Political polarisation hindering economic recovery

LAHORE: Risks to the economy are on the rise with every passing day, while political polarisation is making even the most earnest steps towards recovery extremely difficult. The tragic reality is that the ruling party itself is further fuelling this polarisation.

The discontent at the mass level is simmering as people continue to lose jobs, while the cost of living is soaring. We are in deep recession and every creditable institution is predicting further slowdown in growth in the next two years.

We are at risk of social unrest. We all know that social conflicts remain subdued during high economic growth but are sharpened during economic downturn.

This is because the economic benefits are easier to share than the burden of sharing extremely inadequate resources. Current economic scenario should give nightmares to the economic planners.

Businessmen are genuinely worried. They try to avoid all conflicts be it with workers or the bureaucracy because each has the capability to destroy the growth of their businesses.

With productions declining regularly they have no option but to shed some jobs. Their plans for expansion have been put on hold due to declining demand and uncertain government policies.

Business disputes enlarge because Pakistan has no bankruptcy law that ensure that in case of insolvency, each stakeholder would share the leftover resources fairly.

Consumptive pattern in Pakistan is very high. Pakistan is the 41st largest economy in the world by GDP. But it is the 25th-largest crude oil importer (372,800 barrels / day) in the world. The per capita consumption of tea is also highest in the world.

Poverty is increasing and many families cannot afford two square meals a day; still even the most poorest and starved family owns a mobile phone. Pakistan lacks conflict management institutions.

Absence of safety nets increases crisis in economic recession when jobless numbers are increasing. Benazir Income Support Programme (BISP) is just eye wash as the state lacks resources to provide the minimum resources for subsistence to the beneficiaries.

Cash transfers under BISP are without any condition that makes beneficiaries irresponsible towards their civic responsibilities. No government has adopted the more difficult conditional cash transfers, under which a beneficiary family is asked to ensure enrolment of girls or do some community work to justify the dole out.

Businesses flourish when the rule of law is ensured. But when reliable and effective legal systems are nonexistent the society and the businesses tend to adopt alternate paths.

Societies prosper when workers have permanent jobs. The industries also benefit because the permanent worker gains experience with time and becomes an invaluable asset for the company.

Also, among those employed, a large majority of workers are employed as contract workers. It is because the law makes it prohibitive for them to fire permanent workers however inefficient they may be.

In developed economies, workers are protected against wrongful layoffs, and punitive actions are taken in case a worker is fired on the basis of cast, creed, colour, or religion, but the employer is at liberty to fire any undisciplined or non-productive worker.

Their legal system is fair and efficient to penalise the erring employer. However, the legal system in Pakistan at lower level is very weak in providing relief to a wrongly ejected permanent worker.

Meanwhile, non-productive or undisciplined take refuge under union and cannot be dislodged as unions hold many industries hostage. Businessmen now continue to go for contract workers.

A cursory survey of all big offices would reveal that almost all low cadre staff members from security guards to sweepers and clerks are employed through a contractor. These businesses and workers would have to show a responsible attitude until the institutions grow in strength.

Businesses have the duty to act responsibly, while dealing with state. They should pay their tax dues and accept some painful decisions in the larger interest of the country.

Revenue pilferage has been so rampant that now the tax evaders think that the state is unfairly asking them to deposit their due taxes.

Instead of evading taxes and avoiding documentation, businesses should support the government’s documentation drive.

Trade associations too should identify the black sheep among their ranks who evade taxes by any means. Society as a whole needs to support the concept of equal taxation on income earned from any source.