“We need to move from routinely blaming the world for Pakistan’s woes and looking inwards to see what Pakistan can do for itself that will help strengthen it as a polity and garner the respect of friends and foes alike”

 

Shuja Nawaz Spotlights Pakistan’s Problems and Potential Solutions at HDF Michigan Moot
By Dr M. Shahid Yousuf
Bloomfield Hills, MI

Mr Shuja Nawaz, author and political analyst has written extensively on Pakistan in publications such as the The New York Times, The Boston Globe, The International Herald Tribune,   The Washington Post, The American Interest, Foreign Affairs, Foreign Policy, He was the keynote speaker at the Human Development Foundation (HDF USA) fund raising event at San Marino Club, Troy Michigan on March 18 th, 2023. This event raised over $ 300,000 for projects of HDF in Pakistan. Some 580 guests at the fundraiser were Pakistani expatriates from all walks of life and included community leaders.

Most notable of his observations included this remark: “We need to move from routinely blaming the world for Pakistan’s woes and looking inwards to see what Pakistan can do for itself that will help strengthen it as a polity and garner the respect of friends and foes alike.”

Pakistani Demographics

Mr Shuja Nawaz stressed that “Pakistan matters” borne out by its strategic location, population, and being the fifth largest country in terms of population. It is a nuclear power and till recently had a middle class of 50 million. “All said and done, Pakistan needs to be looked at with a greater deal of respect than it has received, particularly by its own rulers and its own people. They have always sold Pakistan short, and they have behaved in a manner that has depleted Pakistan’s strengths over time. Here I'm shifting the focus to the people of Pakistan as well as the Pakistani diaspora, including this gathering today. We need to move from routinely blaming the world for Pakistan’s woes and looking inwards to see what Pakistan can do for itself that will help strengthen it as a polity and garner the respect of friends and foes alike.” He said that Pakistan has a sharply rising population. There is a net increase of 13,400 Pakistanis every day. Half of the population has been born after 2000. Thirty five percent of the population is under 14 years of age.”

He said that there are possibilities that exist. “If we can change the mindset of the people that reside in the country, then those of us who are working for Pakistan outside the country can help create an enabling environment which they need to truly become a middle income country and an emerging power on the global space.”

Explaining the demographics of Pakistan, he said: “It has the highest population growth rate in South Asia. This is not a good thing. But there are some inherent values. It is a very young country with a median age of 23.8 years which means half, if not more than half, of the country was born after the millennium. That is an advantage because young population means that Pakistan has a population pyramid that is shaped (explaining with his hands a pyramid) like this. When demographers look at a population like this (pyramid) it means that potentially it has a bright future because there are many young people at the base of the pyramid. Those young people, if they are given the opportunity with health care and education be productive members of society, will help to carry the country to progress.

He cited countries like Japan and United States where the pyramid is upside down. He said that is a challenge for the country which has human development index of 2018 places Pakistan at 152 nd out of out of 189 countries. Bangladesh was placed 137 and India 129. Pakistan had a GDP of $ 346 billion in 2021. This was before COVID and the floods and this has plummeted. In 1991 both India and Pakistan had a per capita income of $328. In 2021 India had a per capita of $2,277, which was 50% higher than that of Pakistan. That is a cause of concern for all of us.

“Pakistan used to be the poster child of the developing world, of the World Bank and of the IMF. When I was at the IMF there was a study over a 14-year period in terms of growth rates which put Pakistan in 2 nd place after China. But today Pakistan has a GDP growth rate of 1.8%.”

Pakistani Economy

“The tax-to-GDP ratio, which is often used as a measure of the ability of a country and its economy to provide for its people, is around 9%. In India, it is around 12%. It needs to be in double digits and higher for Pakistan to be able to provide for its population. According to the World Bank, there are 2.5 million Pakistanis out of a population of 231 or 232 million, who are on the income tax rolls. Out of them roughly half pay income tax. The agricultural income is not taxed and has never been taxed. The economy and its manufacturing sector depend heavily on subsidies. In 2013, 50% of the lawmakers in Pakistan were reported to have paid no tax.

At this point in time, Pakistan is facing a dire economic condition. The current account deficit in '21-'22 was $174 billion. The fiscal deficit, that means the money that it collected in revenue as opposed to what it was spending, increased by 43% in the first quarter of 2023. The country's fiscal deficit has been recorded at two percent of the GDP or Rs1,683 billion during the first six months of the fiscal year 2022-23.

Currently, the Pakistan government under its constitution gives a so-called Development Fund or allowance to every single member of parliament. This is to spend as they wish in their constituency. The amount of money that is given for parliamentarians to spend as they wish is 90 billion rupees. Cutting back on such expenditures and other extraordinary spending would allow the IMF to revive its program with Pakistan and, after the current sixth review, release the next tranche of payments of over a billion dollars.

In order for Pakistan to avert a default on its obligations to its private and public creditors around the world, it needs to get the seal of “Good Housekeeping” approval from the International Monetary Fund. If it gets the Fund's approval and the Fund’s next tranche of funding and starts preparing to receive the following tranche and then maybe prepare for a new program at the end of the current program, it will be able to release funds from other institutions such as the World Bank, the Asian Development Bank, and other entities, plus the private sector.

Every other potential lender and investor is waiting for this signal from the IMF that Pakistan has made the systemic changes that it needs in order not just to keep its head above water, but to grow at its natural rate, which is probably around 6 to 7% annually. And if it does that, it stays ahead of its population curve, it creates a net of a million jobs a year instead of currently losing one to two million jobs a year, and it will be able to match other countries and go up the ladder of the Human Development Index.

Pakistani Youth

Another World Bank report has indicated that 1.6 million Pakistani youth have been idled as a result of the COVID pandemic. And it is not just Pakistan, but COVID-19 has had a similar effect on young people in all of South Asia. The report was released in February this year. It shows that there was an enormous change in school enrollment percentages in Pakistan before and after the pandemic. Something like a 15% drop in preschool enrollment by the end of 2021 in Pakistan. Enrollment among children between the ages of six and 14 dropped by six percentage points and 7.6 million children dropped out of school. This is in addition to the normally cited figure of 23 million children in Pakistan who are not going to school at all.

The World Bank estimates that today's students could lose up to 14.4% of their future earnings due to COVID-induced education shocks. And this was because between April 1st, 2020 and March 31st, 2022 schools were only partially open. In fact, they were partially or fully closed for 83% of the time. This was significantly longer than the global average of school closures, which was 52% for the same period. So, for every 30 days that schools were closed, the school-going children lost approximately 32 days of learning on average, according to the World Bank. Not only did they miss out on learning, but they also forgot what they had already learned. And so, the term learning poverty came into being, which was already 60% before the pandemic. It has further increased. An estimated 78% of the 10-year-olds in South Asia are unable to read and understand a simple written text. This is the kind of challenge that we are facing.

Another World Bank report has indicated that 1.6 million Pakistani youth have been idled as a result of the COVID pandemic. And it is not just Pakistan, but COVID-19 has had a similar effect on young people in all of South Asia. The report was released in February this year. It shows that there was an enormous change in school enrollment percentages in Pakistan before and after the pandemic. Something like a 15% drop in preschool enrollment by the end of 2021 in Pakistan. Enrollment among children between the ages of six and 14 dropped by six percentage points and 7.6 million children dropped out of school. This is in addition to the normally cited figure of 23 million children in Pakistan who are not going to school at all.

The World Bank estimates that today's students could lose up to 14.4% of their future earnings due to COVID-induced education shocks. And this was because between April 1st, 2020 and March 31st, 2022 schools were only partially open. In fact, they were partially or fully closed for 83% of the time. This was significantly longer than the global average of school closures, which was 52% for the same period. So, for every 30 days that schools were closed, the school-going children lost approximately 32 days of learning on average, according to the World Bank. Not only did they miss out on learning, but they also forgot what they had already learned. And so the term learning poverty came into being, which was already 60% before the pandemic. It has further increased. An estimated 78% of the 10-year-olds in South Asia are unable to read and understand a simple written text. This is the kind of challenge that we are facing.

In the region, Pakistan is ranked at the bottom in the performance to achieve the “education for all” agenda. In the global competitiveness index, Pakistan lags regional countries like India, China, Bangladesh, Sri Lanka, and Malaysia in provision of primary education services. There's also a huge difference between urban and rural areas in terms of children's enrollment and the share between public and private sector.

The share of enrollment in private primary schools is much higher in urban areas, about 60% of total enrollment. There's also a lack of authentic information about enrollments, exit and quality of education in the private sector.

So, the conclusion that we can reach for now is that the primary education system in Pakistan is in a dismal state, needs radical and strategic shifting of policies and implementation on multiple fronts.

In order to become an upper middle income country, by the time Pakistan is a hundred years old in 2047, Pakistan will need to accelerate and sustain a growth of six to 8% per year.

Pakistani Economic Policy

Pakistan's growth is stunted by its inability to allocate all its talent and resources to the most productive sectors. And this is because the economy and the political system is marked by distortions introduced by policy decisions or not addressed by policies. And these distortions, as I referred to in my opening, refer to things like taxes or absence of taxes like income tax on agricultural income, subsidies going to the richest or going to the entire population when they need to be targeted for the poor. And industrial policies that depend on the size of the industries as well as trade restrictions or gender norms. And gender norms are critical because Pakistan has the worst women's participation rate in the labor market in South Asia today, which means that we are working with one hand tied behind our backs. We are at barely 21 per cent compared to Bangladesh at 37per cent.

Differences in direct tax rates, for instance, tend to make it very profitable to invest in real estate relative to manufacturing or tradable services, according to the World Bank. High import duties make it profitable for firms to sell domestically rather than exporting. So for example, the World Bank calculates that in Pakistan, a 10% import duty on any product increases the profits of selling domestically relative to exporting by 40% on average. Our industries love being Big Fishes in a Small Desi Pond rather than competing against the Big Fish in the Global Pond.

Let me conclude by saying that much more than aid, much more than financial assistance from China or Saudi Arabia or America or Britain, Pakistan needs to look internally and make some decisions about what it wants to do to help education, to help girls, to help its young children, and to help its youth; to develop them physically, emotionally, and intellectually, so that they can become part of a growing service and tech-based economy, of an economy that is based on development of ideas and innovation of technologies, and that is interconnected with the world and that will be a hub for service provision to the rest of the world, not just a producer of raw material to which others are adding value and reaping profits.

This can all be done if we stop thinking about ourselves alone, or our group, or our province, or our sect, or our religion, and take a more inclusive approach to give back to the country what the founders of Pakistan gave us. Quaid I Azam Mohammed Ali Jinnah and his cohorts worked to create a nation with great potential, the fifth-largest country in the world, that could become the fifth-largest economy in the world if it so chooses. Inshallah!