Sage
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Budget: lack of vision
Pakistan can embark on the road to developing a strong knowledge-based economy only if we have a visionary leadership that truly understands and appreciates the role of knowledge in socio-economic development in this day and age.
We don’t have to reinvent the wheel but learn lessons from other Asian countries such as Singapore, Korea, Malaysia and China that have transformed their respective economies by investing in their real resource – their children. We need to attain a deep understanding of how a small country like Singapore with a population one-fourth of Karachi (five million) and with no natural resources can have exports of over $460 billion while the exports of Pakistan, a country with a population about 40 times that of Singapore, have stagnated around only $ 25 billion!
Singapore has a much higher per capita income today than even the United Kingdom. The reason is simple: the huge investments that Singapore has been making into education particularly into its universities, and then benefiting from the exports of its high tech manufacturing sector. The budget of the National University of Singapore this year is about Rs200 billion. The budget of all our 80 public sector universities taken together amounts to only Rs70 billion. This means that we are allocating 230 times lower budget on average to a public sector university in Pakistan than what Singapore or Korea do.
The same applies to college and school level education where the situation is even worse. There is a complete lack of vision in our rulers of the way forward that is reflected in the budget – a complete ignorance of the fact that we live in a world which is knowledge driven, and that we can only progress by investing in our real wealth – our children.
The present government had promised in its manifesto that it would allocate four percent of GDP on education. Where is that promise today? What we see instead is a massive attempt to cheat the masses by now twisting that promise from ‘four percent to education’ to ‘four percent to education and health’ sometime in the future! Mr Prime Minister, look at Malaysia. The country has been spending 25 percent of its budget for the last 30 years on education and today about 87 percent of the total high technology exports from the Islamic world come from Malaysia alone, with the remaining 56 countries contributing only 13 percent.
One dollar worth of gas/petrol today can be converted to $10 worth of monomers by the ‘cracking’ process (using a naphtha cracker) which in turn can be converted into $1000 worth of pharmaceuticals. Similar thousand fold or more value additions can be seen from sand to solar cells, from molasses to citric acid (a microbial conversion), and from iron to engineering goods. Alas we are, however, caught up in the low value added sector whereas the name of the game now is high technology.
If we look at our industry we find that 87 percent is involved in manufacturing very low value added goods. Textiles occupy only three percent of the world market and yet 60 percent of our industry is focused on textiles. Pakistan must transition to setting up high tech manufacturing and exports if we want to emerge from the present vicious circle of poverty, ignorance and corruption. These include chemicals, pharmaceuticals, electronics, engineering goods, nanotechnology and biotechnology based products etc.
The four golden rules that need to be followed are:
• Give the highest budgetary priority to education
• Strengthen the science and technology institutions, with the highest priority to engineering, and link them to industrial and agricultural development
• Promote innovation and entrepreneurship so that students emerging from our universities are job givers and not job seekers
• Focus on high technology manufacturing, particularly on engineering goods which occupy over 50 percent of the world manufacturing sector worth over six trillion dollars.
To achieve a major breakthrough, we need to undertake massive investments into education, science and promotion of high tech manufacturing. For this we need to find a way to generate resources, not by adding to the national debt by taking more loans from the IMF but by widening the tax net. How do we do that?
• The FBR has a list of about 3.2 million persons who do not pay tax but who have significant expenditures in the form of air tickets, automobile purchases etc. Each of these persons should be taxed in the range of Rs0.3 to 0.5 million annually after a detailed scrutiny to be carried out by an independent body with death penalty for corruption, as has been done in China and some other countries. This will afford an additional 1000 billion annually.
• Agricultural tax should be introduced on all medium- and large-sized farmers. This too should give about Rs500 billion or more annually.
• The taxes on sales and purchase of properties across Pakistan can be increased at least 10 fold if the correct market value of the properties is assessed and taxes levied on that. At least Rs500 billion can be collected additionally if the correct valuation based categorisation of city areas is carried out.
• According to Shaukat Tarin, the FBR is involved in annual corruption of Rs500 billion. This should be plugged and the FBR revamped
• There is massive smuggling across the borders, including the Afghan transit trade, of at least Rs500 billion annually. This should be plugged and duties imposed.
The above five measures would afford an additional Rs3000 billion or more, which would be sufficient for us to launch vigorously into a new direction to establish a knowledge based economy with a strong export oriented high technology industry.
The present system of ‘feudocracy’ is a dirty game in which the corrupt invest millions to come into the National Assembly or Senate, and then strive to earn billions by corruption. It needs to be completely dismantled and then rebuilt to ensure that only technocrat governments can be formed in the future. The 18th Amendment to the constitution needs to be abolished as it has weakened the federation and served the interests of the corrupt in the provinces.
The presidential system of democracy, about which I have written in earlier articles, with strict conditions for eligibility to parliament, confining the role of parliament to law-making, and capital punishment for corruption may provide the solution. The present politicians will not make such changes. This can therefore only be done with the armed forces and the judiciary working together to find a long-term solution that ensures that only highly qualified and honest persons can enter parliament.
Pakistan can embark on the road to developing a strong knowledge-based economy only if we have a visionary leadership that truly understands and appreciates the role of knowledge in socio-economic development in this day and age.
We don’t have to reinvent the wheel but learn lessons from other Asian countries such as Singapore, Korea, Malaysia and China that have transformed their respective economies by investing in their real resource – their children. We need to attain a deep understanding of how a small country like Singapore with a population one-fourth of Karachi (five million) and with no natural resources can have exports of over $460 billion while the exports of Pakistan, a country with a population about 40 times that of Singapore, have stagnated around only $ 25 billion!
Singapore has a much higher per capita income today than even the United Kingdom. The reason is simple: the huge investments that Singapore has been making into education particularly into its universities, and then benefiting from the exports of its high tech manufacturing sector. The budget of the National University of Singapore this year is about Rs200 billion. The budget of all our 80 public sector universities taken together amounts to only Rs70 billion. This means that we are allocating 230 times lower budget on average to a public sector university in Pakistan than what Singapore or Korea do.
The same applies to college and school level education where the situation is even worse. There is a complete lack of vision in our rulers of the way forward that is reflected in the budget – a complete ignorance of the fact that we live in a world which is knowledge driven, and that we can only progress by investing in our real wealth – our children.
The present government had promised in its manifesto that it would allocate four percent of GDP on education. Where is that promise today? What we see instead is a massive attempt to cheat the masses by now twisting that promise from ‘four percent to education’ to ‘four percent to education and health’ sometime in the future! Mr Prime Minister, look at Malaysia. The country has been spending 25 percent of its budget for the last 30 years on education and today about 87 percent of the total high technology exports from the Islamic world come from Malaysia alone, with the remaining 56 countries contributing only 13 percent.
One dollar worth of gas/petrol today can be converted to $10 worth of monomers by the ‘cracking’ process (using a naphtha cracker) which in turn can be converted into $1000 worth of pharmaceuticals. Similar thousand fold or more value additions can be seen from sand to solar cells, from molasses to citric acid (a microbial conversion), and from iron to engineering goods. Alas we are, however, caught up in the low value added sector whereas the name of the game now is high technology.
If we look at our industry we find that 87 percent is involved in manufacturing very low value added goods. Textiles occupy only three percent of the world market and yet 60 percent of our industry is focused on textiles. Pakistan must transition to setting up high tech manufacturing and exports if we want to emerge from the present vicious circle of poverty, ignorance and corruption. These include chemicals, pharmaceuticals, electronics, engineering goods, nanotechnology and biotechnology based products etc.
The four golden rules that need to be followed are:
• Give the highest budgetary priority to education
• Strengthen the science and technology institutions, with the highest priority to engineering, and link them to industrial and agricultural development
• Promote innovation and entrepreneurship so that students emerging from our universities are job givers and not job seekers
• Focus on high technology manufacturing, particularly on engineering goods which occupy over 50 percent of the world manufacturing sector worth over six trillion dollars.
To achieve a major breakthrough, we need to undertake massive investments into education, science and promotion of high tech manufacturing. For this we need to find a way to generate resources, not by adding to the national debt by taking more loans from the IMF but by widening the tax net. How do we do that?
• The FBR has a list of about 3.2 million persons who do not pay tax but who have significant expenditures in the form of air tickets, automobile purchases etc. Each of these persons should be taxed in the range of Rs0.3 to 0.5 million annually after a detailed scrutiny to be carried out by an independent body with death penalty for corruption, as has been done in China and some other countries. This will afford an additional 1000 billion annually.
• Agricultural tax should be introduced on all medium- and large-sized farmers. This too should give about Rs500 billion or more annually.
• The taxes on sales and purchase of properties across Pakistan can be increased at least 10 fold if the correct market value of the properties is assessed and taxes levied on that. At least Rs500 billion can be collected additionally if the correct valuation based categorisation of city areas is carried out.
• According to Shaukat Tarin, the FBR is involved in annual corruption of Rs500 billion. This should be plugged and the FBR revamped
• There is massive smuggling across the borders, including the Afghan transit trade, of at least Rs500 billion annually. This should be plugged and duties imposed.
The above five measures would afford an additional Rs3000 billion or more, which would be sufficient for us to launch vigorously into a new direction to establish a knowledge based economy with a strong export oriented high technology industry.
The present system of ‘feudocracy’ is a dirty game in which the corrupt invest millions to come into the National Assembly or Senate, and then strive to earn billions by corruption. It needs to be completely dismantled and then rebuilt to ensure that only technocrat governments can be formed in the future. The 18th Amendment to the constitution needs to be abolished as it has weakened the federation and served the interests of the corrupt in the provinces.
The presidential system of democracy, about which I have written in earlier articles, with strict conditions for eligibility to parliament, confining the role of parliament to law-making, and capital punishment for corruption may provide the solution. The present politicians will not make such changes. This can therefore only be done with the armed forces and the judiciary working together to find a long-term solution that ensures that only highly qualified and honest persons can enter parliament.
