Building Sustainable Resistance

"You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”

– Rahm Emanuel (White House Chief of Staff, 2008-10)

Pakistan is in crisis mode on both the economic and political fronts. Divisive politics are exacerbating a dire economy struggling to keep afloat. The economic story started with a strong recovery post-Covid-19 last year and quickly regressed. Import-dependent growth, along with rising global commodity prices, increased the current account deficit which negatively impacted foreign reserves, devalued the currency and drove up inflation. It created a need to borrow to cover the deficit and pay off earlier debts. Lenders needed assurance that the government had sufficient revenues to pay the increasing debts, which it did not. Hence, the need for more taxes to contain the growth, and the boom bust cycle goes on.

However, this crisis is unique as continued increases in global energy and commodity prices poses an existential threat to Pakistan’s economy. Fortunately, there is a realisation that a systemic change is needed to get out of the boom bust cycles plaguing Pakistan’s economy. But the realisation needs to be matched with the ability to make fundamental changes.

Successful navigation in a VUCA (volatility, uncertainty, complexity, ambiguity) world requires the ability to anticipate, plan and act quickly. In the article I wrote for last year’s July-August edition of Aurora, Budgeting for Growth in a VUCA World, I gave examples of macroeconomic factors whose volatility could significantly impact economic recovery. It included increases in global energy prices and supply chain disruptions, the impact of global politics, and changes in fiscal and monetary policy that were already being discussed in global media and think tanks.

Apart from the unexpected Russia-Ukraine conflict, the other macroeconomic trends which contributed to Pakistan’s economic crisis were not necessarily surprises. Simulating scenarios to gauge the impact would have allowed options to be explored for mitigating risk.

The capability and capacity for simulating scenarios will not only be critical for government policymakers but also for businesses as they learn to live with constant uncertainty. Simulations should be conducted frequently using key factors with quantified outcomes. In military theory, it is said that no battle plan ever survives first contact with the enemy.

What macroeconomic trends are likely to prevail in this fiscal year?
• Global commodity prices are likely to remain high based on the continuing Russia-Ukraine conflict and supply chain disruptions. Energy conservation efforts, global reduction in the demand for oil and the chance of a nuclear deal with Iran could reduce prices. The government has based the budget on an 11.7% inflation rate with the optimistic assumption of stabilising or reducing commodity prices. Persistent high inflation would result in budget adjustments during the year to balance the books.
• With the prevailing energy crisis, continued disruption in utilities will not only impact businesses, they will also add to the economic hardship faced by the public, leading to potential deterioration in law and order. It will also reduce the productivity of people which hurts the competitiveness of the country.
• Monetary policy will continue to remain tight to curtail demand. Further interest rate hikes are likely if escalating commodity prices continue to fuel inflation. However, the impact of suppressing demand is uncertain since inflation is driven by the supply side.
• The possibility of a severe economic downturn in North America and Europe could impact the demand for Pakistani exports. Competitive pricing arising from the devaluation of the rupee could mitigate the risk, although higher energy and input costs may restrict the advantage. Geopolitical instability such as the implicit confrontation between the West and Russia and/or China can indirectly impact the fragile economies of developing countries like Pakistan.
• Climate change is one of the highest risk factors facing Pakistan. The Asian Development Bank and World Bank have estimated that Pakistan is facing up to $3.8 billion in annual economic loss due to climate change.
• Political instability in the form of protests and prolonged sit-ins could cause direct economic disruption and reduce the attractiveness of the country for foreign investment.
• Another pandemic or new and more dangerous variants of Covid-19 would obviously have a negative effect. It may be less drastic as the world is learning how to better manage and coordinate.

As implied by the quote at the beginning of the article, crises can be the best pretext for accelerating long-term transformational change. While foresight, planning and agility to act quickly are key-elements of building resilience, there are softer management practices which are equally important and applicable to the economy and businesses.

1. Purpose and Clear Articulation of Goals: Goals create a clear direction and a path forward. They anchor people and prevent pessimism to seep through as shocks become transitory in the larger scheme. People are more accepting of making sacrifices if they know it will eventually help meet a purpose. It provides optimism and a silver lining in a crisis. However, it needs to be believable and not seen as mere rhetoric.

2. Trust and Unity of Purpose: Organisations which have a strong culture of fairness, openness and teamwork tend to be more resilient. There is a sense of ownership and a belief that overcoming a crisis requires collective effort. Without unity of purpose, people tend to fend for themselves and act individually and opportunistically. Pakistanis are known to give generously to charity but many do not pay taxes. A system of fairness and transparency is among the key factors that are the prerequisites for motivating people to pay taxes. From a country perspective, the current divisive politics in Pakistan with a constant blame game are diminishing trust in the system and moving people away from a shared sense of responsibility.

3. Communicate Simply, Genuinely, Often: In a hyper-connected world, it is important to keep people engaged and driven towards the purpose. The articulation of the purpose should be clear and concise in an authentic manner. An often-quoted example is the story of US President John F. Kennedy’s late-night encounter with a janitor during his tour of NASA headquarters in 1961. “Why are you working so late?” Kennedy asked. “Mr President,” the janitor responded, “I’m helping put a man on the moon.” President Kennedy was able to capture the collective imagination of a 400,000-person organisation with a clear singular purpose of putting a man on the moon. He refined the abstract objective of ‘advancing science by exploring the solar system’ to become a ‘scientific exploration of the moon and planets’. Eventually, the objective was made more tangible when he told the US Congress: “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to Earth.” He was able to communicate a highly concrete and time-bound objective which became the focus of all of NASA.

4. Develop Milestones, Empower People: Clear stepping stones explain how people’s day-to-day actions and work connect to the purpose. It creates a sense of responsibility as a citizen or an employee. Digitisation is a critical element to empower people. Internet access is an essential utility and every effort should be made to connect the entire country backed with strong digital literacy programmes. It is a catalyst for driving the transformation of the economy and enabling the bulging youth population to be more productive.

5. Measure Progress with Discipline: Another benefit of digitisation is the ability to capture and share real-time data. To minimise confusion and dispel rumours, communication of timely, clear and credible information is important. People need to know that their efforts or sacrifices are significant; otherwise, it leads to apathy.

While it is important to reflect and learn from the past, Pakistan as a nation needs to move forward and make transformational decisions that lead to clearly articulated purposes and goals. As the Chinese proverb goes, “The best time to plant a tree was 20 years ago. The second-best time is now.”

Amin Rammal is a marketing technology enthusiast and Director, Asiatic Public Relations.amin.rammal@gmail.com