For a knowledge economy

Wednesday / Nov 27 2019

Newspaper : The News

For the first time in the history of Pakistan, emphasis is now being placed on developing a strong knowledge economy. A National Task Force has been formed under the chairmanship of the prime minister with several federal ministers as members.

The priority areas identified include high-value agriculture, rapidly emerging areas of IT (including AI), industrial biotechnology, mineral development and blended education. Just this year alone, one important project taken up by our task force was to work closely with NADRA and the FBR to increase the tax revenue and widen the tax net. Using NADRA's (limited) transaction records with innovative AI protocols, the model identified 3.8 million non-filers 00 each with a tax liability of more than Rs100,000 who should have paid an estimated Rs1.6 trillion in income tax in the fiscal year ended June 30, 2017.

The total declared assets moved sharply up to Rs3 trillion and actual taxes paid to Rs65 Billion. More than 90,000 non-filers became filers and total tax returns for the year ending June 30, 2018 crossed two million. This was by far the highest number ever in the history of the FBR. This illustrates the tremendous power of technology.

In order to build a strong knowledge economy, Pakistan needs to rid itself of the old economic strategies and frameworks that focused on a natural resource driven approach to socio-economic development. We now need to concentrate instead on strengthening the dynamic interplay between the three key pillars of a knowledge economy.

These are: One, quality education at school, college and university levels. Establishment of top-class universities and centres of excellence in key fields. Two, government policies directed at strengthening the knowledge and research base, and enhancing manufacturing and export of high-technology products, through promotion of innovation and entrepreneurship. Access to major venture capital funding, science & technology parks and high-tech manufacturing zones with tax holidays.

And, three: support of the private sector so that high-technology manufacturing and exports are aggressively targeted. In this connection, the government must promote R&D within private-sector institutions through suitable incentives such as tax holidays.

It is important for the government to take measures to facilitate the establishment of new start-up companies with ample supply of risk capital. According to standard international practice, seed capital is rarely provided by bank loans but it is normally made available through venture capital firms or through private investors (angel investors). This mode of financing is outside normal banking channels, and relies on contracts between inventors and investors. This can only happen if the contractual rights of all parties are fully protected through a robust and efficient legal system. We are seriously lagging in this respect.

Special emphasis should be placed on the translation of new knowledge into new technological products ensuring the development of small, medium and large-sized industries in the country, particularly in high-technology fields. Mechanisms should be introduced so that the benefits of technological growth reach the vast masses with the aim of impacting and improving the quality of life of every citizen of the country. ‘Technology foresight’ exercises should be regularly carried out by our planning ministry to assess the present and future needs of technology, the niche opportunities for Pakistan and the projected impact of such technologies on social, economic, health and environmental aspects.

It is vital to understand that the proportion of hi-tech products is increasing in world trade. Pakistan’s share of hi-tech products in total exports is insignificant. About 60 percent of our exports are in low value textiles. We must move away from this ‘textiles syndrome’ that has been holding us back. Artificial intelligence holds huge possibilities if we can invest in this important emerging area. Other fields include high-tech agriculture and mineral processing. These technologies need to be commercialized through public/private partnerships.

The national defense organizations are a repository of considerable skills in instrumentation, sensor technologies, drone technologies, as well as electronic control and advanced materials. Extending or converting these skills to civil use could broaden our industrial skill base considerably and would help us develop hi-tech industrial products for export.

For a strong knowledge economy to develop, a visionary leader that understands that rapid socio-economic development cannot occur just by building roads and bridges is essential. The key lies in unleashing the creative potential of the youth through the measures indicated above. Lessons may be learned in this respect from the policies of Lee Kuan Yew of Singapore, Deng Xioping of China, General Park Chung-hee of Korea and Mahathir Mohammed of Malaysia. It requires a highly professional team of selected (not ‘elected’) experts as ministers.

It is only through transitioning to a knowledge economy that we can reproduce the ‘Singapore miracle’. Singapore has virtually no natural resources but the country focused on research, manufacturing and export of high-technology products. The result is that Singapore has astonishing high exports of over $330 billion annually compared to only $25 billion from Pakistan, a country with a population about 40 times greater than that of Singapore. On a per capita basis, the exports from Singapore are about 50,000 percent greater than that of Pakistan!

The hands of our prime minister are, alas, tied as he does not have the required majority to bring major legal reforms. Under the present parliamentary system, the prime minister must rely only on parliament for appointing ministers.

The presidential system of democracy allows the elected president to select his/her own team of top experts in their respective fields as ministers. This leads to much better governance than the parliamentary system of democracy where ministers must only be appointed from non-specialist politicians. The present paralysed system of governance (due to the stalemate in parliament) should be replaced by the system that was envisioned by the founder of this nation.

A glorious future lies ahead for Pakistan, as long as we are not afraid to give exemplary punishments to the corrupt, and invest massively in our real wealth – the 100 million youth below the age of 25.