Anjum Ibrahim
Trump and his rather outlandish claims are being challenged by the world media; and mirror what Pakistanis have become used to for decades: our politicians’ frequent untruths, at best, outright lies at worst. Trump’s blatant bias with respect to all his decisions (including those relating to nepotism in appointments) echo Nawaz Sharif’s energetic defence of all his decisions, barring none, which in several instances have required manipulating the truth; these decisions include Sharif’s blatant support for his daughter’s bid for power, Zardari’s frequent eulogy of his five years in government and pride in the political prowess of his three children and Imran Khan’s assessment of the way Khyber Pakhtunkhwa is being run and his overwhelming support for Jehangir Tareen.
And last but not least Trump’s dismissal of anyone challenging his world view whether it relates to himself and his family directly or to his policies is mirrored by the elder Sharif, Zardari and the Khan. Trump is also being fully supported by those who would benefit from his largesse, members of the Republican party, irrespective of the damage that may do to the institutions – a view held by successive Pakistan administrations that accounts for poor governance. Never before in history has Pakistan been able to compare its leaders’ attitudes with the most powerful man on earth - the President of the United States.
Trump during his speech at the World Economic Forum projected America as the most desired investment destination in the world and credited his tax reforms (reduction of corporate rate from 35 percent to 21 percent) as well as reducing regulations (two for every one that is imposed which he accused unelected bureaucrats of being responsible for) as leading to an increase in average American income of up to 3000 dollars as well as an unprecedented buoyancy in the stock market – 7 trillion dollars added to new wealth since he came to power a year ago.
America First, he further maintained, will benefit the world and added that it has led to 350 billion dollars of reinvestment in the US by just one company, a number he added on to during his State of the Union address on Tuesday; he also noted that the 15 top business leaders he met in Davos had all indicated an interest in investing in the US. Not able to resist a dig at his former adversary Hillary Clinton Trump claimed that had she won the presidency the markets would be down at least 50 percent.
There is no doubt that the stock market has been extremely buoyant since Trump took over the presidency however the New York Times notes that “these gains in wealth have disproportionally benefited Americans by income bracket. Roughly, half of Americans do not own stock directly or in retirement accounts and mutual funds, and the richest 10 percent of households controlled 84 percent of the total value of stocks, a recent study by the non-partisan National Bureau of Economic Research estimated. Buoyed by stock market growth, net household wealth increased to $96.9 trillion in the third quarter of 2017 from $91.7 trillion in the last quarter of 2016, according to the latest data available from the Federal Reserve”.
The impact of a buoyant stock market is even more limited to a few market players in Pakistan and our finance minister after finance minister has dealt with the stock market players with kid gloves, with respect to levy of taxes, so as to ensure that when the going gets tough the market can show a buoyancy in support of their contention that their policies are bearing fruit. Pakistan’s stock market generates less than 2 to 3 billion rupees in taxes per annum due to extremely favourable taxation measures, in contrast to India’s 100 billion rupees or so, and reportedly has around 40 or so main market players who manipulate the market. Foreign portfolio investment enters the country as and when our market offers even more tax incentives and leaves as soon as better incentives, coupled with a more stable government, is available elsewhere. Therefore, Nawaz Sharif’s claim during his recent visit to Karachi that the stock market was buoyant due to good macroeconomic policies reflects as flawed an assessment as that touted by his predecessors.
Trump’s claim that his tax cuts, the highest since Reagan, account for from 1000 to 3000 dollars as employee bonus has also been challenged. The New York Times notes that as per an anecdotal list compiled by Norquist for Americans for Tax Reform, a group dedicated to lower taxes who worked with the White House on the legislation, more than 260 companies announced employee bonus, raise or investment since the tax bill was passed and only one company announced a 3000 dollar bonus for 700 employees a day before Trump signed the tax bill in December. The paper adds that most of these businesses are financial institutions and that “the payouts to workers reflect a small slice of the windfall that banks large and small are in line to receive.” Additionally, Bill Clinton, Bush and Obama all passed tax reform bills.
Nawaz Sharif claims that his party alone has the capacity and will to undertake mega projects and when Dar was still functional he would urge other political parties to agree to a charter of the economy – an inane proposition given that each political party in a multiparty system distinguishes itself from others by presenting its own expenditure and revenue generating priorities. Additionally, claims that all the long-term binding agreements signed by PML-N are in the national interest can be easily challenged by the PPP which when in power (2008-13) refused to sign an LNG deal with Qatar due to the high price on offer at the time and it is doubtful if any other party would support the 15 year 15 billion dollar LNG deal signed between Qatargas and Pakistan State Oil by the Sharif administration.
Dar’s policies with respect to reliance on expensive foreign borrowing, propping up a rupee to understate foreign borrowing, domestic borrowing and a steady rise in current expenditure with a heavier tax burden on existing tax payers based on ease of collection instead of rendering the tax system more equitable, non-anomalous and fair are just some of the other flawed policies that he was allowed to continue with impunity. The outcome: industrial output declined, units began closing operations and relocating to other countries, PML-N’s main support base, and Sharif/Dar duo remained visibly indifferent to their woes. These policies need to change on an emergent basis. And most disturbingly the PML-N administration has taken decisions with respect to some mega projects that have raised the input costs of productive sectors, particularly electricity, making them uncompetitive internationally that accounts for a steady decline in exports for the past two years. These are hardly pro-business policies and account for the current economic impasse.
America First has also implied ending trade deals and basing them on reciprocal trade - reminiscent of Zardari and other Pakistani leaders’ statements that we want trade not aid. This approach is leading the US towards isolationism with trading blocs set to continue their internal arrangements without the US with China and Russia emerging as pro-globalization countries. Trump has also taken the decision to stop security assistance to Pakistan based on an assessment that Pakistan is continuing to be selective in going after the Taliban, a view that was also prevalent during the previous administrations.
There has been a focus by the Foreign Office to remain engaged with Trump’s administration irrespective of the derogatory tweets and the Pakistan First policy is limited to continuing to project a point of view (with respect to our Eastern and Western borders) that is continuing to be challenged by India, Afghanistan and now more openly by Trump. Drone strikes without local support are the order of the day at present, as opposed to taking support from our forces during the Obama administration; however Pakistani officialdom is condemning these strikes though no preemptive action is being taken.
The policy to attract foreign investment remains limited to taking expensive jaunts abroad by a select group of ministers and the failure to translate these trips into tangible investment is not considered a failure, as in the past. And the government remains silent on the modalities of the fifty billion dollar plus China Pakistan Economic Corridor projects, the game changer, and has yet to clarify why there has been a decline in Chinese foreign direct investment during the past year while employment opportunities have risen for Chinese nationals, including unskilled labour, as opposed to Pakistani nationals.
To conclude, there appears to be enough material to compare the attitude of President Trump and that of Pakistan’s ruling party however while America First reflects a new policy that may prevail in the hearts and minds of Americans yet Pakistan First is limited to the same narrative that has not worked much in the past and is working even less at present.
