Pakistan Institute of Development Economics (PIDE), a think-tank established at Karachi in 1957 and accorded the status of an autonomous research organization by the Government of Pakistan in 1964, has projected some rather disturbing trends due to Covid-19: job losses of 18.5 million subject to the intensity of the pandemic in an earlier bulletin and more recently upping the job losses in Punjab and Khyber Pakhtunkhwa relative to Sindh and Balochistan.
Vice Chancellor Nadeem ul Haq, former Deputy Chairman Planning Commission (01-05-2010 to 07-06-2013), notes on the PIDE website: “the unprecedented negative economic growth of the country attributable to the badly impacted services sector as well the locked down manufacturing sector. Manufacturing sector remained shutdown leading to a massive shortfall in exports. The informal sector- the daily labour, small and medium industry and restaurants are badly suffering. As per the projections, poverty has gone up by 20-30% and if this state of affairs continues, poverty is expected to be doubled…”but added that ”the biggest problem of South Asia is not COVID-19 but the incapability of developing our economies for the 21st century. COVID-19 has shown that we couldn’t impose lockdown like the rest of the world has done because we lack the systems to do so. COVID-19 is not the ultimate problem of Pakistan, it is just the tip of the iceberg compared to the deep rooted structural problems that we are just not ready to face.”
Those who argue that the global economy would simply revert to pre-pandemic days once the pandemic threat is tackled effectively through the wide dissemination of vaccines are unlikely to be proved right as global public behaviour/attitude has undergone a major irreversible change with the massive rise in on-line householder purchases; and a realization by those companies/retailers renting/purchasing extremely expensive office/shop space in major cities that this expense is not a requirement for sales. Economic theory however dictates that the loss of one type of job is usually accompanied by the opening of another that may require some initial training and the example usually cited is that of vehicles replacing horse-drawn carts. A more recent example is the rise of Alibaba’s financial empire after SARS fuelled growth in on-line purchases and e-commerce.
Pakistan as a case in point is not immune to this global trend and without doubt on-line purchases have witnessed a significant growth post-Covid-19. However PIDE’s projection of more than 18.5 million job losses seen in conjunction with the opinion that Covid-19 is not our major problem which is “deep rooted structural problems” and that “we couldn’t impose a lockdown because of lack of systems” can be challenged as Pakistan does have the capacity for a complete lockdown as law enforcement officials together with the military establishment have previously shown the ability to undertake a countrywide lockdown. A complete lockdown was deliberately not undertaken as part of the Prime Minister’s policy for a trade-off between containing the pandemic and ensuring that the poor do not go hungry.
There is, however, no doubt that deep-seated structural problems persist in our economy specifically in the energy sector, the appalling sustained performance of state-owned entities and a tax structure that is heavily reliant on indirect taxes, whose incidence is greater on the poor relative to the rich, as opposed to direct taxes – problems identified by successive governments including the incumbent as well as Pakistan’s major multilateral and bilateral donors. It is this inability to deal with these structural problems, previously due entirely to political considerations while post the onslaught of the pandemic there has been a significant increase in the general public’s inability to bear the cost of these reforms that, as per Nadeemul Haq, necessitates that “the terms of the programme (IMF) need to be renegotiated taking into account the post Covid-19 scenarios…..(which are) just the tip of the iceberg compared to the deep-rooted structural problems that we are just not ready to face.” This is easier said than done and as a former World Bank staffer the Khan administration would have benefitted if he had identified those components of the Fund programme where renegotiations would have been acceptable.
The Asian Development Bank in its five-year evaluation report (2015-19) has expressed concern at insufficient political support to reforms, and poor funding to development projects which it argues accounts of sub-optimal outcome of its 7 billion dollar support. The fault lies with the government as well as ADB for falling short of operationalizing the institutional reform pillar.
Last but not least, while Pakistani administrations, including the incumbent, have identified and pledged to deal with structural problems yet unfortunately political considerations have allowed the status quo to remain undisturbed and with each passing year the situation is getting worse. The time to act is now and may require a dramatic slashing of current expenditure, over and above the freezing of civilian and military salaries, to minimize the impact of structural problems on the general public and at the same time to formulate and implement a tax structure that relies on direct as opposed to indirect tax collections.
https://www.brecorder.com/news/40039056/job-losses-up-to-staggering-185m
Job losses up to staggering 18.5m : edit in Business Recorder, Dec 9, 2020
Pakistan Institute of Development Economics (PIDE), a think-tank established at Karachi in 1957 and accorded the status of an autonomous research organization by the Government of Pakistan in 1964, has projected some rather disturbing trends due to Covid-19: job losses of 18.5 million subject to the intensity of the pandemic in an earlier bulletin and more recently upping the job losses in Punjab and Khyber Pakhtunkhwa relative to Sindh and Balochistan.
Vice Chancellor Nadeem ul Haq, former Deputy Chairman Planning Commission (01-05-2010 to 07-06-2013), notes on the PIDE website: “the unprecedented negative economic growth of the country attributable to the badly impacted services sector as well the locked down manufacturing sector. Manufacturing sector remained shutdown leading to a massive shortfall in exports. The informal sector- the daily labour, small and medium industry and restaurants are badly suffering. As per the projections, poverty has gone up by 20-30% and if this state of affairs continues, poverty is expected to be doubled…”but added that ”the biggest problem of South Asia is not COVID-19 but the incapability of developing our economies for the 21st century. COVID-19 has shown that we couldn’t impose lockdown like the rest of the world has done because we lack the systems to do so. COVID-19 is not the ultimate problem of Pakistan, it is just the tip of the iceberg compared to the deep rooted structural problems that we are just not ready to face.”
Those who argue that the global economy would simply revert to pre-pandemic days once the pandemic threat is tackled effectively through the wide dissemination of vaccines are unlikely to be proved right as global public behaviour/attitude has undergone a major irreversible change with the massive rise in on-line householder purchases; and a realization by those companies/retailers renting/purchasing extremely expensive office/shop space in major cities that this expense is not a requirement for sales. Economic theory however dictates that the loss of one type of job is usually accompanied by the opening of another that may require some initial training and the example usually cited is that of vehicles replacing horse-drawn carts. A more recent example is the rise of Alibaba’s financial empire after SARS fuelled growth in on-line purchases and e-commerce.
Pakistan as a case in point is not immune to this global trend and without doubt on-line purchases have witnessed a significant growth post-Covid-19. However PIDE’s projection of more than 18.5 million job losses seen in conjunction with the opinion that Covid-19 is not our major problem which is “deep rooted structural problems” and that “we couldn’t impose a lockdown because of lack of systems” can be challenged as Pakistan does have the capacity for a complete lockdown as law enforcement officials together with the military establishment have previously shown the ability to undertake a countrywide lockdown. A complete lockdown was deliberately not undertaken as part of the Prime Minister’s policy for a trade-off between containing the pandemic and ensuring that the poor do not go hungry.
There is, however, no doubt that deep-seated structural problems persist in our economy specifically in the energy sector, the appalling sustained performance of state-owned entities and a tax structure that is heavily reliant on indirect taxes, whose incidence is greater on the poor relative to the rich, as opposed to direct taxes – problems identified by successive governments including the incumbent as well as Pakistan’s major multilateral and bilateral donors. It is this inability to deal with these structural problems, previously due entirely to political considerations while post the onslaught of the pandemic there has been a significant increase in the general public’s inability to bear the cost of these reforms that, as per Nadeemul Haq, necessitates that “the terms of the programme (IMF) need to be renegotiated taking into account the post Covid-19 scenarios…..(which are) just the tip of the iceberg compared to the deep-rooted structural problems that we are just not ready to face.” This is easier said than done and as a former World Bank staffer the Khan administration would have benefitted if he had identified those components of the Fund programme where renegotiations would have been acceptable.
The Asian Development Bank in its five-year evaluation report (2015-19) has expressed concern at insufficient political support to reforms, and poor funding to development projects which it argues accounts of sub-optimal outcome of its 7 billion dollar support. The fault lies with the government as well as ADB for falling short of operationalizing the institutional reform pillar.
Last but not least, while Pakistani administrations, including the incumbent, have identified and pledged to deal with structural problems yet unfortunately political considerations have allowed the status quo to remain undisturbed and with each passing year the situation is getting worse. The time to act is now and may require a dramatic slashing of current expenditure, over and above the freezing of civilian and military salaries, to minimize the impact of structural problems on the general public and at the same time to formulate and implement a tax structure that relies on direct as opposed to indirect tax collections.
https://www.brecorder.com/news/40039056/job-losses-up-to-staggering-185m
Published in Pak Media comment and Pakistan