We have recently seen a very upbeat spin on the economy being given by Mr. Dar. Markets to a large extent work on perception cum sentiment and if somehow the government can create a positive outlook about the economy, enhanced economic activity invariably follows suit. However, perception alone is not enough and it needs to be backed by a clear vision about the economic agenda. And this is precisely what seems to be missing in the PML-N’s economic policies. Pakistan is a country with one of the highest mix of young employable population and any government with a real desire to serve the Pakistani people will primarily need to focus on Employment Generation. This in-turn implies that the main issues to be tackled are, a) Promoting investments in SMEs (small and medium sized enterprises) and b) Shoring up national competitiveness. In many ways both elements are intertwined. While this government may be taking comfort in the latest figures where LSM (large scale manufacturing) is projected to be on a rebound, many analysts feel that this may actually be taking place on the expense of a shrinking SME sector. If true, then this on the contrary, presents a dangerous trend.

One can understand that it is important for any government to be receptive to big business and understand their concerns, but at the end of the day the government needs to be a government and keep a distance. More importantly, it needs to come across as being impartial and fair to thousands of smaller firms that provide nearly 75% of the jobs in Pakistan. Pakistan may be a market economy, but going by the post 2008 financial crises’ lessons, there is a realization that markets are not perfect and the government always needs to work to improve market performance. Now, no one here is advocating increasing the government footprint on the operational domain of the private sector, but what it means is to maintain a market structure that provides a level playing field and bust opens monopolies, cartels, rent-seeking operations and oligopolies. The inherent weakness of any democracy relates to the temptation of political opportunism taking precedence over economic pragmatism. PML-N also seems to be falling prey to such temptation and needs to guard against the same.

As we know, capital knows no boundaries and the investors are primarily driven by ‘sustainability’

of returns on their investment. Unless we can find a way to raise Pakistan’s competitiveness as a choice destination for investment, the desired results will not be forthcoming. The World Economic Forum (WEF) undertakes an annual exercise to rate countries (142 economies) according to their competitiveness. Countries that seek to attract investment and grow, strive hard to implement the necessary measures in order to move up this ranking.

In 2012, Singapore led the Asian countries to rank second in the world behind Switzerland in the WEF global Competitiveness Index, which showed developing nations narrowing the gap with established economies across a range of measures from infrastructure to governance. Pakistan sadly came across as being an exception by moving in the opposite direction. Singapore climbed one place from its rank last year (in 2011) and the other Asia economies in the top 20 on the 2012 survey were Japan (9th), Hong Kong (11th), Taiwan (13th) and Australia (20th). The landlocked Saharan state of Chad ranked last. Australia, India and Pakistan, all three lost ground in the survey. In Australia, the forum flagged a shortfall in business innovation as well as a weakness in the standard of infrastructure, especially around transportation networks and seaports under strain from the growing trade in mining commodities. India dropped five places to 56th and Pakistan fell well below even the Indian mark - mainly on account of poor governance and corruption. China climbed 10 notches edging closer to the top 20 while already having its long arm Hong Kong placed at number 11. The annual survey by the Geneva-based organization considers 12 main criteria such as labor-market efficiency, financial-market development, infrastructure, transparency, stability, corruption and education. For this report, it polled 14,000 business executives in 142 countries. The results over the past several years show competitiveness stagnating in advanced economies as results improve among emerging markets, mirroring the trend in present day economic activity. Pakistan ironically being an exception! Interestingly, the survey is a further sign of the shift in the geography of the global economy, with fast-growing Asian nations now better placed to invest in areas that improve competitiveness, such as infrastructure, while the US and European sates are focused on staving off recession or on austerity drives to cut ballooning debt.

As discussed above, China, the world’s second-largest economy, climbed in the survey to rank 26th – still quite far behind the US, which fell one place to fifth. China was the top ranking of the BRICS nations, well ahead of Brazil, Russia, India and South Africa, whose rank ranged from 54th to 70th.

So what did China do right? The forum stated that China’s competitive performance was helped by strong economic growth of its SME sector and a national focus on enhancing quality employment opportunities. These positives outweighed persistent problems with corruption and financial market development. Actually, come to think of it, Asia’s rise to economic prominence can be largely attributed to its remarkable progress in terms of ‘competitiveness.’ China continues to do well on the back of its people-focus policies and infrastructure development and Singapore on the other hand due to the sheer efficiency of its government and its freedom from corruption.

So what is the lesson here for us? In a nutshell: If we are serious about reviving investment climate in Pakistan then we will have to ensure that our market place is competitive for investors to produce here. Also, what the policy makers need to be asking themselves, before they go looking elsewhere for investment, is: are our domestic investors happy? Foreign investors largely base their investment decisions on the confidence exuded by local entrepreneurs.

Perhaps a good way to go about this would be to assign their members of the parliament with the task of surveying their respective constituencies to determine the main growth drivers and job contributors in their areas, and what facilitation can be provided to them by the government to help overcome the difficulties they face. Unless there exists a conducive work environment, which is free of extortion, political blackmail and corruption and allows freedom to hire and fire, flexibility on human resource transfer cum movement, minimized bureaucratic contact, the small and medium sector will not thrive to its real potential. Countries that have succeeded economically have done so by successfully utilizing the potential of their entrepreneurs, in shaping economic structures and brokering key economic alliances, by placing them in lead roles, both in legislating upper houses and key diplomatic positions. The Greeks (ironically the birth place of democracy) in this regard have been refreshingly innovative by democratically deciding to take time out from political managers and their incompetence. Greece has voluntarily opted to use its best qualified entrepreneurial minds to bail its economy out from its current mess!

 The writer is an entrepreneur and economic analyst.