New directions

Wednesday / Jun 03 2020

Newspaper : The News

The disaster that has descended on the world in the form of Covid-19 has shaken global economies. Many economic giants including the US, China, Germany, UK, Japan, France and Italy are struggling to cope.

The sectors most affected include tourism and travel-related industries, transportation, automobile industry, hotels, restaurants, sports events, consumer electronics, and financial markets. Stock markets around the world have suffered badly and oil prices have collapsed. Kristalina Georgieva, managing director of the IMF, has stated that “a recession at least as bad as during the Global Financial Crisis or worse” is expected.

Investors are moving money away from emerging markets and about 100 billion dollars has already been withdrawn, badly hurting these economies. Recovery may take years, and so there are tough times ahead. In this challenging scenario, what does Pakistan do?

The immediate answer for us lies in building a much stronger industrial relationship with China. Our planning and finance ministers, and when needed our prime minister, should be spending a significant portion of their time in China, meeting and persuading the Chinese government and their largest companies to establish joint industrial ventures under CEPC for manufacture and export of high technology value added products. We should be ready to offer whatever incentives are needed to persuade Chinese industrial groups to shift some of their industries to Pakistan. India is already trying hard to attract many US, European and Korean industries from China to India. Indian Prime Minister Narendra Modi met with top executives of Apple, Samsung and domestic phone manufacturer Lava last December to promote the process.

The next few years will see a major change in the economic and political world scenario with China overtaking the US as the major world power, with Russia close behind. We should also see the rise of Africa which has a large young population and the fall of the Middle East with oil losing its importance as alternative sources of energy (solar, wind etc) gain prominence.

Middle Eastern countries have failed miserably in using the window of opportunity created for them by the demand and high prices of oil in the last 40 years. They should have invested in building strong knowledge economies but failed to do so. The difference in scientific and technological expertise between the West and the Islamic world is huge.

Our prime minister has vowed to invest massively in building a strong knowledge economy. These intentions need to be urgently translated into action. In order to build a strong knowledge economy, Pakistan needs a cabinet with a deep understanding regarding what constitutes a knowledge economy and how it is built. There needs to be a single-minded focus on developing national abilities for manufacture and export of high technology goods, as Singapore, Korea and Taiwan have done. The five key pillars that need to be strengthened in this respect are:

One, quality education at school, college and university levels, with massive investments in industrial and agricultural research. Two, emphasis on strengthening science and engineering through building Centers of Excellence and linking them to industrial development. Three, promotion of innovation and entrepreneurship by access to major venture capital funding, establishment of Science & Technology Parks for industrial product development, setting up high-tech manufacturing zones with tax holidays, and by enhancing Pakistan’s expertise in the manufacture and export of defense products.

Four, focus on new and emerging technologies that are expected to have an impact of over 100 trillion dollars over the next five years. These include Artificial Intelligence, Industrial Biotechnology, Next Generation Genomics, Energy storage systems, 3D printing, etc. And, five, support to the private sector through interest-free loans and risk capital so that high technology manufacturing and exports are aggressively promoted. In this connection, the government must aggressively promote R&D within private-sector institutions through suitable incentives such as tax holidays.

However investments in education or science cannot bear fruit unless we simultaneously introduce major governance reforms. Most important of these is the need to introduce an efficient and fair justice system so that the corrupt can be given swift and exemplary punishment. We have seen the complete failure of our justice system so that loot and plunder at the highest level has gone unchecked. Our parliament has been reduced to verbal battles without any debates on serious national issues or proper law making. Our failure to transfer power and funds to the grassroots after local bodies elections has made a complete mockery of the parliamentary system of democracy.

It is important to understand that the global scenario of value of manufacture and exports has changed significantly in the last few decades. Hi-tech products now dominate world trade but Pakistan’s share of hi-tech products in total exports is insignificant. About 60 percent of our exports are in low value textiles. Areas such as Artificial Intelligence, mineral processing, hi-tech agriculture and microelectronics present huge opportunities for Pakistan. We must therefore quickly move away from the ‘textiles syndrome’ that has been holding us back and start to build major industries targeting new and emerging technologies in order to acquire a leadership position in the world of tomorrow.

In this knowledge driven world of today, we must realise that our most precious resource is our children. It is only through unleashing their creative potential that we can march forward and face the challenges of the new world order in the post-Covid era.