Economy

Question 1

Give Figure in Percentage

How Much Does Pakistani Government Regulation Affect the Formal Market?

Answer 1

The formal market faces significant regulation, with government involvement accounting for about 64%. This high level of control is due to outdated rules from the colonial era that restrict how new businesses can enter and expand in the market.

64% Government Control in the Market

(PIDE, Reform Manifesto, January 2024)

Question 2

Give Figure in Percentage

How Much Does Permission Culture and Regulation Cost Pakistan’s Economy?

Answer 2

It is estimated that the cost of the permission culture and extensive regulations could be as high as 45% of Pakistan’s GDP. This significant expense leaves very little room for investing in the country’s economy.

45% of GDP Due to Permission Culture and Regulations

(PIDE, Reform Manifesto, January 2024)

Question 3

Grabber on Economy

Answer 3

The economic situation in Pakistan persists as problematic, with the country remaining close to default despite having undergone 24 IMF programs. The economy struggles with lack of investment and ongoing fears of current account and fiscal deficits.

Question 3

Pakistan’s Economic Policy Stuck in Outdated Haq/HAG Model

Answer 3

• Focus on hard infrastructure (roads, buildings, energy, dams, canals).
• Import substitution with tariff protection and export promotion through subsidies, leading to isolation from global value chains.
• Underdeveloped local value chain due to mercantilism, affecting sectors like retail, wholesale, storage, commerce, city development, and construction.
• Neglect of soft infrastructure (research, management, productivity).
• Excessive demand for dollars for hard projects and maintaining an exchange rate that fails to meet import needs from global value chains.

The Haq/HAG model that foreign advisers provided in the 1950s.

The Haq/HAG model assumes that the primary shortage is dollars and resources for building hard infrastructure (roads, buildings, energy, dams, canals). It also assumes that the inherited governance structures (software) are adequate and adaptable to meet the needs of both the 20th and 21st centuries.

Question 4

Pakistan’s Economic Policy Stuck in Outdated Haq/HAG Model

Argument - Haq/HAG Model’s Market Distrust and Control

Answer 4

The Haq/HAG model also exhibits a deep suspicion of markets, relying on excessive government control over investments and market activities. This approach led to the suppression of various markets and activities—such as media, cinema, and sports—through official mandates for decades. Additionally, the system of permissions (SLUDGE) has stunted market development and impeded transactions.

Question 5

Argument - Cost Overruns and Inefficiencies from Input-Based Budgeting

Answer 5

Input-based budgeting has resulted in many projects experiencing significant cost overruns and limited utility, leading to wasted assets. Examples include stadiums, convention centers, auditoriums, and educational buildings lacking faculty. Additionally, because the focus is not on returns, PSDP funds are often used to build houses and purchase cars for official use.

Question 6

Argument - Central Planning and Mercantilism Hinder Investment and Entrepreneurship

Answer 6

Central planning and mercantilism grant excessive power to the government, embedding Registrations, Licenses, Certificates, and Other permits (RLCOs) in the economy, which incurs high costs for investment and entrepreneurship. Consequently, entrepreneurs and investors often spend more time navigating bureaucratic permissions than managing their businesses. Additionally, colonial systems give officials the freedom to arbitrarily change or enforce rules, further impeding economic progress.

PIDE, Reform Manifesto Transforming Economy and Society