A new ministry for Pakistan

Were the recent elections a peaceful revolt of the silent majority against the incompetence and greed that had become the hallmark of a dysfunctional system? Was this a vote of no confidence by the people against a tainted bunch of usual suspects who kept being recycled and foisted upon them?

Imran Khan’s call for changing the suffocating status quo had resonated with enough people of Pakistan to bring him into power. People wanted an end to the callous neglect that they had suffered in not receiving even small tangible goods and services like clean water, schools for their children, basic healthcare clinics and jobs to earn a decent living.

But above all, as victims of a dysfunctional system, they also wanted dignity and respect as citizens of a sovereign state. They didn’t want to be treated as serfs and slaves of the modern era. A change in the status quo for them also meant the end of indignities and injustices they suffer in their everyday lives and respect for their fundamental rights, which are violated with impunity by both officials and the political bureaucracy.

The sage of Singapore, Lee Kwan Yew, used to say: “give people a fair system of governance and you won’t need to give them any welfare”. It is our unfair and decadent governance that has turned what should have been Pakistan’s assets into liabilities. There are many changes that need to be implemented to create an enabling environment for the people of Pakistan to realise their potential. This is a tall order only because the sins of omission and commission in governance have been accumulating for several years and have been pushing people’s wellbeing to the periphery.

However, in this article we will take up the tangible issue of economic revival, and how it can generate employment opportunities and help reduce poverty. In choosing from among various options, the question that arises is: which economic activity or sector has the highest potential for employment generation and poverty reduction? The answer is provided by the following fact: in any one square mile area of economic activity, more jobs are created by the industrial than by the agriculture or services sector.

If this is the case, the next question that arises is: what strategy will deliver rapid industrialisation in the economy for the desired results to be achieved in the shortest possible time? This brings us to the point: why does Pakistan need a ministry of investment, trade and industry (MITI). The success stories of Asia’s industrialisation bear witness to the fact that employment-generation and poverty-reduction – along with power and prosperity – can best be achieved through the rapid industrialisation of the economy through an active and enterprising private-sector assisted by the government.

But for this to happen, the government of Prime Minister Imran Khan needs to create a suitable platform – as no such mechanisms exists today to take the country forward in this direction. Japan created the institutional architecture for the rapid industrialisation of its economy soon after the end of the World War II, showing Asian nations how to quickly catch up with the power and prosperity of the West, and create wealth and value in their own economies.

The Japanese model – that has been successfully followed by several Asian nations like South Korea, Malaysia and others – required pooling the strengths of both the public and private sectors. This pooling resulted in the creation of two platforms, one in each sector.

In the public sector, this model integrated three related functions – investment, industry and exports – under one platform, the ministry of international trade and industry, which also included the function of investment within its mandate. In the private sector, the model created a platform called Keidanren, or Japan Business Federation, for self-sustaining industrial development. This platform acts as a bridge between the industrial sector and the government, and interacts with international business on issues of investment, technology and other areas of cooperation. Such platforms also exist in Italy, South Korea, India, the UK and other countries.

The MITI removed internal conflicts and integrated the strengths of three ministries: trade, industry and investment. It effectively assisted private-sector in the development of all major industries in Japan through various programmes like R&D, skill development, resource mobilisation, licensing foreign technology, technological intelligence and others.

This model of pooling the strengths of the government and private-sector helped Japan quickly recover from the devastations of the Second World War and made it a major industrial power by the 1970s. The same model, adapted to the conditions, delivered successes in industrialisation and the export promotion of several Asian countries, and brought prosperity to their people.

In Pakistan, this strategy was initiated in two stages because of the usual political disruptions. In the first phase, I had designed the Board of Investment in 1989 to provide a platform for attracting foreign direct investment in the country. In the second phase, in the mid-1990s, I had developed a private-sector platform, the Confederation of Pakistan Industries, which was also promised policy and financial support by the government.

Along with this confederation, a new board of trade and a board of industry were developed to form an MITI-like architecture for rapid industrialisation and export promotion. Although these initiatives received support from then prime minister of Pakistan – apart from the BOI – others withered on the vine as we again turned towards becoming a consumption-based economy living on borrowed money, instead of creating indigenous wealth by industrialising our own economy.

Till today, Pakistan remains the only large country in Asia that has neither developed an integrated public-sector platform like an MITI nor a private-sector platform like the Confederation of Industry, even though these institutions continue to propel the industry and exports of several Asian and European countries. How can there be an industrial take-off in our country without a launching pad?

Imran Khan’s clarion call of changing the status quo, when translated into the economic revival of Pakistan, will require disassembling some fragmented institutions of the public sector and reassembling them in a different shape and form in order to achieve his objectives. This means thinking out of the box, because business as usual has already grounded these institutions. After all, you cannot make an omelette without breaking some eggs.

In other words, without integrating human and economic resources, presently spread across ministries of investment, industries and commerce, we will not be able to create an integrated and vibrant platform like an MITI – which along with the Confederation of Pakistan Industry could become a launching pad for rapid industrialisation and growth of exports.

This MITI doesn’t envisage a large bureaucratic structure. The ministry would only be a platform for policymaking, coordination and conflict-resolution. The operations would all be conducted by three autonomous and professionally managed boards – a board of investment (for attracting investment), a board of industry (for channelling investment into industrial development, as against luxury housing, for instance) and a board of trade (for market research and export promotion). These boards should be self-contained and free from the political interference of the ministry.

Business as usual has not and will not deliver. If humans had given up thinking about big things, and not tried to achieve them, we would never have liberated ourselves from the limitations of the status quo and would still be travelling in horse-drawn carriages. Nothing ever came of thinking small.

The writer designed the Board of Investment and the First Women’s Bank.

Email: smshah@alum.mit.edu