The recent fighting in Basra in Iraq has been dominating the international news. While Fox bemoans the 'defeatist' coverage of 'liberal' media, and CNN and BBC have reporting thats only marginally better, here is an interesting article about Muqtada al-Sadr. Its a chapter from an upcoming book by the Independent's reporter, Patrick Cockburn and makes for interesting reading.
On a different note, Slate has a good explainer on why global food prices are soaring. They also link to a chart showing the global food price index on the UN Food and Agriculture Organization's website.
In light of food inflation and recessionary fears in the United States, the IMF had reduced its forecast of global economic growth last month and is now warning that the developing world should brace itself to suffer a knock on effect.
Ah, good news for the future, then.
Showing posts with label pakistani economy. Show all posts
Showing posts with label pakistani economy. Show all posts
Wednesday, 9 April 2008
Saturday, 2 February 2008
On Economic Miracles Part II
I wanted to try and put into context much of the rhetoric about the economic performance of the country during the Musharraf years (1999-2007). On the one side we have the loud claims on the side of the government about an economic miracle. On the other side we have a host of economists and opposition politicians sniping from the sidelines, sometimes making equally shrill claims of incompetence and impending economic disaster.
Has the economy ‘developed’ rather than simply grown? Is the growth sustainable? Has a platform for future economic growth been laid? Have the benefits of that growth had a positive social impact on the nation and its people? The government claims that this is so, arguing that their policies have placed the economy on a footing whereby it will be able to sustain growth at 7% to 8% annually for the foreseeable future.
Pakistani economists of one stripe or another, have advocated in the media one of three models of economic development. A general idea that runs through these is that a developing economy needs a large amount of capital investment, which spurs economic activity until ‘lift off’ is finally achieved when economic growth becomes self-sustaining and the effects of this growth permeates throughout society.
The first model, which I will call “The World Bank Model: Mark I”, was formulated in the 50s. It is based on the idea that to achieve ‘lift off’, an economy needs investment from abroad focused on promoting rapid GDP growth. This rapid growth will lead to industrialisation which will in turn allow the country to repay its loans. The movement of labour from rural to urban areas would feed industrialisation and allow the benefits of economic growth to ‘trickle down’ to the population at large. Eventually, once the supply of labour starts to contract, wages for the population will begin to rise. Living standards will rise and lo and behold! A fully developed society will result! A couple of elements were added to the this model in the 70s and 80s. Firstly, the growth of export-oriented industries was seen as key to achieving “lift off” – otherwise economies would remain in debt for a very, very long time. Secondly, the need for ‘responsible’ fiscal and monetary policies were emphasized –gotta pay off those loans.
The second model, which I will call “The World Bank Model: Mark II”, was formulated based on the experience of the preceding decades. It was belatedly realised that the wealth of most developing economies didn’t really trickle down, so much as pool at the top. It was therefore decided that certain institutional structures needed to be created, mostly to do with educational and health infrastructure as well as governance, if the channels for trickle down were to work effectively. The need for social sector and governance reforms was emphasized, not just because of 'fuzzy liberal' sentiment for the teeming masses, but because economists found that developing economies without social governance actually undermined economic growth. Opportunities for expansion were lost and instability ensued. This second model was given explicit shape in the World Bank’s World Development Report 2006. Shahid Javed Burki, a former World Bank economist and ex-Finance Minister of Pakistan, is a proponent of this approach, both in his columns in Dawn and in his book Changing Perceptions, Altered Reality: Pakistan’s Economy Under Musharraf, 1999-2006.
The third model, which I will call “The Slow GDP Growth Model” is gleaned from what I have read by the economist Qaiser Bengali. This model has a greater emphasis on government intervention in the economy, an emphasis on industrial growth for domestic consumption, low foreign debt and higher employment at the expense of a high GDP growth. The idea is to replace “trickle-down” with heavy government investment in social infrastructure in order to raise living standards, with explicit reference to China and India’s nurturing insular, state-dominated economies for a "gestation" period, allowing them to grow and attain a certain critical mass before subjecting them to global market forces. The idea is that a socio-economic foundation first needs to be laid before “lift off” can occur.
While the Musharraf government has made lip-service to adhering to the second model of development (it has to, since many of the country’s loans from institutions such as the Asian Development Bank and other foreign donors are tied to investing in the social sphere), it is obvious that it has not made any serious attempts to work in this regard. Policy and political will is focused on the first model of economic development. This sense is reinforced by listening to the various pronouncements of former PM Shaukat Aziz or former special adviser to the President and current Finance Minister, Salman Shah – their focus is all on GDP growth and foreign investment.
But the problem here is, not only is the first model flawed, but Pakistan’s economic performance does not even meet its relatively simplistic standards. The government has repeatedly claimed that they have placed the economy on a sound footing and the country is poised for “lift off”. [More recently, Musharraf has said that this position was being threatened by the Chief Justice’s ruling against the Steel Mill sale and the consequent deleterious effect on foreign investment.] But something both Shahid Burki and Qaiser Bengali, amongst just about every other dispassionate (and some rather impassioned) economic observers, have underlined, is that the claims that Pakistan has undergone an economic miracle is a myth.
All seems to sit well with World Bank Model I, right? Maybe not. Lets look more closely.
1. Foreign investment was mostly confined to privatising existing state run enterprises, along with small, yet significant amounts in the stock market and in real estate. While the injection of foreign capital and management was expected to help improve these enterprises, investment in new industries has been tentative to say the least, and is only done in limited form with major concessions (50 year tax holidays, limited liability, etc.). Foreign Direct Investment (FDI) is still very low and contributes very little to the economy. Pakistan is still considered too politically unstable to be an attractive proposition for long term investments. Anything that can’t be dumped for cash in quick order is risky.
2. The increase in exports have mostly been in primary goods – agricultural produce, cotton, etc. These are dependent on price fluctuations and seasonal variations. While the increase in global prices in a number of primary commodities have inflated the export ledger, its important to realise that percentage wise the export of industrial goods has dropped precipitously. For example, textile exports have actually declined, leading to the closure of hundreds of textile mills, but the export of raw cotton has increased. Furthermore, the rise in exports has not matched the rise in imports which have escalated at a far faster rate, which means that the balance of payments deficit is now at unprecedented levels.
3. Thanks to the global crackdown on money laundering, the vast amounts of money previously remitted through the ‘black’ hundi system from foreign workers now came through official channels. This had three consequences: these vast amounts were now taxed, providing additional revenue to the government; the local banks were flush with cash, [which along with banking sector reforms and the introduction of newer technologies (ATMS, credit cards etc.) spurred the boom in consumer credit financing]; foreign exchange reserves grew. Foreign exchange reserves were also bolstered by three other windfalls; heaps of money from the United States for participation in the War on Terror; the sale of state enterprises as part of the ‘privatisation’ process; the cancellation or rescheduling of foreign debt post 9-11, and a geopolitical climate conducive to new loans on generous terms. I term all of these ‘windfalls’ because they arose from particular situations external to the economy and may not come again. The U.S. money tap will close someday (perhaps sooner, perhaps later); the state will run out of stuff to privatise; and the rescheduled loans will eventually come due once more. The Pakistani economy needs to be able to handle its balance of payments before this happens. Which it currently can’t.
4. A decline in poverty? Statistics in this field have become a free for all. Government sponsored reports insist that poverty is declining. NGOs beg to differ. Its probably safe to say that the data is inconclusive. The problem is not just of current data, but of past data as well. Approximately a third of the population earns less than a dollar a day. But whether or not that is defined as poverty is debatable. And whether or not that figure is a significant decrease from previous years is also debatable. But given increasing inflation, especially food inflation, which far outstrips the rise in GDP per capita, or increases in minimum wage etc., its safe to say that while figures on poverty are debatable, the purchasing power of a large chunk of the population has been decreasing over the last few years, particularly the urban poor and agricultural wage workers.
Perhaps more to the point is the question about whether the Pakistani economy has moved (or is moving) to the point presented in the ‘World Bank Model I’ where the benefits of the growing economy can trickle down to the population at large. The answer is a resounding ‘no’. Firstly, most of the economic growth has been in the services sector, which has created upward economic oppurtunities almost exclusively for the educated, urban middle classes. Few jobs have been added to the economy. There has been very little industrial growth. Agribusiness has benefited landholding farmers, particularly those who own middle and large sized land holdings (or institutions like the army which owns huge tracts of agricultural land) – but this has basically been confined to parts of the country (incidentally building on the success of the transport infrastructure built there during the Nawaz years). Agricultural productivity is limited by the lack of credit, transport, irrigation and other oppurtunities to large tracts of land, particularly in Sindh, Balochistan and southern Punjab.
5. Is the current economic growth sustainable? The answer has to be ‘not yet’, given that the trade deficit is so high, that investments are skewed towards speculative sectors, that the country has a very low investment to national savings ratio, and that growth has been focused on the service sectors, particularly banking, which itself is exposed to a wide variety of consumer loans. These consumer loans were driving growth in other sectors where the performance was good, such as agribusiness and the automobile industry. Already, the banks have started drawing back from these sectors (several banks have stopped giving auto loans for example). The government itself is now borrowing very heavily from local banks and the wave of inflation coming from the rise in oil prices is only now going to hit the economy (so far the government has been subsidising costs through various ‘buy now, pay later’ schemes with Saudi Arabia and the UAE, dipping into the National Reserves, and borrowing). On top of this are infrastructural failures which are active hindrances to further growth, such as the energy crisis, poor human resource development, underdeveloped infrastructure, lack of foreign markets and of course the political instability. Its all very well to sell off existing industries and talk about the money you have made. But the conditions for more industries to be created simply are not being put into place. 'Lift off' has not yet been achieved.
Now all of these are criticisms from the standpoint of ‘World Bank Model I’. There are more criticisms to be made if we look at matters from the perspective of the other two models. Unfortunately I don’t really have the time to go into them at this point in time (I do have a job and a family after all). Perhaps that can await a later post.
Update: Kaiser Bengali recently gave a talk in which he expounded on his criticisms of economic development. I find his characterization of Pakistan in the 50s, 60s and 70s as a development state, and in the 80s, 90s and 00s as a 'national security state' an interesting and informative tool.
Has the economy ‘developed’ rather than simply grown? Is the growth sustainable? Has a platform for future economic growth been laid? Have the benefits of that growth had a positive social impact on the nation and its people? The government claims that this is so, arguing that their policies have placed the economy on a footing whereby it will be able to sustain growth at 7% to 8% annually for the foreseeable future.
Pakistani economists of one stripe or another, have advocated in the media one of three models of economic development. A general idea that runs through these is that a developing economy needs a large amount of capital investment, which spurs economic activity until ‘lift off’ is finally achieved when economic growth becomes self-sustaining and the effects of this growth permeates throughout society.
The first model, which I will call “The World Bank Model: Mark I”, was formulated in the 50s. It is based on the idea that to achieve ‘lift off’, an economy needs investment from abroad focused on promoting rapid GDP growth. This rapid growth will lead to industrialisation which will in turn allow the country to repay its loans. The movement of labour from rural to urban areas would feed industrialisation and allow the benefits of economic growth to ‘trickle down’ to the population at large. Eventually, once the supply of labour starts to contract, wages for the population will begin to rise. Living standards will rise and lo and behold! A fully developed society will result! A couple of elements were added to the this model in the 70s and 80s. Firstly, the growth of export-oriented industries was seen as key to achieving “lift off” – otherwise economies would remain in debt for a very, very long time. Secondly, the need for ‘responsible’ fiscal and monetary policies were emphasized –gotta pay off those loans.
The second model, which I will call “The World Bank Model: Mark II”, was formulated based on the experience of the preceding decades. It was belatedly realised that the wealth of most developing economies didn’t really trickle down, so much as pool at the top. It was therefore decided that certain institutional structures needed to be created, mostly to do with educational and health infrastructure as well as governance, if the channels for trickle down were to work effectively. The need for social sector and governance reforms was emphasized, not just because of 'fuzzy liberal' sentiment for the teeming masses, but because economists found that developing economies without social governance actually undermined economic growth. Opportunities for expansion were lost and instability ensued. This second model was given explicit shape in the World Bank’s World Development Report 2006. Shahid Javed Burki, a former World Bank economist and ex-Finance Minister of Pakistan, is a proponent of this approach, both in his columns in Dawn and in his book Changing Perceptions, Altered Reality: Pakistan’s Economy Under Musharraf, 1999-2006.
The third model, which I will call “The Slow GDP Growth Model” is gleaned from what I have read by the economist Qaiser Bengali. This model has a greater emphasis on government intervention in the economy, an emphasis on industrial growth for domestic consumption, low foreign debt and higher employment at the expense of a high GDP growth. The idea is to replace “trickle-down” with heavy government investment in social infrastructure in order to raise living standards, with explicit reference to China and India’s nurturing insular, state-dominated economies for a "gestation" period, allowing them to grow and attain a certain critical mass before subjecting them to global market forces. The idea is that a socio-economic foundation first needs to be laid before “lift off” can occur.
While the Musharraf government has made lip-service to adhering to the second model of development (it has to, since many of the country’s loans from institutions such as the Asian Development Bank and other foreign donors are tied to investing in the social sphere), it is obvious that it has not made any serious attempts to work in this regard. Policy and political will is focused on the first model of economic development. This sense is reinforced by listening to the various pronouncements of former PM Shaukat Aziz or former special adviser to the President and current Finance Minister, Salman Shah – their focus is all on GDP growth and foreign investment.
But the problem here is, not only is the first model flawed, but Pakistan’s economic performance does not even meet its relatively simplistic standards. The government has repeatedly claimed that they have placed the economy on a sound footing and the country is poised for “lift off”. [More recently, Musharraf has said that this position was being threatened by the Chief Justice’s ruling against the Steel Mill sale and the consequent deleterious effect on foreign investment.] But something both Shahid Burki and Qaiser Bengali, amongst just about every other dispassionate (and some rather impassioned) economic observers, have underlined, is that the claims that Pakistan has undergone an economic miracle is a myth.
Lets look at the country’s economy in terms of the First Model:
The government claims that its policies have led to:
- Foreign investment
- Increase in exports
- Increase in Foreign Reserves
- A decline in poverty
- Sustained economic growth
All seems to sit well with World Bank Model I, right? Maybe not. Lets look more closely.
1. Foreign investment was mostly confined to privatising existing state run enterprises, along with small, yet significant amounts in the stock market and in real estate. While the injection of foreign capital and management was expected to help improve these enterprises, investment in new industries has been tentative to say the least, and is only done in limited form with major concessions (50 year tax holidays, limited liability, etc.). Foreign Direct Investment (FDI) is still very low and contributes very little to the economy. Pakistan is still considered too politically unstable to be an attractive proposition for long term investments. Anything that can’t be dumped for cash in quick order is risky.
2. The increase in exports have mostly been in primary goods – agricultural produce, cotton, etc. These are dependent on price fluctuations and seasonal variations. While the increase in global prices in a number of primary commodities have inflated the export ledger, its important to realise that percentage wise the export of industrial goods has dropped precipitously. For example, textile exports have actually declined, leading to the closure of hundreds of textile mills, but the export of raw cotton has increased. Furthermore, the rise in exports has not matched the rise in imports which have escalated at a far faster rate, which means that the balance of payments deficit is now at unprecedented levels.
3. Thanks to the global crackdown on money laundering, the vast amounts of money previously remitted through the ‘black’ hundi system from foreign workers now came through official channels. This had three consequences: these vast amounts were now taxed, providing additional revenue to the government; the local banks were flush with cash, [which along with banking sector reforms and the introduction of newer technologies (ATMS, credit cards etc.) spurred the boom in consumer credit financing]; foreign exchange reserves grew. Foreign exchange reserves were also bolstered by three other windfalls; heaps of money from the United States for participation in the War on Terror; the sale of state enterprises as part of the ‘privatisation’ process; the cancellation or rescheduling of foreign debt post 9-11, and a geopolitical climate conducive to new loans on generous terms. I term all of these ‘windfalls’ because they arose from particular situations external to the economy and may not come again. The U.S. money tap will close someday (perhaps sooner, perhaps later); the state will run out of stuff to privatise; and the rescheduled loans will eventually come due once more. The Pakistani economy needs to be able to handle its balance of payments before this happens. Which it currently can’t.
4. A decline in poverty? Statistics in this field have become a free for all. Government sponsored reports insist that poverty is declining. NGOs beg to differ. Its probably safe to say that the data is inconclusive. The problem is not just of current data, but of past data as well. Approximately a third of the population earns less than a dollar a day. But whether or not that is defined as poverty is debatable. And whether or not that figure is a significant decrease from previous years is also debatable. But given increasing inflation, especially food inflation, which far outstrips the rise in GDP per capita, or increases in minimum wage etc., its safe to say that while figures on poverty are debatable, the purchasing power of a large chunk of the population has been decreasing over the last few years, particularly the urban poor and agricultural wage workers.
Perhaps more to the point is the question about whether the Pakistani economy has moved (or is moving) to the point presented in the ‘World Bank Model I’ where the benefits of the growing economy can trickle down to the population at large. The answer is a resounding ‘no’. Firstly, most of the economic growth has been in the services sector, which has created upward economic oppurtunities almost exclusively for the educated, urban middle classes. Few jobs have been added to the economy. There has been very little industrial growth. Agribusiness has benefited landholding farmers, particularly those who own middle and large sized land holdings (or institutions like the army which owns huge tracts of agricultural land) – but this has basically been confined to parts of the country (incidentally building on the success of the transport infrastructure built there during the Nawaz years). Agricultural productivity is limited by the lack of credit, transport, irrigation and other oppurtunities to large tracts of land, particularly in Sindh, Balochistan and southern Punjab.
5. Is the current economic growth sustainable? The answer has to be ‘not yet’, given that the trade deficit is so high, that investments are skewed towards speculative sectors, that the country has a very low investment to national savings ratio, and that growth has been focused on the service sectors, particularly banking, which itself is exposed to a wide variety of consumer loans. These consumer loans were driving growth in other sectors where the performance was good, such as agribusiness and the automobile industry. Already, the banks have started drawing back from these sectors (several banks have stopped giving auto loans for example). The government itself is now borrowing very heavily from local banks and the wave of inflation coming from the rise in oil prices is only now going to hit the economy (so far the government has been subsidising costs through various ‘buy now, pay later’ schemes with Saudi Arabia and the UAE, dipping into the National Reserves, and borrowing). On top of this are infrastructural failures which are active hindrances to further growth, such as the energy crisis, poor human resource development, underdeveloped infrastructure, lack of foreign markets and of course the political instability. Its all very well to sell off existing industries and talk about the money you have made. But the conditions for more industries to be created simply are not being put into place. 'Lift off' has not yet been achieved.
Now all of these are criticisms from the standpoint of ‘World Bank Model I’. There are more criticisms to be made if we look at matters from the perspective of the other two models. Unfortunately I don’t really have the time to go into them at this point in time (I do have a job and a family after all). Perhaps that can await a later post.
Update: Kaiser Bengali recently gave a talk in which he expounded on his criticisms of economic development. I find his characterization of Pakistan in the 50s, 60s and 70s as a development state, and in the 80s, 90s and 00s as a 'national security state' an interesting and informative tool.
Tuesday, 29 January 2008
On Economic Miracles
Having been viciously struck down by the flu, I have been unable to blog much in recent times, even though there has been a great deal of grist for the mill.
By now the myth of Musharraf's economic miracle has been pretty much punctured, but just in case one wants some more details on the topic, here is some interesting reading:
An Interview with the economist Qaiser Bengali from The News which can be found here at Watandost.
An article from Dawn on the atrocious decline in Pakistan's social indicators as measured by the Human Development Index.
Just below the above article, in the same issue of Dawn is an article about the officially sanctioned abuse of public funds by the previous government even as food inflation reduces the purchasing power of ordinary people. One, amongst many startling figures noted in the article; "A report in this paper on Oct 23, 2007 said, ‘Government spends Rs 65 million on overseas treatment of 18 bigwigs’ and ‘that too in a country where the public per capita health expenditure is a measly Rs 360’." Yes, you read that right, the government spent Rs. 3,611,111 per head for the treatment of 18 rich members of the ruling class, while its average expenditure on the layman was Rs. 360 ($5.7) per person, most of which is not spent on treatment, but on infrastructure (building maintenance, electricity bills, the health ministry, etc.). To make further sense of why this happens, I refer you to my earlier post on how the state serves the elite, while failing the poor.
Finally, here is a report that the Caretaker Prime Minister, Mohammad Mian Soomro, has had to form a committee to "ascertain the accuracy, reliability and credibility" of the economic data put forward by the previous government. It seems, not unsurprisingly, that some of the data broadcast by the previous government as 'proof' of their economic achievements has proved to be unreliable. Surprise, surprise!
Enjoy!
Edit: And on top of it all, here is an article in today's issue of The News about Pakistan's social sector and an analysis of the weaknesses of its social policy.
By now the myth of Musharraf's economic miracle has been pretty much punctured, but just in case one wants some more details on the topic, here is some interesting reading:
An Interview with the economist Qaiser Bengali from The News which can be found here at Watandost.
An article from Dawn on the atrocious decline in Pakistan's social indicators as measured by the Human Development Index.
Just below the above article, in the same issue of Dawn is an article about the officially sanctioned abuse of public funds by the previous government even as food inflation reduces the purchasing power of ordinary people. One, amongst many startling figures noted in the article; "A report in this paper on Oct 23, 2007 said, ‘Government spends Rs 65 million on overseas treatment of 18 bigwigs’ and ‘that too in a country where the public per capita health expenditure is a measly Rs 360’." Yes, you read that right, the government spent Rs. 3,611,111 per head for the treatment of 18 rich members of the ruling class, while its average expenditure on the layman was Rs. 360 ($5.7) per person, most of which is not spent on treatment, but on infrastructure (building maintenance, electricity bills, the health ministry, etc.). To make further sense of why this happens, I refer you to my earlier post on how the state serves the elite, while failing the poor.
Finally, here is a report that the Caretaker Prime Minister, Mohammad Mian Soomro, has had to form a committee to "ascertain the accuracy, reliability and credibility" of the economic data put forward by the previous government. It seems, not unsurprisingly, that some of the data broadcast by the previous government as 'proof' of their economic achievements has proved to be unreliable. Surprise, surprise!
Enjoy!
Edit: And on top of it all, here is an article in today's issue of The News about Pakistan's social sector and an analysis of the weaknesses of its social policy.
Thursday, 15 November 2007
On the Media, the Coming Elections and the Economy
Musharraf has launched his media blitz, giving interviews to newspapers and news channels from around the world. In an interview with Sky TV yesterday, he insisted that he is actually a democrat and that his rule is democratic (!!!) and is committed to holding elections. When asked how these elections can be considered fair when all the opposition party leadership is in jail or under house arrest, he insisted that this presented no problem:
Uh... well, perhaps it belatedly occurred to someone that in fact you couldn't see the opposition leaders on TV because of the media ban. Today it seems as if Aaj TV, Dawn News, CNN and BBC have all come back on air. Geo is still banned it would seem. CNN and BBC had returned briefly on Sunday when they aired Musharraf's press conference live, but of course were duly taken off air again when Benazir held a press conference later that evening. Lets see how long they stay on air this time.
So now that we have, more or less, access to the media again, what do we see? Well, first of all there is Chaudhry Pervez Elahi, the Chief Minister of Punjab holding an election rally. Hmm... doesn't seem unusual, except... wait! Didn't the very same Chaudhry Pervez Elahi warn of "specific information" that suicide bombers had entered Lahore and that it wasn't safe for the PPP to hold a rally? The same Chaudhry Pervez Elahi who when asked why he felt so secure in holding rallies, while at the same time citing "specific" security threats against rallies of his political opponents, answered that his rallies were "safe" because of the "prayers of the people"?
The same Chaudhry Pervez Elahi who was pushing Musharraf not to make a deal with the PPP and to hold elections early because "the PML was now better placed and well-entrenched to win the polls".
No wonder Elahi is so confidant about the PML-Q's ability to do well in coming elections. After all, all the political opposition has been detained. Opposition rallies can be banned due to 'security threats', political opponents and other agitators can be arbitrarily thrown into jail, where they are made to understand that their only way out is to become PML-Q members. And anti-graffitti and billboard laws only apply to the opposition.... One gets the feeling that Mr Chaudhry Pervez Elahi may well become our next prime minister. (Thats the slogan that was being chanted at the rally they were showing on the TV by the way).
Something else, one got to watch on TV was the adviser to the Prime Minister on finance, Dr. Salman Shah, harping on about the wonderful performance of the government's economic policies. He insisted vehemently that the Emergency had not hurt investor confidence (as he was speaking, the stock market was in free fall by the way - it lost 300 points today), and insisted that any reservations that investors had was because of the "bad image" that the media presented of Pakistan.
Now I really know nothing about Dr. Shah, except that he used to work in the World Bank, and is supposedly one of Musharraf's most trusted advisers. I have no knowledge of his achievements or ambitions but what he said convinced me that he is a man full of sh*t who is not averse to lying in his master's cause.
He went on about how he read some report about failed states that was issued 18 months ago, which ranked Pakistan as a number 2 failed state below Somalia and above Afghanistan and that being curious, he examined the methodology of the report and found that they came to conclusion by finding 'negative' media reports from the country's media, and feeding them into a computer, which tallied the results to give a list of failed states. Thus, Pakistan's high ranking was due to its media's "negativism". The implication was that Musharraf's muzzling of the media was justified because, it was tarnishing Pakistan's image and thereby hurting its economy.
A bigger crock of sh*t I have yet to see presented by one of Musharraf's lackeys. No such report exists. No such methodology exists. And really if this is the best the government can come up with, it deserves to be torn down in quick order. This is precisely why we need a free media - to hear our leaders in their own words so that we can expose their lies.
Oh, and on the note of the government's economic policies:
Pakistan's trade deficit is now $1.945 billion per month. And the ADB funded $1.8 billion governance reform programme is failing due to a lack of interest shown by the government in making it work. This programme was supposed to help improve governance on a local level, providing better access to justice, legal protection, and improve the ability of local government officials to understand and cater to the needs of their localities. As this jargon littered report in Dawn quotes:
Another argument, perhaps, that for the vast majority of people, the current government has had as little interest in making a positive difference in their lives as the much maligned governments of the 90s did?
The government has attracted a great deal of foreign investment. But don't think that this is some kind of charity. According to CNBC, in the first quarter of 2007-08, $180 million was remitted out of the country as profit on investment. And this is before massive, now foreign-owned companies such as PTCL have announced their profits. Yes, while it hasn't been too interested in bettering the lives of the people, our government has done well by the multinationals, hasn't it?
Phew. On a slightly lighter note, a fine article on 'The Divine Right of Army Chiefs' in Pakistan.
Oh, and if anyone is wondering why a student wing of the MMA would betray Imran Khan to the police? I refer you to this report in the papers about the fact that the non-jailed political leadership of the MMA is almost unanimous in feeling that it should not confront the establishment on the issue of the Emergency.
AC: But all your main opponents are either locked up or under house arrest. Can't you see how the West finds that difficult to square?PM: No they are not locked up?
AC: or under house arrest?
PM: The main political parties, the leader, you see them on the TV, the main leader you can see on the television.
AC: They're still locked up. I did see Imran Khan, I did see the head of the Jamaat-e-Islami but they're both under house arrest or on the run. Even Benazir Bhutto is now locked up in her house?
PM: Yes, but what do you expect?
AC: how can that be free and fair, Sir?
PM: You should get to the root of the problem...
Uh... well, perhaps it belatedly occurred to someone that in fact you couldn't see the opposition leaders on TV because of the media ban. Today it seems as if Aaj TV, Dawn News, CNN and BBC have all come back on air. Geo is still banned it would seem. CNN and BBC had returned briefly on Sunday when they aired Musharraf's press conference live, but of course were duly taken off air again when Benazir held a press conference later that evening. Lets see how long they stay on air this time.
So now that we have, more or less, access to the media again, what do we see? Well, first of all there is Chaudhry Pervez Elahi, the Chief Minister of Punjab holding an election rally. Hmm... doesn't seem unusual, except... wait! Didn't the very same Chaudhry Pervez Elahi warn of "specific information" that suicide bombers had entered Lahore and that it wasn't safe for the PPP to hold a rally? The same Chaudhry Pervez Elahi who when asked why he felt so secure in holding rallies, while at the same time citing "specific" security threats against rallies of his political opponents, answered that his rallies were "safe" because of the "prayers of the people"?
The same Chaudhry Pervez Elahi who was pushing Musharraf not to make a deal with the PPP and to hold elections early because "the PML was now better placed and well-entrenched to win the polls".
No wonder Elahi is so confidant about the PML-Q's ability to do well in coming elections. After all, all the political opposition has been detained. Opposition rallies can be banned due to 'security threats', political opponents and other agitators can be arbitrarily thrown into jail, where they are made to understand that their only way out is to become PML-Q members. And anti-graffitti and billboard laws only apply to the opposition.... One gets the feeling that Mr Chaudhry Pervez Elahi may well become our next prime minister. (Thats the slogan that was being chanted at the rally they were showing on the TV by the way).
Something else, one got to watch on TV was the adviser to the Prime Minister on finance, Dr. Salman Shah, harping on about the wonderful performance of the government's economic policies. He insisted vehemently that the Emergency had not hurt investor confidence (as he was speaking, the stock market was in free fall by the way - it lost 300 points today), and insisted that any reservations that investors had was because of the "bad image" that the media presented of Pakistan.
Now I really know nothing about Dr. Shah, except that he used to work in the World Bank, and is supposedly one of Musharraf's most trusted advisers. I have no knowledge of his achievements or ambitions but what he said convinced me that he is a man full of sh*t who is not averse to lying in his master's cause.
He went on about how he read some report about failed states that was issued 18 months ago, which ranked Pakistan as a number 2 failed state below Somalia and above Afghanistan and that being curious, he examined the methodology of the report and found that they came to conclusion by finding 'negative' media reports from the country's media, and feeding them into a computer, which tallied the results to give a list of failed states. Thus, Pakistan's high ranking was due to its media's "negativism". The implication was that Musharraf's muzzling of the media was justified because, it was tarnishing Pakistan's image and thereby hurting its economy.
A bigger crock of sh*t I have yet to see presented by one of Musharraf's lackeys. No such report exists. No such methodology exists. And really if this is the best the government can come up with, it deserves to be torn down in quick order. This is precisely why we need a free media - to hear our leaders in their own words so that we can expose their lies.
Oh, and on the note of the government's economic policies:
Pakistan's trade deficit is now $1.945 billion per month. And the ADB funded $1.8 billion governance reform programme is failing due to a lack of interest shown by the government in making it work. This programme was supposed to help improve governance on a local level, providing better access to justice, legal protection, and improve the ability of local government officials to understand and cater to the needs of their localities. As this jargon littered report in Dawn quotes:
The final outcome of the reform programme may not be different from the poor results of the Social Action Programme of the 90s, says the assessment.
Another argument, perhaps, that for the vast majority of people, the current government has had as little interest in making a positive difference in their lives as the much maligned governments of the 90s did?
The government has attracted a great deal of foreign investment. But don't think that this is some kind of charity. According to CNBC, in the first quarter of 2007-08, $180 million was remitted out of the country as profit on investment. And this is before massive, now foreign-owned companies such as PTCL have announced their profits. Yes, while it hasn't been too interested in bettering the lives of the people, our government has done well by the multinationals, hasn't it?
Phew. On a slightly lighter note, a fine article on 'The Divine Right of Army Chiefs' in Pakistan.
Oh, and if anyone is wondering why a student wing of the MMA would betray Imran Khan to the police? I refer you to this report in the papers about the fact that the non-jailed political leadership of the MMA is almost unanimous in feeling that it should not confront the establishment on the issue of the Emergency.
Saturday, 23 June 2007
More on the Pakistani Budget
Sherry Rehman has an excellent critique of the government's proposed budget here in Dawn which is simply a must read. She adds a great deal of nuance and detail to the point I made in my blog here about how the budget is once again concerned with growth at the expense of welfare, thereby benefiting the rich at the expense of the poor. She also points out the following:
1. The Rs. 60 billion handout from the US Pentagon isn't in the budget. Where is it? Rahman reminds us that there is no parliamentary oversight over the military budget (the military does not report what its spending the public's money on).
2. Despite massive economic growth, the Pakistani government still borrows heavily. Massive borrowing from local banks drives interest rates up, inhibits local investment and drives inflation.
3. My point about the need to tax luxury consumer imports is made. (I had made the point about imported cars.) These account for $2.04 billion out of $27 billion spent on imports.
4. Where's the pork? Rahman points out the expenditure of the President House is earmarked as Rs. 316 million. NAB's budget has now been inflated to Rs. 897 million (Rs. 2.4 million a day!) By contrast, the Ministry of Law, Justice and Human Rights is a paltry Rs. 197 million! Does NAB have any kind of results to show for this kind of expenditure? What possible use will this money be put to? One answer might lie in the fact that NAB is now a civilian façade for a retirement welfare club for ex-ISI officials.
As it happens, in the same issue of the Dawn is a small op-ed on the Provincial Budget of Baluchistan. Widespread resentment about the exploitation of Baluchistan's rich mineral and fossil fuel wealth, while the provincial government remained starved of funds, helped fuel the civil war that has raged in the province over the last few years. One might have expected the government to try and address some of these concerns, even on a cosmetic level. Alas, this has not happened.
Firstly, the total budget outlay is Rs. 63 billion. This in a province where the "the federal government extracts no less than an estimated Rs. 78 billion annually from Baluchistan's oil fields alone." That does not, of course count the huge amounts earned from the extraction of sui gas, or the large amounts of coal, iron ore and copper deposits found there. Overall 39 different minerals are being mined in the province (source: Baluchistan Economic Report 2005). Yet the Public Sector Development Programme has budgeted only Rs. 13 billion for social development - of which Rs. 10 billion is unfunded, with the province hoping for handouts from foreign development donors and the Federal government. This amount is solely for the continuance of current projects. No new projects are envisaged.
All this in a province where 47% of the population is below the poverty line, there is no significant private investment in productive sectors of the economy - whether agricultural, mining, or industrial. Female literacy is half that of the national average and maternal mortality is almost twice the national average.
The Federal government argues that it is investing billions in Baluchistan - these billions are all going into the development of the new port and its environs in Gwadar, and the building of a highway infrastructure to link military and naval installations to the rest of the country. While there is some trickle down in terms of menial jobs, this is offset by the navy's encroachment onto coastal areas through which they are destroying the livelihood of Makrani fishing communities. Productive investment this is not.
These are important concerns and needed to be given due consideration by the people's representatives. Alas, the NA has adopted the budget with hardly any changes, or any debate, whatsoever.
IZ
1. The Rs. 60 billion handout from the US Pentagon isn't in the budget. Where is it? Rahman reminds us that there is no parliamentary oversight over the military budget (the military does not report what its spending the public's money on).
2. Despite massive economic growth, the Pakistani government still borrows heavily. Massive borrowing from local banks drives interest rates up, inhibits local investment and drives inflation.
3. My point about the need to tax luxury consumer imports is made. (I had made the point about imported cars.) These account for $2.04 billion out of $27 billion spent on imports.
4. Where's the pork? Rahman points out the expenditure of the President House is earmarked as Rs. 316 million. NAB's budget has now been inflated to Rs. 897 million (Rs. 2.4 million a day!) By contrast, the Ministry of Law, Justice and Human Rights is a paltry Rs. 197 million! Does NAB have any kind of results to show for this kind of expenditure? What possible use will this money be put to? One answer might lie in the fact that NAB is now a civilian façade for a retirement welfare club for ex-ISI officials.
As it happens, in the same issue of the Dawn is a small op-ed on the Provincial Budget of Baluchistan. Widespread resentment about the exploitation of Baluchistan's rich mineral and fossil fuel wealth, while the provincial government remained starved of funds, helped fuel the civil war that has raged in the province over the last few years. One might have expected the government to try and address some of these concerns, even on a cosmetic level. Alas, this has not happened.
Firstly, the total budget outlay is Rs. 63 billion. This in a province where the "the federal government extracts no less than an estimated Rs. 78 billion annually from Baluchistan's oil fields alone." That does not, of course count the huge amounts earned from the extraction of sui gas, or the large amounts of coal, iron ore and copper deposits found there. Overall 39 different minerals are being mined in the province (source: Baluchistan Economic Report 2005). Yet the Public Sector Development Programme has budgeted only Rs. 13 billion for social development - of which Rs. 10 billion is unfunded, with the province hoping for handouts from foreign development donors and the Federal government. This amount is solely for the continuance of current projects. No new projects are envisaged.
All this in a province where 47% of the population is below the poverty line, there is no significant private investment in productive sectors of the economy - whether agricultural, mining, or industrial. Female literacy is half that of the national average and maternal mortality is almost twice the national average.
The Federal government argues that it is investing billions in Baluchistan - these billions are all going into the development of the new port and its environs in Gwadar, and the building of a highway infrastructure to link military and naval installations to the rest of the country. While there is some trickle down in terms of menial jobs, this is offset by the navy's encroachment onto coastal areas through which they are destroying the livelihood of Makrani fishing communities. Productive investment this is not.
These are important concerns and needed to be given due consideration by the people's representatives. Alas, the NA has adopted the budget with hardly any changes, or any debate, whatsoever.
IZ
Tuesday, 19 June 2007
The National Budget
I've been browsing through some elements of the Pakistani government's proposed budget. Unfortunately I don't have either the time, or the expertise to give it a thorough going over, but I thought I would post some of my reflections on some of the features that caught my eye. At a later date I hope to pursue some of the debates about the budget more carefully. In the meantime there is a good, short overview of what's in the budget here. There is also an interesting article in the Gulf News under Benazir Bhutto's name (though it reads as if it was written by someone on her economic policy team) which mixes some good analysis of Pakistan's economic needs with plugs for the former PPP government.
So, the budget. Firstly, its huge - almost 22% bigger than last year's budget. Military spending once again increases, as does the allocation for educational spending. Interestingly, education spending is still 1/12th of the official military budget (its a widely known secret that actual spending on the military is much higher).
As an aside, I tend to be a little cynical about increased education spending. While I'm for it in principle, there tend to be far too many cash cow pet projects and a severe lack of overall strategy in educational development. Education is not going to have a major social impact just by having more money thrown at it. Remember how the Education Ministry spent millions of rupees on buying computers for government schools after a presentation by Intel's marketing team? No wonder the country manager for Intel sounds the warning that Pakistan is being left behind in the "world IT scene" while simultaneously being "very optimistic about increasing our future market share" in the country. There's big money in education.
Okay, back to the budget:
There's a great deal of talk about poverty alleviation through fighting inflation. Which is odd, because if people are currently poor, fighting inflation, at best, keeps them where they are instead of improving their situation. The Bhutto article has some good bits on why the budget does not present a sound strategy to fight inflation.
Pension allocations have increased, which is to the good. Minimum wage has now increased to Rs. 4600. Interesting. I never even knew that Pakistan had a minimum wage and I don't think many other people do either. But at least if the government sticks to the minimum wage this should have a knock on effect on salaries elsewhere.
There's still a strong emphasis on sales tax, which is a flat tax that effects poor and rich equally, and once again more chipping away at more progressive taxes - to the benefit of the rich. For example, there is a proposal to drop the Capital Value Tax on imported cars. Poor people, who are not buying many imported cars, don't benefit much from this. But on the "upside" we'll be seeing more Mercedes' and Porsches on the streets in coming years.
This raises an interesting point about "development" spending priorities. Due to Pakistan's booming economy over the last few years, the Musharraf government has been able to spend huge amounts on infrastructure projects. Local governments, Karachi most notably, also launched a large number of infrastructure projects in Karachi. Many of these have taken the form of roads, bridges, underpasses, highways etc.
It brings to mind the two different models of infrastructure spending by the USA and UK in the fifties. The USA opted to go for massive infrastructure spending on roads, the highway system, etc. which acted as a massive subsidy for the automobile sector. The UK on the other hand opted for massive spending on public transport thereby building a train, tube and bus network that was one of the best in the world at the time. The US government was inviting Americans to buy cars. The UK was dissuading them from doing so. The social and environmental impact of these decisions are with us today. I should also say political impact, since the USA is such a huge consumer of petroleum that much of its foreign policy is focused on ensuring that it has cheap and steady supplies of oil.
Which brings me back to the massive infrastructure projects in Pakistan's cities, and the attempt to promote automobile ownership. Most Pakistanis seem to take it as a sign of modernisation and economic development that car ownership has boomed in the last few years. But despite the multi-million rupee projects to improve Karachi's road, congestion remains a major problem, as does pollution. Interestingly proposals for a monorail and revamping for the circular railway and other public transportation schemes have been rejected, halted or severely watered down. One suspects that its not the best way to plan for the country's future.
One last thing. The sales tax on paper and paper products has been ramped up to 20%. Why? Its not as if the country needs any more disincentives to printing and publishing.
IZ
So, the budget. Firstly, its huge - almost 22% bigger than last year's budget. Military spending once again increases, as does the allocation for educational spending. Interestingly, education spending is still 1/12th of the official military budget (its a widely known secret that actual spending on the military is much higher).
As an aside, I tend to be a little cynical about increased education spending. While I'm for it in principle, there tend to be far too many cash cow pet projects and a severe lack of overall strategy in educational development. Education is not going to have a major social impact just by having more money thrown at it. Remember how the Education Ministry spent millions of rupees on buying computers for government schools after a presentation by Intel's marketing team? No wonder the country manager for Intel sounds the warning that Pakistan is being left behind in the "world IT scene" while simultaneously being "very optimistic about increasing our future market share" in the country. There's big money in education.
Okay, back to the budget:
There's a great deal of talk about poverty alleviation through fighting inflation. Which is odd, because if people are currently poor, fighting inflation, at best, keeps them where they are instead of improving their situation. The Bhutto article has some good bits on why the budget does not present a sound strategy to fight inflation.
Pension allocations have increased, which is to the good. Minimum wage has now increased to Rs. 4600. Interesting. I never even knew that Pakistan had a minimum wage and I don't think many other people do either. But at least if the government sticks to the minimum wage this should have a knock on effect on salaries elsewhere.
There's still a strong emphasis on sales tax, which is a flat tax that effects poor and rich equally, and once again more chipping away at more progressive taxes - to the benefit of the rich. For example, there is a proposal to drop the Capital Value Tax on imported cars. Poor people, who are not buying many imported cars, don't benefit much from this. But on the "upside" we'll be seeing more Mercedes' and Porsches on the streets in coming years.
This raises an interesting point about "development" spending priorities. Due to Pakistan's booming economy over the last few years, the Musharraf government has been able to spend huge amounts on infrastructure projects. Local governments, Karachi most notably, also launched a large number of infrastructure projects in Karachi. Many of these have taken the form of roads, bridges, underpasses, highways etc.
It brings to mind the two different models of infrastructure spending by the USA and UK in the fifties. The USA opted to go for massive infrastructure spending on roads, the highway system, etc. which acted as a massive subsidy for the automobile sector. The UK on the other hand opted for massive spending on public transport thereby building a train, tube and bus network that was one of the best in the world at the time. The US government was inviting Americans to buy cars. The UK was dissuading them from doing so. The social and environmental impact of these decisions are with us today. I should also say political impact, since the USA is such a huge consumer of petroleum that much of its foreign policy is focused on ensuring that it has cheap and steady supplies of oil.
Which brings me back to the massive infrastructure projects in Pakistan's cities, and the attempt to promote automobile ownership. Most Pakistanis seem to take it as a sign of modernisation and economic development that car ownership has boomed in the last few years. But despite the multi-million rupee projects to improve Karachi's road, congestion remains a major problem, as does pollution. Interestingly proposals for a monorail and revamping for the circular railway and other public transportation schemes have been rejected, halted or severely watered down. One suspects that its not the best way to plan for the country's future.
One last thing. The sales tax on paper and paper products has been ramped up to 20%. Why? Its not as if the country needs any more disincentives to printing and publishing.
IZ
Monday, 18 June 2007
Failed States
'Foreign Policy' magazine and the Fund for Peace recently released their third annual Failed States Index. Pakistan is ranked a surprisingly high 12th on the overall indicators of instability, making it just better off than Haiti (11th) and just worse off than North Korea (13th).
The bottom five, in order, are: Sudan, Iraq, Somalia, Zimbabwe and then Chad.
'Most Improved' prize goes to Liberia, followed by Indonesia (primarily on the back of its settling of the Aceh conflict since 2005 and economic stabilisation). The country whose situation changed the most drastically for the worse over the last year is Lebanon which has seen a sharp drop, followed by Somalia.
Now generally I'm sceptical about these kinds of exercises and always find that their methodology is endlessly debatable. But a survey of these results does seem to correspond to my own rough estimates. I'm not sure if I would put Sudan at number one though. It seems to me that with the large oil reserves and a rich wildlife ecosystem that have been discovered there, and with the humanitarian disaster and civil conflict limited to one part of the country, and no serious crisis for its government, its probably better off than both Iraq and Somalia, but that's only from a cursory look.
Interestingly Pakistan's economic performance is one of the highest rated in the rankings. In the 50 worst states, only Columbia, Nigeria and Equatorial Guinea have better performing economies - and all three economies are major oil exporters that have been benefiting from the oil boom of the last few years. This is particularly interesting because the myth of Pakistani economic weakness still plagues political and public debate in Pakistan. Instead on focusing on social justice, public services and narrowing the poverty gap, the government still insists on following narrow, growth-driven economic polices that contribute to the growing inequality between rich and poor and ignore social priorities such as the environment.
That's particularly important because according to the report, Pakistan is in the high risk category with regards to environmental sustainability. Whatever gains Pakistan is making through its booming economy are at threat if environmental management is not made a priority.
IZ
The bottom five, in order, are: Sudan, Iraq, Somalia, Zimbabwe and then Chad.
'Most Improved' prize goes to Liberia, followed by Indonesia (primarily on the back of its settling of the Aceh conflict since 2005 and economic stabilisation). The country whose situation changed the most drastically for the worse over the last year is Lebanon which has seen a sharp drop, followed by Somalia.
Now generally I'm sceptical about these kinds of exercises and always find that their methodology is endlessly debatable. But a survey of these results does seem to correspond to my own rough estimates. I'm not sure if I would put Sudan at number one though. It seems to me that with the large oil reserves and a rich wildlife ecosystem that have been discovered there, and with the humanitarian disaster and civil conflict limited to one part of the country, and no serious crisis for its government, its probably better off than both Iraq and Somalia, but that's only from a cursory look.
Interestingly Pakistan's economic performance is one of the highest rated in the rankings. In the 50 worst states, only Columbia, Nigeria and Equatorial Guinea have better performing economies - and all three economies are major oil exporters that have been benefiting from the oil boom of the last few years. This is particularly interesting because the myth of Pakistani economic weakness still plagues political and public debate in Pakistan. Instead on focusing on social justice, public services and narrowing the poverty gap, the government still insists on following narrow, growth-driven economic polices that contribute to the growing inequality between rich and poor and ignore social priorities such as the environment.
That's particularly important because according to the report, Pakistan is in the high risk category with regards to environmental sustainability. Whatever gains Pakistan is making through its booming economy are at threat if environmental management is not made a priority.
IZ
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