Organized for Extraction: Why Pakistan Keeps Missing the Development Turn — and How to Finally Make It

A deeply reported explainer on why Pakistan’s economy under-delivers — and how to reorganize the state for development, drawing on Hirschman’s classic insight, Sakib Sherani’s critique, and fresh data on human development, education, energy, and governance.

The uncomfortable diagnosis

In 1958, economist Albert O. Hirschman argued that underdevelopment is, at its core, an organizational problem: not mainly a shortage of money or talent, but a society’s failure to organize itself for development. That lens fits today’s Pakistan uncomfortably well. On the country’s 78th Independence anniversary (Aug 14, 2025), Dawn asked why a nation “born on the wings of hope” keeps faltering, and why a parade of supposed “game-changers”—from CENTO/SEATO to CPEC and now the Special Investment Facilitation Council (SIFC)—has not delivered better outcomes for ordinary people.

Economist Sakib Sherani, who has served on several Economic Advisory Councils, has been blunt: Pakistan is not organized for development. A self-interested ruling elite with little “skin in the game” has engineered rules for extraction, not production — an elite consensus around protecting rents (land, energy, non-tradables, and regulatory favors) rather than expanding the productive base. Dawn’s broader critique echoes this: the system is optimized to extract, not to transform.

This article of mine unpacks the mechanics of that “organization for extraction” — and then lays out a practical, sequenced agenda to flip the incentives and organize for development instead.

A quick reality check: what the data says

Human development: UNDP’s 2023/24 report places Pakistan 164th of 193 with an HDI of 0.540 (2022), in the “low human development” category — a sobering, big-picture summary of health, education, and income outcomes.
IMF dependency as a symptom: The IMF lists 25 lending arrangements with Pakistan since membership — a signal of chronic macro instability and reform slippage, not success. Bailouts buy time; they don’t build capacity.
Foundational learning crisis: The World Bank estimates ~78% of 10-year-olds in Pakistan cannot read and understand a simple text (“learning poverty”). Even recent ASER surveys show worrying literacy and numeracy outcomes. An economy can’t compete when most children never acquire foundations.
Child nutrition: National Nutrition Survey data show about 4 in 10 children are stunted — a long-run growth killer because it impairs cognition and productivity for life.
Energy sector stress: Power-sector “circular debt” has swelled to Rs 2.57 trillion (as of late 2024), driven by high losses, poor recoveries, mounting capacity payments, and tariff distortions — a constant drag on competitiveness.
Exchange-rate and policy volatility: 2022–23 import/payment curbs, LC disruptions, and a widening open-market vs interbank premium signaled policy inconsistency and market stress — bad news for exporters and investors.

These aren’t random failures. They are consistent with a political economy built to protect rents in non-tradables (real estate, protected domestic markets, regulated utilities) while squeezing tradables (exports), human capital, and cities — the very engines of sustained growth.

How a system gets organized for extraction (and underdevelopment)

1) The plot economy beats the factory and the lab

Policy has systematically channeled wealth into land and real estate. As the Pakistan Institute of Development Economics (PIDE) has documented, a “plot economy” diverts savings and political attention away from tradable, job-creating sectors. Windfalls in land come from zoning, discretionary allotments, and infrastructure routing — not from productivity improvements. It’s development in reverse.

2) An energy trap that taxes growth

When distribution losses, theft, and non-payment meet expensive capacity contracts and delayed reforms, circular debt balloons. Tariffs rise to plug the hole, strangling industry and households, which further shrinks the paying base — a doom loop that keeps investment on the sidelines.

3) Talent without foundations

Stunting and learning poverty ensure millions never reach their potential. You can’t “import” a workforce at scale; you build it — beginning with nutrition, early childhood, foundational literacy/numeracy, and girls’ schooling. Pakistan’s numbers show a system that talks skills but doesn’t deliver basics.

4) Chronic macro firefighting

Twenty-plus IMF programs reflect a pattern: delay difficult fixes (tax base, energy losses, SOE reform, rule of law), run down buffers, then stabilize under duress — and repeat. Each cycle erodes credibility, raises borrowing costs, and shrinks policy space for development.

5) Policy signals that scare tradables

Frequent import controls, exchange-rate “management,” and sudden directives disrupt supply chains and raise uncertainty premia. Exporters need predictable access to inputs, competitive energy, and a market-clearing FX regime. Volatility tells entrepreneurs: stay small, go informal, or shift to rentier plays.

6) Institutions geared to approve projects, not to solve problems

Pakistan has repeatedly pinned hopes on “game-changer” platforms and councils. The newest, the SIFC, aims to fast-track investment via a civil-military one-window approach. But without deeper rule-of-law, competition, and regulatory reforms, fast-tracking a few deals can’t substitute for a system that’s fair, open, and scalable.

Why “game-changers” keep under-delivering

Hirschman warned against “monumentalism” — the bias toward big projects rather than the hard, cumulative work of building capacity. Pakistan’s track record fits: alliances (CENTO/SEATO), corridors (CPEC), and investment councils (SIFC) are instruments, not institutions. Without competitive markets, stable macro policy, capable regulators, empowered local governments, and basic human capital, they can’t perform alchemy. Dawn’s anniversary editorial calls this out plainly.

The comparative hint: what successful reorganizers did

Countries that broke out — Vietnam, Indonesia, Bangladesh — didn’t wait for one mega-project. They sequenced reforms to (a) make exports competitive, (b) flood factories with female labor by making it easier and safer for women to work, and (c) relentlessly upgrade skills. The lesson is not to copy-paste their models, but to replicate the logic: align prices, institutions, and politics around producing, not extracting.

A sequenced blueprint to organize for development

Below is a practical, 24–36-month reform program that admits constraints and prioritizes compounding gains. It is designed to be politically feasible (front-load visible wins), macro-consistent (works with IMF not against it), and export-first (jobs + FX).

0) Adopt one clarifying North Star

“Make Pakistan an export-powered, skills-rich, city-led economy.” Every policy should pass an “export and learning” test: does it raise productivity in tradables or build human capital?

1) Fix the macro plumbing (first 6–12 months)

Single, market-clearing FX regime; publish any interventions ex-post for credibility.
Medium-term fiscal framework that commits to lowering the primary deficit while protecting human development and export support.
Transparent energy pricing with a published glide path and targeted cash support for the poorest deciles (through BISP) to cushion tariff adjustments.
Priority SOEs: fast-track restructuring/privatization where chronic losses and contingent liabilities are largest (aviation, power distribution).

2) Energy sector: stop the bleeding, then get cheaper

Loss reduction: smart meters in highest-loss feeders; independent audits of DISCOs; time-bound performance contracts for management.
Capacity payments renegotiation where feasible; accelerate retirement of most expensive generation; prioritize least-cost dispatch.
Open access for captive renewables and competitive auctions. The goal is a credible downward trajectory for industrial energy costs — the single best subsidy for exporters.

3) Make exports the easiest thing to do

No LC surprises and zero export bans on inputs. Publish a “no-surprise” trade calendar.
Tariff reform to reduce anti-export bias; consolidate para-tariffs; simplify duty drawback for the entire value chain, not only textiles.
FX retention accounts for exporters with clear rules; faster VAT refunds (<15 days).
SEZs done right: one-stop customs, labor facilitation, and dispute resolution inside zones; link skills programs to zone employers.

4) Cities and local government as growth platforms

Empower metropolitan authorities (Karachi, Lahore, Faisalabad, Peshawar, Quetta) with elected mayors, own-source revenues (property tax modernization), and land-use reform.
Mass transit + serviced industrial land unlock female labor force participation and agglomeration benefits (suppliers, services, finance).

5) From plot economy to product economy

Digitize and open land records; publish all public land inventories; sunset discretionary allotments.
Tax real-estate gains at parity with financial assets; curb speculative flipping with holding-period rules.
Channel savings into productive equity via pension and insurance reforms and SME-friendly listing rules.

6) Human capital big-bets that compound

Zero stunting in new births within 5 years: maternal supplements, breastfeeding support, clean water/sanitation, and conditional cash transfers. Track this like a macro target. UNICEF
Foundational learning mission: every Grade-3 child reads with comprehension. Use high-frequency assessments; re-train teachers on structured pedagogy; extend the school day where feasible. Aim to cut learning poverty by one-third in three years.
Girls to skills: safe transport, stipends for secondary completion, micro-credential pipelines tied to export clusters (garments, IT-enabled services, light engineering).

7) Justice, contracts, and admin capacity

Commercial courts with time limits (e.g., 180 days) and e-filing; publish court-performance dashboards.
“Silence is consent” for low-risk permits after a fixed SLA; make regulators publish reasons for rejections online.
Strengthen the Competition Commission to go after cartels (sugar, cement, energy services) with real penalties.

8) Climate resilience as competitiveness

Flood-proof infrastructure where it protects high-value people and assets; index insurance for smallholders; climate-resilient seed and water-saving irrigation. 2022 and now the current floods in 2025 floods were/is a macro event; resilience is not a luxury.

Addressing common pushbacks

“We can’t reform while stabilizing with the IMF.” You must. IMF itself now stresses structural fixes — energy losses, tax base, SOEs — as the route out of repeat programs. Pakistan’s 25 arrangements are the evidence that stabilization without reform is a cul-de-sac.
“SIFC will unlock investment.” It can help if it is the tip of an iceberg of systemic improvements (rule of law, competition, predictability). Otherwise it risks proving Hirschman right: another monument without institutions.
“Education and nutrition are nice-to-haves.” They’re productivity policy. Stunted, under-schooled workers cannot power an export surge; no country has industrialized at scale with 70–80% learning poverty.

A simple scoreboard citizens can track (quarterly)

Learning: share of Grade-3 students reading with comprehension (national + provincial).
Stunting: prevalence in under-5s (rolling sentinel surveillance in high-burden districts).
Exports: non-textile goods & services exports growth; number of new first-time exporters.
Energy: DISCO loss and recovery rates; circular-debt stock and capacity-payment share.
Justice: median days to dispose of a commercial dispute; enforcement rate of court orders.
Investment climate: number of regulatory SLAs met; published reasons for rejections.
Macro: primary balance (ex-grants), reserves (months of imports), exchange-rate premium (interbank vs open market).

The political economy key: change who wins

Reform sticks when winners from the new system can defend it. That means visibly benefiting:

Women who work because transport, safety, and childcare improve.
Exporters whose margins rise as energy becomes reliable and predictable.
Cities that can fund and run their own growth.
Families who see their children reading and growing, not stunted and stuck.

When these constituencies grow, they shift politics from extraction to production. That is what it means to organize for development.

TL;DR

Pakistan’s problem is not mainly money or brains; it’s organization. The state is wired to protect rents in land, energy, and non-tradables; to lurch from one stabilization to the next; and to underinvest in the human and institutional basics that make economies competitive. Flip the wiring — export-first macro rules, energy loss reduction, plot-to-product rebalancing, foundational learning and nutrition, empowered cities, real competition and contracts — and the same society can produce very different results. Hirschman’s insight still holds: prosperity follows when a country organizes itself for development.