PRESIDENT Musharraf has voiced his concern over the slow economic progress in the country. Until recently he was ebullient over the high economic growth as international rating agencies were speaking high of that, but now they had noted a down turn in the economy.
That is inevitable in a country with an acute shortage of power, made worse by power riots in cities like Karachi and disruption in supply of water. And there is no immediate prospect of any change in the situation.
To add to that, infrastructure constrains are on the increase and traffic in large cities is getting jammed and far worse.
As interest rates rise, investment is becoming costlier and there can be a decline in investment. The investment per capita last year had reached 20 per cent which is a record. Inflation is making investment more costly as the rate of inflation for construction and industrial investment is far higher than the average inflation of 6.8 per cent. High interest rates on borrowed capital can be more than made up by larger profits in the country as there are no checks on such profits and competition is feeble.
As the KSE 100-index slides, following world trends as well, portfolio investment by foreigners is moving out. The president laments that work on the five large approved dams has not started, although the target for their completion is 2015 at a variable cost of around $20 billion. Now the Basha dam, the first of the five, is to cost $10 billion. That means the overall cost of the five dams will be much larger than estimated, and would mean heavier borrowing.
Hydro power is the cleanest and cheapest source of energy at a time of rising oil prices which is setting world records, hence the dam has to be given priority over all other energy projects if our quest for energy security is real and earnest.
Federal Minister for Food and Agriculture Malik Sikander Bosan has told the senate that no substantial increase in agricultural output is possible before the completion of large dams. Meanwhile, the government has taken up the task of building a series of small dams.
Pending adequate growth of agriculture, the country is to import six million bales of cotton from India and there are official moves to import sugar as well.
The world climatic change seems to be affecting southern Pakistan more than the North. The total damage to Balochistan from the recent floods has been estimated at Rs24 billion which is a large sum.
And this is the election year not only in Pakistan but also in the US where the campaign is far longer.
The West led by the US wants Pakistan to fight terror as orchestrated by it and at the same time restore democracy in the country through free and fair elections.
Following the virtual failure of a deal with President Musharraf, Ms Bhutto insists on fair and free elections and wants the US to make aid conditional to that. She wants the European Union to make its aid conditional on the return of real democracy..
A number of senior US officials are to visit Pakistan to make sure that Pakistan is doing all it could in the war against terror. Following the visit of Richard Boucher, Assistant Secretary of State for South Asia, the Deputy Secretary for Strategic Affairs John Negroponte is to visit Pakistan to discuss strategic issues. President Bush and the Secretary of State Condoleezza Rice are on the telephone to President Musharraf from time to time to make sure he stands firm in the war against terror and does not slacken his resolve to fight the Al Qaeda elements in the tribal areas.
A source of major fear for America now is that the tribal areas will be used by Al Qaeda as the launching pad for a missile attack on the US. Memories of 9/11 are being revived and there is a fear for a repetition of the same with the tribal areas as the base. Hence the US argues that if Pakistan cannot clear its tribal areas of the Al Qaeda and Taliban elements, America will do so using its rockets and planes. That will amount to a gross violation of Pakistan’s sovereignty and undermining of the US friendship with Pakistan.
In an election year in the US, if the candidates play on the fear of another 9/11 with the tribal areas as the base for attack, strong anti-Pakistan speeches are likely to be made.
No one can stop the democratic candidate Obama and other candidates from voicing such fears, while Hilary Clinton, the leading democratic candidate, is restrained and sensitive to Pakistani feelings.
As the result of the two bills passed by the US House of Representatives and the senate, tying US aid to Pakistan to the president’s satisfaction that Pakistan is doing all it could in the war against terror, the country is back to the time when the Pressler Amendment came into force in the US. The aid was then tied to the president’s satisfaction that Pakistan was not making the nuclear bomb and now the aid is tied to the president’s satisfaction that Pakistan is doing all it could in the war against terror.
As the US elections get hot, the elections in Pakistan will also gain momentum and candidates in Pakistan will not want to see Pakistan yielding to the excessive demands of the Americans. So we are in for tough times.
The opposition parties will also press the US to make President Musharraf to hold free, fair and transparent elections after shedding his uniform and that includes the wishes of other moderate elements as well which the US wants to back.
Ms Bhutto says a military government led by general Musharraf cannot win the war against terror. It can only be won by a freely elected democratic government. So what kind of a balance the US strikes between its demand that Pakistan does all it can in the war against terror as well as hold free and fair elections ,remains to be seen.
But it does seem odd to try to hold free elections with three major leaders outside the country- Ms Bhutto, Mr Nawaz Sharif and Mr Altaf Hussain. Meanwhile, financial help is coming from the Asian Development Bank which is to mobilise $12.15 billion for Pakistan. Out of that, $6 billion will be from the Asian Development Bank at the rate of $2 billion a year for three years instead of $1.5 billion annually.
It will also raise another $6.15 billion from the private sector and use the total for infrastructure development, deepening the administrative and economic reforms and creating a better investment climate.
This is the largest mobilisation of aid to come from one sponsoring source. Separate loans for large dams will be provided when the schemes are finalised and their implementation is sanctioned by the government. Usually in such large project funding, the World Bank plays a major part.