Drinking less tea for the economy?

Humayun Akhtar Khan
Representational image. — Reuters
Representational image. — Reuters

Recently, a minister faced much flak for asking Pakistanis to cut their tea intake by one cup a day. The reaction should come as no surprise, in a climate that will reduce every comment made by a person in power to a mocking meme. Yet, it is also an occasion to ponder.

Social media’s cynicism is not unwarranted. Every few years, the country is struck by an economic crisis, and citizens must pay for the folly and avarice of the few. The falling rupee and added taxes raise the price of most things. Their next generation has to repay ever higher debt. This impoverishment of Pakistan must stop.

I have used one remark of a minister as an example of the condition of our state. The minister is known for his rectitude and ability, and his idea is not odd. The state is right to expect the sacrifice of a cup of tea a day. But the credibility of governments is eroding. It is the wrong idea at the wrong time.

The state has to recover its lost trust. Where Pakistanis want development and improved living conditions, they get false promises and a list of successes that never occurred. They are told that GDP growth was high, yet they face privation. They are told about poverty reduction when the numbers are actually up, education improvement with low student achievement. Hype and bombast have taken the place of facts.

The people have been taken up the garden path so often that an appeal for the smallest sacrifice is not accepted as sincere. For the country to regain its strength, it must build trust between the citizens and the state. And the state must do it.

Recall the response of the people to the COVID-19 crisis. Authorities were sincere and clear — and the people responded. Besides, the loss of freedom was shared equally by all.

Deloitte has studied the subject of trust. Their study finds that in giving their trust, citizens look at the intent of the government and its ability. They gauge intent via open and clear messaging and if the government cares. They also see the government’s ability to form and deliver high-quality programmes and services, and if they have done so over a period of time. I leave it to readers to judge where Pakistan stands on these values.

Deloitte says that there are simple things the state can do to rebuild trust. First, it must make citizen safety and security a top concern. In their policy, the state must show respect for all people and also that it values the broader good of society. Officials must be clear when they share facts and data on taxes and fees. Lastly, the people must see continued improvement in services.

The findings of other research are similar. The Stanford Social Innovation Review says that the state must make sure that offices ‘deliver real benefits for people'. Leaders must show that they work for the greater good, not just for themselves. And the state must engage with people at the local level. Taxpayers must know that what they pay offers good value. A study by LUMS et al gives similar results.

Pakistanis see a reality that is vastly at odds with the above findings. Our rank on the HDI index has fallen. Indicators that make the HDI touch the peoples’ lives every day. In the index on transparency too, our rank fell last year. In all other indices, we have either lost position or have a low rank, whether the index is about ease of doing business or some other area of governance.

So, what must the Pakistan state do to rebuild trust, that is if it wants to do so? For one, it must begin to perform and deliver. And it must replace ennui with hope.

There are many areas to focus on. When consulted, experts share an abundance of ideas. Some want a higher education budget. Others want more funds and space for local bodies to empower the people. Yet, some more think the government ought to be transparent in decision-making. For example, it may share facts about the uses to which foreign debt has gone. Many want cleaner cities with services that at least minimally meet their needs.

In an age of active social media and cable TV, citizens see images of world cities that work, high-speed trains and many other comforts.

For the bulk of our people, daily living conditions are not much better than before. Every day they suffer indignity at the hands of the police and the courts. They live with poor water supply, littered streets and traffic disorder. An hour or less of rain can bring cities to a halt. They cannot comprehend why, with power rates soaring and surplus electricity, they must do without power for hours.

Also, they have to travel on trains that are forever late. Among other reasons, engine failure is a major cause given by Pakistan Railways for poor train service. Yet, with the help of JICA and Hitachi, Pakistan built a factory in 1993 to build engines. Eleven years later, JICA found that the factory had produced 25% of the targeted number of engines. All the engines were made with ODA loans, it said. The government or Pakistan Railways did not provide any funds. On the other hand, since 1993, Pakistan has imported over 300 engines from China, Germany and the US.

For years and until recently, the country has been a captive market for PIA. The airline had landing rights at the busiest airports in the world. Yet, both Railways and PIA still need subsidies in tens of billions.

The scale of PIA’s loss is of great concern. As per its annual report, its loss of Rs50 billion in 2021 was 45% more than the previous year. All air travel was affected badly by the virus in 2020. Yet, with traffic picking up in 2021, PIA’s load factor and revenue passenger KMs went down even more. Its revenue passenger KMs fell from 15 billion in 2019, to 6.6 billion in 2020 and 5 billion in 2021. Despite the traffic in 2019, its loss of Rs55 billion was excessive. This suggests that PIA cannot recover either its variable or its fixed cost.

In general, state-owned companies have exacted a high charge on government funds. In 2016, ADB loaned $300 million to reform the PSEs. The evaluation report of the loan says that of the 191 PSEs most performed poorly. These PSEs employed over 420,000 workers. The ADB programme aimed to reform them to reduce GoP subsidy and transfers. Overall, the evaluation report rated the programme as ‘less than successful’. It found the government of Pakistan’s commitment to reforms ‘particularly weak’. Yet, Pakistanis still have to pay back the loan to ADB.

Such lassitude and lack of care is the sad reality that makes up the lives of most Pakistanis.

So, the government must prove to citizens that it is not just there to ask. It is also to deliver. For about half a century, that role of the government as enabling change has ended. Now, dependence is a strategy. Borrowing is policy. If all the people see of the government is one attempt to borrow after another, they will know that conditions in Pakistan will not improve.

The writer, a former commerce minister, is chair and CEO of the Institute for Policy Reforms.