Vision Pakistan2047; Part - III

Our exploration through the Pakistan2047 series shows that the starting point of any transformation is a grand vision. The second step is backing the vision with an implementation capability to translate the dream into a reality.

After focusing on the ‘why of the vision’, and ‘how to implement it’, we turn to ‘who is best suited’ for bringing about transformation. History offers compelling examples from countries that have escaped poverty. The common theme among these economic miracles is an entrepreneurial private sector-led economic and development model with the government as a facilitator.

Take the case of South Korea. It was not state-owned enterprises, but rather private conglomerates or ‘chaebols’ that accelerated South Korea's GDP per capita from $146 to $29,700 in forty years. In South Korea’s economic transformation, its leader General Park Chung hee leaned upon first-generation entrepreneurs like Chung Ju-yung, founder of Hyundai, who helped build the country after the devastation of the Korean War.

Similarly, Saudi Arabia's Aramco began as a private enterprise with the technical expertise of Standard Oil of California. Aramco is a valuable case study of a private-sector-led approach coupled with public-sector facilitation building a huge economic engine of growth – Aramco now generates an annual surplus of $161 billion.

The third example of private sector-led development is the Dutch East India Co or VOC, which was licensed by the Dutch government to explore the spice trade in Asia. VOC was a joint stock company with private management and shareholders. It operated 50,000 ships and made the Netherlands a sea-faring empire and Rotterdam a shipping hub.

On the contrary, Pakistan has doggedly pursued a state-led economic and development model, relying on state-owned enterprises (SOEs) and bureaucracy to make investment decisions, or run conglomerates. This approach has led to large deficits and a decline in export competitiveness. As per the World Bank, Pakistan’s SOEs are the worst in South Asia and their combined losses are Rs458 billion per annum. In 2021, SOE loans or guarantees were ten percent of GDP, posing a significant drain on national resources and a risk to our financial sovereignty.

The Asian Development Bank has the highest proportion of failed projects in Pakistan, and we have lost almost all arbitrations against foreign investors. This demonstrates a depleting capability of the state to effectively negotiate and implement projects with foreign counterparts. Similarly, the failure of the Soviet Union’s state-led economic model resulted in its collapse and disintegration.

In the context of Pakistan’s Vision 2047, we earlier proposed the establishment of a SIFC Development Company (SIFC DevCo), akin to Saudi Arabia's Public Investment Fund (PIF), to implement economic transformation projects. The success of such an approach to transformation hinges on sound governance and crucially a management team capable of driving the transformation agenda.

Taking the examples of Aramco and the Dutch East India Company, the vision and governance were provided by the public leadership of the country. For the PIF, it is a sub-committee of the Saudi Council of Ministers and so in the case of Pakistan, governance and vision will be the domain of the public stakeholders represented in the SIFC. And, similar to the PIF, the implementation arm or the SIFC DevCo management must be drawn from the private sector. A combination of public oversight and private management with technical subject-matter expertise can result in the successful implementation of Pakistan’s transformation projects.

The CEO of the PIF is a prime example of the type of management capabilities required. Yasir Al Rumayyan is an investment banker with extensive private-sector experience from the Capital Markets Authority and the Stock Exchange, and not a former public-sector official. Right from the CEO of the PIF to its various project entities, such as Neom or Lean, are led by private-sector professionals with the technical know-how and business relationships necessary to drive the economic transformation.

An advantage of private-sector management is their ability to operate beyond the short-term political cycle and take their roles as competitive career progression. This long-term perspective is crucial for sustainable development and building capacity within these ‘super organizations’. Private-sector professionals are more likely to be market-oriented, collaborative, and deal-focused, bringing in a different skill set to investment facilitation and project implementation. They are also natural counterparts to international investors.

SIFC DevCo as the principal investment and project development entity, along with its sectoral subsidiaries in mining, agriculture, technology, infrastructure can be listed in the future and earn significant windfall for Pakistan. For example, Aramco is now valued at $2 trillion. However, to achieve this outcome, SIF DevCo must have a private sector DNA.

As Pakistan reverses its economic slide and becomes a financially sovereign nation, it requires an innovative and out-of-the-box solution. A parallel private-sector-led implementation structure with public-sector governance could be our transformative solution.

For Vision Pakistan2047 to materialize as more than just a dream, it necessitates a shift to a private-sector-led economic and development model, under the guidance of a public leadership that envisions the transformation. It is time for us to embrace a new paradigm, free from the legacy of the past, with the government as a catalyst rather than an active player in our economy.

Concluded.

The writer is a venture builder, a private equity investor and investment banker. He tweets/posts @AhmadJalal_1