Elections, Pakistani Style

Did anyone see the PBS International Dispatch program on Pakistan called

``Pakistan-the Inside Story``? Utterly riveting. This was a program by Najam

Sethi and he traversed the tortuous paths Pakistan has taken through various

inept leaders, pulling no punches. Wonderfully produced, paced and edited.

This is a must see for all those interested in Pakistan.

Gen. Musharraf states his concerns and vision clearly, as the

straightforward and honest individual that he is - for the first time those

views are not skewed or distorted or presented in a background of prejudiced

stereotypes by the western media.

I am in the process of trying to get a copy of the program. I remember an

article a while back here on Chowk by Salman Lodhy in the advertising

business who wanted Pakistanis to present the truth in the media rather than

the slanted and distorted versions we get. Here is one such program.

I think that the offer of the $1000 Mr. Lodhy made should be put to good

use by airing this program again. I will do my best to help make it happen.

Well some people may find humourous the wretchedness of their nation, I most certainly do not. Saleem, Irfan Uncle & Co. are not nice friendly ppl but vicious mobsters and plunderers of our national wealth. Present them as they really are.

Otherwise a good piece.

Adnan

Fuzair: I found an interesting article discussing why certain countries like Korea and Malaysia have benefited from high rates of economic growth. While other countries like Pakistan have not benefited from them.

``After the race riots of 1969, the Government of Malaysia adopted a 20-year plan to promote growth and human development, reduce poverty, end racial discrimination in employment and improve education and health standards. The success of that 20-year plan led to a second plan in 1990 which aims to continue the country`s successful pattern of growth with equity, bringing Malaysia to the status of a fully developed country by 2020.

The Republic of Korea is a prime example of government-forged strong links between growth and human development. In 1945 only 13 per cent of adults had any formal schooling. Then both public and private investment focused on education. By 1990, average years of schooling for all reached 9.9 years, higher than in industrialized countries. It is the fastest educational growth in the world, supplemented by strong vocational training. While education improved, so did the economy, with growth averaging 9.2 per cent a year in the 1980s, based on exports, high savings and investment rates.

Pakistan, by contrast, has failed to turn economic growth to the advantage of its people. Despite a healthy growth rate of more than 5 per cent a year during the 1980s, job opportunities contracted. The government concentrated resources on capital-intensive industry such as chemicals, iron and steel at the expense of small-scale, labour-intensive areas such as rubber and agriculture. On the Human Development Index, Pakistan ranks 134th out of 174 countries, compared with Korea, ranked 81st. School enrolment totals 37 per cent of youth in Pakistan, compared with 81 per cent in Korea.``

Complete article at http://www.undp.org/news/hdr96pr1.htm

Fuzair #45

Having read your apology, I read your earlier lengthy post in any case. Reminded me of the following lines:

Caught no fish

Tell you why

water too low

wind to high

fly wouldnt catch

drat those boys

... and so on

Caught no fish

plenty of reasons

Caught no fish

could talk two seasons

Having criticized others for their poor/repetitive/obfuscating/just-plain-confused writing styles, I must apologize for my last post. I can only plead that I did not have time to edit it properly.

Regards to all.

Re: Umairr #40

I read Omar Noman`s first book, `The Political Economy of Pakistan,` a few years ago but I am not familiar with the one in which he states that, but for nationalization, Pakistan would be at Malaysian levels of industrialization/development. I do not know on what assumptions he has based this conclusion but I sincerely doubt that his analysis is anywhere close to correct. Unlike us, Malaysia, Thailand, Indonesia and any other wannabe NIC that you can name was extremely open to foreign investment. They allow majority or 100% foreign ownership and not just minority share joint-ventures. We were never this open. In addition, these other countries also produced for export. We were interested only in producing for the captive home market where shoddy goods were sold at artificially inflated prices to a captive market. The foreign firms very early on decided that Pakistan was a lousy market and moved on. For example, General Tyres, GM, Bedford (the ones I can remember off the top of my head) all packed up and left. Ayub Khan`s cronies (esp. Gen. Habibullah who was given an industrial empire as a consolation prize for not being made CinC) and the infamous 22 Families of Pakistan also, I believe, helped `convince` the foreign firms to leave and brought up the assets at knockdown prices. The only MNCs left were the British ones which predated Pakistan (ICI, BT now Pakistan Tobacco, etc) and were content to make a comfortable and safe little profit in a completely protected market. In any case, our entire industrial structure (textiles, sporting goods and minor surgical steel stuff excepted) was meant for the domestic market. To reiterate, our economy`s manufacturing sector under Ayub was a hothouse flower that could only survive in an extremely protected environment. So very high tariffs, completely closed/captive domestic markets, an artificially high exchange rate (to make imports cheap), cheap credit and massive government patronage made our Ayubian `miracle` possible.
Back when I was a banker in Karachi, I was talking to one of my uncle`s friends from Lahore, a fairly large though not really big industrialist, and I naively asked him if he was looking forward to the privatization and economic liberalization and the chance to compete openly in the market. He laughed out aloud at my naivete and said that why would he want to compete in an open market when now, in this highly regulated and unfree market, he was netting a 30-35% profit margin? Why indeed? Much of our private sector is almost as fat, bloated, incompetent, corrupt and inefficient as our public sector.

Incidentally, many Latin American countries enjoyed the same type of success as we did in the 1960s, just to collapse completely in the 1970s and 1980s as the oil crisis led to the debt crisis.

The S. Koreans also went the same route as we did (except for the artificially high exchange rate) but they made it work because General Park`s govt insisted on the chaebol exporting a large portion of their output. This forced the S. Korean firms to improve both the quality and cost aspects of their products and keep climbing up the economic food chain.

Primary and Secondary Import Substitution industrialization will work extremely well as long as the economy has some way to earn foreign exchange (to pay for its capital imports) AND its not hit by adverse external economic shocks. We exported jute, cotton and cotton yarn and textiles all through the 1950s and 1960s to pay for our capital and other imports and overvalued exchange rate. Combined with substantial foreign aid and ridiculously cheap oil, we thrived. However, the 1965 War, massive economic disruption, drying up of US aid, massive war cost to pay, nearly did us in. We survived because oil was still dirt cheap and world commodity prices fairly high. However, post-1973, our economy would still have been very badly hurt by the oil crisis and the inability to earn enough foreign exchange to afford our trade deficit. Unlike the Japanese, Taiwanese or S. Koreans, we would not have had any viable export base to generate foreign exchange. Our economy would still have limped along all through the 1970s with worker remittances being used to finance oil imports and the budget deficit.

To repeat, a focus on Import Substitution Industrialization, the Pakistani strategy in the 1960s, was an invitation to disaster. Why we didn`t collapse in the 1970s was because we discovered a new export market: the Middle East for our manpower. At its peak, worker remittances were bringing in about 12% of GDP (these are official figures, mind you; unofficial ones would be much higher). As far as these workers investing in the stock market goes (or buying govt bonds, or opening up small businesses/manufacturing firms of their own), alas, that is a wishful dream indeed. I wrote a paper as an undergrad analyzing Pakistani worker remittances betwen 1975-85 and found that all they were interested in was (i) buying land and/or building a house, preferably the fanciest one in the gaon or mohalla, (ii) jewellery for their women, and (iii) getting their sons/daughters married off in a REALLY fancy shaadi. On the plus side, the nutrition and calorie intake of remittance families was cleary better than that of non-remittance ones. As one family member put it, ``Aho ji, assi to roz asli ghee da pakka huwa khana khaanday!``

So, in short, pure consumption and no investment. Ours is not a savings oriented culture but one that is geared to conspicious consumption. Just look at our national savings rate, the last time I looked it was well below 10%. The govt used the remittances to make up the import gap, defence expenditure and for debt servicing, not infrastructure investment or even social welfare spending.

As far as capitalism making things worse at first, this is the famous Kuznet Inverted-U hypothesis that relates to several differenet social welfare indicators. Mahbubul Haq, who was a brilliant economist, wrote in his Harvard thesis that development consists of expropriating the surplus from the labourer and reinvesting it. This, he said, was not exploitation but development. The belief is that, once the nation has reached the Rostowian takeoff stage of self-sustaining growth, it can afford some level of redistributive policies. Nobody, not even the conservatives, really believes in trickle-down helping the bottom 30-40% or so of the income distribution. Even the US in the 1950s and 1960s had a national poverty rate of 20-25% or so (and the poverty rate is a family of four with an annual income BELOW

Re Umairr

Your wistfulness about the economic potential of Pakistan is about correct...with hindsight being a perfect 20/20. You had a certain amount of homogeneity, a cultural cohesion and you were given an infrastructure that did not exist. In other words, you were quite close to Korea or Japan right after WW2. But of course, what happened is a whole another story.You could have built from scratch a whole new system. But...

Re nationalization...it was a hot trend in that phase and your country did what the others did. That egomaniac Mrs Gandhi did the same with her half-baked socialist tendencies that was countered by your hotheaded ZAB. And the mothership, England was in a similar situation then with a whole lot of centralized planning.

While your economy of buoyant in the 60s, that very same buoyancy enabled many of the elite to shut their eyes toward democratic systems. This period led to a certain arrogance that manifested in many misteps beginning with the 65 war, and since then it has been a progressive downhill ride save for that brief period when you were able to milk the Soviet invasion of Afghanistan. But then you were not able to convert those into economic vibrancy and the only constituency, and I stress, the only constituency that has gained by the overall slide is the military, and specifically, the army. Perhaps, this is one of the largest armies that does not serve the will of the people. Rather, it`s the poor people that serve the will of the army.

Re: Umairr # 40

I agree with you that nationalization was an ill-fated choice in Pakistan`s development and it should be corrected; the present dream about privatization process needs to be spured onwards and realized as soon as possible!

Robert Kaplan not withstanding, Pakistan`s future is quiet disconcerting and as a nation, we should be paying more attention to where we are heading instead of where we could have been had our stars been different!

In all of this there is a glimmer of hope and that is that Pakistan, in its present state, cannot continue any longer and therein lies our redemption as a nation!

The days of the ``vulture culture`` are limited and the fools can rejoice all they want, because the king is gone and the queen is not coming back!

Ciao!

Fuzair #34: Thanks for the informative reply. My knowledge of the Pakistan economy in the 60s is based on the following factors:

Writings by economists like Omar Noman (who states that Pakistan would have been where Malaysia is currently had nationalization not taken place in the 70s).

A comparative analysis of the buying power of salaries of govt. employees in the 50s and 60s with the salaries of govt. employees in the 90s. I have done this in quite a bit of detail for the members of the armed forces. Basically, whenever an old time soldier told me how, ``good`` they were during his days, I promptly reminded him the buying power of my salary as a Captain was equivalent to the buying power of the salary of his batman in the 50s (this is a fact, based on quite a bit of analysis done by me):-) Not to mention the fact that the civil servants now are quite a bit more educated than those of the 50s and 60s. So, much much lower salary for more educated people. During one part of the 50s, the PAF officers actually made more money in terms of buying power than the officers of the USAF.

The third factor is the history of Pakistan, itself. If the legend is correct, than Pakistan was the boondocks at the time of 1947. The Montana, Wyoming and North Dakota of the Sub-Continent. I can remember Pakistan from around the mid 70s. And at that time, Pakistan had made quite a bit of progress. Along with Punjab University, there were a string of other universities, medical colleges, hotel chains, dams, roads etc. However, since the mid-70s onwards, nothing much seems to have been done. So somewhere between 1947 and 1970, somebody build quite a bit of infrastructure.

The fourth factor is the influx of money from the ex-patriates in the Middle East, after the 70s. Had Pakistan not nationalized everything, this money could have been put to quite a bit of use by being invested in private enterprise. Along with this, the ex-patriates in areas besides the Middle East would have actually contributed their skills and money also, if they had the option of investing in private enterprises, which despite their inefficiencies must have been quite a bit more efficient than anything else available in South Asia at that time, and in Pakistan currently.

However, my analysis is somewhat unscientific, while yours seems more scientific. So I will default to yours. But I would be interested in your replies to the points I have mentioned above. Why does the current average Captain level person`s salary in the PAF give him the same buying power as the batman of Captain in the 50s/60s?

Also one final scientific point: While driving on the Pakistani highways, one still sees a lot of pictures of Ayub Khan painted on the back of trucks belonging the average Pakistani. One hardly ever sees a picture of any other leader on these trucks, including Jinnah :-) This point probably won`t hold up in an economics class, however something must have been going good during those days.

My own analysis of the 60s compared to now is that: During the 60s in Pakistan, the rich were getting richer and the poorer were getting poorer (this usually happens in the first stages of capitalism, until the benefits start trickling down). In the 90s, the poor continued to get poorer and the rich also started getting poorer. I think Pakistan in the 50s and 60s missed the social side of things (hence the creation of Bangladesh), but may have been on the right track on the economic side. From the 70s onwards, it missed both the social and economic side.

Zakk #38: ``btw his coment about the PTI and others not being infiltrated by teh families ...is somehwat wrong his senior vice prez is Mohsin Ali Khan ..son in Law of Aslam Khattak?...and in case of Maulana Fazlur Rehman ..he is Muft Mehmoods son ...he might not have the cash of one of teh families ...but he has the influence ...to the MQM and the Jamaat I would agree :) ..``

To some extent, I agree. I believe Nasim Zehra quit PTI when Mohsin Ali Khan joined PTI. I am not too much about him, though. However, he is by far the exception in terms of the membership of PTI. Perhaps the only last name in the PTI. I am familiar with the names that were given seats by PTI in the previous election. Almost all of them were either middle class people, or ex-beurecrats, technocrats etc. Very very few last names. That is why PTI didn`t win a single seat. NS had offered PTI something like 35 seats if they agreed to support joint candidates, with the PML. But PTI did not agree due to the last name factor. Ethically, a very upright decision. Politically, the biggest mistake Imran Khan has made so far.

Fazlur-ur-Rahman is also definitely a last name. However, he is an exception also. The religious parties are still pre-dominantly last-name free (except for the one odd leader of each party).

Viking #35 You asked for comments concerning 50% share of parliament seats to the military. How about an even more radical suggestion: tell the military guys that they can have 100% of the parliament IF they are qualified to run for elections AFTER leaving the army and IF they win elections. Otherwise, they stick to playing bands and showing up for disaster relief, and not be seen or heard from at any other time.

Hmm interestin debate ..Fuzairs post was very interesting .I recently sent of a letter to the frontier post and mailed a few other people about a simple idea of using the existing peshawar Landi Kotal railway line as a mass transit system for commuters ..apprently the railway as a economical and eco friendly means of transport does not go down well with the gov fat cats ...

I would like to point out something to both Fuzair and Umair about the Pakistani economy ..being very bouyant in the 60`s ..First fo the economic boom was not there in teh real sense ..You should read G.W Choudrys book ..the last day of United Pakistan ...there had been a continuous capital outflow from East pakistan to West Pakistan which had been markedly increasin during Ayubs Govt.In fact Jute processing was being done in West Pakistan ! ...

ANother comment was the one about Bhuttos Nationalisation ..now I am no PPP person ..but other countried had done the same taking on outta control capitalists ...like Egypts revolution ..it caused a setback to the business sector ..but lead to a major improvement in social services ..simialirly India ...in both cases ..it was only when smart leaders realising that now was the time to allow innovative local people ..to invest ..that caused an economic take off ..In ZA B`s case ..at the time there had been a massive concentration of wealth in the hands of a few families ..al concentrated in Karachi to the detriment of the rest of the country IN fact a new generation of business people cropped up because of that Nationalisation and the subsequent liberlisation caused by Zia Ul haq ..( oddly most of which are the bed rock of the Muslim League in Punjab ) What was wrong was the way it was done ..brutally and ad hoc ...that was wrong ..but then that goes with the intention ZAB was settling scores ..seen in that sense he did the job evry well!:)

As Fuzairs said ..the failure of the Ayub govt to invest in social services ..was bound to cause a situation which would damgae even the strongest govt. ..a rapidly politically aware people ..deprived of basic righst like education ..the author of this policy ..`the tricle down efect ` was the now venerated late ..Mehbubul Haq ..who believd if u amke the top ofthe cake heavy enough it would trickle down ...which it never did ...btw he was a great economist too!:)

To correct Umair ..btw his coment about the PTI and others not being infiltrated by teh families ...is somehwat wrong his senior vice prez is Mohsin Ali Khan ..son in Law of Aslam Khattak?...and in case of Maulana Fazlur Rehman ..he is Muft Mehmoods son ...he might not have the cash of one of teh families ...but he has the influence ...to the MQM and the Jamaat I would agree :) ..

Hmm interestin debate ..Fuzairs post was very interesting .I recently sent of a letter to the frontier post and mailed a few other people about a simple idea of using the existing peshawar Landi Kotal railway line as a mass transit system for commuters ..apprently the railway as a economical and eco friendly means of transport does not go down well with the gov fat cats ...

I would like to point out something to both Fuzair and Umair about the Pakistani economy ..being very bouyant in the 60`s ..First fo the economic boom was not there in teh real sense ..You should read G.W Choudrys book ..the last day of United Pakistan ...there had been a continuous capital outflow from East pakistan to West Pakistan which had been markedly increasin during Ayubs Govt.In fact Jute processing was being done in West Pakistan ! ...

ANother comment was the one about Bhuttos Nationalisation ..now I am no PPP person ..but other countried had done the same taking on outta control capitalists ...like Egypts revolution ..it caused a setback to the business sector ..but lead to a major improvement in social services ..simialirly India ...in both cases ..it was only when smart leaders realising that now was the time to allow innovative local people ..to invest ..that caused an economic take off ..In ZA B`s case ..at the time there had been a massive concentration of wealth in the hands of a few families ..al concentrated in Karachi to the detriment of the rest of the country IN fact a new generation of business people cropped up because of that Nationalisation and the subsequent liberlisation caused by Zia Ul haq ..( oddly most of which are the bed rock of the Muslim League in Punjab ) What was wrong was the way it was done ..brutally and ad hoc ...that was wrong ..but then that goes with the intention ZAB was settling scores ..seen in that sense he did the job evry well!:)

As Fuzairs said ..the failure of the Ayub govt to invest in social services ..was bound to cause a situation which would damgae even the strongest govt. ..a rapidly politically aware people ..deprived of basic righst like education ..the author of this policy ..`the tricle down efect ` was the now venerated late ..Mehbubul Haq ..who believd if u amke the top ofthe cake heavy enough it would trickle down ...which it never did ...btw he was a great economist too!:)

To correct Umair ..btw his coment about the PTI and others not being infiltrated by teh families ...is somehwat wrong his senior vice prez is Mohsin Ali Khan ..son in Law of Aslam Khattak?...and in case of Maulana Fazlur Rehman ..he is Muft Mehmoods son ...he might not have the cash of one of teh families ...but he has the influence ...to the MQM and the Jamaat I would agree :) ..

Sorry for the digression, but some interesting stuff in here enough to fuel enough e-jehads. check this out: The financial times annual review of India. Finally online

http://surveys.ft.com/india2000/

its quite interesting. while the pakis decry their elected leaders as extremely corrupt and authoritarian and welcome the army`s action when they are toppled, they also criticize the army for trampling its democracy. may its time to design a constituition that blends both the civil and military components and give them both an equal and simultaneous chance to plunder.

may be there could be a system where half of the seats of the legislative assembly could be filled in by the army representatives and the other half by the elected ones. or a system wherein the army could be assigned a number of seats equal to that of the seats secured by the single largest party.

any ideas how this kind of demockracy might work in pakistan?

Re: Umairr #23

I usually find myself in general agreement with much of what you say but in this I have to disagree somewhat. Pakistan was certainly doing extremely well in the 1960s (at least up till the 1965 War) but it would in all likelihood have suffered a massive economic setback in the 1970s even if there had been no 1971 War. Why?

Pretty straightforward actually. First, we failed miserably in providing primary education to the masses and put most of our education funds into white elephant type `showcase` educational institutions (all those medical and engineering colleges, for example). Granted that Bhutto`s nationalization absolutely ruined what used to be a pretty good educational system (at least at the college level), the fact still remains that we have absolutely failed our `common` man and woman.

Second, we went for primary and secondary import substitution industrialization (ISI) and completely ignored the importance of a viable export sector. We relied on jute and cotton export to earn our foreign exchange and our idea of a high value-added export component was/is cotton textiles and sporting goods. Both of these actually rank very low on the economic food chain and in the 1970s oil crisis, our economy would have tanked anyway, even without the Bangladesh fiasco. S. Korea, for example, was among the world`s most heavily indebted countries in the 1970s but, unlike Argentina or Brazil, did not suffer from a serious debt crisis because their industrial sector was geared not just for export production but high value-added export production. So they kept moving up the economic food chain into higher and higher value-added exports. They now compete with the US, Japan, and EU on more or less equal terms.

Our infant industries went straight from infancy to senility because they had no incentive to either improve quality or to keep costs down. Our work force is among the Third World`s most expensive, in terms of productivity, and our industrial sector is dead. My uncle, who owned a textile mill and export business in the 1980s before he cut his losses and got out of it, once calculated that the S. Koreans could buy Pakistani raw cotton, ship it to S. Korea, spin it and produce textiles AND still outcompete us in both price and quality. Since he has a Ph.D. in Economics, I have a certain amount of faith in his calculations.

The only reason why 90% of our textile industry hasn`t died completely is because of the quota we get under the Multi-Fibre Agreement. Even Bangladesh, which only started in the 1970s, can outcompete us in both price and quality! And as far as I know, they don`t even grow cotton there!

Third reason why our economy would have failed miserably in the 1970s even without ZAB is that our infrastructure is among the worst in the world (barring Somalia or the Central African Republic or some other bananastan). In the 1980s, it used to cost almost as much to ship cotton from Punjab to Karachi as it did to ship it from Karachi to Europe. For god`s sake, we ship almost everything by truck! One of the most expensive shipping methods known to man. Even in the US, truck transport is only profitable if it is subsidized (indirectly) by the government!

The less said about our power generation and telecommunications system, the better. The World Bank, the architect of all of the Third World`s ills, put forward two excellent infrastructure proposals in the 1980s for Pakistan. One was to make the entire rail line from Karachi to Peshawar double tracked and to improve the quality of the existing line so that the average speed on it could be just about doubled. This was shot down by Saeed Qadir because it would have meant no money for the NLC (and him). The second proposal was to build a barge port at Sukkur, just below the Sukkur Barrage, so as to make commodity (cotton and rice mainly) transport to Karachi much more cost efficient. This was of course shot down by the transport lobby since then half the truck drivers in Pakistan would be out of work. I believe there were also ``vested interests`` in the Federal government who weren`t too keen on developing interior Sind either.

The point is that all of these were/are ideas which should have been carried out in the 1960s but weren`t. Education, improved infrastructure, economic efficiency, and so on, are really no-brainers when you come to think about it but no one had thought about it.

Regards.

PS: Don`t forget about Punjab University which actually predates Pakistan by few decades!

Even the BBC gets it wrong !

http://www.the-hindu.com/2000/11/10/stories/0410210l.htm

The World Bank is considering programs worth 12,000 crores or $2.5 billion -- it has not approved them. Moveover, this is over a period of seven years.

If you go to www.worldbank.com you will find the actual projects approved by the World Bank.

-Arun Gupta