Reasons why Pakistan's economy on failed stage

[Indos]

Unless Pakistan can protect Indian Muslims no one is going to die for Pakistan in a sustained war. Ever wonder why Indonesia wised up in its fight against Malaysia and Singapore @Indos

Invader mentality was still prevail during our earlier period, Soeharto for example was invading East Timor in 1977

Uniting all Nusantara is likely behind the idea, similar like current Russia invasion motive, claiming past glory

 

[Olympus81]

Good discussion.

There needs to be two pronged workstreams to improve Pakistan’s economy.

1. Control imports through reduction and import substitution. Live within your means, which in effect will control CAD and pressure on Forex reserves.

2. Value addition, increase exports. Over short term encourage investments, value addition etc. in the long run Human Development through education.

Other streams, include controlling population, encourage women into the workforce. You have to break the shackles of jahalat here, which is the most difficult part.

 

[pikkuboss]

Just by imposing more import tax Pakistan will get more USD and make the country more interesting for FDI to come. Bigger import tax will also reduce consumption and save more USD stored in the country.

It will bring more inflation of course (from imported products), but that inflation is necessary for the better future.

Pakistan also should make law to convert all USD made by export into Pakistan Rupee so the USD can be used to import and strengthen the currency.

India also has similar law (all USD made from Export must be stored in local banks)

Yes but India wants to deregulate this. Recently RBI notified about this and liberalisation of INR. I think this step is necessary for Pakistan at this stage, India has outlived the necessity of this and moving towards liberalisation.

 

[Indos]

Yes but India wants to deregulate this. Recently RBI notified about this and liberalisation of INR. I think this step is necessary for Pakistan at this stage, India has outlived the necessity of this and moving towards liberalisation.

Indonesia is also starting to become less liberal, expected more tight control on our USD coming from export sector. Not that tight though, just 3 months obligation to store in local banks. The law hasnt yet been implemented. This is the measure to withstand from The Fed tightening policy. Most of the 2022 our currency was stable and strong, but after government raise subsidized gasoline price at 30 %, the currency is getting fragile thus it needs to be supported by our USD reserves.

For Pakistan, it needs more tight measure. As I suggested the need for USD coming from export to get converted into Pakistani Rupee by Pakistan local banks (SOE banks IMO should be prioritized)

 

[Enigma SIG]

Then a pig face neutral ruined everything

Not pig faced. Actual Pig. Nasli.

 

[nahtanbob]

Invader mentality was still prevail during our earlier period, Soeharto for example was invading East Timor in 1977

Uniting all Nusantara is likely behind the idea, similar like current Russia invasion motive, claiming past glory

it is all fine. most minorities have given up irredentism

 

[pikkuboss]

Indonesia is also starting to become less liberal, expected more tight control on our USD coming from export sector. Not that tight though, just 3 months obligation to store in local banks. The law hasnt yet been implemented. This is the measure to withstand from The Fed tightening policy. Most of the 2022 our currency was stable and strong, but after government raise subsidized gasoline price at 30 %, the currency is getting fragile thus it needs to be supported by our USD reserves.

For Pakistan, it needs more tight measure. As I suggested the need for USD coming from export to get converted into Pakistani Rupee by Pakistan local banks (SOE banks IMO should be prioritized)

This move is actually anti market and can hamper growth, exports and FDI in the long run. India is actually going in the opposite direction without caring about the value of Rupee. Rupee will find its own value if left alone. This rule works great for banana republics like Pakistan, Sri Lanka etc, it worked for India when India was closer to Banana republic in the last century. Emerging economies don't need this artificial method. If Indonesia is doing this to arrest the fluctuations in global turmoil in the short term, then it is fine, but don't make it a law.

 

[Indos]

The problem is alot of things needed only make fiscal sense if you can make it in such bulk that the cost vs selling price is worth the effort. Unfortunately that usually means exports.

Market protection is needed. This was also happening during Soeharto period. After WTO deal is signed by almost all nations in late 1990's, the protection is still implemented at 20 % as this rate is still eligible according to WTO.

Country with large population is already big market that can entice FDI to come and this is something that needs to be capitalized.


FTA and Comparative Advantage

Indonesia did signed FTA with China in middle of 2000 which is actually ASEAN-China FTA. This measure is conducted because of market liberalism has become the trend during early 2000, other countries are also doing the same like Pakistan, Bangladesh, etc.

On the implementation side, market liberalism will not benefit countries that dont have focus on their economic development like countries with large defense budget compared to their GDP. Market liberalism should be followed by lot of institution and law reform and infrastructure development to make the country competitive. Market liberalism will make the economy gets competitive but there should be conditions being implemented to make the market become more competitve, in this aspec the country government play big role.

The basis of the FTA is comparative advantage. Does Pakistan define its comparative advantage compared to China ?

For Indonesia we have several comparative advantage like :

1. Affordable energy prices
2. Major producers of nickel, bauxit, tin, copper = Followed up by export ban
3. Big population
4. Long coastline = Many industries can be set up there and sea transport is still the most efficient means for large cargo transportation
5. Mature Democracy, Political Stability

The government also try to make the country gets more competitive by

1. Improving infrastructure
2. Institution Reform ( Increase salary by performance system)
3. Reform state owned enterprises which assets is bigger than half of GDP (2021)

4. Financial Reform (The formation of OJK, increase capital on bank, limiting bank owner to lend money to their own group, reforming SOE banks which are the largest banks in the country)
5. Improve ease of doing business (Making Omnibus Law, digitalization, etc)
6. Anti-Corruption Campaign
7. Etc



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To achieve those thing, our leaders try to improve harmony among political powers and only spend defense spending lower than 1 % of GDP for decades

Indonesia also start building ASEAN and let go its invading mentality, make the region become peaceful

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For Pakistan for example, it is a producer of textile raw material, but Pakistan is not clever to manage it. Pakistan should become the next China in term of this textile industry since it has the raw material.

Pakistan can start from this textile industry. Next stage Pakistan can try to make textile machinery as the industries are already large. Of course high tarrif needs to be implemented to kick start it

 

[VCheng]

All of the except fuel oil and animal and vegetable oil.
Most of the rest, we already make in some number,

Not really. Once one dives into the details, much of these imports are too complex for Pakistan to make, or provide inputs for other downstream industries. But some effort to improve domestic production can be made, I agree.

 

[sparten]

Not really. Once one dives into the details, much of these imports are too complex for Pakistan to make, or provide inputs for other downstream industries. But some effort to improve domestic production can be made, I agree.

Really? We make many of them, including industrial machinery and machine tools.

 

[313ghazi]

We spend more than we make, that is the crux of our problem. How can we change that?

1. Spend less on things that don't make money. Govt spending needs to be reduced massively, there should not be scope for a single piece of paper in govt, every transaction should be digital. We shouldn't be giving subsidies to anyone - absolutely nobody, unless it's to prevent starvation.

2. Import substitution. PTI govt was doing this in part. High taxes on foreign goods, either use local alternatives or pay the really high prices for the foreign stuff.

3. When we have some room and capability, only give interest free loans to small and medium businesses to encourage job creation.

4. Faciliate exporters and especially service exporters. If someone is working as a freelancer, let them claim their internet, their equipment, part of their electricity, phone bills etc as taxable expenses, but at the same time tax them too. However in return support the industry, give them stable electric connections etc.

 

[Olympus81]

I am not sure what’s stopping Pakistan from working on alternative energy projects (hydro, nuclear, solar, wind, biofuel, local coal etc) and to a certain degree arrest the growth in import bill for energy requirements.

Pakistan is already producing alternate energy but as a %age this number is too low.

Are we too stuck to the IPPs with guaranteed payments and when are these $ based deals expiring?

 

[313ghazi]

We spend more than we make, that is the crux of our problem. How can we change that?

1. Spend less on things that don't make money. Govt spending needs to be reduced massively, there should not be scope for a single piece of paper in govt, every transaction should be digital. We shouldn't be giving subsidies to anyone - absolutely nobody, unless it's to prevent starvation.

2. Import substitution. PTI govt was doing this in part. High taxes on foreign goods, either use local alternatives or pay the really high prices for the foreign stuff.

3. When we have some room and capability, only give interest free loans to small and medium businesses to encourage job creation.

4. Faciliate exporters and especially service exporters. If someone is working as a freelancer, let them claim their internet, their equipment, part of their electricity, phone bills etc as taxable expenses, but at the same time tax them too. However in return support the industry, give them stable electric connections etc.

Long term we need to switch to renewables and building extensive public transport links. We need to have well insulated homes to make it easier to keep the heat in and out. We need solar panels on every roof, we need EV's as the basis of our public transport. We need to get to energy independence.

Frankly we are a country if 220 million people, as long as we generate enough jobs and tax the workers, we should not have any economic difficulties. Its very simple, we just don't get the bare basics right because the people in charge have no interest in governance, just looting and maintaining the brown raaj.

 

[VCheng]

Really? We make many of them, including industrial machinery and machine tools.

Which ones, exactly? We won't even go into whether the domestic machines can produce goods of a competitive quality. And many of the components still are imported. Assembly is not production.

 

[Acetic Acid]

After listening to interviews and reading economic papers. Found a few issues.

1. If you check Dar era, he always supports and advocates import based economy. IMF also raised this issue and advised this trend needs to be changed if Pakistan needs to get out of this economic disaster.
2. Since we give China MFN trade status our local small manufacturing totally evaporated and the market is now full of Chinese low price products, which our local producers/manufacturer can't complete.
3. Pakistan has no long term economic plans, in every budget Govt proposed 5 year plans,but ends prematurely.
4. Our elite perks and privileges need to be reduced, which is over 17 billion dollars a year, beyond embarrassing when our leaders go to GCC countries for financial help.
5. Right person for the Righ job.
7. Massive corruption and subsidiaries.

And your take please .

O today I bought a partha for my little nephew for 685 rupees, where the tax was 50 rupees,

I remember in 2006 or 07 Shaukat aziz said we will cross 30 billion dollars in export by 2010

But then came PPP and PMLN and our export was stuck for 10 years.

Then it reached 30 billion mark during PTI tenure