In a country whose government is as obsessed with the exchange rate, the current account deficit, and thus every single component that goes into the calculation of the current account deficit, imports are a bad word, even though we import nearly twice as much as we export every year. No, in Islamabad, and in macroeconomic conversations in Karachi and beyond, imports are bad thing, a dirty word, and discussion of them takes on a weirdly moral undertone, as though imports represent a national moral failure of some sort.
This is, of course, complete balderdash. In reality, Pakistan imports things that it needs and its main imports are things we cannot do without, such as primary energy inputs (oil and natural gas) as well as heavy machinery and equipment that allows the country to produce things like electricity, manufactured goods, telecommunication services, etc. Why is it a bad thing is Pakistan is importing more fuel and more capital goods? It means the economy is not only growing, but is investing in its own future growth as well.
Yet old ideas about import substituting industries, and some fantastical notions that somehow everything should be manufactured in Pakistan, continue to dominate national policymaking mindsets, ignoring completely the fact that no country – not even the United States and China – can manufacture and produce everything entirely for themselves.
Indeed, our cover story this week explores just how much imports can play a vital role in the economic development of a country by helping multinational corporations understand product-market fit for their products manufactured in other countries. They offer, effectively, a real-life market testing exercise that can often serve as a prelude to domestic manufacturing. Our cover story focuses on real examples from Procter & Gamble, and mentions that they are by no means alone in using imports as a precursor ingredient to their eventual local manufacturing expansion.
It is examples like this that lead us to advocate for economic freedom for all: the government should not try to shape the economy in a particular direction by encouraging this and discouraging that, and instead focus on providing an enabling environment for all businesses, and treat all economic activity as equal under the law. If we do so, maybe we can find new ways of growth that we have not even witnessed yet.