AFTER a tumultuous 2023, most people remain “cautiously optimistic” about Pakistan’s economic outlook as we enter the new year, waiting with bated breath for a new government to take office. Last week, we had an interview with Muhammad Ali Tabba, Lucky Cement’s Chief Executive Officer (CEO) and one of the most dynamic businessmen this country has ever produced, to know his thoughts on Pakistan’s economic outlook in 2024 and what the newly elected government should focus on. The excerpts of the interview are given below:

In retrospect: The outgoing year was very interesting. We entered an International Monetary Fund programme (IMF) and the interim set-up came in (to hold elections). The economy had to be contracted to control the burgeoning current account deficit and stabilise forex reserves that had fallen to a very low level; the government was left with no other option but to compromise on growth. If we hadn’t slowed down the economy, our financialsituation would have been worse.

Based on that, it was a decision that had to be made to avoid further complications.

Outlook 2024: The new year will be the year of stabilisation. We need to stabilise the economy to facilitate new investment; this economy needs investment. Whichever party comes to power after the polls will know how hard the conditions are and what kind of challenges they will have to deal with.

Pakistan needs homegrown solutions, not wait for handouts

New investment will be mobilised through domestic investors. Foreign investors follow local investors; when they see that local investors are keen to invest their capital, they will follow. The thinking that we should first bring in foreign investment is flawed.

How to mobilise investment? In order to mobilise investments, the state should focus on economic policy consistency.

After due diligence and consultation with the stakeholders, we need to finalise a longer-term investment policy.

It should have a broader political consensus and must be whetted and approved by all institutions and the cabinet so it gets the legal cover and no one objects to the incentive structure built in it.

The thinking that we should first bring in foreign investment, rather than focusing on local investors, is flawed

Secondly, there is a need to bridge the huge trust deficit between the business people and the policymakers. The state considers investors rent seekers. We need to change this mindset and close the trust deficit. Only the combined efforts of the state, the government, and the private sector can solve this country’s problems. No formula from outside the country will work here. We will have to find solutions (to the challenges) if we desire to grow, create jobs and boost exports.

I think we should let bygones be bygones and start worrying about the future. If we don’t look forward, the conditions could worsen in Pakistan. We are already having high inflation, record interest rates and growing unemployment.

Every institution wants the economy to improve and the country to stand back on its feet. We have wasted a lot of time. For the last 15 to 17 years, we’ve seen one policy replaced by another. There is no consistency, vision, or leadership in the real sense that can make tough decisions to deal with the difficult times and put the nation back on the rails.

Economic stabilisation may take a year or two. We can’t put a timeline to it. The thinking should be to restart the privatisation process quickly. Once the publicly owned assets change hands and come under the private sector, they will reinvest money in these businesses. The government can improve these companies and raise a significant amount of money by listing them on the stock exchange.

There is a lot of cash in the private sector and system. It is just that it is not being mobilised. Privatisation will help support your economy and bring in investments, and the private sector would make joint ventures with foreign investors to fetch foreign direct investment to create economic activity.

There is a lot of cash in the private sector and system, which is not being mobilised

Fast-track: Likewise, we must fast-track work on agriculture. We need to cultivate new areas and develop new crops for import substitution. In the energy sector, we must shift to local fuels like Thar coal, hydropower and renewables to reduce import bills.

Since we will not receive money from outside and foreign direct investment will take some time, we have to squeeze imports a bit. Not that we squeeze essential imports but those available in Pakistan to save dollars for use in productive assets.

We should encourage those industries for which raw materials are locally available. For example, we have large reserves of iron ore in Chiniot and Balochistan but have never explored it. It can meet our local steel industry demand and leave a surplus for export. It will also develop our mining industry.

Similarly, we have so much coal in Thar, but we are still far from meeting the demand of local power plants. The system is so slow, and new extraction is facing long delays. We need to expand production and export it. We should avoid establishing industries that are 70-80 per cent dependent on imported raw materials. We need to work on these policies and areas.

Foreign assistance: Time is gone waiting for friendly countries to dole out cash to us, and, in my view, it won’t return. No one is going to give us money now. You cannot run this country on borrowed money.

No one is coming to help us. Whatever the solution to our issues, it must be homegrown. (The army-backed) Special Investment Facilitation Council (SIFC) is working hard to attract foreign investors, especially in agriculture and mining. However, we should be clear that foreign investors will not come unless local investors start investing in the economy. Reforms in four sectors — energy, agriculture, privatisation and taxation — will have to be fast-tracked to grow the economy and create jobs.

The change cannot happen overnight. It requires long-term vision and policies. We have made our industry uncompetitive by promoting smuggling, Afghan transit trade and under-invoicing in the last 30 years. We have signed free trade agreements with our eyes closed without considering their impact on our local productivity.

These are all issues that the state must tackle. They are not for the private sector to fix. The rest of the world is moving forward at the speed of light while we take years to decide even minor issues. Unless the stakeholders realise these issues, no change will come, and we will remain stuck in low growth mode.

Published in Dawn, The Business and Finance Weekly, January 1st, 2024