OPINION
Osman Niazi
Jo Banain Gai Khain Gai (We will eat what we make) The main focus of our economic policy should be efficient production of exportable goods and agricultural products. Our standard of living faces a collapse due to a lack of industrial and agricultural production
If the current industrial crisis deepens (in our opinion it is possible that thousands more industries may well shut down) the cities may face severe problems
goods we produce (in effect we barter exports for imports). The services sector does not manufacture anything but rather takes a cut from the productive sectors. In countries such as the USA, the services sector is so good that they can actually export services (e.g. investment banking, consulting). Unfortunately in the case of Pakistan our services sector is not capable of exporting and our exports are real goods produced by our industrial or agricultural sector. o Banain Gai Khain Gai. That is the idea that needs to be We Pakistanis have been living way beyond our means. on every Pakistani’s mind if we are to have a chance to We consume more than we produce. We make up the difference make our economy grow. People of most countries realize between our imports and exports by external borrowing or by the importance of locally produced goods, so much so that foreign exchange remittances from our workers from abroad. The even in the richest country in the world, the USA, great problem is that we have borrowed for decades. Our level of debt is emphasis is placed on the competitiveness of their so much that our net new borrowing ability is being diminished. industrial sector. At the same time our foreign exchange liabilities are increasing. The simple fact is that in the absence of borrowing, what we This loss in new borrowing ability is the reason that we are produce as a Nation is what we consume. So let's look at this process. worried about a GOP default for the first time. As a result it's beOur manufacturing sector and our agricultural sector produce the coming more and more important that we live within our means. goods that we can consume. What we need in terms of imports We have to balance our budget and trade deficits. we pay for by foreign exchange earned by exporting the surplus The solution seems simple: increase your production of industries and agriculture and cut down on your imports. In the past the means for achieving this was by placing tariff barriers and protecting your industries and controlling imports also through import barriers. The new trend seems to be towards freer trade under the WTO. In such a situation the solution is supposed to be to devalue and make your nation poor enough so that they are competitive in the world. Inefficient industries should shut down and people of a country Osman Niazi should compete in avenues where they can be competitive in the world. is a graduate of the One reason for our excessive trade deficit is perhaps a lack of understanding of what is Wharton School of happening. As Pakistanis we don’t realize the implications of buying imported goods to such a large extent. When you import so much more than your exports there is a larger demand for Business and a former foreign exchange than for the rupee. The net result is a devaluation pressure on the rupee. The associate at Goldman devaluing of the Rupee makes the consumer poorer. Most Pakistani’s must realize this. When I Sachs buy an imported product, I am worsening the trade deficit and the net result of doing that over decades is that I have lost a lot of my buying power and I am becoming poorer.
J
COMMENT
33
