The proposal for a charter of the economy first surfaced in 2011. Since then, it has cropped up from time to time in search of a road map for inclusive, sustainable development.
In recent weeks, the move has gained fresh grounds with the key players — the business community and the main opposition party — proposing and the government supporting it.
Apparently, there is a growing national realisation that joint efforts are required to put the economy back on its feet. Some political leaders see the charter of the economy intertwined with the charter of democracy that has helped in imparting stability to constitutional and civilian rule.
The industrial community believes tax policies should be development-oriented instead of revenue-oriented. Economic growth will automatically yield more tax revenue
Grappling with baffling ground realities, the PTI-led government is finding that solo flight is not a very convenient way to implement its agenda. It was, therefore, not surprising that on Sept 24 Finance Minister Asad Umar welcomed a proposal for the charter of the economy made by opposition leader Shahbaz Sharif during the debate on Finance Supplementary Bill 2018 in the National Assembly.
Mr Umar went a step further. He suggested that the finance committees of the National Assembly and the Senate are the best platforms available to build a consensus on the charter. He said the committees work on a non-partisan basis, so a consensus on the charter can be developed on these platforms.
In 2017, former finance minister Ishaq Dar suggested that all political parties should “draw up a common economic vision for 2018-2023”. Mr Umar’s proposal may just set the ball rolling by trusting the finance committees to evolve a strategy to double tax revenues as envisioned by the PTI leadership.
London-based independent economist Yusuf Nazar says an integrated digital system (IDS) linking the tax regime with the record of interest and dividend payments to individuals by financial institutions and companies could double Pakistan’s tax-to-GDP ratio of around 11 per cent to 22pc. In his presentation at a press conference convened by Aam Log Ittehad leader, former Justice Wajihuddin Ahmed, he said the IDS had helped no less than 90 countries raise their tax-to-GDP ratios.
The good news is that more and more representatives of mainstream political parties and the business community are moving towards a consensus on the need for the charter of the economy/industry.
On Sept 5, the Pakistan Business Council (PBC) unveiled a Charter of Pakistan Industry to ‘help’ the PTI-government in “its efforts to improve the competitiveness of industry and put it on sustainable growth trajectory”. The latest call for the charter has come from the recently elected president of the Karachi Chamber of Commerce and Industry, Junaid Esmail Madka.
A key recommendation in the industrial charter of the PBC, an influential research-based advocacy group, is to “separate fiscal policymaking from tax collection”. The PBC wants a fiscal policy — fed by its inputs — “to promote capital formation, accumulation and investment”. The proposal has come at a time when, according to an Asian Development Bank forecast, economic growth may come down this fiscal year to 4.8pc from last year’s 5.8pc as the domestic rates of savings, investment and capital formations are very low.
Mr Umar seems to share the PBC’s views. He told the Islamabad Chamber of Commerce and Industry recently that the government was working to separate tax policy from tax collection functions. And the business community would be represented in the proposed Tax Policy Board to be set up shortly.
According to official pronouncements, it seems commodity production, import substitution and export-oriented sectors will feature prominently in the PTI’s strategy for economic growth. Addressing the Employers’ Federation of Pakistan, Adviser to the Prime Minister Abdul Razzak Dawood said the government would “protect the local industry and reinvigorate all industrial sectors”. He acknowledged that a policy must have long-term orientation to be successful.
The industrial community has for long felt that tax policies should be development-oriented instead of revenue-oriented. Economic growth will automatically yield more tax revenue.
The PBC has also called for redefining the role of foreign direct investment (FDI) in the country’s economic development: shift the “focus on export-generating industries, on technology-oriented sectors, and on those industries for which Pakistan’s private sector lacks capital and risk appetite”. Currently, FDI is competing with the local industry in the domestic consumer market.
On the political front, the PTI-government has an advantage. Both the PML-N and the PPP have promised to extend a helping hand to the new government provided it takes, what they consider, the right steps to resolve the country’s problems. The assurances were given to the PTI-led government by Bilawal Bhutto and Shahbaz Sharif on the floor of the National Assembly. This provides room for building consensus for a common vision, policies and programmes.
However, the charter has its critics also. “A common economic manifesto, courtesy the charter of the economy, will deprive the nation of the opportunity to show its preference for one or another development paradigm,” says a technocrat.
The argument may lose its relevance if one looks at the Chinese experience where an appropriate inclusive development paradigm has yielded sustainable development for more than a decade and reduced poverty at an unprecedented pace. It demonstrates that putting collective national wisdom to work for evolving a common agenda and sound implementation approach will yield the best results.
For any charter of the economy to be meaningful, views of vulnerable citizens and grassroots community organisations must be sought to redesign the social contract between the state and the citizens. To quote Dr Farrukh Saleem, our “democracy is exclusive and our economic institutions are extractive”. Nobel Prize-winning
economist Joseph Stiglitz says, “Take care of poverty and this will take care of GDP.” For this to happen, the voiceless should have a say in programmes and policies that can improve their livelihood and quality of life.
The country needs an inclusive charter of the economy — anchored on a corresponding democratic base — to make rapid socio-economic progress. Unlike arbitrary rule, authority and responsibly are widely dispersed in an evolving democratic order.
Published in Dawn, The Business and Finance Weekly, October 8th, 2018
Dear visitor, the comments section is undergoing an overhaul and will return soon.