational policy with the
national economic policy. In case of Pakistan, thecountry should not only focus on providing
degrees, but it should also inculcate the up to date skills. Higher education council should be
reformed according the modern era needs. Additionally, for the longer sustainablegrowth,
the country should transfer the funds of short term projects to the area of human
development.Also, the government should make investments in health sector to increase
the life expectancy. Furthermore, the government should also set vocational training
institutes in smaller cities so that more people can access it. Hence, if the government will
focus on the development of human capital, it will be able to revive its economy.

 Developing Equity based tax policy

Second, the government should also devise an equity based tax system so that everyone can
contribute according to their capacity.For example, China’s tax rate is divided into seven
level according to monthly income, with the highest level is 45 percent and lowest is 3
percent.Unfortunately, Pakistan’s current tax system is highly flawed, which has provided a
space for the elite to do tax evasion and exploit poor people. For this, Pakistan should
reduce the tax on the basic necessities of life and increase taxes on luxuries to ensure the
maximumcontribution of rich class. Moreover, heavy taxes should also be applied on the
imported products to promote the use of local commodities. Further, policies should also be
devised to expand the tax net and remove all the loopholes that can provide cover to tax
evaders. So, if these measures are taken seriously, the government will be able to stabilise
its economy.

 Increasing competition among local producers

Third, the competition among the producers should also be increased so that the domestic
producers can focus on reducing the prices and increasing the quality of their products.
There should be aconducive environmentforbusinesses so that people can have access to
vast number of products. Consequently, the variety of items will compel the local
manufacturers to produce low price and high quality products. According to the Harvard
Business Review, conducive business environment and competition with foreign items can
improve the quality of local products and save them from extinction. In case of Pakistan, this
will not only save the domestic industries from extinction, but also lead towards the
decrement in imports as people will start preferring local products. Thus, these pragmatic
steps can help Pakistan to move up on the ladder of economic development.

 Developing small scale industries

Moreover, the government should also develop small scale industries which can play a
greater role in the economic development. Setting up these industries will help creating
enormous jobs and quality products worthy of exports. They will also help the country to
reduce issues like slums, poverty, pollution etc.As mentioned byWollongong Research
Centre, the contribution of small scale industries in the economy of India has played a major
role in flourishing its economy. For this purpose, the Pakistani government should provide
funding and incentives for supporting these industries, and proper banking channels should
be established to ensure transparency.Besides this, terms for starting the business should
be easier so that maximum participation can be ensured. In conclusion, setting up small
scale industries will help the government to uplift its economy.

 Privatising state owned enterprises

Furthermore ,privatisation of state owned enterprises can prove to be very beneficial in
terms of economy.As, privatising the state owned enterprises will reduce the stress on
public finances and help reduce the fiscal deficit.In Denmark, transmission grid is fully
publicly owned and most wind farms are community owned, which is helping its
government to focus on important areas.So, thePakistan’s government should try to locate
the enterprises which are causing more stress on resources, suffering from losses, and do
not have sensitive data about the state. After the analysis, the government should made
these enterprises available for privatisation. Moreover, the government should also try to
outsource some of the departments if the enterprise cannot be privatised fully. In summary,
privatisation of state owned enterprises is a right step towards the revival of economy.

 Promoting digitalisation
Last but not least, the government should also focus on the digitalisation of its economy to
ensure positive growth. By adopting the practises of digital economy, the country will be
able to driveinnovationand fuel job opportunities.According to Asian Development Bank,
the digital economy has the potential to radically change the social environment, and can
increase the economic growth of Asia.In addition, the automation will revolutionise the tax
system and ensure maximum contribution. Most of the people try to avoid taxes because of
the lengthy and difficult procedures, but technology will help them to pay their taxes with
their smartphones. Moreover, there should be acomplete system of information about the
use of tax money so that the trust of people become firm on the process. Consequently, this
will not only increase the tax net, but also reduce the chances of doing corruption.In closing,
if the government will adopt the digitalisation, the economic growth willmove towards
positivity.

4- Critical Analysis
In a sagacious diagnosis, it is not wrong to say that Pakistan is going through the most
difficult stage because of the threat of default. It is very unfortunate situation that , like
previous decades, the country is still relying on foreign aid for its revival. The successive
governments have done nothing to take it out of the quagmire of
economicinstability.Rather than building their own capacity to avoid this
catastrophicsituation, the government is ready to give up some of its sovereignty for
financial assistance. There are many reform programs available, whichcan make Pakistanself
sufficient , but the lack of political will and foresight have always drowned these programs in
the ocean. However, we have much potential in our economy and there is a hope that next
governments will surely take realistic steps for its revival and Pakistanwill move on the road
of economic development.

5- Conclusion
In a nutshell, Pakistan is facing economic downfall due to its mistakes. In recent time, it is
suffering from the serious threat of default as its foreign reserves are drowning. Fortunately,
from several past months the country is avoiding this destructive situation, but it is not
enough as the country should take some realistic steps to energise its economy. Some
measures, such as digitalisation of economy, privatisation of state owned enterprises,
increasing the tax net, and development of small scale industries can be done to realise the
dream of economic prosperity. Also, the government should invest in the development of
human capital to set the basis for productive growth. Thus, despite of the difficulties, some
small steps can help Pakistan to reinvigorate its economy.