A generational exodus

A mass exodus of people, capital, and knowledge is in process. Deteriorating economic circumstances and largely flat (or even deteriorating) incomes in real terms during the last five years has led to a scenario where individuals and institutions alike are either on their way towards an exit, or planning an exit from Pakistan.

The sheer incompetence of consecutive governments, whether with or without the hyperbole of establishment, has led to a scenario where people and private capital alike have lost hope. It is hope that lays the foundation of growth, or property. It is the hope of a better, more prosperous, and healthier future that provides the incentive to both people and capital to work towards a better future. Such a hope has been declining over the years, and is currently at its lowest point in decades.

Over the last few years, there have been many multinational companies that have either announced an exit from Pakistan, or are planning an exit spanning different sectors. An exodus of such foreign capital also means exodus of the intellectual property and knowledge that comes with such capital. As such, companies and capital continue to exit. And the absence of any hope or sustainable growth strategy further cements the conviction of such foreign capital to exit from the country. It is not high risk associated with the country that is pushing people out – high risk is often a prerequisite for high returns. It is the absence of a coherent policy framework that encourages entrepreneurial growth, and private capital.

The government over the last ten years has been the largest borrower in the country, effectively crowding out private capital. Moreover, the taxation structure that has been devised further squeezes the formal segment, while encouraging an informal economy. As the size of the informal economy increases, it gets increasingly difficult for multinationals, and other formal entities to operate in a highly taxed environment, eventually resulting in an exit.

The policies of successive governments over the years have led to a scenario where Pakistan is not an attractive destination for foreign direct investment, largely due to policy inconsistency, an excessive taxation regime, and a dysfunctional legal system. Entrepreneurs, and private capital can live with risk, but they cannot live with a system which is stacked against them, with a government that continues to incentivize an informal economy.

On an individual level, things are worse. The recent disaster in the Mediterranean where more than one hundred Pakistani nationals lost their lives, was about people trying to seek a better future for themselves, and their families. This is purely a failure of the state where it has not just failed to educate or enable work for its people, but is also failing to feed its people. The government instead of addressing the problem at hand remains aloof, and continues to run its affairs like we are still in the last century, since most people running its affairs peaked during the last century as well.

During the last three years, more than 1.4 million people left the country for better job prospects as reported by the Bureau of Emigration & Overseas Employment; this included a large number of highly skilled resources, such as doctors and engineers.

It is estimated that almost 5,000 doctors officially emigrated out of Pakistan during the last three years. It is also estimated that Pakistan trains about 4,000 doctors on an annual basis, implying that we trained about 12,000 doctors during the last three years. Effectively, more than 40 per cent of doctors trained in the country left for better job opportunities, in a country that has the highest population growth rate in the world, and continues to have one of the worst availability of doctors per million people.

If that is not enough, lopsided government policies have also led to a shortage of medicine in the country, with pharmaceutical production in the country dropping by more than 30 per cent during the last one year – primarily due to the inability of the government to understand how market pricing works. An exodus of doctors is a good proxy of how skilled professionals are leaving the country, resulting in a severe shortage of skilled professionals in the country.

There is little to no hope, and any little hope is further dented by absolutely zero regard of the government to the sheer prevalence of malnutrition and stunting in the country. As food inflation increased by more than 50 per cent during the last one year, the prevalence of malnutrition and stunting is only going to increase further.

It is estimated that more than 40 per cent of children under the age of five years are stunted, which means that they do not get sufficient nutrition to develop cognitive abilities to be more productive members of society. As the same children grow older, they will have more difficulty in studying and training themselves, eventually leading to a workforce that is not able to perform up to its true potential, because it lacked basic nutrition in its early stages of life. The sheer incompetence and ignorance of the government to such an existential issue clearly attests to how the priorities of those at the helm are not in the right place.

The exodus is gaining strength. People and capital will continue to leave, while we gravitate towards an environment that is framed around singing ballads in praise of personalities and institutions, all the while losing skilled professionals and precious capital in the process. The real economic growth rate of the country on a per capita basis has been flat for the last five years. If the same continues, we will be pushing millions into poverty and succumbing millions of children to the horrors of stunting and malnutrition. Whoever can leave will leave, even if that means taking an arduous journey that can lead them to drown in the Mediterranean Sea, or get shot at some border crossing.

Policymakers may only have a few more years or a decade or so left in their life – their incompetence and sheer disregard for the common person meanwhile will be succumbing millions to a life of misery and poverty for decades to come.

The writer is an independent macroeconomist.