At least that is according to Shahid Javed Burki, who has usually been rather critical of the leadership of the time…
In this article from todays dawn, he states that Sharif was on the right track, but was derailed, only to be forced to go on the defensive later on. This ofcourse lead to the many mistakes of his second term… But if he had been allowed to continue as prime minister from the start, thing might have been different.
http://www.dawn.com/2006/11/14/op.htm
Private sector in the lead
By Shahid Javed Burki
THIS series of articles is concerned with identifying the “positives” in the Pakistani economy. I defined the positives to mean those features in the economic landscape on which the country could build a durable economic structure if the right set of public policies is pursued. In this context, I kept the discussion of the resurgent private sector to the last. This was for a reason. The other positives are well known and many of them have been analysed, some of them in considerable detail.
However, the increasing importance of the role of the private sector has not received the attention it deserves. This needs to be done. We need to discuss how the private sector has re-emerged as the leader in the Pakistani economy, the role it can play, and the constraints that need to be put in place so that it does not damage social development and the physical environment.
This is not the first time the private sector has been assigned a position of importance in the Pakistani economy. It helped with the very rapid industrialisation of the country following the unexpected cessation of trade with India in 1949. In fact, if a number of entrepreneurs had not stepped forward and provided the Pakistani consumers with the consumer goods they desperately needed, Pakistan may well have been forced back into the waiting arms of India whose leaders had opposed the creation of a separate Muslim state in South Asia. The private sector was once again at the forefront of the development effort during the Ayub Khan period when there was consensus among economists that Pakistan was on the verge of a Rostovian take-off.
The private sector was, however, eclipsed by the aggressive socialist policies followed by President/Prime Minister Zulfikar Ali Bhutto. During that period, the state was put on the commanding heights of the economy. According to this line of thinking, the private sector could not be trusted to provide social good; Adam Smith’s “hidden hand” remained just that — hidden. It did not appear to guide national resources towards the provision of basic needs to those who were disadvantaged.
This approach continued to guide public policy even after Bhutto’s removal from office by the military. For many years, the economy was under the control of Ghulam Ishaq Khan who was deeply suspicious of the private sector and the goals that private entrepreneurs wished to pursue. He believed that industrialisation and economic modernisation could only be achieved if the state got directly involved in managing the economy. Without the state’s engagement, an economic system led by the private sector could cause considerable social stress. This way of thinking began to change after almost two decades, especially with the arrival of Mian Nawaz Sharif in the corridors of power in Islamabad.
How did Islamabad’s policymakers deliver the economy back to the private sector? As discussed in this space last week, the process was begun in 1991 by the first administration of Prime Minister Nawaz Sharif. The 1990s is often referred to as the lost decade. This is one of the themes that runs through President Pervez Musharraf’s recently published memoir, In the Line of Fire. I have also contributed to this line of thinking in the columns I have written for this newspaper. But deeper reflection leads me to revise my views and arrive at a somewhat different conclusion.
Some of the reforms that rescued Pakistan from economic sluggishness in the early 2000s have their roots in the early 1990s. This is certainly the case for bringing the private sector back as the leading force in the economy. The first Nawaz administration used privatisation to revitalise the private sector and to reduce the presence of the state in the economy. It also brought professional management into the banking sector while large commercial banks were being prepared for privatisation. Unfortunately, by dismissing the Sharif administration in 1993, President Ghulam Ishaq Khan interrupted the process. As was to happen again and again in the 1990s, there was no continuity in policymaking since none of the elected governments were allowed to complete their tenure.
What would have happened had Nawaz Sharif been allowed to complete his term, had he and his team been allowed to stay in office until 1995 when he would have been required to go back to the electorate and compete with the opposition to obtain another term?
This is obviously one of the “what if…?” questions I often raise in my writings on Pakistan. I do that not to be wistful about the good things that might have happened if the process of positive change had not been interrupted, sometimes by the acts of men and sometimes by events that were not under the control of people. The dismissal of Prime Minister Nawaz Sharif by President Ghulam Ishaq Khan belonged to the former category of events, a change in the direction of Pakistan’s history that resulted from human action.
Once again a powerful political leader had acted to disrupt the march of events in the belief that his action was good for the country and the people. This was the second time Ghulam Ishaq Khan had so acted, using the extraordinary amount of power that he had inherited from the changes made in the Constitution by Gen Ziaul Haq. This action was to have profound consequences for the evolution of Pakistan’s political system and the development of its economy. It was also a messy dismissal; for the first time in Pakistan’s history the Supreme Court refused to validate the action of the head of the state and ordered the return of the prime minister to office. But the president was not willing to work with Sharif; he tried to undermine his authority in many different ways. This further eroded the confidence of the people and, even more important, the confidence of politicians in the political process.
To begin with, it was clear to Nawaz Sharif that if he ever returned to political power he had to cleanse the 1973 Constitution of the blemishes brought into it by his own mentor, Ziaul Haq.
The most egregious of this was the power it gave the president to dismiss an elected prime minister on charges of corruption and mismanagement. This extraordinary power was used four times, once by Ziaul Haq himself, twice by Ghulam Ishaq Khan, and once by Farooq Leghari. Nawaz Sharif did have another opportunity when he became prime minister in February 1997 and went to work to consolidate his powers.
Unlike the case in his previous tenure, his priority this time was on making changes in the political structure. He left economic matters on the sidelines. He undertook to rewrite the Constitution. Not only that, he concentrated a great deal of power in his hands and in the process brought down upon himself the wrath of the military.
Had Nawaz Sharif remained in place from 1993 to 1995, there is little doubt that he and his associates would have followed on the reforms they had introduced after assuming office. The process of privatisation would have gained momentum, the private sector would have reacted by increasing investment in the real sector of the economy, the Pakistani diasporas would have started to put their savings in the economy of the homeland, relations with India may also have improved along with more trade with that rapidly growing economy, the regulatory system may also have been provided more teeth to check the energies of the newly empowered private sector.
Would Nawaz Sharif also have checked himself and constrained the tendency to use public funds for large projects whose benefits to the economy were not carefully worked out? Would he have done something to stop corruption from deeply penetrating the upper echelons of his administration and his party? Would he have taken steps to bring Pakistan’s external accounts into balance? Once secure in his place he may have moved in the right direction. However, not doing these things was among the reason for his loss of power.
The perceived economic failures of the Sharif government motivated the interim government. It was in office for three months following the prime minister’s dismissal and it introduced a programme of structural reforms to deal with some of the problems it thought the country faced. As adviser to the caretaker prime minister, Moeen Qureshi, I had a large role in crafting the programme.
We put emphasis on institution-building to constrain the behaviour of those who held power, both politicians and bureaucrats. We published a list of taxpayers and the amounts they had paid into the government’s coffers. We also published a list of the people who had defaulted on loans they had obtained from the banking system. These lists were made public to induce a sense of responsibility on the part of those who had used economic power or access to those in positions of power for personal advantage.
Giving more powers to the State Bank of Pakistan was an important part of our effort. We also identified the sources of growth for the Pakistani economy and promulgated a number of reforms that would have helped to attract the private sector to these areas. We opened the government to greater access by citizens so that they could understand the actions the government was taking. And, we put on hold the expensive projects that the Sharif government had launched without estimating their economic and social rewards.
These reforms were not meant to turn the country into a different direction from the one pursued by the previous government. They, in fact, built upon some of the actions the political administration had taken in the short time it had spent in office. Their main aim was to take out the wrinkles that had appeared in the process of economic management largely on account of the sometimes impetuous behaviour of the dismissed prime minister. The structural reforms introduced by us continued the pattern established by the Sharif government. It was our expectation that by undertaking these reforms we would be able to establish an environment in which the government that took office after the interim period would function.
The expectation that the process of reforms initiated by the Nawaz Sharif administration and continued by the interim government in the 1991-93 period would not be interrupted once elections were held and a new government took office came to nothing. An analysis of the period that followed from the perspective of the development of the private sector will be the subject for next week.
