DURING my just concluded visit to Pakistan I met a number of journalists writing on economic issues. They asked me many questions about the state of the Pakistani economy and its future prospects. While I tried to answer these questions as best as I could, I was puzzled by the degree of scepticism that was implied in many of them about the government’s claim that Pakistan had finally turned the economic corner and was set to proceed on a trajectory of fairly rapid growth.

It is important to reflect on the doubts that persist and also about the way the media perceives the current economic situation. In recent years, economists have begun to focus on what they call “behavioural economics”. This deals with the way people react to various economic stimuli and the way they relate to the economic environment in which they function. Since confidence about the future is an important determinant of the way people will save and spend money and the way entrepreneurs will invest, lingering doubts about government pronouncements need to be seriously addressed.

The most frequently asked question was about Islamabad’s claim that the gross national product in the current fiscal year was likely to be in the neighbourhood of seven per cent. “Do you believe in this estimate?” I was asked. Some journalists posing this question said that their doubt was based on the fact that they had been lied to before. I gave two answers to this question. One, it is exceedingly difficult and also very risky for governments to lie or even exaggerate about such broad estimates as GDP growth.

The performance of a country such as Pakistan that has had active programmes with the International Monetary Fund in the recent past and in which development institutions such as the World Bank and the Asian Development Bank are deeply engaged is under careful scrutiny. Since national income accounts are carefully looked at by these agencies, there is not much point in the government exaggerating the rate of growth of the economy. If the prime minister has said, as he did in Jeddah during a recent visit, that he expected the economy to expand by seven per cent in 2004-2005, that is what is likely to happen.

Sometimes it also helps to go beyond the numbers the government provides and to look around what should be easily visible and discernible. For a visitor such as this writer, the fact that the Pakistani economy was booming was quite apparent. The Karachi stock market was climbing relentlessly and new records were being set almost every day while I was in Pakistan. Driving around Lahore, Islamabad and Rawalpindi, one cannot help but notice all manner of construction activity involving not just houses and new residential estates but also offices, roads and infrastructure. All this is indicative of an economy on the rebound. This was my second answer to the question about the reliability of growth rate estimates.

“Even if Pakistan achieves a rate of growth of seven per cent this year, will this level of growth be sustained in the future as the government claims?” This is a much more legitimate question to ask. My answer usually took me into some simple development economics. Economic growth rates are the product of a number of changes, among them the rate of increase in population; the amounts of investment by the government, businesses and households; and improvements in worker productivity.

Pakistan’s population is growing at just above two per cent a year. Unless there is a decline in the productivity of the work force, this increase should result in at least two per cent increase in gross domestic product. If the existing and new workforce can be supplied with capital to work with and if it can also acquire skills that would make it more productive, the rate of growth should be much larger than the rate of increase in population. This is where investments of different types enter the picture.

The best way to move this discussion forward is to think in terms of the returns on investment — what the economists call the incremental capital out ratio, or ICOR. The ICOR measures the proportion of GDP that needs to be invested in order to produce one per cent increase in national output. At the moment, Pakistan is investing about one-fifth of its GDP; if the ICOR is four that would produce a rate of growth of five per cent a year. An ICOR of three would mean a rate of growth of nearly seven per cent a year. A lower ICOR means a more efficient economy.

Let us look at two economies in our neighbourhood, China and India. China has been investing some 40 per cent of its GDP with which it has achieved a rate of growth averaging 10 per cent a year. The Chinese ICOR, therefore, is of the order of four. The Indian growth rate has averaged at just over six per cent a year for the last couple of decades with investment of about 25 per cent of GDP a year. This means an incremental capital output ratio of slightly more than four. Pakistan’s ICOR cannot be lower than those of India and China for the reason that its economy is not more efficient than those of these two countries. Therefore, in order to achieve rates of growth of seven to eight per cent a year, Pakistan will need to increase its rate of investment by about 50 per cent, from the current 20 per cent to somewhere near 30 per cent. Is this feasible?

Such an increase is possible if the country increases the rates of savings by households and businesses, contains government expenditures on non-productive parts of the economy, and is able to receive considerably larger doses of external capital flows. The last mentioned item has played a critical role in economic revival. Remittances by the Pakistanis living abroad are responsible for adding somewhere between one to one and a half percentage points of growth over the last few years. There is considerable scope for increasing this flow, doubling it perhaps over the next five years.

The reason for this is that the extremely well-off members of the Pakistani diasporas in North America that saves between $15 and $20 billion a year are developing confidence in the economic future of their homeland and are prepared to invest not only in real estate and the stock market but also in start-up businesses. This palpable change in attitude is largely the result of the policies adopted by the Musharraf government. Their continuation would add to the confidence of the members of the diasporas.

It would, however, be imprudent to rely on external capital flows for producing high rates of economic growth. There is a clear lesson to be drawn from the two economic booms of the sixties and the eighties which were the products of spikes in external capital flows. Once those flows ceased, the rate of economic growth slowed down. There is hope this time round that external flows — in particular those originating with overseas Pakistanis — will continue and that business and household savings rates will begin to increase.

I base this confidence on the deep structural changes in the financial structure of the last several years that have brought new instruments of savings into the market while removing some of the major distortions. But much more needs to be done in this area. While Pakistan has one of the better banking systems in South Asia and now has an exceptionally vibrant capital market, it needs to develop new instruments that would attract more personal and business savings to be channelled into the productive sectors of the economy.

One other line of questioning about the performance of the economy concerned the impact of growth on the incidence of poverty and income inequality. There is a widespread impression in the country that economic revival is not benefiting the poor; that the rewards of growth are being captured by the rich; that, given the relatively unequal distribution of income in the country, a trickle-down growth of development would succeed only with much higher rates of GDP increase.

I saw several articles in the newspapers that recalled the experience of the “decade of development” under President Ayub Khan when, as conventional wisdom has it, much of the benefits of GDP increase were reaped by the infamous “22” families. I have always had misgivings about that interpretation of the Ayub Khan period but this is not the place for getting into that subject. The important point is to underscore that there are many who believe that history is about to repeat itself.

The Musharraf government has taken a different stance. It maintains that the growth in the economy is much more broad-based than the mainstream press maintains; that the small and medium sized industries are playing an important role in both economic recovery and laying the foundation for high rates of growth that would be maintained over a long period of time; and the government is now using the fiscal space it created through better macroeconomic management into investing resources that would directly benefit the poor. Islamabad does not agree with the analyses of some of the think tanks that in spite of the revival of growth the number of people living in poverty has continued to increase.

In presenting my thoughts on this subject to those I talked with, I emphasized that the development community now knows much more than it did a few decades ago about devising a pro-poor growth strategy. Such a strategy has essentially three components. One, the economy must grow at rates of about three times the increase in population. For Pakistan, this would imply a rate of growth averaging at 6.5 per cent a year to be sustained over several years, if not decades.

Two, the public sector must invest heavily in improving the quality of the human resource. This includes not only reaching the goals of universal primary education for boys as well as girls but also providing secondary and tertiary education to a significant proportion of the population. And the state must help to develop a skilled workforce needed by a growing economy.

Three, given Pakistan’s resource endowment, there has to be a significant amount of public sector attention given to improving agricultural productivity. This would mean simultaneous movement along a number of fronts by both the public and private sectors. The most important part of this strategy has to be the rehabilitation of the large irrigation network the country possesses and which it has neglected to adequately maintain.

There is, therefore, considerable debate in the country on economic issues. Some of it is founded on misplaced suspicions about the government’s intentions, some of it is based on the absence of good information about the structure and characteristics of the economy, and some of it is related to the fears that history would repeat itself and produce unpleasant consequences. The government should not be dismissive about these concerns. It should earnestly join the discourse.

MOST women in this country lack so many rights that activists generally have to prioritize them to make their campaigning more effective. International Women’s Day and Week have been observed all over Pakistan but they have been understandably varied in their focus.

A half hour’s drive from the capital, peasant women from surrounding villages converged to attend a women farmers’ conference organized by an NGO which has been reviving and teaching organic farming of food crops to eager learners.

A group from each of a dozen surrounding villages cooked dishes with organic vegetables they themselves had grown. The forgotten flavours of naturally grown food was an exhilarating rediscovery and the variations of the same dish from different villages were amazing as were those made from uncultivated crops from the wild.

Governments and donors acknowledge hunger is one of the biggest issues in the world today although they don’t tend to act in the obvious direction of this resolvable problem. The message of the women peasants was that when not denied access to communal land and water and their right to farmland as tillers, and with no impositions from above, they could provide for their families and contribute towards national food security with high-productivity organic farming.

However, International Women’s Day has unflattering aspects to it in Pakistan. On this day of days for women, the men are still debating the role of women, in the light of religion and nation, as if theirs were an optional existence. There is no minister for women and no chairperson for the National Commission on the Status of Women. Honour killing has not gone away, brutalization and violence against women are routine, and malnutrition and mortality have soared.

There is no strong women representation in any of the other ministries that affect women’s lives such as the ministries of population, labour, agriculture, education and industries. There may be a lot of women MPAs and MNAs but they wear invisible handcuffs. There are even more councillors but they are not given the resources to put anything worthwhile into effect.

At the UN-organized Beijing Conference in 1995, 189 governments committed to do all that was owed to women as human beings that had mostly not been done before. A 10-year period was allowed in which to achieve what is known as the Millennium Development Goals that included universal education for girls, ending violence against women, and access to life-saving reproductive health care.

A 45-member UN Commission on the Status of Women drawn from all over the world was set up to advocate and to monitor the goals. But it had little that was encouraging to report. Male-dominated governments remained as male centred as ever. Released recently by the UN Geneva, the report based on government responses from 135 nations to a questionnaire on what they had done for women, is hollow.

The global military expenditure rose to an annual $900 billion although costs cloaked under civilian heads would bring it to way over a trillion dollars. Yet only one-twentieth of that figure every year, says the UN, could do away with the worst and most of global hunger, poverty, illiteracy, mother and child mortality, and disease.

International Women’s Day has unfortunately given an opportunity to many states to indulge in some empty rhetoric for the occasion to serve until the next women’s day came round. During Ziaul Haq’s time, the women’s ministry was effectively contained by a military head whose sole function seemed to be to keep out all empowerment-seeking women and initiatives. But the powers behind the throne never really changed despite elected governments. Many years later, a more assertive woman heading the National Commission on the Status of Women (NCSW) abruptly left the commission as well as the country in frustration.

Members of the various committees and the commission have always been government-appointed, carefully chosen for not rocking the boat (although a few refreshing mistakes were sometimes made in the selection). They were never comprehensively representative, confined as they were to the educated middle class and elite, although an educated ‘labour’ class also exists, some of them as articulate as they are knowledgeable. But despite an almost constant senior bureaucratic male presence at meetings, the findings of the various groups have not been at great variance with one another.

The mere existence of the National Commission (NCSW) has been invaluable for government after government. By pushing it in the forefront every time a women’s issue came up, a misleading impression was given that the fate of women hinged on the NCSW. But if women at large have gained nothing from it, they could stand to lose if it didn’t exist at all, because it is the only visible indication of women’s struggle. For the government, however, it has throughout been a low-cost and convenient ‘evidence’ of their claim of ‘looking into’ women’s issues on an ongoing basis, and doing little more than that.

The NCSW — and the new government — got a tremendous boost with the appointment of the much-liked and respected Justice (retd) Majida Rizvi. Finally, it seemed some hopes would be realized, and the worst of the Hudood Ordinance would be neutralized to allow for true justice with decency for women. Narrower minds had mistaken Justice Majida’s gentle demeanour and extraordinary courtesy as a pushover. When she took a stand for women on the Hudood Ordinance, it was not expected that she would refuse to budge an iota. This fine legal mind analysed and saw through the holes, and her report provided logic and muscle against what was always known to be intrinsically wrong.

Also, new appointees were not brought in to replace those who had completed their terms in the women’s commission so that their numbers were whittled down to two. In fact, March 8 was heralded by a headless commission, as Justice Majida’s term had ended the day before and the government neither bothered to extend her term as was hoped for and expected, nor brought in a new and equally principled chairperson. Naturally, some will wonder if the government is using this as an opportunity to do away with the NCSW altogether since, after its report for which the only honest response can be women’s empowerment, the NCSW’s role as an expedient tool was unexpectedly replaced with high nuisance value.

As it is, the month was not working out well on many other fronts such as continued, practical donor support for initiatives for women including in the vital reproductive health care and other basic sectors. A major problem continues to be that projects and plans reflect decision-makers, not the people’s, wishes and needs. Then, women activists were plunged in grief just two days after March 8 when Shehla Zia, human rights lawyer and a bottomless fund of information and advice for ways and means for activists and a leading light of the Women’s Action Forum, died.

Now women have to add to their already overwhelming list of woes the fallout of globalization, 9/11, the donors’ change of heart in an altered economic world order where there is no compunction about exploiting poverty and hunger for power and profit activities. Women still have a long way to go, because although the minority has carved a niche for itself, some have progressed slowly, some not at all while others have been actively blocked in their efforts. It appears that the majority are not going to see something better in their lifetime.

DOES the US invasion of Iraq have a silver lining? Is democracy about to spread through the Middle East, toppling one odious regime after another? And will they be replaced by moderate, peace-loving, America-loving governments?

Paula Dobriansky thinks so, and she claims that the non-violent demonstrations in Beirut and the resignation on March one of the pro-Syrian Lebanese government prove her case.

Ms Dobriansky, a core neo-conservative, is undersecretary of state for global affairs in the Bush administration. On February 28, she greeted the demonstrations in Beirut with the following claim: “As the president noted in Bratislava just last week, there was a rose revolution in Georgia, an orange revolution in Ukraine, and most recently, a purple revolution in Iraq. In Lebanon, we see growing momentum for a “cedar revolution” that is unifying the citizens of that nation to the cause of true democracy and freedom from foreign influence.”

The “purple revolution” is a phrase invented by Bush administration flacks to link the January elections in Iraq, conducted under foreign military occupation and largely boycotted by the country’s Sunni Arabs, with the spontaneous non-violent uprisings that have brought democracy to several dozen other countries, from the Philippines to Ukraine, over the past two decades. Whatever else it may be, Iraq is not a case of spontaneous non-violent revolution against tyranny. On the other hand, the Lebanese protesters who are demanding the withdrawal of Syrian troops from their country do fit that general pattern: there seems to be a case to answer here.

This hypothesis of “democratic infection” is bolstered by the recent men-only partial municipal elections in Saudi Arabia and the announcement by Egyptian President Hosni Mubarak that opposition parties will be allowed to run candidates in the next presidential election. But those are token gestures to deflect American pressure by regimes that are inextricably tied to the United States.

A free adult-suffrage election for an Arabian parliament and government in the near future is about as likely as a defeat for Mubarak in his campaign for a fifth term as president of Egypt in September. Lebanon, by contrast, is undoubtedly a genuine “people power” event (to use the original phrase coined in the streets of Manila in 1986).

Lebanon has long had the institutional forms of a democratic country, although the deep sectarian divisions of the country — Maronite Christian, Orthodox Christian, Sunni Muslim, Shia Muslim and Druze — distorted everything, even the constitution. For the past fifteen years, however, the Syrian intelligence services, backed up by a substantial Syrian military force in the country, have had the last word on everything that happened in the country.

The Syrian army first entered Lebanon in 1976 (with the blessing of the United States) soon after the outbreak of the Lebanese civil war. Thirteen years later its continued presence was legitimised by the Taif treaty that brought the war to an end, and the Syrians insist that their presence is vital even now to “stabilize” the country and keep the Lebanese from going for one another’s throats again. And unless the Syrians pull out, we will never know whether that is true or not.

Syria’s President Bashir al-Assad is under severe pressure to withdraw from many quarters (notably the US, France, Egypt, and Saudi Arabia), but he is under equally strong pressure at home to stay. The revenues that Syria creams off in Lebanon help to sustain the moribund Syrian economy, and a humiliating defeat in Lebanon could pave the way for a challenge to the Baathist regime in Syria itself. And some governments in the region fear that a full Syrian withdrawal might indeed turn Lebanon back into a playground of Palestinian and Islamist militias in short order.

But to return to the original question: are the Lebanese responding as one to an example of democratisation that has been set by the United States occupation of Iraq? Well, they are certainly not responding as one.

The Shia community, which is closely allied to Syria and accounts for almost half of Lebanon’s population, has been virtually absent from the Beirut demos and from the talks that have produced a “united” opposition front.

As for the example that the US is setting in Iraq, Lebanese opinion was probably well represented by Walid Jumblatt, the Druze leader who has become the spokesman of the “democratic opposition.” When the Iraqi resistance fired rockets at the Baghdad hotel where visiting US Assistant Defence Secretary Paul Wolfowitz was staying last year, Jumblatt expressed the wish that the rocket had hit Wolfowitz personally (and was denied a US visa as a punishment). These people are not US puppets.

Lebanon could come out of this free, prosperous and democratic, or it could slide back into some kind of civil war (though probably a very different one from 1975-90). The Syrian regime, in power for 36 years, could also fall, though what might replace it is entirely unclear. Even the identities of the people who triggered the current crisis by murdering former Lebanese prime minister Rafik Hariri with a giant bomb on 14 February are not clear.

Most Lebanese instantly suspected the Syrians, since Hariri opposed their presence in Lebanon, but they would have had to be extremely stupid to risk the reaction that has actually occurred. And if not the Syrians, then who? Don’t even go there.

Long-congealed positions are starting to melt in the Middle East, and a wave of something is about to sweep through the area, but it isn’t necessarily democracy.

—Copyright

THE forthcoming visit of US Secretary of State Condoleezza Rice to Pakistan is a matter of great satisfaction for the political leadership. In fact, a visit by any senior American official is an occasion for the government to claim that it amounts to fresh evidence of the appreciation with which the United States views it.

That the newly appointed secretary of state, who is also a confidant of the US president, should choose to visit this region and, more importantly, Pakistan, so very early in her tenure, is certainly an event that needs great preparation and deep introspection by our foreign policy establishment, for no visit of this nature is ever without a well thought-out purpose.

True, the Bush administration has been publicly and forcefully supportive of General Musharraf, ever since the Pakistani president conducted a major strategic switch after the 9/11 events. Since then, the administration has introduced legislation in Congress to waive the many sanctions imposed on Pakistan, both on account of the nuclear tests of 1998, as well as the military takeover in October 1999. It has also approved large, multi-year aid packages for Pakistan, making Islamabad one of the major recipients of US largesse.

The passage of time has not diluted the administration’s continuing appreciation of the ‘good work’ being performed by the Pakistan government. In fact, recent pronouncements by both President Bush and his senior officials has only added to the impression that President Musharraf is now among those few world leaders whose policies, as well personalities are upheld as examples for other world leaders, especially from the Islamic world, to emulate. Only a couple of days ago, Bush referred to Pakistan’s contribution as having made the United States “more secure”.

Even the Congressional Research Service (CRS), an influential body that advises Congress and writes policy briefs for many of the important congressional committees, has been generous in praise of the critical role that the Pakistan president has performed in the US-led war on terrorism. It brushes aside concerns that the civilian democratic institutions have been weakened by the president’s decision to retain both the office of the chief of staff and head of state, by asserting that the president remains the “best hope” for stability for both Pakistan and Afghanistan. It further recommends the provision of long-term and comprehensive support to Pakistan, but with an important proviso — so long as we remained faithful to the war on terror, which will be defined by the US alone. Of course, as regards Pakistan’s request for advance weapon systems, the CRS recommended that the administration set fresh, highly stringent non-proliferation terms for Pakistan before the consideration of any such proposal.

Given the current state of Pakistan-US relations, and especially in view of the recent public pronouncements by senior administration officials, it would appear that Ms Rice’s visit would be a love-fest. But given the history of our ties with Washington, the ideological orientation of the president and, in particular, of his key counsellors, we need to be extremely cautious.

First of all, we must not forget the well known dictum that all unequal relations are, by their very nature, inherently unstable and volatile. Secondly, American policy makers take a hard headed, objective, no-nonsense approach to foreign policy issues, in which there is no place for emotions, sentiments or even fairness. It is based on “realpolitik”, as Dr. Kissinger, the guru of the foreign policy establishment, keeps reminding us.

Appreciation, approbation, accolade are all for the moment, very transient and very ephemeral. Once the task is done, an objective achieved, the past is gone, leaving nothing more than a pleasant, distant memory. The Americans are genuinely surprised and somewhat amused when the Pakistani leaders speak of disappointment and allege betrayal, as we did publicly and vociferously after October 1990, when George Bush (senior) imposed sanctions on all forms of assistance to Pakistan, on the plea that we had violated the provisions of the Pressler Amendment. We, as naive as ever, could not figure how this was happening, since we knew that the Americans knew what we had been doing for years. It was quite some time before the penny finally dropped — that the withdrawal of the Soviet troops from Afghanistan and the subsequent collapse of the Soviet Union meant the ushering in of a new world order where there was simply no need for our services.

Now, on to more current times. True, we are the toast of the American capital. But the administration has made it clear that this current dalliance is dependent on Pakistan continuing to play the role that the US has earmarked for us. If that were indeed the case, there would be no losing sleep over the matter. But there have been enough stories floating around Washington to cause us worry that the Americans have a more ambitious agenda in store for us. This is especially in the context of what the Americans refer to as the Greater Middle East. The region, which now includes Pakistan, must embrace liberal democracy, accept market economy, abandon any pretensions of wanting to possess weapons of mass destruction, and more importantly, never pursue policies that the United States perceives as inimical to American interests. When viewed from this perspective test, the destruction of the Saddam regime in Iraq appears inevitable, the policy of threats against Syria understandable and the need for a regime change in Iran essential.

Closer to home, what will Ms Rice be telling us? Thrice in one week alone, senior administration officials have voiced their praise of Pakistan’s policies. Thus we can expect Ms Rice to be generous in her praise of the president’s enlightened moderation. This is the new mantra that will eliminate extremism from Islamic societies and ensure greater appreciation of all the good things the Americans have been doing for the Islamic world.

Secondly, there will be a very positive appraisal of Pakistan’s role against the war on terror. We will also be hearing pleasant things about how our many initiatives towards India has set the region on the road to durable peace and meaningful cooperation. But this will be accompanied by a gentle reminder that this policy can be sustained only by ensuring that the commitment made in January 2004 on the issue of cross-border terrorism continues to be respected by us.

Having thus stroked our egos, Ms Rice can then reveal the true purpose of her mission — ensuring our assistance and cooperation on Iran. Having announced our neutrality in any confrontation between the US and Iran, we have already made ourselves open to American pressure. Ms Rice is likely to claim that in the struggle between good and evil, there can be no neutrals and thus we cannot absolve ourselves of the task the Americans have earmarked for us. This is not mere conjecture.

Enough has already been revealed by well-known journalists in the US media about efforts to infiltrate agents into Iran from neighbouring countries to tell us both the advanced state of American preparations and the expected role that the Americans envisage for their friends in the region. It will need all our skill and resolve to disabuse the Americans of any expectation of involvement by us in US designs. In fact, we should have no hesitation in conveying to Ms Rice how we view the American plans to bring about a regime change in Iran and its likely impact not only on the region, but on American interests as well.

On the non-proliferation issue, the Bush Administration appears to have given us only temporary respite. There has been no dilution of America’s fundamental opposition to Pakistan being in possession of nuclear weapons. We, in turn, have not helped our cause. We can thus expect renewed pressure on this score, especially in light of the statements some of our own people have come out with. These damage both our credibility and image.

It would do us good if we could persuade our politicians that the issue is too sensitive and too dangerous to be treated in a cavalier fashion and extreme caution and restraint are essential, at least until such time that we have weathered the storm. Ms Rice is not likely to be satisfied by renewed commitments of good and responsible behaviour by us. There may be no truth to claims that in early 2002, US agents had succeeded in getting into our nuclear facilities in order to take an inventory of what there was and to examine records of what ought to be there. (as claimed by George Friedman in his book, America’s Secret War) But there are likely to be fresh demands for access to our scientists and some kind of technical monitoring of our facilities. This has to be firmly rejected, for any concession on this score would place us on a slippery, self-destructive course.

The other item that may cause momentary anxiety to her interlocutors would be Secretary Rice’s likely remarks on democracy. But these would be merely for the record. True, President Bush’s inaugural address and comments in past weeks by officials in Washington may have led to speculation in opposition circles in Pakistan.

But this would be a mistake on their part and the government need have no real worry. An objective analysis of President Bush’s national priorities should disabuse anyone of such expectations. Pakistan’s performance in the war on terror has been exemplary and the expectation of meaningful contribution by us on other important American interests, are much too great, for such fanciful ideas as democracy to disturb America’s larger goals.

The writer is a former ambassador.