Details have begun emerging from a high-powered gathering where the Chief of Army Staff, General Asim Munir, met business and industry leaders in a marathon 5-hour meeting. Insider accounts lead one to conclude that the powers that be are envisioning a heavy-handed agenda to bring a failing economy off the ventilator. In what is being labelled a new ‘doctrine’ to revive Pakistan’s economy, conversations on a number of key matters took place, a significant chunk of which were dedicated to all matters economic. In his usual style, the Chief also quoted several Quranic verses to signal optimism and hope with regards to the country’s economic recovery.
‘Potential G20 economy…’
Insider accounts of the meeting confirmed that COAS General Asim Munir expressed optimism around Pakistan’s potential to become a G20 economy, because of its vast reserves of mineral and natural resources. The Chief reportedly pinned his hopes on the young demographic of Pakistan’s population: 65% of who are 30 or below, in leading the economic recovery.
Structural economic reform
The COAS reportedly emphasised the need for structural reform to make the economy work. Speaking about the need to tax the informal sector and eradicating any ‘grey’ zones, the Army Chief expressly pointed out that documentation of the economy was pivotal for widening the tax net and providing thrust for the economy.
According to attendees, the Chief also hinted towards a special task force being created for structural reforms in the Federal Board of Revenue for tax collection. On the all-important question of state-owned enterprises, COAS signalled toward privatisation of loss making state-owned entities as a matter under consideration.
It has also been claimed by insiders that a radical change to the minimum wage may be proposed soon. This could entail the minimum wage rising to 32,000 rupees a month in Punjab for starters. The COAS also called on the business community to give back to the community in form of fair wages and philanthropic activities.
‘Blast, Bulldoze, Disregard…’
The defining theme of the high-profile gathering was an emphasis on the strategic role envisioned for the Special Investment Facilitation Council (SIFC). Rooted in a dire need for economic rejuvenation, the newly enacted body has been designed to strike a balance between military decision making and democratic governance to remove bureaucratic hurdles for attracting foreign direct investment. The SIFC has been termed pivotal for economic revival, and the aim, as confirmed by several attendees, is to ‘blast, bulldoze and disregard’ any and all obstacles in attracting foreign investment to Pakistan.
The military top brass aims to root out bureaucratic inefficiencies and red tape. The COAS is reportedly eying $100 billion of investment and foreign reserves under the SIFC initiative, but it remains unclear if a time horizon was offered for the rather ambitious target.
As part of the SIFC, there seems to be significant reliance placed on Middle Eastern countries. Although the Chief distanced himself from having any expertise on matters concerning the region, it is nonetheless reported that Saudi Arabian investment to the tune of $25 billion could reignite the economy.
An end to smuggling
The pertinent topic of sugar and dollar smuggling also came up, the halting of which is viewed as quintessential for economic revival. In response to a question, the Chief expressed a willingness to clamp down on smuggling by tightening porous borders.
Old wine in new bottles: Is the military prepared to make sacrifices?
As the military’s top brass presses for economic revival, one shudders to think if this is old wine in a new bottle. Not long ago, the Bajwa doctrine prioritised pivoting toward geoeconomics over geopolitics by reducing reliance on the age old policy of strategic depth. The end result was a failed model of hybrid governance and the ultimate failure to liberalise the trade regime with neighbouring countries.
The Munir Doctrine, however, arrives at a time when Pakistan’s economy is on an unending downward spiral. Given the rupee’s free fall and backbreaking inflation, it is clear that sweeping reforms are required to fix the economy. While grandiose plans have been put forward, it is unquestionable that any meaningful reform would require the military to make monetary and most importantly, political concessions.
While the documentation of the informal economy is crucial to widen tax net, so is property taxation. It is no secret that rent-seeking industries, including real estate, benefit from low tax rates. The armed forces have themselves ventured into mega real estate schemes, notably Defence Housing Authority, but real reform would require taxing property aggressively and giving FBR the teeth to collect those taxes. Reducing electricity subsidies, negotiating pension schemes and limiting defence expenditure remain an important issue area where concessions from the military are required to allow for prudent fiscal resource allocation.
Similarly, political stability is centripetal for economic revival. The last decade can be characterised as one of sheer instability mainly due to the military’s constant meddling in political affairs, due to their penchant for uncontested control and power. It is therefore pertinent that a stable government is present to deliver on a transformative economic agenda, which would require distancing from Pakistan’s politics as usual. A hybrid model of governance, by design, is rigged with civil-military tensions. Take for example, the control of the China Pakistan Economic Corridor (CPEC), which ended up being a bone of contention between the then PML-N government and military. Combined ownership and direction of potential foreign direct investment will require an impeccable balance to be struck between the civilian government and military. Whether that’s possible remains to be seen.
SIFC and ‘red tape’
The matter of foreign direct investment under the SIFC remains uncertain, not least because it is unclear the shape and form it arrives in. Investment in productive engines of the economy, mainly industrial manufacturing, will be critical for growth, but it is doubtful if major industrial manufacturing will seek to relocate to Pakistan, given concerns around rising extremism, political instability, regionally uncompetitive energy costs and limited infrastructure availability. It seems that there is some hope and optimism for significant investment from the Gulf Cooperation Council (GCC) and Saudi Arabia. The latter is also where 3-time ex-premier, Nawaz Sharif, spent a number of weeks, which can be seen in conjunction with the push to secure investment to shore up reserves and kickstart the economy. Once again, it is important to be sceptical of Saudi’s vision for Pakistan. Having pivoted away from geopolitics themselves, the Saudis are hurriedly liberalising their economy by playing hard and fast with established geopolitical alliances. Saudi Arabia’s reliance on Pakistan for defence is not as strategically valuable for the kingdom as it once was, therefore claims of a mega investment remain conjecture at best.
Furthermore, meaningful reform dictates ease of business for small business and empowering entrepreneurs, not just foreign investors. While the SIFC initiatives may cut out bureaucratic red tape for foreign investors, there remain small business owners who suffer from a host of regulatory requirements in registering and operating documented businesses. From operating corporate accounts to work related identification checks, a number of issues plague their ability to function efficiently. Any serious reform must treat ease of business as a goal itself.