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Eying stable democracy

Updated May 13, 2013
Illustration by Abro
Illustration by Abro

WHILE the country’s business community tilts towards the PML-N, the markets are expected to rejoice at the successful completion of the election process irrespective of the outcome. Implicit in the expectation is a vote for democracy.

Businesses would be looking to the government voted in power in the next few days or weeks to resolve grave issues facing the economy, industry and trade, disappointed as they are from the interim set-up for doing nothing worthwhile. Most businessmen interviewed were critical of the caretakers, and felt that they had failed them and the country by not even trying to put the economy on the right track.

Economists generally believe that falling exchange reserves pose a grave threat to the external sector as well as the economy, and that post-elections, the new government might not get much time to ponder over it, but may be forced to act swiftly to prevent a severe crisis.

However, many trade and industry leaders are focused on three ‘immediate’ challenges that the next government will need to tackle on priority: budget 2013-14 given the financial constraints, improving the deteriorating law and order situation, and managing the worsening energy crisis.

“Both capital and currency markets will boom on May 13, the day they open after the election weekend, to celebrate the victory of the rule of law if the country succeeds in reasonably conducting free and fair elections. Investors play on risks, but they abhor political uncertainty,” a senior analyst told Dawn, while commenting on the economy.

“It is very important for Pakistan and its economy that the election cycle stays on course and delivers the next elected parliament and the government. Who actually succeeds in occupying treasury benches matters, but not as much as the peaceful and quick transfer of power to elected representatives, to put at rest speculations about the future of democracy,” a top investment advisor commented two days before the election.

“Any party that bags 110 NA seats should be able to form a fairly stable government at the centre, as 20 to 25 independent candidates traditionally throw their weight in support of the majority party.”

“Business sentiments will turn positive and investors-in-waiting will enter the rings and set the ball rolling,” said Muhammad Sohail, CEO of Topline Securities, a brokerage firm, over the phone.

But he had a different opinion on the performance of the interim setup. “Without a mandate, the Khoso government could not have taken key economic decisions. They did what they should have done: start negotiations with the IMF, and do the homework for the next budget.”

Haji Fazal Khan Sheerani, a business leader from Balochistan who is the former head of the Federation of Pakistan Chamber of Commerce and Industry and chairman of the association of chambers of D8 countries, was critical of the interim government, which, he felt, performed way short of expectations.

“If the election throws up a leadership that has capacity and character, Pakistan can ride through the problems. If Indonesia and Malaysia can emerge from much worse situation, so can Pakistan, given the will and resolve of its leaders,” he said.

“It will, however, take time, as no one has a magic wand to make all problems disappear in one go. I consider the lack of security to be the single most stubborn irritant compromising the country’s potential of trade and industry,” he maintained.

However, some consider democracy as an obstacle in the economic reform process. They wish for a medium-term government of technocrats that is not obligated to appease the electorate, and which will undertake surgery that they believe the economic framework needs before the country starts looking up.

The weak fiscal policy perpetuated by an irresponsible monetary stance, they feel, is an outcome of the politicisation of the policymaking process, which has landed the country in the tight corner it finds itself.

Dr Muhammad Yaqoob, former governor of the State Bank of Pakistan, wrote in a newspaper recently: “It was expected that the interim prime minister will promptly gather a competent team that would initiate a sound stabilisation programme to create conditions that could enable the next elected government to pave the way for structural policy reforms, to reduce inflation and impart stability to the balance of payments as a precondition to accelerate the rate of economic growth.”

Some found Dr Yaqoob and other like-minded experts disoriented. “Their expectations had been misplaced, and their frustration is a reflection of their lack of understanding of the ground realities and caretakers’ mandate,” said an economist who does not subscribe to market orthodoxy.

Dr Hafiz Pasha, a former finance minister who advised past governments, brushed aside criticism of the interim government, and wished that the democratic transformation be completed quickly so the next government gets time to finalise the budget before the cut off date of June 30.

“Events might force quick action by the next government. How long can we ignore the humungous Rs872 billion circular debt? If the balance of payment situation and depleting reserves spill over and the currency value dips, the government would not sit back and let the market implode. It sure will act to contain the situation,” Dr Pasha commented when reached in Lahore over the phone.

“The situation can improve faster if the mandate is strong. A hung parliament and a coalition government consumes its energy in politicking, leaving little time for the economic agenda, which, in the end, decides the fate of a country,” commented a top businessman interested in Punjab’s politics.