Re: Pakistan is NOT a failed state
here kali mata,
from International herald Tribune
The World Bank president, James Wolfensohn, is heaping lavish praise on Pakistan’s economic advances. “The progress has been terrific,” Wolfensohn said in the capital, Islamabad, this week. “Seven percent growth by a country which was hovering around 3 percent a few years back is quite an achievement.”
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And then, having commended his hosts, Wolfensohn - whose bank has lent more than $15 billion to Pakistan - warned against complacency. Pakistan must keep its foot on the growth accelerator to make a real dent in poverty, he said.
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That challenge is recognized within Pakistan, too.
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In a table appended to the text of a speech he made this month, the central bank governor, Ishrat Husain, gave a snapshot of the country’s advances in the five years starting October 1999, when General Pervez Musharraf wrested power from the elected government of Prime Minister Nawaz Sharif. The impressive record is marred by poverty and unemployment, which are getting worse.
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In 1999, “poverty incidence” was 33 percent. In other words, a third of Pakistan’s 145 million people were then classified as poor. Although data is not available for October 2004, poverty is “perhaps rising,” Husain noted. The jobless rate, too, has increased to 8 percent from 6 percent.
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Statistics like these buttress the “windfall argument,” which says that nothing has fundamentally changed in Pakistan, even though most other macroeconomic indicators are looking up. The government’s budget deficit has fallen to 2.4 percent of gross domestic product, from 6.1 percent; the ratio of public debt to GDP is now a more manageable 68 percent, down from 100 percent.
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External debt has fallen to 37 percent of GDP from 52 percent in 1999. Foreign reserves have swelled.
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The skeptics are being unfair to Shaukat Aziz, who has been - first as Musharraf’s finance minister and then as prime minister since August - the architect of a modernization program that will pull Pakistan out of poverty if given some more time. Provided, of course, there isn’t another war with India.
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By reducing import tariffs to an average 10 percent - a third of their 1991 levels - Aziz started up the export engine in time for Pakistani-made textile and apparel to benefit from the new quota-free regime in global textile trade.
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Or take the privatization program, which was a nonstarter in the 1990s amid allegations of corruption that surrounded a system of staggered payments by buyers of government assets. State-owned companies are now sold transparently through open bidding, and buyers pay up front. The government uses asset sales proceeds mostly to repay debt.
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As much as 80 percent of the banking system’s assets have slipped out of oppressive government control that brings with it the malaise of state-directed lending and asset misallocation.
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In 2003, a 51 percent stake was sold in Habib Bank, the country’s second-biggest lender. As many as 14 investors, including Singapore Telecommunications, are in the race for management control of Pakistan Telecommunications, the nation’s biggest fixed-line phone service provider. Soon, Pakistan State Oil, a government-run fuel marketer, will pass into private hands.
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Since October 1999, the 100-share Karachi Stock Exchange index has been the world’s second-best performing benchmark, returning almost 424 percent in U.S. dollar terms.
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Pakistan’s economy did well when Ayub Khan was dictator in the 1960s, and then again under Zia ul-Haq between 1977 and 1988. Since higher growth of those periods did not last, why should it now? Growth may be sustained this time because the painful changes Aziz has pushed through in the last five years are going to be irreversible - under any political dispensation.
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“I can’t imagine any future leadership taking steps to nationalize banks or undo the privatization process,” Husain, the State Bank of Pakistan governor, said in a recent speech.
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Investors like the certainty that dictators offer; they also like the protection of property rights that comes with strong democratic institutions. What they don’t like are fledgling democracies minus institutions, especially if they are also struggling economically.
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And that’s what Pakistan was in the 1990s. Wolfensohn is right. The challenge now is to “stay the course” and build institutions that would bring investments and jobs - even when Musharraf steps down as army chief.
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http://www.iht.com/articles/2005/02/10/bloomberg/sxmuk.html
