Pakistan’s Decade of 1999-2009 in Review

December 30, 2009 at 3:28 am (Economics, Pakistan) (, )


By Riaz Haq

This December 31, 2009, is not just the end of the year; it brings a momentous decade of achievements in Pakistan to a chaotic and bloody end. After a relatively peaceful but economically stagnant decade of the 1990s, the year 1999 brought a bloodless coup led by General Pervez Musharraf, ushering in an era of accelerated economic growth that led to more than doubling of the national GDP, and dramatic expansion in Pakistan’s urban middle class. The decade also cast a huge shadow of the US “war on terror” on Pakistan, eventually turning the nation into a frontline state in the increasingly deadly conflict that shows no signs of abating. Along with the blood and gore and chaos on the streets, there are hopeful signs that rule of law and accountability is beginning to prevail in the country with the restoration of representative democracy and independent judiciary, largely in response to an increasingly assertive urban middle class, vibrant mass media and growing civil society. Let’s look at some of the highlights, low lights and then discuss the shape of things to come.

High-lights:

1. Pakistan’s tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1.2 trillion.

2. Pakistan’s GDP more than doubled to $165 billion (nominal) since 1999. It has reached $440 billion in terms of purchasing power parity (PPP).

3. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01.

4. The country has experienced a mass media revolution. There are now multiple, competing television channels catering to almost every niche, whim and taste—from news, sports, comedy and talk shows to channels dedicated to cooking, fashion, fitness, music, business, religion, local languages and cultures etc. It seems that this media revolution has had a profound influence on how many young people talk, dress and behave, emulating the outspoken media personalities, actors, preachers, singers, sportsmen, celebrities and fashion models. In addition to a smorgasbord of TV channels born out of a surge in advertising spending, there are many newspapers and tabloids, and serious and glossy magazines, and many FM radio stations providing local news, sports, weather and traffic.

5. The strong consumer demand in Pakistan drove large investments in real estate, construction, communications, automobile manufacturing, banking and various consumer goods. Millions of new jobs were created. By all accounts, the ranks of the middle class swelled in Pakistan.

6. The Karachi stock market surged ten fold from 2001 to 2007. After a 50% drop in 2008 due to election-related turmoil, the Karachi stock market recovered about 50% this year. According to Tariq Iqbal Khan, Chairman of Pakistan National Investment Trust(NIT), KSE-100 equities provided investors with average annual return of 21 percent during the decade 1999-2009 while the average inflation during this period was 7.2 percent.

7. The Wall Street Journal did a story in September 2007 on Pakistan’s start-up boom that said, “Scores of new businesses once unseen in Pakistan, from fitness studios to chic coffee shops to hair-transplant centers, are springing up in the wake of a dramatic economic expansion. As a result, new wealth and unprecedented consumer choice have become part of Pakistan’s volatile social mix.”

8. The PPP leadership under former Prime Minister Benazir Bhutto returned to Pakistan in 2007 following a US-sponsored amnesty signed by former President Musharraf. Unfortunately, Ms. Bhutto was assassinated before the elections in December 2007. However, the results of the free and fair elections held in 2008 were respected by former President Musharraf that allowed the PPP, led by Benazir Bhutto’s widower Asif Ali Zardari, to assume control of the government. Later, Mr. Zardari forced President Musharraf out and succeeded him into the office of the president.

9. Persistent and powerful mass movement led by Pakistani lawyers forced the PPP government to restore Chief Justice Iftikhar Chaudhry and several other senior judges earlier this year. The NRO amnesty that facilitated the PPP leaders’ return has since been annulled by the Supreme Court of Pakistan, and all of the corruption and criminal cases against Mr. Zardari and many of his ministers have been re-opened. The chief justice appears determined to pursue accountability and rule of law against all odds.

10. Pakistan’s information technology(IT) sector revenue grew from almost nothing to about $2.8 billion in 2008, with about half of it from exports.

11. Higher education reform initiated by Dr. Ata-ur Rehman Khan under President Musharraf resulted in over fivefold increase in public funding for universities, with a special emphasis on science, technology and engineering. The reform supported initiatives such as a free national digital library and high-speed Internet access for universities as well as new scholarships enabling more than 2,000 students to study abroad for PhDs — with incentives to return to Pakistan afterward. The years of reform have coincided with increases in the number of Pakistani authors publishing in research journals, especially in mathematics and engineering, as well as boosting the impact of their research outside Pakistan.

12. The telecom boom increased mobile phone penetration from near zero in 1999 to over 50% now, along with the expansion of Internet access to double digits.

13. Pakistan joined the ranks of the top destinations for business process and technology outsourcing. According to oDesk, Pakistan experienced 328% growth in its outsourcing business in 2007-8, second only to the Philippines (789%) on a list of seven top locations that include US (260%), Canada (121%), India (113%), the Ukraine (77%) and Russia (43%).

14. Over two dozen Pakistani scientists are doing research on large hadron collider at CERN in Switzerland. More scientists are engaged in research at Pakistan’s Jinnah research station in Antarctica.

15. Urbanization is not just a side effect of economic growth; it is an integral part of the process, according to the World Bank. With the robust economic growth averaging 7 percent and availability of millions of new jobs created between 2000 and 2008, there has been increased rural to urban migration in Pakistan to fill the jobs in growing manufacturing and service sectors. The level of urbanization in Pakistan is now the highest in South Asia, and its urban population is likely to equal its rural population by 2030, according to a report titled ‘Life in the City: Pakistan in Focus’, released by the United Nations Population Fund. Pakistan ranks 163 and India at 174 on a list of over 200 countries compiled by Nationmaster. The urban population now contributes about three quarters of Pakistan’s gross domestic product and almost all of the government revenue. The industrial sector contributes over 27% of the GDP, higher than the 19% contributed by agriculture, with services accounting for the rest of the GDP.

16. Along with increasing internal rural to urban migration, there has also been a wave overseas migration from urban areas in Pakistan to urban centers overseas, especially the Middle East. The Middle East, with its vast oil wealth, has provided many opportunities for overseas workers to work and earn a living building and maintaining infrastructure in various Arab states, especially in the Persian Gulf. In recent years, overseas Pakistanis have been contributing to Pakistan’s economy with remittances exceeding $8 billion a year.

17. A new class of entrepreneurs has emerged in Pakistan during this decade who, in small but significant ways, have challenged the religious orthodoxy. They present a sharp contrast to the rising wave of Islamic radicalism that the U.S. and others in the West view as an existential threat to Pakistan. And with many well-traveled Pakistanis importing ideas from abroad, they are contributing to Pakistan’s 21st-century search for itself.

18. Pakistan’s arms industry came a long way from making small arms as a cottage industry in the last few decades. The US and Western arms embargoes imposed on Pakistan at critical moments in its history have proved to be a blessing in disguise. In particular, the problems Pakistan faced in the aftermath of Pressler Amendment in 1992 became an opportunity for the country to rely on indigenous development and production of defense equipment. Not only did the country become a significant arms exporter, the defense production went high tech this decade, with the growing private defense production sector.

Low-lights:

1. There appears to be a serious lack of leadership in the face of daily carnage unfolding in Pakistan’s cities and towns. In the 51 weeks so far in 2009, Pakistan has suffered at least 44 attacks. The death toll from this steady stream of violence stands at more than 650. And if the past few days are any guide, that horrifying annual tally is not yet complete.

The past three months have been particularly bloody. More than half of Pakistan’s terrorists attacks this year have occurred since the beginning of October, a few weeks after the Pakistan military launched an operation to drive the Pakistan Taliban out of its stronghold in South Waziristan.

The country has suffered at least 25 terrorist attacks in that brutal ten-week phase. The latest one was in Peshawar, killing at least 4.

2. In spite of the IMF bailout of Pakistan, the economy is practically in recession, barely keeping pace with the population growth. According to Economic Survey 2008-09, presented by Finance Minister Shaukat Tarin, Pakistan’s economy grew by a mere 2.0 percent, barely keeping pace with population growth. The growth fell significantly short of the 4.5 percent target for the year, which was already very modest compared with an average of 7% economic growth witnessed from 2001-2008.

3. Long, recurring and daily power outages are severely impacting all business, economic and social activities in Pakistan. Adding further to the public pain are the multiple crises of sugar shortage, food price rises, and water scarcity, and deteriorating security situation making life extremely difficult for ordinary people.

4. In spite of the fact that Pakistan’s Human Development Index (HDI) has risen by 1.30 percent per year from 0.402 to 0.572 during 1980-2007 period, and it has accelerated to 1.9% increase since 2000 when it was reported to be 0.499, its progress is not yet sufficient to improve the nation’s ranking relative to other countries in regions like East Asia, which have been moving considerably faster. Pakistan’s index grew by 1.75% in the 1980s but slipped to less than 1.3% during the lost decade of the 1990s.

5. Low levels of literacy continue to threaten Pakistan’s future. Although literacy in Pakistan has grown by about 13% this decade to about 56%, it remains woefully low when compared to other South Asian nations. Ranked at 141 on a list of 177 countries, Pakistan’s human development ranking remains very low. Particularly alarming is the low primary school enrollment for girls which stands at about 30% in rural areas, where the majority of Pakistanis live.

6. Lack of opportunity in rural areas is pushing more and more young people to cities and towns which is further straining the already overburdened infrastructure and municipal services in major cities. In a recent interview with Wall Street Journal, Pakistan’s former finance minister Salman Shah explained that “Pakistan has to be part of globalization or you end up with Talibanization”. “Until we put these young people into industrialization and services, and off-farm work, they will drift into this negative extremism; there is nothing worse than not having a job,” Shah elaborated. But increasing urbanization in South Asia represents both a challenge and an opportunity for India, Pakistan and Bangladesh. It is a challenge because it imposes a rapidly growing burden on the already overcrowded megacities such as Mumbai, Delhi, Dhaka and Karachi. Such a massive challenge will require a tremendous focus on providing housing, transportation, schooling, healthcare, water, power, sanitation and other services at an accelerated pace.

7. There has been rising intolerance and violence against minorities in Pakistan. This year has been particularly traumatic for Pakistani christian community. In August, an angry and armed mob of radical Muslims attacked a Christian village in Gojra, Punjab, firing indiscriminately, throwing Molotov cocktails and looting houses. About 70 houses were burnt to the ground and at least seven Christians died in the flames. Sectarian violence has also increased against Shia and Ahmedi minority communities.

8. Violence against women and wide gender gap continue to hold Pakistan back. The status of women in Pakistan continues to vary considerably across different classes, regions, and the rural/urban divide due to uneven socioeconomic development and the impact of tribal, feudal, and urban social customs on women’s lives. While some women are soaring in the skies as pilots of passenger jets and supersonic fighter planes, others are being buried alive for defying tribal traditions.

9. Pakistan’s water crisis became more acute during this decade. According to the United Nations’ World Water Development Report, the total actual renewable water resources in Pakistan decreased from 2,961 cubic meters per capita in 2000 to 1,420 cubic meters in 2005. A more recent study indicates an available supply of water of little more than 1,000 cubic meters per person, which puts Pakistan in the category of a high stress country.

10. Even after significant reduction in poverty, the number of poor people earning less than $1.25 a day remains high. Center for Poverty Reduction (CPRSPD), backed by the United Nations Development Program(UNDP), estimated that Pakistan’s poverty at national level declined sharply from 22.3 percent in 2005-06 (versus India’s poverty rate of 42%) to 17.2 percent in 2007-08. The poverty has most likely increased in 2008-09 with the disappearance of economic growth.

The Future:

While Pakistanis must accept responsibility for their own unwise actions in the past, there is no doubt that the US presence in the region has had a huge negative impact on Pakistanis. Some of the actions by Americans, starting with the use of the “Mujaheddin” during the Soviet war in Afghanistan, have clearly contributed to the problems Pakistan faces today. These problems have been further exacerbated by the use of heavy-handed US tactics in the region, American policy of targeted assassinations by the CIA, and the use of private contractors like Blackwater who view themselves as “Christian Crusaders tasked with eliminating Muslims and the Islamic faith from the globe”. There were few religious militants and no incidents of suicide bombings in Pakistan before the US invasion of Afghanistan in 2001. There was only a small presence of the Taliban or al Qaeda in Pakistan prior to the tragic terrorist attacks of September 11, 2001 in the United States. But in recent years, thousands of Pakistani soldiers have died fighting, killing or capturing the militants who fled into Pakistan from Afghanistan. And the civilian death toll from terrorist attacks in Pakistan is continuing to increase on a daily basis.

Pakistan is in the midst of multiple crises of confidence ranging from lack of basic security and political stability to continuing economic stagnation, many of which are of their own making. More than anything else, what the nation needs now is sincere, strong and wise leadership to deal with both internal and external threats. Pakistan needs leaders who can not only respond to the urgent national security problems now, but those leaders who can also ensure a better future looking beyond the current “war on terror” and US demands on Pakistan to a time when the US will leave the region and Pakistanis will have to live with the consequences of their actions in support of the United States. Pakistanis should use force when necessary against the militants and murderers, but they must not shun other avenues of political dialog and necessary reforms to build a national consensus for peace, stability, social justice, and shared economic benefits.

Pakistan is just too big to fail. In spite of all of the serious problems it faces today, I remain optimistic that country will not only survive but thrive in the coming decades. With a fairly large educated urban middle class, vibrant media, active civil society, assertive judiciary, many philanthropic organizations, and a spirit of entrepreneurship, the nation has the necessary ingredients to overcome its current difficulties to build a democratic government accountable to its people.

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