DAWN - Editorial; May 14, 2007

Published May 14, 2007

Growth without equity

While the worsening economic indicators are signalling a slowdown, the government has pitched the GDP growth rate at 7.2 per cent for the next fiscal year. The second Poverty Reduction Strategy Paper stipulates growth in excess of seven per cent over a five-year period. The economy has expanded on rising investment, surging exports (up to December 2005) and a significant increase in consumer spending, facilitated by easily available cheap bank credit and a rising inflow of remittances. But for the remittances, there are visible signs of reversible growth trends in these areas. In the first ten months of this fiscal year, private sector credit expansion dropped sharply to 12.6 per cent from 19.8 per cent in the corresponding period last year. Demand for fixed investment (creation of new industrial capacity) remained subdued. Unless the real sector problems are addressed, bank credit may be made to carry more than normal banking risks. With a dismal savings rate, also eroded by a high rate of inflation (currently at eight per cent) and a sharp rise in interest rates, consumer financing is becoming a more risky business for lenders as well as borrowers. Debt-default cases are on the rise. Consumer spending with low savings is turning out to be a short-term option. Finally, export growth has plummeted to 3.6 per cent this year.

Export-oriented industrialisation has suffered under a faulty foreign trade policy. With production lagging behind domestic demand, shortages are met through huge imports — estimated at $30 billion this year — that provide jobs to foreigners and make a negative contribution to the GDP. The surging trade and current account deficits are met by capital and financial inflows that include $1.7 billion portfolio investment or hot money. Foreign direct investment is not export-oriented and remittances of profits and dividends are going up. The pressure on the overall external sector is mounting. To boost the GDP growth rate, the government reportedly plans to increase development spending to Rs500 billion from the current year’s Rs415 billion. But the pace of fund utilisation is slow and only 34 per cent of the annual financial target was achieved during the first half of the current fiscal year as compared to 45 per cent last year. The tardy pace of implementation of foreign-aided projects locks up substantial sums of money. Delays and cost overruns widen the gap between the financial and physical targets. Often the planning, designing, implementation and monitoring of major development projects is faulty.

In the absence of governmental reforms, the delivery system is pretty weak. Although the poverty reduction strategy stipulates pro-poor growth, the yawning gap between the poor and the rich is widening despite a high growth rate over the past four consecutive years. The government’s failure to recognise that it is the source of economic growth — whether production is driven by technology that creates redundancies or if it is labour-intensive which creates jobs — that determine how the fruits of economic development are shared. A high growth, though important, can be without equity in the current development phase that tends to weaken the trickle-down effect and promotes social exclusion. It is time to consider using development with social indicators as the yardstick to measure social and economic progress. In the long term, growth without equity is neither economically nor politically sustainable.

NA absenteeism

IT is not surprising that the Speaker of the National Assembly angrily reprimanded the MNAs of the ruling party for their absence from the House on Friday. It has now become quite a routine for our elected representatives to play truant. But on Friday they had another reason for absenting themselves from the NA. They were busy mobilising their supporters for the showdown that was brewing. It reflects sadly on parliamentary democracy in Pakistan that the National Assembly failed to attract in sizable numbers the presence of legislators who owe their status in society to their membership of this august body. What subsequently happened in Karachi and Islamabad on Saturday only reinforced the impression that the political parties and their parliamentarians attach little importance to the National Assembly. In fact, so low has it sunk in their esteem that organising rallies seems to have acquired greater significance for them.

This attitude on the part of the opposition parties — though not fully justified — is at least understandable. With the ruling party not observing the rules of parliamentary democracy or showing respect for democratic institutions, the opposition feels emboldened to resort to methods that go beyond the limits of constitutional proprieties. Thus rallies for it are an important means of assertion of its popular standing especially when it feels that the elections were not fair and its representation in the House does not truly reflect its standing on the ground. But why should the ruling party bypass the Constitution and the political institutions over which it exercises full control? That is what it has been doing. Thus the Assembly met on 18 days during its 39th session lasting from February 6 to February 23. On nine days it could not muster a quorum of 86 (out of its 342 members) although the PML-Q and its partners have 201 seats. There are 60-plus ministers and ministers of state. Yet Prime Minister Shaukat Aziz, who himself has not set a very positive example for his colleagues to follow, could not persuade PML-Q members to attend the NA sessions regularly. Can political institutions be expected to survive for long in view of this anti-democratic mindset?

Woes of quake victims

GIVEN the scale of destruction in Balakot after the 2005 earthquake levelled this NWFP town, it was to be expected that rehabilitation of the victims and reconstruction would be a gargantuan task for Erra, the earthquake authority. But the recent protest by quake survivors in Balakot underlined just how little has been done to make the town more habitable. Aggravating the slow reconstruction process is the government’s vacillation on relocating the town some 20 kilometres away, even though the NWFP government approved the master plan for this project some time ago. The anger of Balakot’s inhabitants is justified. They braved unbearable weather conditions last winter when they were forced to live in damaged tents. Things do not seem to have improved as people are now complaining of high construction and labour costs and of the government’s reluctance to hand over the full instalments of the monetary compensation they had been promised. Thousands of families have stopped rebuilding their houses midway through the process for lack of funds.

Somehow, a clear and coherent policy on rehabilitation and reconstruction seems to have evaded Erra whose planning on this score has been deficient. This, together with alleged corruption among relevant officials, has forced earthquake survivors all over the country to undergo months of hardship, and they have periodically given vent to their frustration through angry demonstrations and hunger strikes. There is need for greater transparency in Erra. Even though it has posted its audit report on its website, more specific information needs to be provided by the rehabilitation authority on how the money allocated for earthquake survivors, including funds received from donor countries and various agencies, has been utilised. Otherwise, it will continue to be distrusted, especially because of its slow pace of work in the quake-hit zones.

Elections and security environment

By Talat Masood


BESIDES being located in the most disturbed region of the world, Pakistan is also faced with several internal threats. On its western border is Afghanistan which in the last thirty years has been devastated by a series of geopolitical and strategic events.

It continues to be under foreign occupation and caught in an internecine fight among its various factions. The greatest threat to Pakistan is Afghanistan’s instability to contain the upsurge of the Taliban in its south and south-western provinces bordering Pakistan.

On the south western side is Iran, locked in a dangerous nuclear standoff with the US and is the focus of new American military deployment causing deep anxiety as to how this confrontation would unfold. Islamabad enjoys close relations with the US and considers American support vital for national security and economic development. On the other hand, deep historical, cultural and religious ties bind Pakistan with Iran. In the event of a US attack on Iran, Pakistan will find itself in a very difficult situation.

Moreover, the fast deteriorating situation in Iraq and the Israeli-Palestinian conflict have strong reverberations is Pakistan. Regrettably, when a superpower takes a wrong decision, the negative fallout is global and Pakistan is one of those countries that are affected the most.

The security environment on the eastern front, however, has improved. India and Pakistan are following the path of dialogue instead of confrontation. Several confidence- building measures have been initiated in the last four years but progress on substantive issues of Kashmir and even much less complex ones like Siachen and Sir Creek remains disappointing.

The internal security situation in Pakistan is even more worrisome. The nationalist forces in Balochistan are engaged in a low-intensity insurgency. Pakistan’s tribal belt and the adjoining areas are experiencing the growing influence of the Taliban. In the heart of the capital city of Islamabad the state seems to be losing control to militant religious groups which have set up parallel administrative and judicial structures. Acts of terrorism by suicide bombers is on the increase. At another level nation-wide movement against military rule is gaining momentum.

In this scenario the question arises: what will be the possible impact of the 2007 general elections on the regional security environment? As a matter of broad principle, empirical experience has shown that free and fair elections have a salutary effect on turbulent societies and unify a country to face external threats and internal strife and insurgencies. Much would therefore depend on how the elections are conducted as there is a high level of distrust about the fairness of the government’s conduct. If the elections are manipulated, it could have a destabilising effect and civil- military divide will sharpen.

With several variables, it is difficult to foresee what would be the possible outcome of the forthcoming elections, but for purposes of an analysis three possible scenarios can be examined: (1) a parliament with mainstream political parties in a majority, (2) religious and centre right parties forming a coalition, or (3) a hung parliament.

(1) Mainstream political parties are in favour of the peace process with India. Relations with that country are therefore likely to improve. The political parties would uphold the existing agreements and take steps to further deepen and expand them in scope and continue pursuing the resolution of the Kashmir problem and other issues. The Indian government should find it more comfortable working with a PPP or the PML-dominated civilian government and that should also give greater legitimacy to the relationship. However, it could also be said that New Delhi would be less sure of the validity of an agreement with any civilian government unless it has the backing of the military leadership.

Dealing with Iran would be relatively easy for a civilian government. Military regimes have always been suspect in the eyes of the Iran’s religious leadership for being too subservient and weak to resist US pressure. Nonetheless, an attack on Iran would pose a serious challenge for any Pakistan government, giving rise to a steep rise in anti-US sentiment. There could be tough demands from the US for the use of territory and in the event of a refusal it could flout Pakistan’s decision and violate air space or its territory.

If a Pakistan People’s Party-led coalition came to power, it would continue to support the US and Afghan governments’ efforts to curb the influence of the Taliban in the tribal region and would probably use nationalist elements to counter the Taliban politically.

For the Balochs a civilian political government in Islamabad would be preferable and the nationalist elements would feel more at ease dealing with political leaders rather than military and intelligence agencies the influence of religious parties in Balochistan have grown in influence since 1999, because the nationalist and secular parties have had a rough deal and remained suppressed. With the advent of a civilian government, they will reassert themselves. The incidence of violence and acts of sabotage are likely to subside over a period and the call for ‘independence’ could diminish if the civilian government would allow Balochs and Pashtuns to manage their provincial and local affairs.

Clearly, inter-provincial harmony and a stable Balochistan are key requisites for sustained development and social cohesion in the country. The trilateral Iran-Pakistan-India gaspipe line could become a more feasible proposition if peace returned to Balochistan. Similarly, misunderstandings among Baloch nationalists about the development of Gwadar would be relatively easy for a civilian government to tackle.

Allowing political parties to operate in the tribal belt, accompanied with economic development, could contain the influence of the Taliban and other militant elements there. Victory of the mainstream political parties in Balochistan and the NWFP would be helpful in reversing the growing trend of relivious radicalism and Talibanisation. Nonetheless, tribal areas will pose the greatest challenge to any future government.

In all likelihood the US will continue to work closely with Pakistan’s civilian government in its fight against the Taliban and other militant groups. In spite of the fact that US regimes have been very supportive of dictators in Pakistan in disregard of their own professed values of democracy and human rights, pressure from the US and other western countries will remain on Islamabad as long as Afghanistan and the tribal belt do not stabilise. Pentagon will maintain good relations with the military as Washington cannot abandon interests in Pakistan because of this country’s critical geo-strategic position. Washington also acknowledges Pakistan’s role within the Islamic world and hopefully this will enhance with the formation of a civilian democratic government.

Religious and rightist parties are more rigid in respect of Kashmir. It is, however, possible that they may suitably adjust their policy of supporting the insurgency there once they are in power. Initially, India would remain distrustful and the peace process could receive a set back. A politico- religious grouping favouring “Jihad” in Kashmir could invite a serious response not only from India but also from the US and most of the European countries.

The religious right is expected to be sympathetic and supportive of the Taliban. This can create serious misgivings in the West, especially the US. Pakistan will come under extreme pressure both at the regional and global levels. India will step up its activity in Afghanistan and the US interference in the tribal belt would intensify. They would be emboldened to take direct action on the pretext of sanctuaries and violate Pakistan’s territorial space more frequently and with less sensitivity.

The West would also become concerned about Pakistan’s nuclear capability if religious parties come to power. Although military will continue to be the custodian of nuclear assets, still the US would remain very uneasy. Chinese have always maintained very good relations with both civilian and military governments in Pakistan and have followed a policy of non-interference in domestic affairs. The strategic and economic content of the relationship has expanded in scope and depth. They are likely to pursue the same path, notwithstanding that they would be uneasy if a religious group of parties came power in Pakistan.

Prudence demands that politico-religious parties nuance their policies and adjust to global and regional compulsions so as to be more acceptable to the international community.

In a hung parliament much would depend on the nature of the coalition, but a government with a weak political base and divergent interests is likely to be more amenable in its foreign and defence policies to the military viewpoint. Present policies will probably continue but the peace process with India could slow down and the US pressure to “do more” on the war on terror would intensify.

In view of the overarching influence of the military in the national affairs, it is not clear what would be its attitude towards political parties after the coming elections. Will they reconcile to accepting the supremacy of a civilian order and follow faithfully the foreign and defence policies formulated by it? Going by the past and making an objective assessment of the ground reality, it can be assumed that the next civilian government, irrespective of its political inclinations, will still rely on the advice of the military. However, two distinct advantages of having a civilian government are apparent. Policies pursued in respect of Afghanistan, India, the Middle East and the US will have a broader public support and acceptance, even if in substance these may not be very different from the present. Prospects of a more peaceful domestic environment will be brighter, which should have a salutary impact on regional security. And with lessening of civil-military tensions, the country would be in a better position to counter any foreign pressure or dominance.

The writer is a retired lieutenat-general.



© DAWN Group of Newspapers, 2007

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