If you lose hope, somehow you lose the vitality that keeps life moving, you lose that courage to be, that quality that helps you go on in spite of it all. And so today I still have a dream. - Martin Luther King, Jr.
I previously wrote on the role of public policy in the United States and China. Both American and Chinese policies have a significant effect on the developing world’s economies. Relevant to this discussion is an understanding of what Pakistan based business and public sector leaders can and should do in the current financial environment.
In generating such priorities it is important to manage expectations for all stakeholders. This includes managing expectations for Pakistan’s economic participants and the economic conditions in which we live today and crucially what they might look like for the next several years.
I recently spent two weeks in Karachi conducting project leadership training for leading organisations. Many business leaders I met continue to believe we can and will return to the period of heady growth experienced in the period from 2003 to 2007. I am not sure such individuals understand how important public policy is, how rare good public policy is, and its effect on the wealth, well-being and the future for us all. While I respect their level of local expertise and understanding of market temperament, this scenario of anticipated healthy growth is unrealistic.
President Obama came to office as an almost inspirational leader. Expectations both within the U.S. and around the world ran high for a presidency that would bring change to Washington and lift America’s prospects. What a sobering experience reality has been.
Admittedly, good long term policy decisions are difficult to shepherd through a Congress traditionally focused on daily opinion polls. But previous American presidents have used their considerable oratorical skills to reach out to public opinion so as to ensure Congress behaved. Obama seems to have these same sorts of skills, but has not been willing to use them in support of policy which is capable of defining his presidency in a manner consistent with those early expectations. The U.S. President has struggled with a poorly conceived foreign policy agenda. He has not decided whether China is a friend or a foe and as a result has struggled with trying to impose unnecessary discipline on Iran’s nuclear programme. One big handicap he unfortunately has is the huge deficit. Public opinion in the U.S. is increasingly, and rightly so, concerned with fiscal deficits.
Governments in the developed world are having to deal with colossal deficits. They are looking at raising revenues and reducing expenditures, thereby ensuring there will be no more fiscal stimulus upon which their economies can rely. Access to credit in the U.S. and Europe is going to be restricted as banks respond to new regulations requiring them to bolster their balance sheets. This situation is worsened by the sluggish real estate market and the inventory hanging over the market. The geo-political situation continues to be very complex and sensitive. The war in Afghanistan, instability in Pakistan, leadership change in North Korea, continued western propaganda against Iran and a more assertive China all conspire to ensure defense budgets will continue to be disproportionate consumers of fiscal budgets. A blow-up in any of these areas or a dreadful terrorist raid in a western city could negatively impact the economy.
Some will argue the Pakistani economic scene is far brighter than that of the U.S. After all, we continue to hear of the magical flow of global financial aid and non-resident funds. Whilst this may be true for the time being, the U.S. remains an important customer for our services and manufactured products. And the U.S. economy is having trouble standing tall. While it is good to see several sectors of the economy are much more engaged with those parts of the world which are growing quickly, like the Asian tigers, Latin America and Russia, such efforts will take time. Moreover, some of these efforts have their own set of challenges.
So my point is this — be prepared for sluggish growth, continued fluctuation in the real estate market, a more difficult environment in which to find good opportunities for those entering the work force, and a stock market which will reflect those factors. Both corporate and public sector leaders must be prepared for worse.
Local, regional and domestic politics cannot be allowed to mitigate economic prosperity. There is too much else at stake for citizens of this great nation. The danger now is one of complacency. Pakistan, like the rest of the region, needs a prosperous and growing global economy with which it can trade. We must sincerely work together for progress and prosperity. Success on these initiatives requires leadership and statesmanlike qualities.