June 5, 2005

Taking the government’s word at face value, many believed that things were about to take the vital U-turn, but then came a World Bank report according to which, Pakistan’s ratings on the six governance indices have deteriorated. Pakistan is not only a poor performer in the world, but also in the region

WHY is that the most presentable and, arguably, capable pair of leaders that we have had for some time, repeatedly falls in the political trap of promising and then compromising on the same issues which have been the nemesis for every politician? Political perks, insecurity and a lack of integrity have once again overshadowed poverty alleviation, justice and education for the masses. It seems that the ‘Islamabad Syndrome’ is inescapable — the virus of self absorption, self projection and self perpetuation, completely destroy immunity against mythical fantasies. The Islamabad power addiction makes every leader seek permanency on a till-death-do-us-part basis.

Every time the nation starts to believe that finally we have made the all important grade of being classified as an economy belonging to the league of emerging nations, there is inevitably a dampener, which chills the hopes into a despairing resignation that, maybe, we are destined to live in a fool’s paradise.

Reality bites, but keeps your hovering hopes in check. The recent celebratory mood triggered off by the robust predictions of GDP growth rate, and, of course, the unbelievable performance of our cricket team in India, had all but created a high where all seemed to be in the right direction with the country firmly on the highway to development. But then came this report by the World Bank, according to which Pakistan’s country ratings on the six governance indices — voice and accountability, political stability, government effectiveness, regulatory control, rule of law and control of corruption — have deteriorated.

The World Bank released these governance indicators for the period 1996-2004 covering 209 countries of the world which show that Pakistan is not only a poor performer in the world, but also in the region.

In fact, Pakistan’s score slipped down further during the research period on all the indices, except corruption, which faltered again from 2000 onwards.

Thus, when we hear the constant chant of macro-economic wonders and then read such shocking news, the mental conflict of whether all this proclaimed economic stability is just a myth, or there is some reality in it as well, starts to create intellectual stress and mental distress. Let us look at some key areas where many contradictory and controversial claims have been made by the government, and try to see what the government cannot see:

POVERTY WILL BE REDUCED FROM 30 TO 15 PER CENT BY 2007: Fool’s paradise, economic myopia, inflated exaggeration, call it whatever you may, but this statement from President General Pervez Musharraf cannot be classified neither as extreme optimism nor as a slip of the tongue. If anything, such statements reflect a total disconnect from the reality and sadly make us resigned to the fact that the Islamabad Syndrome has made heavy inroads into whatever sanity one saw in the beginning of the tenure. The year 2005 has evidently eroded the purchasing power of the common man with spiraling inflation and price hikes in all the necessary consumer and utility items.

The government has consistently tried to manipulate statistics to prove that poverty has decreased. In 2004, the Federal Bureau of Statistics conducted a sample survey (the sample was one-third of the sample covered in the survey of 2000-01) which, after taking into consideration inflation, set the poverty line at Rs848.798 per adult equivalent per month.

On the basis of the results of this survey, the government claimed that the poverty had declined by around four per cent to 27.9 per cent in 2004. The government believes that a major factor contributing to this decline in poverty was the growth in Gross Domestic Product (GDP).

Independent researchers and some organizations, like the Social Policy and Development Centre (SPDC), are of the view that the incidence of poverty has consistently increased since 1992-93. According to SPDC estimates, almost 33 per cent of the population is still living below the poverty line.

A report of SPDC launched in 2004 emphasizes that growth alone cannot reduce poverty significantly, at least in the short run, and in order to ensure sustainable development and consistent decline in poverty it is necessary to take policy measures to directly address inequality.

The ‘growth alone’ mechanism is an old philosophy and it generally favours the rich class. The alternative strategy, many researchers propose, is the reduction of recurring expenditure, increase in development expenditure and special poverty targeted social/human development programmes, along with high GDP growth.

In the decade of 1960s, consistent growth was experienced, but the poverty was the highest by the end of 1960s in the history of Pakistan. During the mid-1970s, although the GDP growth was not as promising as in the 1960s, poverty was decreasing. The prime minister has promised an increase in PSDP expenditure in the coming budget which is supposed to create jobs for the poor, but it is apparently a useless measure, as it is not the allocation of funds but the utilization of funds which is the issue. The prime minister must wake up to this reality that 49 per cent of the PSDP funds allocated in 2004 are still lying unused.

PAKISTAN IS A CASE STUDY OF ECONOMIC TURNAROUND: The economic prowess in 2004 had been tremendously impressive. The GDP growth rate touched new heights every quarter. From fice per cent to six per cent to the latest forecast of over eight per cent, it is an impressive rate of growth. Per capita income from $600 to over $700 was commendable in equal measures. Export targets were achieved and official reserves were almost overflowing till the first half of 2005, but the last six months show the trend reversing.

However, the stability of economy has become highly debatable. Despite these achievements no noticeable improvement in the quality of life of the people took place and poverty had not been reduced despite macro-economic stability and higher-than-targeted growth for the third year in a row.

On the macro-economic indicators, the growth rate of large-scale manufacturing (LSM), exports, and private-sector credit declined when compared with the first half of the fiscal year.

The fiscal deficit and trade deficit as percentage of the GDP were higher than the last year, while current account balance went into deficit compared with the surplus last year.

The LSM growth in the first six months of the current fiscal was 16.1 per cent against 17.9 per cent last year; exports increased by 10.5 per cent compared with 13.2 per cent last year and tax revenues increased by 7.4 per cent compared with -7 ????

per cent in the same period last year.

The fiscal deficit as percentage of the GDP increased to 1.3 per cent from 0.6 per cent of the first six months of the last year and trade deficit increased to 2.5 per cent of the GDP this year compared with 0.9 per cent of same period last year. Trade deficit has risen, exports have almost stagnated and inflation has gone out of control. All the leading indicators which normally herald the economic boom cycle have started showing signs of instability.

Stock markets are supposed to be the first indicator of the investment climate of an economy. After rocketing to over 10,000 points it has steadily fallen back to barely 7000 points. Many who had finally started believing that the stock market had reached a stable level and put their money in stocks have found their money disappearing overnight.

According to some estimates, the loss to the economy by the stock market crash is more than the loss that occurred due to the freezing of the foreign currency accounts during Nawaz Sharif’s time.

THE POST-W.T.O. ERA IS AN OPPORTUNITY FOR PAKISTAN: As January 1, 2005, set in, we saw big advertisements given by the Export Promotion Bureau, declaring that the WTO regime is going to open up a whole new arena for Pakistani exporters. However, exports have already started feeling the heat of the WTO effect. Although the government has been merrily advertising that the WTO is not having a bad effect on our exports, the figures in the first half of the year are not encouraging.

Textiles are facing stiff competition in the post-quota era. Value-added textiles, like the garment industry, have found itself squeezed on prices and margins due to the ever encroaching Chinese and Indian suppliers. The bed linen industry has become crippled by the imposition of anti-dumping duty by European Union and the withdrawal of the GSP status from Pakistan.

As if all this was not enough, the pre-shipment finance rate for exports has been raised to eight per cent from five per cent. Seafood exports has been suspended by the government in order to improve the hygienic conditions at the Karachi harbour after an inspection team from the EU objected against the substandard infrastructure of the exporters supplying shrimps and prawns to Europe. The government had planned to get the improvements completed by March and then allow the exporters to resume activity, but till date there are no signs of any improvement in the infrastructure. Meanwhile, the exporters have been screaming that the importers sick of the delay have shifted to alternative sources like Bangladesh and many Far Eastern suppliers.

Rice exports still reeling from the increase in duty in one of its main market, Kenya which increased duty on rice from 35 to 75 per cent, got another shock when the EU recently banned containers coming from Pakistan on the contention that they contain harmful chemicals. While the exporters are crying for government support, institutions like the EPB and the RECP are giving typically little heed to what looks like a major exporting crisis cropping up in the post-WTO era.

PAKISTAN HAS GAINED STATURE IN THE AREA OF GOOD GOVERNANCE: As the Musharraf government struggles to keep its promises, it continues to claim victory on the good governance front. However, the World Bank report shows otherwise. Pakistan’s score on all the six indices remained poor, and continued to deteriorate further.

The index on Voice and Accountability looks at the political, civil and human rights measurements. In 1996, Pakistan got negative 0.98 on the index, which slightly improved to negative 0.62 in 1998, then nosedived to negative 1.53 in 2000 after the military takeover. India, in the meantime, has got positive scores of 0.28 in 1996 to 0.27 in 2004, while Bangladesh is still better than Pakistan.

The index on Political Instability and Violence measures the likelihood of violent threats to, or changes in, the government, including terrorism etc. The story of Pakistan on this specific index is also not different. It got negative 1.21 in 1996, negative 1.40 in 2002 and negative 1.59 in 2004. A country which is viewed as a one-man show can never be considered stable on any ranking. ACCOUNTABILITY AND RESPONSIVENESS TO PUBLIC HAS INCREASED: The third index dealing with the issue of government effectiveness in terms of the level of competence of the bureaucracy and the quality of public service delivery, tells its own tale. Here, Pakistan’s score deteriorated from a negative 0.40 in 1996 to a negative 0.57 in 2004. India improved from a negative 0.14 in 1996 to a negative 0.04 in the same period.

The public servants continued to rule the masses. Politicians continue to revel on public money; the VVIP culture, special perks like billion-rupee luxury cars — thanks to the special gifting authority of the prime minister — continue to act as breach of public trust by the leadership of the country.

The Control of Corruption index measures the abuse of public power for private gain, including petty and grand corruption (and state capture by the elite). One of the declared objectives of the military takeover of 1999 was to reverse the trend as Pakistan had faltered on this index too. The country’s score in 1996 was negative 0.98, improved slightly to negative 0.76 in 1998, and then declined to negative 0.80 in 2000, negative 0.81 in 2002 and negative 0.87 in 2004. The ugly struggle in Sindh between the Chief Minister Dr Arbab Rahim and former minister Imtiaz Shaikh over massive corruption is enough evidence of how corruption is being condoned at the ministerial level.

CONCLUSION: Economic stability and public welfare are never achieved by freak events and conditional generosity of superpowers. Also, this cannot be achieved by sham democracy and the absence of institutional integrity. As the bubble economy inflated by foreign aid and property investments deflates, the basic question of social development would come raging back.

Half-page advertisements claiming literacy prowess and congratulatory notes on economic miracles do not hide the truth; that the fundamentals of development are still missing. Education, health and poverty remain in intensive care, and no amount of statistical jugglery can hide the fact that this country is not anywhere near the state of development which was the hallmark of the rise of the East Asian nations or the emergence of the new powers like China and India.

The sad part is that the present head and deputy head of the nation are by far the most intelligent and smart pair of leaders we have had for a long period of time. Unfortunately, they themselves are not realizing their potential. They can create history, as they have enough authority, power, knowledge and the skill to create real change in the political and socio-economic paradigm of this country. But they seem to lack this self-belief, and every time there is a danger of a rebellion, they concede and compromise on the very values on whose basis they tried to legitimize their illegitimacy.

The public has, and is still looking at them as their saviours, but the increased politicization of this pair has been responsible for the decline in the prowess of our country which after a long time looked as if it was finally going to break the political shackles and realize its socio-economic potential. What a pity.

Please Visit our Sponsor (Ads open in separate window)