What Musharraf did wrong (economy)..

Society Pakistan & World Affairs
1

Brother, when I was writing about sharing or not (mine and theirs … right and wrong) than it was not to do with resource utilization and reward to area from where resource are originating. It was regarding issue of provincial self-interest when shortage occurs. As for Sindh rural areas not getting their share in development what they should rightly get, that is nothing to do with resource revenue (as that belongs to province and not areas within province) but their development is getting hindered by same people they elect (feudal landlords).

As for cost of gas to industries, I do not know about subsidies industries are getting to have their own power generation, or to produce fertilizer, and further I do not know how much these subsidies are passed on to end users in the form of low cost fertilizers and other produces. But then, captive power is not a bad idea in a country that has very bad record of power supply from national grids and if Musharraf government encouraged that then it must be because Musharraf government was serious in having fast industrial growth in the country. Similarly, use of LNG to fuel transport is also not a bad idea when cost in international market of LNG is lower than petrol.

Anyhow, you may say that it seems bad because extra demand of local gas may have caused shortage of gas in the country for other uses, especially domestic gas.

Well, that would have been true if Musharraf government was doing nothing to import gas. Fortunately, Musharraf government was doing something, and that is, making deal for gas with Iran. By now, Pakistan should have started getting gas from Iran. Unfortunately, present government in last 4 years have done very little in this respect when they could have accelerated the process. Situation is that, Iran has already laid down pipe from their gas fields to Pakistani border (~1200 miles) but Pakistan has done nothing about pipeline from Iran border to their gas distribution network (~500 miles) when it is Pakistan that is needy of gas, not Iran.

Deadline for Pakistan to start importing gas from Iran is ‘end of 2014’. Under the clause of agreement with Iran, if deadline is not met (Pakistan is unable to purchase gas on or before deadline starts) than Pakistan would still have to pay price of gas that Pakistan is suppose to import from Iran.

2

re: What Musharraf did wrong (economy)..

[note]I have split the post from the previous thread to avoid derailing the topic under discussion.. Let's try to discuss the Musharraf economic policies here in this thread without getting in a discussion about his political mistakes. I request the posters to focus on purely economic issues in this thread..[/note]

3

Re: What Musharraf did wrong (economy)..

All what can I say about Musharraf regime’s economic policies and growth is:

4

Re: What Musharraf did wrong (economy)..

My first post will highlight what he has done to destroy the energy balance of the country. It will also include what he could have done.. and what he did not do.

1) Musharraf allowed around 6000/7000 MW Captive power plants to be installed in the country by big scale industry based on cheap gas supplies. Now this is a very inefficient method of generating electricity. What would have been much better was that he should have encouraged IPPs to be installed to supply electricity to the national grid.

This gave an undue advantage to the owners of captive power owners compared to Pepco supplied consumers. While Pepco supplied consumers (who were largely small scale manufacturers) buying electricity at double the rate of captive power operators.. they were subjected to load shedding in addition. This meant their energy cost became much higher because the load shedding period had to be compensated by diesel generators.

The result of this policy was that the small/medium scale industry was discouraged big time at the expense of large scale industry. Furthermore this sealed the possibility of any new industry to come up. the reason for this end of industrialization was that as there was no gas available, there were no more sanction of new captive power plants. Therefore there was no energy source offered to the new aspirant industry except Peopco/diesel generation.. and this mic cost Rs. 18/ per unit compared to Rs. 4/ per unit for captive power plants.

Bottom line is the medium/small scale industry was destroyed.. New industrialization stopped all at the expense of passing extra ordinary profits to the existing large scale manufacturers. Even these extra ordinary profits which were gifted to large scale manufacturers could not be diverted to industrial expansion by these companies as no viable avenue of energy was offered to new aspirant industry..

2) Musharraf being a dictator could have gone for very cheap hydel generation by starting the construction of Kalabagh dam.. and subsequently some more down stream dams. This would have changed the destiny of Pakistan. Not only we would have been generating 8,000 MW of very cheap electricity today from KBD we would have been generating the same amount of electricity from other associated projects. All this was enough for the present day electricity requirement of Pakistan.

3) Importing high price gas from Iran was a bad idea and was not an initial consideration. The project was initially conceived to earn extra foreign exchange by giving a transit passage to Iranian gas to India which was not a bad idea. We have enough gas exploration potential in our country.. and the biggest hinderance to the development of these gas resources is the cheap well-head price. If we give a fraction of the Iranian price to our local producers/explorers of gas.. there will be sufficient investment attracted to this sector and basically Pakistan does not need Iranian gas. This was not done.. and loot sale of gas continued in Musharraf era.

4) Musharraf continued with huge subsidies to Fertilizer manufacturers by providing them gas for almost free/very nominal price. This subsidy was never passed on to the farmer who continued to buy these fertilizers at import substitution price.

5) Musharraf never gave a long term energy policy.. all his era depicts adhocism. Initial focus was on captive plants, in the later part of his tenure there was an overnight shift on thermal base IPPs to be run on furnace oil. In the initial period of his tenure there was a big encouragement for captive plants.. then suddenly a forcing by the GOP to use Pepco supplied energy.. A lot of capital was wasted in his era by this directionless energy policy which had no long term thinking. GOP was just playing in the hands on strong lobbies without any national thinking for 9 years in during his tenure.. and subsequently after Musharraf also in the 4 years of so called democratic rule.

Bottom line is Musharraf energy policies destroyed the future industrialization of the country..

5

Re: What Musharraf did wrong (economy)..

Musharraf created a lot of mafias in the country namely:

1) Stock Market mafia
2) Real Estate mafia
3) Banking Mafia
4) Fertilizer mafia
5) Sugar Mafia
6) Mobile Telecom operators
... and many more

During his tenure all these mafia's were working to rob common people/normal investors. They used to get GOP's patronage to rob general public. Banking Sector was allowed to have the highest spread robbing the depositors and borrowers. The Real Estate developers both in army sector and private sector were allowed to create speculative euphoria without any regulation by any GOP regulating body to safe guard investors interest. They ended up robbing hard earned money from both local as well expatriate pakistanis under the patronage of GOP.. who purposely made no attempt to regulate them..

Stock Market mafia had unlimited access to finance through banking sector of the country without any regulating activity by the GOP.. 3/4 top players were bailed out several time by the GOP when they found themselves in hot water at the expense of general investor by changing the rules of the market. They ended by robbing general public/normal investors/expatriate pakistanis..

Musharraf's era was the era of mafia's and lobbies. There was no attempt to safe guard consumer interest.. investor's interest.. in fact gangsters were promoted in place of genuine business and real economic growth.. at the expense of the country and people of this unfortunate country..

6

Re: What Musharraf did wrong (economy)..

I know that giving credit to Musharraf for his economical policies would make many people jittery. It is especially true in Pakistan where people believe on lies of politicians and media men without investigation or even thinking. The biggest critics of Muaharraf economic policy is PPP as they are in government. Zombies hating Musharraf want to believe them whatever they (PPP) say. So, in this post I won’t say anything (I will leave that for later posts). I would let the words come from horse’s own mouth (Government mouth). Here it is:

When a country applies for loan from bank or funds, they (country) present their (country) past economical achievements and show their future road maps for achieving targets for which they are applying loan. Now it is up to bank (or fund) to assess past achievements and on that basis grant loan.

On 20[SUP]th[/SUP] Nov 2008 after Musharraf resigned and Zardari got elected as president, Pakistan applied for loan from IMF. To get such loan granted, Pakistan wrote a ‘letter of intent’ to IMF that tells IMF Pakistan past achievements (so to get the loan).

Pakistan cannot afford to lie in such letter, because IMF with their teams on ground knows very well what happened in Pakistan. Anyhow, Pakistan could not have exaggerated the achievements as IMF would have considered that lie and would have rejected loan applications. Putting lower achievements would have also exposed the lies and would have made loan application weak. Best Pakistan could have done was to put the achievements as accurately as possible, and that is what Pakistan did. Further, when IMF approves loan on basis of such letter, it means IMF and other world bodies agree that what is written is true.

I am giving an abstract from that letter that is present at IMF site (note, to make my reference as reliable as possible, I did not give reference from xyz, but my reference is from IMF site itself). I believe what Pakistan government wrote to IMF, even though gives an indication of Pakistan economical achievements during Musharraf period, it tells a lot for those who could think. It also shows that Liars in politics and Media try to portray concocted stories (and theories) to fool masses but admit/accept the truth when talking in private or when dealing with people (IMF, WB, ADB, IDB, etc) who are not fools.
](http://www.imf.org/external/np/loi/2008/pak/112008.pdf)http://www.imf.org/external/np/loi/2008/pak/112008.pdf

[Note: above reference is from IMF site, so please do not consider that site is telling lies :)]

Abstract (this letter is written when Musharraf was not in power and government as well as media was trying hard to cover up corruption, incompetency, and nepotism of Political government by talking crap about Musharraf and his economic policies so to put all blame of Pakistan economical misery on Musharraf … the economical misery that is still there in Pakistan after 4 years and seems would stay for another 400 years unless Pakistan again gets an honest person like Musharraf in power):

I. RECENT ECONOMIC DEVELOPMENTS

  1. In the last decade, Pakistan’s economy witnessed a major economic transformation. The country’s real GDP increased from $60 billion in 2000/01 to $170 billion in 2007/08 (fiscal year starts July 1st), with per capita income rising from under $500 to over $1,000. During the same period, the volume of international trade increased from about $20 billion to nearly $60 billion. For most of this period, real GDP grew at more than 7 percent a year with relative price stability. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion (3.8 months of imports) at end-June 2007. Buoyant output growth, low inflation, and the government’s social policies contributed to a reduction in poverty and an improvement in many social indicators.

  2. This strong macroeconomic performance resulted from the implementation of a series of important structural reforms. In the early 2000s, with financial support from international financial institutions (IFIs), including the IMF, the World Bank, and the Asian Development Bank, the government expanded the role of markets in the economy, privatized a number of large state-owned enterprises, established market-based regulatory bodies, and took steps to reduce the cost of doing business in Pakistan.

**Summary of what is written above (from letter of intent):
**
1: Period: Economical year 2000-01 to 2007-08

[Note 2000-01 was first unshared fiscal year of Musharraf, as year started from 1[SUP]st[/SUP] July 2000 and ended on 30[SUP]th[/SUP] June 2001 … last being 2007-08 that ended on 30[SUP]th[/SUP] June 2008 … Musharraf resigned in August 2008].

What happened (from letter of intent)?

Pakistan’s economy witnessed a major economic transformation.

Country’s real GDP increased from $60 billion in 2000/01 to $170 billion in 2007/08 (fiscal year starts July 1st).

Per capita income rose from under $500 to over $1,000.

Volume of international trade increased from about $20 billion to nearly $60 billion.

Real GDP grew at more than 7 percent a year with relative price stability.

Improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s.

Large capital inflows happened

Gross official reserves increased to $14.3 billion (at end-June 2007).

**Poverty was reduced and social indicators were improved due to:
**
A: Buoyant output growth
B: Low Inflation
C: Good social policies

[Letter mentions that: ‘Buoyant output growth, low inflation, and good government’s social policies contributed to a reduction in poverty and an improvement in many social indicators’].

How all happened (from letter of intent)?

Strong macroeconomic performance resulted from the implementation of a series of important structural reforms.

In the early 2000s, government expanded the role of markets in the economy, privatized a number of large state-owned enterprises, established market-based regulatory bodies, and took steps to reduce the cost of doing business in Pakistan.

Now I think anyone denies what is mentioned above, taken from Pakistan letter of intent to IMF declaring Pakistan achievements during Musharraf rule, then we can sincerely say that the person (who denies) is going through disease ‘May-Na-Manoo’ :slight_smile: