A leapfrog strategy

Having performed reasonably well over the last year and a half, could Pakistan increase its GDP growth rate by a notch or two over the next decade or so? Could the current rate of GDP increase, estimated at about 5.2 to 5.5 per cent over the last eighteen month period, increase to 7 to 8 per cent by the end of this decade? In other words, could Pakistan join the league of high performing countries in Asia?

This group includes not only the tiger economies of East Asia, some of which like Korea, Taiwan and Singapore have joined the ranks of the industrial countries in terms of the structure of their economies. The group also includes China - a country that has seen a rate of economic growth that can only be described as "breathless." And perhaps also India.

Since 1975, China's GDP has increased sixteen-fold - a rate of economic expansion that has no equal in human history. In 2003, its GDP increased by 9.1 per cent.

China today is an economic workhorse and, if the present trends continue, it is destined to become the world's largest economy over the next two decades. In terms of purchasing power parity, the size of the Chinese economy may outpace that of the United States by the year 2025.

With China galloping, the Indian economy has also begun to trot. Since about 1991 when the then administration of Prime Minister Narasimha Rao began to demolish what had come to be called the "licence raj," the Indian economy has built up a momentum of growth that is likely to be sustained well into the future.

Over the last dozen years, the India GDP has increased at an annual average rate of 5.5 per cent, about two and a half times the rate of increase in the country's population.

This means that an average Indian is about twice as well-off now as was the case in the early 1990s, the start of the current period of reforms. If this rate of growth is maintained for another two decades, India could become the world's third largest economy by 2025, behind the United States and China.

The question I want to address today is whether Pakistan could also become another rapidly growing Asian economy. My answer to this question is a simple one.

There is absolutely no reason why Pakistan should not, once again, be a high growth economy as it was in the 1960s and the 1980s. In those two decades, Pakistan's GDP increased at the annual rate of 6.7 and 6.3 per cent respectively, much higher than the growth rates in India during the same periods.

Those growth rates in Pakistan could not be sustained since they were based on exogenous factors, in particular the availability of enormous amounts of external capital. In other words, the process of growth was not internalized as was done by East Asia and China and is now being done by India.

It is only with the adoption of a clearly articulated strategy of growth and by finding domestic resources for sustaining it that Pakistan will be able to achieve its potential - which, I believe, is a GDP growth rate of 7 to 8 per cent a year. What should be the nature and content of this strategy?

Pakistan could follow one of the three models that have been tried successfully by the various Asian countries. The first of these is the model that produced the "miracle economies" of East Asia.

Also called "tigers" and "cubs," these economies essentially tapped the large export markets available in the industrial world. This strategy essentially duplicated what Japan had done in the 1950s and 1960s.

In following export led strategies, the industrial sectors in the miracle countries were guided by the state which identified areas into which they could expand. The industries that were being helped were almost always privately owned.

Nonetheless, the state not only helped industries identify markets abroad, it also got the financial sector to lend large amounts of money to the chosen industries at below market rates.

In the parlance of economics this was called "directed credit" - credit provided by banks to industries at the direction of the state. This connection between industry and finance proved remarkably successful but it also led to the financial crisis of 1997-98.

What came to be called "crony capitalism" worked for a while but had to be adjusted once the financial crisis exposed its weaknesses. This has been done successfully and the East Asians are back on the high growth trajectory - something few analysts expected at the peak of the crisis.

The other model that Pakistan could follow was pursued by China. It focused on developing the human resource by providing all people - boys and girls, men and women, and residents in all parts of the country - with free education and health.

This human resource development occurred in an environment of authoritarian management of the economy and of the political system. Either by design or purely because of pragmatism, the Chinese, starting in the 1970s, released the enormous energies of this well-educated and healthy labour by gradually loosening political and social controls they had placed on them.

First agriculture and then small scale and privately owned industries responded to these incentives. The rest, as they say, is history.

Then there is the Indian model. What is today known as the "Indian way" was not a well thought out strategy initially. In fact, the explicit Indian strategy for development adopted by the country's first generation of leaders achieved a result exactly the opposite to the one intended.

It constrained growth rather than accelerate it. In the period between the mid-fifties and the mid-eighties the Indian economy chugged along at what came to be called the "Hindu rate of growth" - a growth rate of some 3 to 3.5 per cent a year. The model being followed now is the product of a series of accidents and ad hoc decisions.

It has at its foundation Prime Minister Jawaharlal Nehru's decision taken in the 1950s to set up half a dozen institutes of technology. When these institutes began to produce thousands of engineers and science graduates, there were very few employment opportunities available within the state dominated, moribund, highly inefficient and stagnant industries.

A large number of graduates of the now famous IITs had to look outside India for jobs and they found thousands of them in the telecommunications, information and communication technology (ICT) industry in the West.

When, in the late 1990s and the era of dotcom explosion, the US industry ran into serious skill shortages, a significant part of this was met by labour imports from India.

Thus was created the Indian diaspora which in the 1980s and 1990s not only acquired great wealth but also considerable experience and expertise. Once the non-resident Indian community had become viable in terms of size, wealth, income, and expertise, it was able to help with the development of the ICT industry back in the homeland. Consequently, India's IT sector became one of the most vibrant in the world.

What we see in India today is an economy that is being pushed forward by skilled people and knowledge-intensive industries. India's policymakers are now confident that based on the recent transformation of the economy they will be able to get their country to climb onto the same growth trajectory on which China has been moving for a while. This, in sum, is the much applauded Indian model of economic success.

Looking at the future, but also looking back at the experience of the various successful Asian countries, what strategy should Pakistan follow? Islamabad has a menu of options available.

It could use private industry to aggressively enter the export sector, exploiting the abundant financial resources now available within the reformed financial sector.

This would mean going on the track previously travelled by the miracle economies of East Asia. But, unfortunately for Pakistan, there is not much synergy between the structure of Pakistan's industrial sector and the nature of demand in the world's large markets. Pakistan will not be able to duplicate the experience of East Asia.

Or, alternatively, Pakistan could invest massively in developing its large human resource by providing it with education, health and opportunities for skill development and knowledge accumulation.

Such a strategy could work if Pakistan had the resources but more importantly the political will. When China went on that track it saved about 42 per cent of its gross national income, a proportion about three times Pakistan's abysmally low saving rate of today.

China's human resource oriented strategy produced results after two generations - or at least a generation and a half - had been sacrificed for the sake of the future. Pakistan neither has the luxury of time nor the political will on the part of its leaders to take the country through such a grind.

Finally, Pakistan could follow the Indian approach of concentrating on the accumulation of skills and knowledge by one segment of the population. A small - small relatively to the size of the population but still numbering in the millions - highly skilled workforce could enter the growth niches available in the global markets.

This is the strategy adopted by the first administration of President Pervez Musharraf. It was championed with great energy by the then minister of science and technology, Dr. Atta ur Rahman. Unfortunately, it did not produce the promised results.

I would advocate, instead, an approach that draws a bit on the Indian experience but then moves onto an altogether different track. This two-pronged approach would still emphasize knowledge and skill development as India has done so successfully.

Based on a well equipped workforce, Pakistan could either export its abundant workforce or take part in the rapidly evolving "outsourcing" opportunities that are changing the global production system.

On the other track, Pakistan could become the hub of north-south and east-west commerce. The north-south track could link Central Asia, including Afghanistan with India and points beyond.

The east-west track could connect the western parts of China with the Arabian Sea through the ports of Karachi and Gwadur. These two tracks will cross in Pakistan and bring enormous benefits to the country.

For Pakistan to follow such a strategy, it will have to undertake large investments in improving physical infrastructure - roads, railways, ports and airports.

It will also need to develop its economy to supply this transit trade with the services it needs including insurance, finance, warehousing, processing, transshipment, etc. Modernization of the service sector that such a strategy would mean focusing on creating appropriate levels of skills within the country in a number of diverse areas.

What I have spelt out above is a strategy for sustained growth and development suitable for a country in Pakistan's situation. Pakistan could successfully exploit its large and young people to do work for the skill-short sectors in the western economies.

It could, at the same time, use its geography as a point of transit for two routes - new versions of the old Silk Route - that would allow commerce to flow from different parts of the world.

Following this two-pronged approach, Pakistan could leapfrog into the future without going through the paces of development followed by other Asian countries. But a great deal of thought and planning will need to be done to develop and implement this novel strategy. Is the Musharraf/Jamali government ready to do that?

Election fever

Elections in our parts of the world tend to start with earnestness and end up as a farce. Many years ago I had a cook whose name was Nazar and he came from Dera Ghazi Khan.

He was given to shooting at the mouth on all matters that contributed to his personal misery including the cost of living. Though I considered him a political yokel, he had the knack of sorting the wheat from the chaff and he had a low opinion of leaders because they did not deliver on their promises.

One day I told him that Zulfikar Ali Bhutto was coming to dinner. Far from being thrilled, he told me that Bhutto owed him money, which seemed far-fetched since they inhabited different worlds.

But he had a case. During one of the elections, stalwarts of the PPP had come to his village to seek votes. They would provide him and other villagers transportation to the election station, which was some distance from his village.

They did provide the transportation but it was one-way and once they had cast their vote, the party-workers abandoned them and they were told to make their own way back.

"I had to take a bus," he said and Bhutto Saab owed him the bus fare and for good measure added that "they are all the same", meaning politicians who promised the earth but came out empty when it came to delivering on the promises. If this is the state of affairs at the basement level of democracy how much more untrustworthy is it on the upper floors?

And I turn my thoughts to the American elections which I follow closely though I have felt like a jilted lover since elections in the greatest democracy in the only planet that is known to have living organizms is something of an illusion.

I was a student in the United States in 1948 when Harry S. Truman, the haberdasher from Missouri, upset Thomas E. Dewey, the slick, moneyed lawyer from New York and I was convinced that the meek had inhented the earth., that David did fell Goliath with his sling-shot, that democracy did indeed work.

I started to study American politics in some depth and the scales started to fall from my eyes.

American politics are no different from politics anywhere else though they are on a grander scale, like a Cecil B. DeMille film production but behind the scene there is the same chicanery and smart deals and manipulations and massive under-the-table funding of the candidates by special interests.

Of the people, by the people, for the people is a giant myth. Abraham Lincoin may have gone from a log-cabin to the White-House and this sort of romantic fiction has created the belief that the highest political office is open to all comers and all that is needed is to win the trust of the majority of the good folk.

This folksy approach to politics is out of date, if ever it was in vogue. Democracy may be a self-evident good but its mechanics are deeply flawed. So too are the results, sometimes.

International agencies and the NGOs are convinced that elections in Third World countries need to be monitored because they are likely to be rigged, that candidates can disappear, that ballot boxes can be changed and that the electors can be intimidated by strong-arm tactics.

More often than not these elections in these countries fail the test of being free and fair. But no one questions the validity of elections in the established democracies.

When Richard Nixon narrowly lost to John F. Kennedy, he made no secret of his conviction that the election had "been stolen." from him. Nixon himself was to paragon of virtue and he was caught with his hands in the cookie-jar and paid the price of Watergate despite his protestations that he was "no crook."

There is, of course, the election of George Bush Jr who lost on-the general vote but was saved by the bell of the electoral college and that too of Florida where the votes had to be counted and recounted until the Supreme Court of the United States anointed him the winner in a split verdict. It was bizarre and showed us the dark side of democracy.

There are elections that are to be held in Iraq and as Oliver Hardy might have said to Stan Laurel, George Bush might say to Donald Rumsfeld: "That's another fine mess you've got me into."

Iraq is an occupied country and the death toll continues to mount and the top US military commander in the Middle East General John Abizaid has narrowly escaped when a convoy carrying him was targeted with rocket-propelled grenades.

The Iraqi people are being asked to decide their future while they would be under military occupation by a foreign army and thus the sapling of democracy will have been planted. Whose kidding who?

One innocent query: How can John Kerry, the front-runner for the Democratic Party's nomination, describe himself as a "Vietnam hero"? The Vietnam War was waged by the most mighty military power on earth against a peasant nation. Dropping napalm on villagers and using Agent Orange, a chemical weapon in the countryside, are hardly heroic acts.

Khatami's last stand?

The crisis in Iran is deepening with each passing day. The president threatens to resign. Two of the vice presidents and seventeen governors have already submitted their resignations to the president for acceptance.

Eighty members of the Iranian parliament called Majlis are staging a sit-in in the House. the situation in Iran is at the centre of the media spotlight just like it was the case in the final weeks of the Shah's rule.

All happened when the hardliners tried to gain through the back door what they could not secure through the ballot twice. The elections to the 290-member Majlis are scheduled for February 20.

Every candidate who was not a professed hardliner was barred from running in the elections. The number of candidates declared ineligible runs into thousands, not scores or even hundreds.

In some constituencies, the number of those barred is up to 16 of the 19 candidates. The zeal of the mullahs to have a straight drive into the corridors of power was so great that in some instances, the hardliners found their own sympathizers among the victims of sweeping disqualifications, at others same person was disqualified twice.

There are many ethical, moral, legal and political questions involved in the whole episode. The disqualifications were done by the 12-member Shura Nigehbaan or the Guardians Council which is a non-elected self-perpetuating body that is responsible to no one except itself.

The president of the republic and the superior judiciary is helpless before the Council. The only recourse available to the persons aggrieved by its decision is again the Council itself.

Should a body which is itself not representative of the people and not answerable to the law, i.e. the parliament and the judiciary, be allowed to determine who should represent the people? The most popular politicians have been ousted from the race and the choice is left between different nominees of the Council itself in each constituency.

The elections, if held under the circumstances, would return a Majlis, more or less a nominated one, lacking even a semblance of legitimacy.

The Islamic Revolution in Iran was not brought about by the mullahs alone. Many groups including the hardliner Islamists, moderate reformists, leftist revolutionaries and the democrat visionaries had joined hands in the struggle against the autocratic and the arbitrary rule of the Shah.

The coalition that was cobbled together when the Shah left for exile was headed by a moderate statesman Dr. Abdul Hassan Banisadr. Soon he fell out with the hardliners and by the time the latter felt themselves strong enough, Banisadr was forced to flee the country in mid-1981.

He was replaced by President Mohammad Ali Rajai, who along with seventy parliamentarians including his Prime Minister Bahonar, was killed in a bomb blast in 1982. He was succeeded by Ali Khamenei, the third president of Iran, who was returned for a second four-year term in 1985.

Another hardliner Ali Akbar Hashmi Rafsanjani also served his two terms, the maximum possible under the constitution, and served from 1989 to 1997.

By the time, Rafsanjani's second term came to a close, the Iranian people were disillusioned with the hardliners. In the person of Dr. Mohammad Khatami, himself a cleric long associated with the revolution, once as the Culture Minister also, they saw an alternative.

There had never been a level-playing field in Iran's electoral politics ever since the Islamic revolution of 1979; the nationalists, the royalists, the leftists and the democrats have persistently been excluded from the arena.

The limited choice available is between different brands of Islamists, like the hardliner Islamists, the liberal Islamist and so on.

Dr. Khatami, fought from the moderate Islamist plank, and dwelled on human rights and values of freedom during his campaign and then his rule. He gave the country a culture of openness.

The media, although continuously at odds with the conservative dominated judiciary, got a breathing space, the discretion of the religious police was curtailed and the rights of women were espoused. Khatami held for the Iranian public, especially the students and the youth, the promise for a bright future.

He romped home in 1997 elections with 70 per cent of the popular vote. The 2001 elections were a referendum on his performance and he carried the day with 77 per cent landslide victory.

After eight years of Khatami era, the hardliners had had enough of him and his liberal ideas. The way the things are going betrays a premeditated plan to wrest the power at the present juncture.

It is nothing short of a coup. The Guardian Council disqualified 3,600 of the 8,200 candidates in the run. Their appeals were subsequently rejected and so was the pressure from the civilized world.

The West has not come out vocal in support of Khatami, since for them he is still too much a cleric, for the mullahs on the Council, he is too unacceptable a liberal.

The fifth president in the post-revolution Iran, found himself sharing power with the third and the fourth presidents, making it a 'presidency troika.' As for the first two, Banisadr had fallen from grace and Rajai is no more among us. President Khaminei was elevated to the Vilayat-i-Faqih and Rafsanjani became the head of the 'expediency council.' Both the offices are in some ways more powerful than the presidency.

The hardliners had concentrated many constitutional powers with them but had never used it with such brazen arbitrariness. They had hoped to clinch power through the normal, albeit restricted, electoral process. When they failed twice they could wait no more.

They were waiting in the wings to use their powers to cripple the president through a hostile Majlis. Khatami did not take the bait. He resisted the temptation to resign, it could have left the field open for the unrepresentative elements.

He did not condemn or confront the Guardians, the latter could have branded him a counter-revolutionary. He did not surrender and acquiesce to the cheating either.

He has so far tried to exercise maximum restraint. He and his supporters have only resorted to constitutional means and representations to undo the decisions. The Council also played cards keeping close to the chest, the restoration of 300 and then 1000 candidacies were calculated moves to stave off some of the harsh criticism from the world media and also to demonstrate that they had tried to avoid a crisis.

Khamenei also made a cautious statement urging better sense. As a last resort, the president announced postponement of farce elections but then Khamenei over-ruled him.

Every moment of trial is also a moment of history. For Khatami, it is a win-win situation and that explains why he is playing so confidently. He has the people behind him and if he survives the crisis, it would be the victory of the ideals of democracy and the rule of law.

If, on the other hand, the elections are forced through and he is forced to resign, he would get a moral victory on behalf of the people of Iran. The new dispensation may not have a smooth sailing.

The Majlis would not command legitimacy to make laws. The executive troika may fall out with each other since the hardliners are not a monolith. Khatami's case was different who was always playing on a back foot, being suspected by both the camps.

It is time Dr Khatami either comes out openly for a free multi-party democracy or succumbs to conservative ideologies. Charting a middle course is no more feasible or possible. the will of the Iranian people must hold supreme now. They have the acumen to decide what is best for them.

No single council or body, by whatever name it is called, is competent to deny a level playing field for all the political factions in Iran.