 Hello and welcome to another episode of Eslauba today on Think Tech Hawaii. I'm your host, Hamdor Khadratan, with me is Executive Director of the Sustainable Development Policy Institute, one of the leading think tanks in the country, which is dedicated towards addressing developmental challenges in Pakistan and also contributing towards the policymaking process. I have with me Mr. Abid Sulari. Mr. Abid Sulari, thank you so much for joining me on the show. The topic of discussion today is Pakistan's developmental challenges and Pakistan's ability to actually address and, you know, all of its economic quiet wires, which is actually plaguing it, whether it's, you know, sustainable development, whether it's rising sovereign debt, whether it's declining GDP per capita and comes up to that exactly what we're going to be discussing in today's episode. So, Mr. Sulari, first of all, thank you so much for joining me on the show. Let's start off with a basic question here. We still have, you know, very dismal economic indicators for Pakistan. We're talking about rising sovereign debt, hyperinflation taking place, decline in purchasing power parity. And this has been a trend which has been going on for quite some time right now. Where do you think policymakers really need to, you know, divert the attention towards to try and make sure that there's no real quick fix as such, but can actually mitigate Pakistan's economic flow? Thank you very much for taking me on your show. You know, when I look at Pakistan's economic history, I think all kind of economic models which are available in textbooks, they have been applied in Pakistan. For example, starting from 1947 till 51, we had a pre-trade agreement and sort of a custom union with between the two newly created countries, Pakistan and India. There were no custom tariffs, there was a single currency, and there was a free movement of goods and people. Then we saw there was an era of licenses and permits centralized and controlled economy. And at that time, applying for or export fund requires these licenses and permits. This actually was the era of industrialization. And that was the time when they used to be talking of 21 families ruling Pakistan. And then it was Mr. Boto's nationalization, which was a sort of model which was quite closer to the socialist economies. Then came General Zia's Islamization, Islamic economy. So all the jaguars used in the comics were actually Arab-ized and Islamized. So we had the rebounds, straddles for interest, and that model was also pursued. Then we saw liberalization and privatization. And now for the last couple of decades, there is this aim of directed and steered, if not the aim of a dictated model of economy. So the point I'm trying to make that we tried almost everything that's available in economic textbooks. But the second thing that happened with Pakistan's economy that from long there was a comparatively an easy pro for dollars to Pakistan. B was the modern terrorism and coalition sport fund. And it was this Soviet Union, the Vatican Soviet Union of Afghanistan. And it was earlier when General Jokhan was playing the role of a deep breaker between China and America. So there was this easy pro for donors. But now for the last couple of years, one finds that that easy pro for order A, it's stopped and B over a geo strategic relevance that is fading away, which is making it more difficult for us to actually keep getting closer to Western countries, and especially the United States of America. So with this Taliban takeover in Afghanistan, with this detente between Saudi Arabia and Iran, which Saudi Arabia and Iran detent is, to me, is a very positive development. But again, it made Pakistan sort of irrelevant to Saudis, who were dependent on Pakistan. So in order to defend themselves from Hossi's attacks from Jaman. And the third important thing that happened in Pakistan is the mismatch between productive sectors of our economy vis-à-vis the economic realities. So to explain what I'm saying, we have been reading and we were told Pakistan is an agricultural economy and agro-based economy and agriculture is the backbone of the country. And then all of a sudden, we found out that services sector was waking up almost 60% of our GDP. The share of agriculture in GDP got reduced to on the 20, 22% and the same was with the industry and manufacturing. So we actually took a quantum leap from agriculture to services sector, bypassing industry. Now, that could have been maybe a turning point for Pakistan's economy had we also been graduating our human resources. So what happens in agriculture? Scales on scale, formerly literate, or those who never went to any formal education and institute, any of further human resources they can get absorbed in agriculture. For industry and manufacturing, we require semi-scale or semi-detract human resources. And for services, we require either high skilled or highly educated service provider. So we couldn't graduate our human resources to the tune of the graduation of the contribution of the sectors to GDP. So resolutely, even today, agriculture is absorbing almost 50% of our human resources. Services sector is absorbing around 35% of our human resources. And there's a mismatch. So there is a mismatch between what is being earned by those 30 to 35% serving in services sector vis-a-vis what is being earned by more than 50% who are in agriculture sectors. So those 50% they are only earning 40 rupees, meaning 40% of the GDP. Those in services sector, they're earning 60 rupees. And that is leading to inequality. That is leading to inequity. And on top of it, if the economy is not documented and the taxation is regressive, rather than be progressive. So the outcome of all this, so our strategy, longishly able to do what you're asking in the later half of the program, but the outcome of all these mismatches and all these experiments, I think, is what we can see now Pakistan's economy. The indicators that you are talking of. OK, so when you mentioned that lack of human resources in the service sector has had a huge impact on Pakistan not being able to progress towards where it actually is supposed to be. So is it due to lack of vocational training, low literacy rates, inability of the young crop to actually access quality education, which would enable them to graduate towards the service sector and make sure that they can make a meaningful contribution? Or is it an amalgamation of different factors? You see, we are not, we're still not ready for the jobs of future. So today it's all about artificial intelligence. It's about data mining and data analysis. It's all about looking at the future towards the green minerals. Lithium, nickel, copper, it's all about the new technologies. It's all about precision agriculture. It's all about climate smart growth, et cetera. So nations have to think at least 10 years ahead when the ban for their human resource progress. In our case, I think it's most of the time it's learning by doing and most of the time it was service providers and that's why we are low on number of productivity, be it like a culture or an industry or a service sector. So productivity is lower than our peer economies because most of the time it's learning by doing and even when we export our human resources, for example, to countries, it's not that we are exporting our amigurts. They are the skilled people, what is required in the government today. So there are still drivers or cooks or carpenters or those labour workers or missons and nothing wrong with having all these professional skills. But these skills are no more required in petrochemical than dollar-rich states. So they require minimum requirement is basic computer literacy. Their minimum requirement is getting used to of the latest apps and digitalized workforce that can embark upon challenges posed by digital economy. So my argument is that because we are not actually, we don't have any mechanism to provide skill to our service providers. And that's why they are not able to make the most of their hard work and their toil. So they keep on working hard, very hard, actually. But they earn less than their peers and less than their competitors because other service providers have additional skills which are particularly service providers for Pakistan they don't possess. So as executive director of the Sustainable Development Policy Institute, obviously the STPI has done a lot of work as far as, you know, contributing towards the policy making process is concerned. I mean, most of the facilities that are actually in Durham, Pakistan that you actually mentioned, a lot of that also has to do with government policy making. And there's an argument that is made that as far as Pakistan is concerned, no government really completes its five-year term. And due to political instability, policy making, which has a trickle down effect on the local population is missing. How much do you think political instability has had a huge role to play as far as Pakistan's digital economic indicators is concerned? Well, of course, this uncertainty, volatility is one of the lethal factor for economy and economic growth. It is one of the deterrent for investment to be its domestic investors and your international investors. So this critical uncertainty, this effect that no elected prime minister in the country has completed. His are five-year tenure so far, even after seven, five years of making. I think that does have an impact on Pakistan's state of economy. So one cannot really get it. It's not all about democracy. It's not all about any particular system of governance. Even the autocrats and monarchs, because of their consistency in policy and their having no ambiguity and no uncertainty in their attenuos and their common policies, they are doing very well. So Gulf countries, they are not democracies, but they are doing very well because we know that there is a consistency of policy and there is a continuity and there is no volatility per se in most of the Middle Eastern Gulf countries. So the point I'm trying to make is, yes, of course, I'm a great fan of democracy, but in Pakistan it's not that it's the presence or lack of functional democracy. It's about the fact that the policy continuity and policy consistency, that is not there and if economic policy consistency and continuity is not there, if there are uncertainties about economic policies, then they would get hard any prospect of economic growth. Okay, so let's come up to the IMF deal. I mean, there's another argument that's actually made that previous governments have also gotten into negotiations with the IMF, but that has not necessarily resulted in any tangible outcome as far as Pakistan is concerned. What do you think is preventing or teetering the IMF negotiation between Pakistan and the IMF board? And how do you think it can actually be resolved? Because when we talk about the IMF, it's something that has in the conditions that they actually attach, it has an excruciating impact on the local population. So there needs to be some sort of balance where there's relief to the masses. And Pakistan also initiates structural reforms as part of the IMF agreement as well. So what in your view is the key to making sure that the IMF negotiations are successful? And under the economic problems of Pakistan, they are long identified, almost everyone knows those, everyone knows those problems. And the solutions to those problems, they are also long known. So everyone knows them, what the solution is. IMF has been saying the same things, program after program after program, expand your tax base, rely on direct taxes that don't provide targeted subsidies, that don't sell electricity or gas or the fuel below the cost of production or below the cost of supplies, get rid of loss making public sector and for prices, etc., etc. These are the things, if you look at these MEF fees, the documents of a different time of program. So you would find that the pages are pages full of these prescriptions. Now, actually, what happened that IMF, yes, IMF is a technical body and it assesses countries on technical grounds. But the decision making in IMF is critical and it's geopolitics. In the board, for example, America has 15, 585 percent, almost 16 percent shares. Now, in order to enjoy any waiver, I would put the IMF as your require around 85 percent share orders to support you, which literally mean that if America is not happy with the country, the country would never get any relaxation from the board because America has 16 percent share. So even if the rest of the board is the other 23 executive director of the board members, I'm a board, even if they're supporting you, if America is not happy, you can never get a waiver. And we have seen, for example, the program which was being managed by a stock dollar back in 2013 to 2018 at that time, Pakistan had an excellent relation with Barack Obama administration. So we got around 12, 13 waivers in that time of program and that was the only program that Pakistan completed with the IMF. But I'd be it without a dozen waivers, means a commitment that Pakistan made and could never achieve. Now, of course, during Trump administration and even now, the relations are not ideal as they should have been. One holds that relations are improving and the fact that what we are talking, Chief of Army Staff is in Washington for a bilateral meeting. And one holds that this meeting would be very fruitful and things would improve. But until they improve, of course, Pakistan shouldn't expect any waiver from the board. And if it should not expect any waiver, it means that the commitment that Pakistan makes to get a loan signed, Pakistan would have to fulfill all those commitments, which, of course, is a tough specially when it comes to the time of the political history in the run up to elections, in the run up to general election. The governments struggle to make, to take tough decisions. And the governments in waiting all the political parties who are aspiring to be part of the government in their campaigns. They have to be very mindful of what they promise to their voters because as soon as they will come in power, if they come in power, the first thing they will have to do is to negotiate another IMFD and take tough measures, almost all the measures against what they had been promising. They would have been promising in their electoral campaign. So I think with the IMFD, it's geopolitical as well as it's a geo-strategic. And Pakistan, although trying to get its level best to maintain a subtle balance between its relationship with the United States, with West, vis-a-vis with China, which is, of course, Pakistan's tested friend, vis-a-vis with the other these economic giants and other powers in the world. So maintaining this subtle balance is difficult and some of the side effects wherever there is an imbalance is actually felt by people of Pakistan when IMF doesn't actually to give any waiver. But the way forward is to come up with more people-centric targeted subsidies to come up with the social protection measures, making best use of Ben's income support program. So IMF doesn't stop Pakistan from giving support through Ben's income support program to the identified beneficiaries. It doesn't stop Pakistan from providing targeted subsidies. I'm fluent on other commodities. So instead of a general subsidy, for example, subsidy in fuel, which is enjoyed by the owner of a bigger vehicle than a two-wheeler because the consumption of a bigger vehicle, bigger vehicle would be almost five, six times more later. Yeah, then the two-wheeler. So of course they are enjoying the benefit of subsidy. And this is what IMF is stopping us to do. From America's perspective, I mean, there's a lot of skepticism with China's Belt and Road Initiative. China believes that, you know, it's an east-west corridor. It's going to connect all of the Eurasian region. But we've seen a lot of voices from countries such as Italy that it's actually going to result in rising sovereign debt for the receiving country and could also result in a debt crisis for, you know, the developing world. And there are some examples which actually corroborate those claims. Let me quote an example here. We're talking about the Humbun Tota port in Sri Lanka, which was actually leased to the Chinese. Many Sri Lankan lawmakers, especially with the right wing, have actually said that, you know, this particular decision by the Rajapaksa government has cost Sri Lanka millions of dollars in debt. Do you think a similar situation would happen if the 62 billion dollar CPAC project actually materializes? Or do you think this is more Western propaganda and it's not something that should actually be taken seriously? Well, Amzab, if you go through a dependent economic literature on Humbun Tota, actually Sri Lanka's debt fund has nothing to do with the Humbun Tota. So now, even the American think tanks, many of them, their reports also tell us that Humbun Tota has nothing to do with the Sri Lanka's debt fund. The second important point is that I borrow somebody from you, who lent it to me. And I go and I spend it in the casino, or I go and spend it on buying the luxurious vehicle instead of spending it on my children's education, or spending it on my children's nutrition and health for the purpose for which you have lent me money. So who will be the party to be blamed for? Landl or the borrower? The receiver, of course. The receiver, because the receiver got money from China, even in that case, Pakistan is getting money in Pakistan is not a responsible borrower. Of course, one cannot blame China for it. China gave money with no strings attached and it keeps on providing money to countries like Pakistan and it's almost, if you look at the China's lending record, in COVID, China's lending in the three years prior to COVID was higher than the combined lending of Khyamlif and Burbank. So China was taking care of the needs of developing countries, providing them with money with no strings attached. So on that account, perhaps we cannot blame China for if we are not prepared to implement those projects. But I would say that in the case of Pakistan, the first phase of CPEC, China provided us what we asked for. We asked for energy. China gave us this power generation plants. We wanted quick energy. China gave us corn-based power plants. We wanted roads. China gave us roads. We wanted an alternative port to Karachi. China gave us garter ports. And that too, without getting involved or without intruding into Pakistan's domestic or political affairs. So one thing that is, one should appreciate that China doesn't interfere in its partner countries' domestic affairs. And now the second phase of this was the one side where it was there in CPEC phase one. The second phase was where we had to make tangible projects to capitalize upon this road and electricity and water port. Now the word got hit by COVID, China closed its borders. Then there was this critical uncertainty in Pakistan. And that's why we could never see the long-term program, LTP of CPEC taking off. Now one can certainly argue that the power negotiation, the power negotiation could have been better. But then again, it is our fault. So if I'm negotiating on behalf of the country and I'm not able to get a good deal, if I'm negotiating the tariff, not only with China, but even with the rest of the IPPs in dollar denominator, when I know that I don't have the reserve of foreign exchange and my currency would give a fee pressure of depreciation, I should never negotiate in dollar denomination. If I know that there is a high cost of insurance, I should argue and I should give a pushback. If I know that the plants which are being get started by China, the cost of generation of electricity per unit is higher than what China has installed in other parts of the world, well, I should negotiate. It's a business through business, even if it's a government to go over negotiation. It's all about the terms and condition and the bargaining part that we exert. So I would say that perhaps we were not ready to negotiate with an economic giant like China and due to our bad negotiation with social side effects due to our, perhaps at that time, some projects in ACE, for example, the Cold Base Power Plant, we could have negotiated renewable energy. China is the largest producer of renewable energy in the world. We could have at that time asked for solar farms or wind farms or other renewable technologies, but at that time we asked for this Cold Base Power Plant in China, it was Cold Base Power Plant. So I think it's not that I'm trying to defend China, but before pointing my finger to any second or third country, I will also have to look at my own shortcomings and I need to rectify my shortcomings first. And then of course I'll be in a better condition to negotiate with our external partner, be it China or America. Okay, so Dr. Salih, just final two questions and then we'll let you go for sure. So when we talk about Pakistan's literacy rate, a lot of academics, a lot of analysts have argued that a literate population and educated population, a population where the school to GDP ratio or for example the amount of children who are actually going to school is actually quite considerable and it's actually quite commendable, can result in strong institutions, a stronger economy and a better forming economy. But there are some outliers here. I mean, let me just quote a few stats for you, Sri Lanka has a literacy rate of 92.5% but it's still Bipro. The Palestinian territory, which are an occupied territory, they have a literacy rate of 93.7% and almost 80% of their population is living in poverty. So when we talk about literacy and its relationship with development, obviously the STPI has done a lot of work as far as promoting education Pakistan is concerned. Do you think Pakistan, the policy makers need to invest more in the higher education commission and towards building better quality universities and producing graduates who can actually contribute towards the development of the future or do you think that the problem is more complicated? Well, I think our policy makers and our governments they need to invest more on primary education, not on HEC or universities. The problem is that not with the postgraduate studies or post graduates, they have got proven track record of success everywhere in the world, wherever they go. But they can only enter universities and good universities after they have completed their secondary and their primary education. And to me, the problem is that foundation 11, that primary 11, the basic numerical literacy mathematics, English, computer literacy, et cetera. So if the foundation is built at that level, then of course the graduates, they would be more prepared for going into even more better careers in the universities. But right now the type of stuff that comes in many of the public sector as universities, because they are not trained in doing private research, they are not trained in doing basic data analysis. They are not trained in doing literature review. Many of them, they have field handicap. So we need to standard our basic education first and then perhaps we can think of ATC, which to me, as universities, they are doing a pretty decent job. So we've actually run out of time, so we'll skip the last few questions for that matter. Executive Director of the STPI, Dr. Abid Salari, thank you so much for joining me on this show. It was a very enlightening discussion and we basically touched on all aspects as to how Pakistan can move forward economically and in terms of sustainable development. So I thank you, sir, for your time. That's all that we have for Islamabad today on Think Tech Hawaii. You can follow us on social media for all your feedback. Do provide us with comments as well. And until next time, take care.