THERE cannot be any doubt that Pakistan is currently faced with a serious economic crisis, one of the most serious in its history.

Even if Benazir Bhutto had not been assassinated in Rawalpindi on Dec 27 and even if serious distortions had not occurred following her assassination, the economic situation would still have been critical today. The assertion that this would have happened anyway would perhaps come as an unpleasant surprise to the policymakers in Islamabad.

They would, I am sure, be even more surprised and unhappy if I suggest — as I will do presently — that the seeds of what the country is seeing today were sown in the period since 1999. This is the time the policymakers had begun to describe as the golden era in Pakistan’s economic history. In some respects it was but, in others it added to the structural problems that had already existed in the economy.

Islamabad allowed itself to be seduced by numbers such as the rate of growth in GDP. That reached an impressive level by seven per cent a year over a period of five years from 2002 to 2007. But the growth rate at that level was not sustainable; it was not supported by the structure of the economy. It did not deliver benefits to the poor and not-so-poor and it aggravated regional disparities.

The supply of some essential items of everyday consumption did not keep pace with their rapidly growing demand. Some of the shortages that have seriously begun to affect the economy and the lives of the people were not anticipated by the government; and if anticipated, little was done to increase their supply.

The most glaring failure of the policymakers was in the area of energy where shortages of electricity and gas have seriously begun to hurt the people and damage the economy.

Policymakers also repeatedly spoke about the sharp rise in foreign exchange reserves that had indeed reached impressive levels. But even at that level they did not provide a large enough cushion to soften the impact of a rapid increase in the size of the trade gap. The economy did well over the short-term; it was, however, headed towards a crisis when the regime in Islamabad changed.

If we are searching for the causes of the present crisis — as we must — we should look in four different directions. The first is the consequence of the damage done to the economy after the assassination of the PPP chairperson. I have already written on this subject (Dawn, Jan 15.)

Today, I will deal with three other sources of the stresses under which the economy is currently operating. They are the structural weaknesses in the economy that various administrations, which have held office over the last six decades, failed to address. Then there are the weaknesses in the structure of the economy that were introduced as a result of the model of development that was pursued by the administration of President Pervez Musharraf from 2002 to the end of 2007.

And finally, there are numerous changes in the structure of the global economy that adversely affected Pakistan for the reason that policymakers made no serious attempt to understand their nature and scope.

Much has been written and said about the structural problems that have persisted for a long time. Some of these date back to the day of Pakistan’s birth. The list is long but I will mention only three. The first is a very low domestic savings rate. Because of this the country has had to rely on copious external flows to have the economy grow at reasonable rates. When the flows were large the economy did well. When the flows were small, the economy fell back to its structural growth rate. This was between four and 4.5 per cent of GDP increase a year.

The second long-persisting structural problem was a combination of a high rate of increase in population which grew from 32 million in 1947 to 165 million in 2008. But this increase in population could have been turned into an economic asset had a determined effort been made to invest in its development. This was not done. No government in Pakistan’s 60-year history made social and human development its priority. The consequence is that Pakistan today has a very large population which has low levels of literacy and very poor skill development.

The third structural problem is the failure to develop the external sector; to get the economy producing for exports. The consequence is a low trade to GDP ratio which means that the country cannot fully finance its import bill. For a country that remains dependent on imported sources of energy — in particular oil — and also on the import of such vital commodities as oil seeds, unless exports increase, this dependence will increase the burden of external debt. But for exports to increase the country will have to change the structure of production since there is not much scope for expanding traditional exports.

I now come to the difficulties that have resulted from the economic model followed by the Musharraf regime in the period between 2002 and 2007. The main strength of the model was to allow the private sector considerable room in which to operate. But this should have been accompanied by the development of a robust regulatory infrastructure.

That did not happen. If anything, policymakers sometimes stood in the way of regulatory agencies. As we know from the experience of the United States, the private sector left entirely to its own devices tends to move towards monopolistic behaviour. This happened in America at the beginning of the 20th century when a number of ‘robber barons’ captured several industries. It took an otherwise business-friendly President Theodore Roosevelt to introduce strong regulations to constrain the private sector from working against the social good.

The other positive feature of the Musharraf model was to make Pakistan attractive to some foreign investors. However, as I pointed out two weeks ago, much of the investment did not go into the export sector but in satisfying domestic demand. This will produce problems for the future since. It will have the result of increasing the pressure on external accounts.

The regime also failed to put in place a strategy that takes care of the supply bottlenecks that would inevitably result from a sharp increase in GDP. It is mind-boggling that the government failed to plan to meet the supply-demand gap in the sector of energy, in both electricity and gas.

It failed to appreciate that the easy money policy followed by the government would lead to a large increase in the number of cars on the roads which, in turn, would produce congestion. It failed to recognise that the growing size of the Indian economy offered Pakistan opportunities that only trade would help to realise.

Finally, it did not recognise that without appropriate changes in fiscal policy much of the space allowed to the private sector would increase income and regional inequalities. A lot of the problems that Pakistan’s economy needs to confront today are the direct product of policies followed in the previous eight years.

IF liberty and equality, as is thought by some, are chiefly to be found in democracy, they will be the best attained when all persons alike share in the government to the utmost. — Aristotle

ELECTIONS 2008 have become a symbol of hope in a country which is passing through the worst period of its socio-political history. That the people of Pakistan will, after long last, have a say in their destiny and the governance of their country is everyone’s cherished dream.

But Pakistan does not have a glorious history of democratic traditions. The country took nine long years to write its constitution as the Constituent Assembly grappled with the form and content of Pakistan’s first Basic Law. Before elections could be called under the new constitution the country fell under the first of a series of martial law regimes, followed by another and then yet another. For the past eight years or more, we have gone through the fourth ‘martial law’ rule in the country which has become progressively oppressive in the closing months. The country has even had the dubious distinction of having a civilian martial law administrator.

During the past 60 years, we have had only six general elections of which one broke up the country while the assembly of another was never called up for functioning. Three other assemblies could not complete even half their tenure as elected prime ministers were sent packing by extra-constitutional forces. If the last assemblies, national as well as provincial, completed their tenure it was because corrupt, incoherent and ineffective governance had driven the people to despair and inertia. Or, perhaps, in the words of former Sindh chief minister, Arbab Ghulam Rahim, “The (Sindh) assembly completed its tenure because of the general’s uniform!”

One of the critical manifestations of the present crisis is the reluctance on the part of the educated members of our civil society to get involved in politics because of the corrupt manipulation it requires. In Pakistan, there is a very fragile infrastructure to insulate the institutions of democracy from extra-constitutional influences, and many politicians are no longer the representatives of the people but a front for some shadowy, sleazy and unhealthy lobby or interests, domestic as well as international.

Yet, I continue to believe in democracy because I consider it to be a system of government and a way of life which offers greater scope for the development of individuality and the varied talents that nature has given to individuals and groups. Men and communities thrive best in an atmosphere of freedom. Any system that seeks to impose a rigid uniformity of ideas and practices, of limitations and restrictions, sins both against the laws of God and the spirit of man.

But modern democracy has proved to be a mixed blessing. It has been cleverly exploited by vested interests: the demagogue without principles, the capitalist without a social conscience, the politician without a vision and a media without idealism. It has not redressed that unequal distribution of wealth which is not only economic, but also cultural and moral injustice. It has been content to allow a majority of its citizens to lead less than fully human lives, and in time of stress and emergency it has proved to be less effective than the machinery of totalitarian systems.

Some well-meaning persons, who suffer from intellectual laziness and like to come to short-cut conclusions, are apt to attribute all these defects to democracy per se and not to the fact that there has not been enough of democracy which would be a more correct diagnosis of the malaise.

Democracy must be so oriented in its ideology, its methods and organisation that it should develop the basic qualities of character which are necessary for the successful functioning of democratic life. What are these qualities?

First and foremost, a passion for social justice and the quickening of social conscience so that people learn to demand for others the good things they demand for themselves.

Second is tolerance. A genuinely democratic society not only allows but actively welcomes cultural, intellectual and belief differences in society. The essence of democratic life is a free flow of ideas which may lead to friction and deadly results in the absence of tolerance.

The third requires the raising of the cultural and intellectual standards of education. Many social evils exist not because of conscious ill-will but on account of ignorance and apathy.

Finally, democracy must develop in the people a love for work, the attitude of a true craftsman who takes pride and delight in doing the best of which he is capable and who hates superficial and half-hearted efforts. A system that fails to inspire the people with a burning passion for social justice, with a passion to break down the barriers of caste, creed, colour and faith, to deepen their cultural understanding and sympathy and broaden their intellectual outlook, to instill a love for honest work and an attachment to the national culture is unworthy of its high status and purpose.

Yet, democracy has failed to fulfill our hopes because we have been content with a certain form of political democracy alone and have not succeeded in establishing it in other areas of life. For example, building up economic, social and cultural democracy without which political democracy has become a pliant tool in the hands of unscrupulous power-seekers.

What is required for democracy to succeed is a fair distribution of wealth, a generous dissemination of cultural and social services, particularly the right education, and the breaking down of invidious class distinctions — differences that are based on economic status, religious and sectarian affinity and language hamper social mobility.

Will our newly elected representatives tread the all too familiar route or introduce democracy in a fuller sense at least now?

SCOTLAND Yard has presented to the government the findings of its inquiry into Mohtarma Benazir Bhutto’s assassination during a political rally in Rawalpindi.

The report states: “In essence, all the evidence indicates that one suspect has fired the shots before detonating an improvised explosive device. At the time of the attack this person was standing close to the rear of Ms Bhutto’s vehicle. The blast caused a violent collision between her head and the escape hatch area of the vehicle, causing a severe and fatal head injury.”

To me, it comes as no surprise that these findings merely endorse the initial, hastily drawn conclusions of the government. Having experienced the Stock Exchange investigation almost two years ago, this is déjà vu.

Those who might draw comfort from the fact that Scotland Yard is a neutral third party in the investigation need to be reminded that, according to the working arrangements between Scotland Yard and the Pakistani authorities, the primacy and responsibility for the investigation remained with the Pakistani authorities. According to its mandate, the Scotland Yard team was required to report to the Pakistani authorities.

The principal purpose of the Scotland Yard officers was merely to “assist the local authorities in providing clarity regarding the precise cause of Ms Bhutto’s death”. Given this arrangement, this was only a government-sponsored investigation and hence not likely to yield a different result.

Scotland Yard was not only given a limited mandate it was also provided limited evidence. Anyone watching television in the immediate aftermath of the assassination would remember the alacrity and determination with which uniformed men hosed down the site of the crime to wash away the evidence. The question has been raised whether this was due to government complicity or incompetence.

General Musharraf, while admitting to the shortcomings in the government’s handling of the evidence, has dismissed any suggestion that there was a plan to conceal evidence: “I’m not fully satisfied. I will accept that: cleaning the area. Why did they do that? If you are meaning they did that by design I would say no. It’s just inefficiency, people thinking things have to be cleared, traffic has to go through,” he said.

The investigators were not able to examine Benazir’s body to establish the probable cause of death. Within hours of her death, and after being examined by government doctors who gave conflicting reports, Benazir’s body was placed in a coffin where it could not be scrutinised due to the Islamic tradition of respect for the deceased. Late the same night, the body was almost surreptitiously removed to Garhi Khuda Bux and buried the next day.

While one could understand Asif Zardari’s decision to decline an autopsy of his wife’s remains, the keenness with which the government accepted this decision does not stand to reason. The assassination was not only a matter of national interest but also a crime under the penal laws of Pakistan. Therefore, despite Asif Zardari’s wishes, it would have been prudent for the government to carry out the autopsy.

The government’s abject failure to gather evidence, indeed its deliberate destruction of evidence, is reminiscent of the manner in which it had allowed evidence to be erased at the time of the 2005 stock market crisis. A forensic investigation had been called for by a task force, which had been appointed by me to carry out an initial inquiry into the causes of the crisis.The Securities and Exchange Commission of Pakistan had decided to engage Diligence Inc, a US-based firm, to carry out the necessary investigation during my tenure as its chairman. However, the actual investigation did not commence until more than six months after my departure from the commission and that too under considerable pressure from the National Assembly Standing Committee on Finance, where I had kept the issue alive.

No effort was made during this time to preserve the evidence that may have substantiated the findings of the task force. Consequently, Diligence had no option but to resort to circumstantial evidence in determining their findings.

Had the government been committed to discovering the truth about Benazir’s assassination — as it claims it is — it would have ensured that direct evidence relating to the event was preserved and made available to the investigators.

If General Musharraf is to be believed when he says that the destruction of the evidence was accidental and without any forethought, then the government should insist that the investigators inquire into the destruction of the evidence itself and identify the persons who were responsible for ordering this clean-up operation.

Once the identity of these persons has been established, an exercise may be launched to examine their motives and their connections with other persons who may have been interested in removing Benazir Bhutto from the scene. The results of this exercise will either corroborate the circumstantial evidence gathered by the Scotland Yard team or will provide new leads for investigation. It is only through this exercise that we can hope to arrive closer to the truth of Benazir’s assassination.

The results of any investigation are commensurate with the clarity and pertinence of the terms of reference, the availability of evidence and the strength of political will. In the Benazir investigation, as perhaps in other similar investigations undertaken in Pakistan such as those pertaining to the killings of General Ziaul Haq and Murtaza Bhutto, these factors are at best below optimum, if not missing altogether.

The investigators have only examined circumstantial evidence made available by their reporting authority. It is, therefore, only natural that the findings of this investigation obfuscate more than they reveal. The caveat in the Scotland Yard Report is noteworthy in this regard: “The task of establishing exactly what happened was complicated by the lack of an extended and detailed search of the crime scene, the absence of an autopsy, and the absence of recognised body recovery and victim identification processes.” The report, nevertheless, goes on to state that “the evidence that is available is sufficient for reliable conclusions to be drawn”.

This echoes the statements made by Diligence in their report on the stock exchange investigation wherein they indicated that they were unable to prove the allegations of guilt against the accused because of inadequate evidence. They, however, had no problem in exonerating the alleged culprits on the basis of the same scant evidence!

In the present case, the wider investigation to establish culpability has remained entirely within the purview of the Pakistani authorities. Perhaps this is why the British investigators have stopped short of exonerating the government for its responsibility — either by way of omission or commission — for the tragic incident.

It is common knowledge that the government showed undue haste in literally washing away the evidence not days but hours after the tragic incident. The only thing that is likely to satisfy the public is an extended investigation as to not only how Benazir died but also who is responsible for her death. With the evidence washed away, the only way there can be any meaningful result would be to investigate the obvious cover-up by those who ordered the destruction of the evidence.

The writer, a lawyer based in Islamabad, is the former chairman of the Securities and Exchange Commission of Pakistan.

thassan@ijurist.org.