“I wanted to understand what is happening in the world, from here the journey began.”
Safety & Security Today recently had a conversation with Dr. Ashfaque Hasan Khan, a prominent Economist & Principal NUST), to better understand the fundamentals of Pakistan’s economy, how it works.
Safety and Security Today (S&ST): As a student, when did you decide to become an economist?
Dr. Ashfaque Hasan Khan (AHK): I was a student of pre-engineering group and did my bachelor’s in science with Physics, Chemistry and double Mathematics. Afterwards, I shifted to economics. The first time I studied economics was at Master’s Level. Shifting from pre-engineering to economics is an interesting tale; it all started with reading the daily newspaper, a practice my father made compulsory for us, especially the editorial section. In Oct 1973, during Arab-Israel war, I used to read about its impact on world economics including oil prices, etc in the newspaper. This made me curious about this subject and then I read an article by Henry Kissinger, in which he discussed the same matters. He used the word ‘stagflation’, which struck my mind and compelled me to think of how I could understand all of these global phenomena. It was all about economics combined with international relations that I was reading and looking for. I started discussing around my curiosity to understand the combination and my interest in economics and international relations. I thus dropped the idea of pursuing engineering and convinced my father to support my decision. My journey to economics started with admission in Karachi University and that has continued till today.
S&ST: You are an economist and an educationist, which role do you like the most?
AHK: Both roles are remarkable in their own domains. I am an economist through and through because of my background and expertise. I was first a researcher then have been a practical economist. As regards my role as an educationist, I prefer this role because I can offer students academic as well as the practical knowledge of economics. Because of my hands-on experience of 11 years, I can offer all those finer aspects of economics to my students that the books cannot.
S&ST: In your opinion, what is wrong with our economy, does it have structural flaws?
AHK: I can divide Pakistan’s economy into two parts i.e. prior to 1990 and then thereafter. Before 1990 Pakistan was doing very well on the economic front. For almost 40 years, Pakistan’s economy was growing at an average rate of 5.2%, which was an excellent pace. After 1990, things changed dramatically, particularly in 1987. That year India conducted an all-equipped military exercise near Rajasthan border and was in a threatening posture to wage a war against Pakistan. Gen Zia ul Haq was then the president of Pakistan. He visited India in the garb of diplomacy and threatened the Indian Prime Minister, Rajiv Gandhi of nuclear retaliation in case India invaded Pakistan. It was at this juncture that the world powers came to know of Pakistan’s status of nuclear acquisition and put in place a plan to regulate the economy of Pakistan. The economic implosion of Pakistan became their long term objective. Pakistan was forced to get into IMF program which in the long run adversely affected our economy and the dependence on international financial institutions kept on rising. Since 1988 when we went to IMF, the ongoing is the 18th program in a row. Before 1973, IMF was a totally different institution and the states facing balance of payment crises or dollar shortages went to the IMF and completed programs. The conditionality proceedings and politicization of IMF came later and, in my opinion, the only solution to today’s problems is learning to live without IMF. We need to learn from other 170 countries that, despite being a member of IMF, are not dependent on it.
S&ST: Economic situation of a country is based on certain indisputable facts and realities. Why is there a stark difference in opinions of eminent economists regarding solutions to mend our national economy?
AHK: All the economists advise according to their assessments but the people who manage the economy do not have the authority to implement bold and unconventional steps to improve the economic situation. There are other considerations and limitations at play. Secondly, the ground realities are only known to those who are at the helm of affairs and manage the economy. Sitting out of the system we can just speculate and advise as per the limited information available.
S&ST: In the recent past, we had Finance Ministers from different backgrounds, i.e corporate, economy, finance, or accountancy. In your opinion, what should be the educational background and experience of a finance minister?
AHK: In Pakistan’s political scenario, all of the political parties do not possess competent and experienced teams, be it economic or foreign policy. They are only focused on coming into power and later the business is left to caretaker type of ministers to manage relevant portfolios. Being not experienced enough, they are hesitant to bring substantial changes to the system and ultimately surrender the policy-making to institutions like IMF. Their performance is solely based on being a good implementer or otherwise of the dictated policies. Coming back to the base question, a Finance Minister should have some knowledge of economics so that he knows what is going on. An ideal candidate should have the capability to balance economics with the politics of the economy. Some economists, despite having knowledge of the economy, failed recently because they weren’t having any practical experience on the ground work.
S&ST: Are our educational institutions producing competent economists?
AHK: No. Most of our institutions are producing unemployable graduates. Keeping NUST and a few other institutions aside, the quality of overall universities in Pakistan is deplorable. NUST is only better because of its merit-centric approach. But generally, due to the deteriorating economic situation, good graduates are focused on leaving the country and making their careers abroad. Out of 200 universities in Pakistan, the quality is too low that students are not properly aware of the basics of economics. Over a period, the quality has significantly dropped. This is the prime reason for educated people facing unemployment. One indicator of this deterioration in quality of education institutions is the number of students who actually attain minimum passing marks in the competitive examination in the civil services of Pakistan.
S&ST: There is a school of thought which believes that huge investments in real estate sectors are an impediment to balance economic growth. What is your take on it?
AHK: Construction sector or real estate as a whole is a very powerful sector for economic growth because it creates jobs of all sorts in the market, specifically in the construction sector. However, when we talk about the investments in files or pieces of land, it badly hurts the economy because it doesn’t help in the circulation of money. We need to reform this sector. China developed because of its construction sector as one construction activity fuels 30-35 industrial activities. We need to differentiate between the two sectors and introduce relevant reforms so that the pieces of land are developed as soon as possible to help circulation and support economic activity.
S&ST: What is the relationship of economic strength with a country’s national security?
AHK: As the former U.S. Defense secretary’s quote said, “Security means development and without development, there is no security.” It is amply clear that a state’s military strength is dependent on its economic strength and there is a very strong linkage between economic security and national security. We have unfortunately landed in a situation wherein we acquired the nuclear power, but we weren’t allowed to become economically sturdier. Through proverbial economic hit man, we were kept away from an economic balance and have been repeatedly dragged to IMF. We have been left behind in the region and the international community played its part in preventing us from attaining economic well-being. We aren’t that prominent now whether it’s BRICS or G20, etc. because we are economically struggling. We are a nation of 225 million people with nuclear power but still ranked so low in all development indices.
S&ST: It is said that corruption impedes the growth of the national economy. We see many countries with a fairly good economy that are quite immersed in corruption. Do you see any direct or indirect proportionality between the two?
AHK: There are direct linkages between corruption and poor growth of a country. Corruption leads to bad governance and bad governance leads to poor growth. Corruption has permeated in the DNA of our nation and is present everywhere in one form or the other. We have got so used to corrupt practices in the form of bribery, kickbacks, ill-gotten wealth etc. All of this leads to an increase in debts and debt servicing which adversely affects our economy. Remember, whatever one says, corruption seriously impedes economic growth.
S&ST: What message would you like to give to those people of Pakistan who are involved in higher level decision-making and business in this hard time of economic stagnation?
AHK: I would like to give them a message of hope and resilience but with a caveat that they need to take decisions for the long-term interest of Pakistan and be mindful of the international players who have their own agendas and own axe to grind.
S&ST: Is there any chance of default situation for Pakistan?
AHK: Pakistan can never default if things are done rightly. We have enough funds to manage our debt obligations and needs but alongside we need to mend our ways how we manage the economy under these testing times. We need to embark on energy conservation, export-oriented approach and, above all, control the corrupt practices.
