Either option you suggest there is impossible, for free markets mean competition, which cannot be allowed for fear of disturbing the favored entrenched monopolies, and government support will continue to be determined by nepotism and corruption, as always, and not by any other measure.
USA was also corrupt as we know there were Al Capone period there, being corrupt is actually the first phase a country should faces
The institution continuous reform that will become the solution. With institution reform there will likely be
1. Better decision making
2. Better leaders in its leadership level
3. Less corruption
4. Improve of ease of doing business
5. Better regulation
6. Better Credit Rating
First to reform institution is to raise their salary based on performance system (done already in Indonesia since 2004)
Better democratic system like changing parlimentary system into Presidential system can be another step to take
First step to start it all is to reduce the Defense Budget significantly. Retain Army strength but reduce Air Force strength with just current F16 and JF17. Use that money for institution reform and remedy Pakistan circular debt.
Enough already with Nuclear Bomb and missile stock pile
10 years after that, Defense budget will likely increase significantly due to bigger GDP and state revenue