May 6, 2002	Monday	Safar 22, 1423

CAN PERVEZ Musharraf’s victory in the referendum affirming public support for his reforms and giving him a five-year term more, accelerate the economic growth?

The urgency for achieving higher economic growth and sustaining that has been stressed by all the players in the economy as the economy has been more or less sluggish since the middle of 1990s in a poor country where the population growth has been steady around 3 per cent.

Various projects for economic growth in this financial year have been between 2.5 per cent and 3.5 per cent, while the earlier official expectation was between 4.5 and 5 per cent in a country where a 6 per cent growth has been the norm during the 1980s.

The question of whether the outcome of the referendum in the manner expected by Gen. Musharraf would accelerate economic growth has arisen as the rulers have been stressing that higher economic growth which would follow the referendum more than justified the large expenses on the exercise.

The Election Commission said official expenses on the referendum would be over Rs2 billion. That excludes extra-official expenses as by the PTV which bills its clients at Rs1,000 a second, Radio Pakistan and the money spent on the publicity campaign through newspapers, hoarding, banners, flags, buntings etc. In addition, transporters spent vast sums in providing free transport on the referendum day and for various public meetings of Gen. Musharraf. Together the total cost will be ten to twenty times the formal official expenditure.

But if even a one per cent increase in GDP could be achieved as a direct result of the referendum, the large expenditure may be regarded as warranted, while that does give rise to major political questions. But an increase in the GDP in this financial year is out of question as the year has only seven more weeks to complete itself.

The fact is higher economic growth comes through higher investment on industry, agriculture and the service sectors. Very little of that has been taking place for the last seven years except to an extent in the textile sector and a lesser extant on information technology.

Foreign investment in the first eight months of the current financial year has been around $280 million while it was $277 million in the first half of 2000. Expression of buyer’s interest in the privatization campaign of the government has also been disappointing. Privatization of the KESC has attracted only two expressions of interest so far. And the Saudi bidder for the National Power Construction Company has failed to raise his bid from Rs254 million to the minimum reference price of Rs500 million. How other major public sector units like the PTCL and the United Bank would fare during the final bidding remains to be seen. Along with that the recovery of the over 4,000 slick industrial units in the country has been small as the recovery in few hundreds of units with official assistance and not in thousands which is the need of the hour.

In the agricultural sector the crops, more so in Sindh, have been affected by the shortage of water and that is expected to hit the wheat crop while sugar cane appears to have survived the shortage. How the water supply will be in the coming months and years remains to be seen.

Economic growth can be accelerated through far better management and by increasing the productivity. Not much is happening in that area either, with the large public sector projects being in doldrums. Those units need large investments to make up for past losses and provide the additional capital needed to increase their capacity, but the government does not have the money. And the public sector banks are weary of financing units like the KESC or the Pakistan Steel. Many of them await priviatization, and prior to that reducing their vast debt and large re-capitalization.

The state of the investment sector might have been different if the end of referendum were to imply the end of the current phase of the political process. Instead there will be general elections after four months, and the election campaign will start midway between now and October.

And President Musharraf himself has voiced his fears about what might follow politically after the elections if the prime minister on the basis of his electoral hacking of parliamentary strength wants to follow a course some what different from that which he general prefers. He his haunted by the fears of past discords between the president and the prime minister.

And the Vice President of the World Bank for South Asia, Meiko Nishimizu, has told the Pakistan Development Forum in Paris that it was a Herculean task to get the country out of the crisis of governance and the government to follow October elections could undermine the new relationship built between Pakistan and the World Bank by missteps if there was inconsistency between its words and deeds. She had the past failures in this regard in her mind.

Problems will arise if the political parties win elections on the basis of the promises they make for better life and welfare measures and then find they can’t fulfil those promises because of Gen. Musharraf’s commitment to the reforms espoused by the World Bank, the IMF and the Asian Development Bank.

Good governance begins with law and order and uniform application of the rule of law. And the absence of that in good measure is holing up investment and economic progress apart from political disputes that hold up industries and commercial operations as Thursdays sudden strike in the city did.

If along with sectarian killings, there are political murders, kidnappings for ransom and other ghastly crimes, large-scale investment will not take place. And if foreign nationals are killed like Daniel Pearl and the Americans killed in a church in the diplomatic enclave in Islamabad foreign investment will be small and too slow.

Foreign investors are not in love with Pakistan while for many diplomats Pakistan is a hardship post.

And if the US diplomats have to do without their family members for long, foreign investors will not walk in readily when other countries offer them a better social life and an easy cultural life.

Foreign investors involved in commercial litigation are also disappointed with our judiciary which is too slow, and at times partisan instead of delivering judgments in commercial disputes quick, as done in advanced countries.

Foreigners find going out without heavy guards hazardous because of the increasing theft of cars. And it is not every one who likes to drive around with gun toting guards apart from the high cost of such security measures in their homes, offices and their vehicles.

It is no use arguing car thefts are getting to be common in other countries as well.

Such countries may offer other compensating features which Pakistan does not in their view because of its orthodoxy.

We are now told industrial production has improved. While growth