Musharraf's Economic Legacy
Regardless of the criticism of President Musharraf's politics or personality, there is general agreement among independent economists that, through his structural reforms and economic management, President Musharraf left Pakistan's economy in much better shape than he found it when he seized power in 1999.
Here are some of the key highlights of the results of Musharraf era economy:
1. Pakistan's tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1 trillion.
2. Pakistan's GDP more than doubled to $144b since 1999.
3. Most recent figures in 2007 indicate that Pakistan's total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999.
4. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. Contrary to accusations by Musharraf's detractors that it was an artificial consumer-led growth, it was really an investment-led boom that Pakistan experienced in Musharraf years.
5. In spite of the election-related political turmoil, Pakistan’s economy maintained its momentum in 2007, growing by 7%, slightly more than the 6.6% for 2006. Agricultural sector growth recovered sharply, from 1.6% in 2006 to 5% in 2007, while the manufacturing sector growth continued at 8.4% in 2007, slightly more moderate than the 10% for 2006. Services grew at 8% in 2007, down from 9.6% in 2006.
6. 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 during Shaukat Aziz's term in office. According to Tara Vishwanath, the World Bank's lead economist for South Asia, about 5% of Pakistanis moved from the poor to the middle class in three years from 2001-2004, the most recent figures available. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan's per capita GDP is approaching $3,000 per head.
7. The Karachi stock market surged ten fold from 2001 to 2007.
8. Pakistan positioned itself as one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.
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."
The one sore spot that sticks out in President Musharraf's and Shaukat Aziz's record is their lack of attention to the rising energy needs of the country. Appropriate planning should have comprehended new power plants to support growth forecasts. There were other mistakes as well, such as the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML (Q) government and ultimately led to President Musharraf's departure.
Since the takeover by the PPP-PML(N) coalition, there has been a sharp decline in Pakistan's economy. Summing up the current economic situation,the Economist magazine in its June 12 issue says as follows:" (The current) macroeconomic disarray will be familiar to the coalition government led by the Pakistan People's Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government's debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October." Please read "Pakistani Economy Returning to the Bad Old Days".
The current government hailed the performance of Pakistan's economy under President Musharraf's watch as follows: "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)
In addition to the improved economy, President Musharraf's policies enabled halving of poverty from 34% in 2000 to 17% in 2008, proliferation of independent radio and television stations, and an expanded middle class, which ultimately led to his downfall.
It was on "dictator" Musharraf's watch that Pakistan saw unprecedented deregulation of the mass media, prolific growth, and vibrant debate that had never occurred before him. None of the "democrats" or "dictators" who ruled before him gave such a gift to the people of Pakistan.
It is this media freedom that I think is Musharraf's best legacy that can not be easily denied or reversed. It'll serve Pakistan well by shining light on the misdeeds of Pakistan's leaders now, and in the future.
Related Links:
Haq's Musings
FDI in Pakistan
Video: Who Says Pakistan Is a Failed State?
Structural Reforms in Pakistan's Economy
President Musharraf Video Defense on Power Crisis
Comments
I find your blog really interesting. However, I have a question regarding your post August 19, 2008- Musharraf's Economic Legacy.
You stated here that 5% of Pakistani moved from being poor to the middle class. What are your sources? I can't seem find the original source from Worldbank's website either.
Thanks in advanced.
Here's the quote from NY Times I was referring to:
"The size of Pakistan’s expanded middle class is in fact debated. Tara Vishwanath, the World Bank’s lead economist for South Asia, said 5 percent of Pakistan’s 160 million people — or roughly 8 million Pakistanis — appear to have moved from living in poverty to being part of the lower middle class between 2001 and 2004. She said data being collected this year was needed to confirm whether the increase was permanent."
More recently, ADB has published a report saying Pakistan's middle class is 40% of the population.
http://www.adb.org/Documents/Books/Key_Indicators/2010/pdf/KI2010-Special-Chapter.pdf
Despite the regular eruptions of bad news from Pakistan, Shaukat Aziz, a former finance and prime minister there, remains cautiously bullish about his country's prospects, including the peace dividend that could come with the orderly exit of U.S. troops from Afghanistan. But that depends, he says, on a Marshall Plan-like reconstruction of Afghanistan -- and the U.S. delivering on tribal economic development plans.
That might seem overly ambitious for distracted Western capitals with tapped out coffers. But the 'mostly-sunny' technocratic vision is not unusual for Aziz, a former Citibank (C) executive who presided over strong growth as finance minister after General Pervez Musharraf staged a coup in 1999. (Musharraf just announced he would shortly be returning to Pakistan -- and risking arrest -- from Dubai where he has been since leaving office.)
Aziz, 64, was elected prime minister in 2004 (surviving an assassination attempt while campaigning) and was the first of 23 predecessors to serve out a full term, until 2007. He took up residence in London soon after and now serves on the board of the British hotel chain Millennium and Copthorne Hotels, and as an advisor to the Blackstone Group (BX).
Aziz recently spoke with Fortune about the state of Pakistan's economy, how to rebuild Afghanistan, and why Pakistan deserves a free trade agreement with the U.S. Below is an edited transcript of that discussion.
It's been more than six years since Goldman Sachs (GS) recognized Pakistan among the Next Eleven newly industrialized countries -- inflation is up, investment is at a 40-year low, and infrastructure is deteriorating, particularly in the power sector. By just about any measure things are not particularly good, so what is the source of your optimism about the Pakistani economy?
The problems of the world economy have obviously leaked to Pakistan. Yes, investment is down, trade also, but in Pakistan's case a lot of this is due to the security situation, the war on terror. We have to pay a huge price in terms of damaging our investor confidence -- both domestic and foreign.
On the other hand, we should bear in mind that more than two-thirds of the population lives in rural areas and agriculture has done well, especially in cotton -- prices and exports are up and the farmer is relatively more comfortable.
The country's human capital is a strong suit, the Pakistani people are very talented, their skills levels are impressive and they are hard-working. There's a huge number of Pakistanis working overseas and we can export a few more million and there won't be an iota of difference because there is a whole pipeline of trained – and untrained - people coming.
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http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
Investing after the Arab Spring: Unfinished business
When India was drawn into the Nuclear Suppliers Group (a multilateral anti-proliferation organization) Pakistan should have been included too. The United States has to decide: are we in the tent or outside? That was a major missed opportunity. Inclusion in the NSG comes with a lot of responsibility and obligations. Engagement becomes more formalized, providing a forum for all key players to be around the table to discuss and solve issues. We are a nuclear power – there is no such thing as a halfway house here - and to deny it doesn't help anybody. It's not too late to rectify this. It would help the whole atmosphere in South Asia. If you keep people out of the tent, things can suddenly move the other way.
You've said that Pakistan would be better off with a free trade agreement with the U.S., instead of aid, but given the state of US-Pakistan relations that seems very unlikely.
I'm not optimistic about a free trade agreement because even when Congress was very friendly, they couldn't get things through, even things which were promised like the Reconstruction Opportunity Zones in the border area of Afghanistan and Pakistan, which was important for all three countries. The idea was to give duty-free access to the U.S. market for any goods produced in the tribal areas. Obviously when you put up a factory there the cost of production will be high, initially at least, because there is no infrastructure. This was a well-conceived and well-designed way of creating jobs. Otherwise they will have no incentive to put down their guns. Congress has approved other special market access programs like this for Haiti and Jordan, and maybe others. It was promised by the U.S. five or six years ago but nothing happened.
We really need to re-focus on these things so that when peace returns in the area, especially in the border areas, people will have alternatives for making a living. Security is not a big issue. It can be done by local people. You don't need expatriates; there are already plenty of entrepreneurs in that area. You're talking about very small numbers for the textile market, but symbolically it's very important because it will give people hope. This would be a good way for the U.S. government and Congress to send a message to people in the border areas: we want you to have a better, peaceful future.....
http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
According to the report’s HDI list, between 2000 and 2007, which roughly corresponds with General Pervez Musharraf’s regime, the Human Development Index rose 18.9 per cent — an annual average of 2.7 per cent.
From 2007 to 2012 it only went up by 3.4 per cent, just under 0.7 per cent per annum. Somehow, things got even worse in the last three years of that time frame, with HDI increases crashing down as low as 0.59% — a negligible average annual increase of under 0.20 per cent.
The 2013 Human Development Report “The Rise of the South: Human Progress in a Diverse World” is instrumental in the context of Pakistan, especially given the challenges faced today due to poor policy choices that have been confronted in the report.
Meeting a small group of journalists here, Marc André Franche, UNDP Pakistan’s Country Director launched the report and said it is important for what it says and there are lessons to be learnt from countries with preconditions similar to Pakistan.
http://tribune.com.pk/story/527474/human-development-report-2013-the-rise-of-the-south-as-others-rise-pakistan-parks-the-bus/
1. Nine world class engineering universities were developed and 18 public universities further developed.
2. Pakistan was ranked third in world banking profitability.
3. The IT industry was valued at around $2 billion, including $1 billion in exports and employed around 90,000 professionals.
4. The CNG sector attracted over $70 billion in investment in the past five years and created 45,000 jobs.
5. The telecommunications sector attracted around $10 billion in investments and created over 1.3 million jobs.
6. Industrial parks were set up throughout the country for the first time.
7. Mega projects such as the Saindak, Rekodiq, marble production, coal production, mining and quarrying were pursued.
8. Foreign reserves increased from $700 million to $17 billion.
9. The Karachi stock market went from 700 points to 15,000 points.
10. The literacy rate improved by 11 per cent.
11. Poverty decreased by 10 per cent.
12. Four dams were built: Mirani, Subakzai, Gomalzam, Khurram, and Tangi,
13. Seven motorways were completed or were under construction,
14. Gwadar, an advanced sea port, was developed,
15. 650 kilometres of coastal highways were constructed.
16. A historic 100% increase in tax collection (amounting to Rs1 trillion) was observed.
17. Large scale manufacturing was at a 30-year high, and construction at a 17-year high.
18. Copper and gold deposits were found in Chagai, worth about $600 million annually if sold.
19. A new oil refinery with the UAE that could process 300,000 oil barrels a day was established.
20. The industrial sector registered 26 per cent growth.
21. The economy was the third fastest growing economy after China and India .
22. The Institute of Space Technology was established.
23. Sardar Bahadur Khan Women University Quetta was established.
24. The University of Science and Technology, Bannu, was established.
25. The University of Hazara was founded.
26. The Malakand University in Chakdara was established.
27. The University of Gujrat was established
28. The Virtual University of Pakistan was established
29. Sarhad University of IT in Peshawar was established
30. The National Law University in Islamabad was established
31. The Media University in Islamabad was established
32. University of Education in Lahore was established
33. Lasbela University of Marine Sciences, Baluchistan, was established
34. Baluchistan University of IT & Management, Quetta (2002)
35. The Pakistan economy was worth $ 160 billion in 2007
36. GDP Purchasing Power Parity (PPP) was $ 475.5 billion in 2007
37. The GDP per Capita in 2007 was $ 1000
38. Revenue collection in 2007/08 was Rs1.002 billion
39. Exports in 2007were worth $18.5 billion
40. Textile exports in 2007 were worth $11.2 billion
41. Foreign direct investment in 2007 was $8.5 billion
42. Debt servicing in 2007 was 26 per cent of the GDP
43. The poverty level in 2007 was 24 per cent
44. The literacy rate in 2007 was 53 per cent
45. Pakistan development programs in 2007 were valued at Rs520 billion
46. The Karachi stock exchange in 2007 was $70 billion at 15,000 points
47. Exports in 2007: $18.5 billion
48. Pakistan now has a total of 245,682 educational institutions in all categories, including 164,579 in the public sector and 81,103 in the private sector, according to the National Education Census (NEC-2005).
49. There are now more than 5,000 Pakistanis doing PhDs in foreign countries on scholarship. 300 Pakistanis receive PhD degrees every year, in 1999, the number was just 20.
50. In total, 99,319 educational institutions increased in Musharraf’s era!
http://blogs.tribune.com.pk/story/2092/50-reasons-pakistan-needs-musharraf/
The former military dictator Pervez Musharraf should be tried for high treason, Pakistan's prime minister said, raising the prospect of a serious clash between the country's civilian and military masters.
A treason trial would mark the first time in Pakistan's history that a military ruler has been held accountable, and the decision was cheered by many who believe the country's overweening army needs to accept the primacy of elected politicians.
The announcement by Nawaz Sharif, Pakistan's recently elected prime minister, ended months of speculation over whether the government would dare take on a former president and army chief who could face the death penalty if found guilty of overturning the country's constitution.
Only the government is able to try someone for treason, for which a special court would have to be established.
Although Musharraf is currently under house arrest and has negligible support in the country, many observers have long claimed the still powerful military elite would never allow a civilian court to try one of its former chiefs.
"Musharraf is still more popular in the army than [his successor General Ashfaq Parvez] Kayani," said a lawyer, Chaudry Faisal Fareed.
He said Sharif risked "opening a Pandora's Box" if the trial expanded to drag in other high-ranking officers.
Musharraf's actions amounted to high treason, Sharif told parliament on Monday , promising that the former dictator had to "answer for all his deeds in court".
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In the view of many lawyers, Musharraf is likely to be successful in defending himself against those charges, but treason charges are "an open and shut case", according to Fareed.
Talat Masood, a retired army officer, said a trial was inevitable given that Musharraf had alienated two of the country's most powerful men: Sharif, whom he toppled in a 1999 coup, and Iftikhar Muhammad Chaudhry, the activist chief justice who was the object of the then president's battle against senior judges in 2007.
"It's a gamble, no doubt about it," said Masood. "Sharif is taking a certain element of risk because the fight against militancy is the greatest challenge Pakistan faces right now and he needs the military for that."
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Many assume that even if the trial does go ahead, a political deal will be hatched to spare Musharraf's life, or even allow him to leave the country to live out his days in exile.
One possible scenario might see the intervention of Saudi Arabia, one of Pakistan's closest allies. Such an outcome would be rich in irony given that Sharif was given exile in the kingdom after he Musharraf deposed him.
Akhtar Hussain, a former vice-president of Pakistan's bar association, said it was likely Musharraf would ultimately receive a presidential pardon after a long legal process that is likely to stretch into 2014 and beyond.
Merely putting the former general on trial would mark an important milestone for Pakistan, he said. "The key thing is the initiation of the trial itself, which is very important for the standing of democratic institutions in this country. The result, whether acquitted or ultimately pardoned is a different matter."
http://www.guardian.co.uk/world/2013/jun/24/pervez-musharraf-treason-pakistan-prime-minister
People who thought WMDs were found in Iraq believed that misinformation even more strongly when they were shown a news story correcting it.
People who thought George W. Bush banned all stem cell research kept thinking he did that even after they were shown an article saying that only some federally funded stem cell work was stopped.
People who said the economy was the most important issue to them, and who disapproved of Obama’s economic record, were shown a graph of nonfarm employment over the prior year – a rising line, adding about a million jobs. They were asked whether the number of people with jobs had gone up, down or stayed about the same. Many, looking straight at the graph, said down.
But if, before they were shown the graph, they were asked to write a few sentences about an experience that made them feel good about themselves, a significant number of them changed their minds about the economy. If you spend a few minutes affirming your self-worth, you’re more likely to say that the number of jobs increased.
In Kahan’s experiment, some people were asked to interpret a table of numbers about whether a skin cream reduced rashes, and some people were asked to interpret a different table – containing the same numbers – about whether a law banning private citizens from carrying concealed handguns reduced crime. Kahan found that when the numbers in the table conflicted with people’s positions on gun control, they couldn’t do the math right, though they could when the subject was skin cream. The bleakest finding was that the more advanced that people’s math skills were, the more likely it was that their political views, whether liberal or conservative, made them less able to solve the math problem.
I hate what this implies – not only about gun control, but also about other contentious issues, like climate change. I’m not completely ready to give up on the idea that disputes over facts can be resolved by evidence, but you have to admit that things aren’t looking so good for a reason. I keep hoping that one more photo of an iceberg the size of Manhattan calving off of Greenland, one more stretch of record-breaking heat and drought and fires, one more graph of how atmospheric carbon dioxide has risen in the past century, will do the trick. But what these studies of how our minds work suggest is that the political judgments we’ve already made are impervious to facts that contradict us.
Maybe climate change denial isn’t the right term; it implies a psychological disorder. Denial is business-as-usual for our brains. More and better facts don’t turn low-information voters into well-equipped citizens. It just makes them more committed to their misperceptions. In the entire history of the universe, no Fox News viewers ever changed their minds because some new data upended their thinking. When there’s a conflict between partisan beliefs and plain evidence, it’s the beliefs that win. The power of emotion over reason isn’t a bug in our human operating systems, it’s a feature.
http://www.salon.com/2013/09/17/the_most_depressing_discovery_about_the_brain_ever_partner/
https://www.nytimes.com/2007/09/26/world/asia/26islamabad.html
It may be the towering black burqa-clad figures that stand at the entrance, or the brickwork, portholes and curved aluminum skylights of the building itself. Either way, the National Art Gallery, which opened last month, has brought new texture to this otherwise sterile, highly planned capital.
The biggest surprise for most Pakistanis is that the National Art Gallery ever opened at all. It took a marathon 28 years to develop and build, and was a victim of financing shortfalls, bureaucratic inertia and repeated shifts in power under alternate military and civilian governments, which often undid what their predecessors had started.
For the gallery’s architect, Naeem Pasha, 64, it has been a long labor of love for the sake of art and what the building represents for the country.
“An art gallery sends a very strong message to the world that we are creative and peaceful, and I want this to be stronger than the act of a suicide bomber,” Mr. Pasha said as he toured the gallery on a recent morning. “His act is one and we are many, and the so many have to be heard, and that is the message that this gallery must make.”
https://twitter.com/haqsmusings/status/1408212855741030400?s=20
Interest payments consume one-third of Pakistan's budget
Over-reliance on loans bodes ill for fiscal sustainability and domestic needs
https://asia.nikkei.com/Economy/Interest-payments-consume-one-third-of-Pakistan-s-budget
Fiscal sustainability has become a major issue among political and economic analysts after Pakistan revealed early this month that servicing debt accounts for more than one-third of its federal budget.
Finance Minister Shaukat Tareen in the National Assembly on June 12 announced the fiscal 2021 federal budget of 8.48 trillion rupees ($54 billion). Interest payments on debt, which are expected to grow by 3.9% from the ongoing fiscal year, account for 3.06 trillion rupees, or 36% of budget expenditures. In contrast, the government is only spending 600 billion rupees on subsidies and 100 billion rupees for COVID-19 vaccinations and emergencies.
The budget also reveals a deficit of 3.99 trillion rupees. The federal government plans to borrow 3.74 trillion rupees to finance this deficit, which makes up 94% of the deficit.
Pakistan's reliance on debt is a violation of the country's Fiscal Responsibility and Debt Limitation Act 2005, which states that the government must limit debt to 60% of gross domestic product. Currently, the ratio stands at 78% of Pakistan's $303 billion GDP.
Hasaan Khawar, a public policy analyst based in Islamabad, says Pakistan borrows heavily not only to finance current expenditures but also to service existing debt. "Pakistan is a having a primary fiscal deficit. That's why the [International Monetary Fund] has been demanding a primary budget surplus so that it starts reducing debt."
"Resources that could have been spent on essential sectors like health, education or public investment are now being dedicated to interest payments," said Naafey Sardar, a senior research associate at Texas A&M University in the U.S., emphasizing that increased debt financing presents a trade-off for Pakistan. "Since increased public investment and expenditures on education and health are associated with improvements in economic growth, higher debt financing expenditures reflect a missed opportunity," he said.
Of the 3.06 trillion rupees earmarked for interest payments on debt, 2.76 trillion rupees, or 90%, will go toward servicing domestic debt.
A senior official involved with the government's development planning told Nikkei on condition of anonymity that domestic borrowing is unsustainable. "Domestic borrowing is always at high commercial rates and external borrowing is mostly at concessional rates. That's why domestic borrowing costs the economy more," the official said.
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Experts believe that a combination of reduced government spending and a tax increase is the solution.
Sardar believes that the way out is to increase tax revenue. "Higher tax receipts can be earned by increasing the corporate tax rate from 29% to 35%," he said. Sardar added that at a time when corporate profits are surging, increasing corporate taxes could be a viable option.
Khawar believes that Pakistan can accrue surpluses by controlling fiscal waste. He says there is a multipronged strategy to deal with the problem. "Government needs to widen the tax base using technology for tax enforcement while reducing expenditures in loss-making state-owned enterprises," he said. "There is no quick fix to this. That's the bottom line."
The Chinese model gained favour as Africa wearied of the free-market capitalism and deregulation that characterised Western-style neoliberalism.
The failure of neoliberal economic policies in fostering social and economic development across the continent has caused political reorientations in Africa
Tim Zajontz
Tim Zajontz, a research fellow at South Africa’s Stellenbosch University, said China positioned its model as an alternative to Western-style democracy, which became a source of inspiration for other African countries such as Zimbabwe, Zambia and Tanzania.
“The failure of neoliberal economic policies in fostering social and economic development across the continent has caused political reorientations in Africa, with China’s economic trajectory frequently being invoked as a viable alternative development model,” Zajontz said.
Orville Schell, Arthur Ross director of the New York-based Asia Society’s Centre on US-China relations, agreed. “China has provided a successful authoritarian developmental model that has worked at home, and is thus seductive to other developing countries that have had difficulty organising their body politics, catalysing their economies with growth and keeping social order. The ‘China model’ has produced economic progress … if people are willing to live in an authoritarian, even totalitarian political environment. There is a trade-off,” Schell said.
China’s Ethiopian ambitions suffer setback with telecoms decision
29 May 2021
However, as Beijing pulls out all the stops to mark the centenary of the ruling party’s establishment on July 1, there is still no consensus on what the China model actually is.
Just over a decade ago after the global financial crisis in 2008, the Chinese government even refused to acknowledge the existence of such a model, or weigh in on the discussions about whether the China model was reality or just something possible.
Instead, a number of retired officials, including former vice-president of the party’s Central Party School Li Junru, cautioned against using the term, citing its possible negative impacts on China’s relations with the world and its domestic development.
In a commentary on Study Times, the school’s flagship newspaper, in December 2009, Li said the notion of China model was factually incorrect and dangerous because it led to “self-satisfaction and blind optimism” and tended to stereotype the country’s ongoing reform experiment.
The ‘China model’ has produced economic progress … if people are willing to live in an authoritarian, even totalitarian political environment
Orville Schell
In the decade since, a group of Chinese academics and intellectuals have also questioned the validity of the Chinese model. Renowned economists Zhang Weiying and Wu Jinglian warned against promoting it, saying it would undermine reform at home and fuel divide and confrontation with the West. Tsinghua University historian Qin Hui argued in 2010 that unlike the rise of China, the rise of the China model, featuring a low level of human rights and welfare, was by no means good news for the country and the world.
It was not until after President Xi Jinping took office in late 2012 that the “China model” finally won official blessing.
“With the rise of China’s national strength and global standing, discussions and studies on the ‘Beijing consensus’, ‘Chinese model, and ‘Chinese road’ have gathered pace in the world,” Xi told senior party cadres at an internal meeting in January 2013.
https://www.thenews.com.pk/print/384431-from-musharraf-to-the-pti
To separate fact from fiction, key economic indicators need to be analysed. Musharraf increased reserves from $1.9 to $11.4 billion. The PPP left $7.2 billion. The PML-N reached a record high of $19.4 billion but ended at $10 billion in FY18. Reserves were $8.3 billion on October 5, 2018. No government could avert the IMF. The PTI may borrow $15 billion.
Musharraf increased the current account deficit from 0.7 percent of GDP to 4.2 percent. The PPP reduced it drastically from 8.2 percent to 1.1 percent. The PML-N ended at 5.8 percent ($18 billion) in FY18. In July 2018 it was 8.3 percent ($2.2 billion) and in August 2.3 percent ($0.6 billion) – a big drop. The dollar-rupee rate increased from 52 to 61, a 17 percent increase when Musharraf left. The PPP increased it by 61 percent to 98. The PML-N increased it by 24 percent to 121. In October 2018, it is 133.
Musharraf increased trade deficit from 2.1 percent of GDP to 8.9 percent. The PPP maintained it at 8.9 percent. The PML-N ended at 9.9 percent ($31 billion). In July 2018 it was 13.6 percent ($3.5 billion) and in Aug 9.2 percent ($2.4 billion). Exports reached a high of 13.5 percent of GDP during Musharraf’s period but ended at 11 percent. The PPP remained at 10.6 percent while the PML-N managed 7.9 percent ($25 billion). In August 2018 it was 8 percent ($2 billion).
Exports are limited to textiles (55 percent) and rice (8 percent). Dawood Razak’s target is $25 billion. Imports rose from 15 percent to 20 percent of GDP during Musharraf’s government. The PPP reduced them to 19.4 percent and the PML-N reduced it further to 18 percent ($56 billion). In August 2018 it was 17.3 percent ($4.5 billion).
Remittances were $5.5 billion in Musharraf’s term. They increased to $14 billion in the PPP’s time and $20 billion in the PML-N’s. Remittances growth dropped drastically to one percent in FY18 from double digits. Imran Khan’s target of $40 billion seems unrealistic. FDI increased from $120 million to $5 billion during Musharraf’s term. In the PPP’s time it dropped to $1.3 billion and in the PML-N’s to $2.8 billion. Pakistan’s Doing Business ranking dropped from 76th in 2007 to 147th in 2017. KSE100 Index has dropped 11.6 percent since August 20 this year. The PTI will need to address the prevailing economic and political uncertainty.
Musharraf increased GDP to 5.5 percent peaking at 9 percent. In FY09 it dropped it to 0.4 percent but the PPP ended with 3.7 percent. The PML-N managed 5.8 percent. The IMF has dampened the PTI’s grand plans with a growth rate of 3 percent, policy rate at 15 percent and inflation at 14 percent. Musharraf reduced the budget deficit from 4.9 percent to 4.1 percent of GDP. The PPP increased it from 7.3 percent to 8.2 percent. The PML-N ended at 6.6 percent (legal limit 4 percent) and borrowed Rs2,260 billion in FY18.
During Musharraf’s period, government expenditure financed through borrowing was 22 percent, PPP 36 percent, PML-N 27 percent. The tax-to-GDP ratio declined from 9.5 percent during Musharraf’s period to 8.7 percent in the PPP’s time. The PML-N increased it to 11.2 percent (Rs3,842 billion). The IMF has proposed 15 percent, a daunting task. Agriculture – with 19 percent share in GDP – contributes only one percent to taxes.
Gross public debt during Musharraf’s time dropped from 79 percent of GDP (Rs3,018 billion) to 53 percent (Rs4,846 billion) in FY07. The PPP increased it from 58 percent (Rs6,128 billion) to 64 percent (Rs14,292 billion) in FY13. The PML-N reached 73 percent (Rs24,952 billion).
PSE debt was Rs220 billion in June 2007 (16 percent of total). The PPP added Rs276 billion (20 percent), while the PML-N increased it by Rs898 billion (64 percent) to end at Rs1,393 billion.
https://www.thenews.com.pk/print/384431-from-musharraf-to-the-pti
The IMF recommends privatisation. PIA’s accumulated losses from 1998 to 2007 were Rs23 billion (6 percent). The PPP added Rs119 billion (33 percent) while the PML-N added Rs222 billion (61 percent) to end at about Rs364 billion. It is difficult to imagine PIA competing with Gulf airlines. Steel Mills profit were Rs9.5 billion during Musharraf’s time. The PPP recorded a loss of Rs119 billion; the PML-N increased it by Rs81 billion to Rs200 billion.
Oil prices increased from $25 in Dec 1999 per barrel to $90 by Dec 2007 (313 percent increase) during Musharraf’s period. The PPP faced over $90 in their term. The average in the PML-N’s time was $55. The PTI started at $73 but is now faced with $85. Gasoline’s average price increased from Rs26/litre to Rs56 (115 percent increase) during Musharraf’s period. The PPP increased it to Rs101 (80 percent) but the PML-N decreased it to Rs78 (-23 percent). In October this year, it increased to Rs93 (19 percent).
The total installed capacity increased to 29,573 MW by February 2017. In this, Musharraf’s contribution is 16 percent, PPP 28 percent and PML-N 56 percent. Considering the last four years of each government, Musharraf’s contribution was 30 percent, PPP 32 percent and PML-N 38 percent in electricity generation. In 2006, the circular debt was Rs87 billion. In August 2018, it was Rs1,200 billion. Musharraf added Rs145 billion (12.6 percent), PPP Rs727 billion (63.2 percent) and PML-N Rs279 billion (24.2 percent). No government has found a solution.
There is no doubt that the economy has been mismanaged. Past governments have been facing similar economic circumstances and governance realities as the PTI, whose main problem is tackling the expectations of its voters. International agencies are also culprits of the mess due to their propensity to provide loans for perpetuating poor governance and corruption. After signing the agreement with the IMF, the PTI’s 100-day agenda and election promises will be compromised. The new captain, the IMF, will carry out a heart transplant as it is not satisfied with Asad Umar’s bypass. ‘IMF ka Pakistan’ will replace ‘Naya Pakistan’.
The writer is a former member of the National Reconstruction Bureau.
Email: riazkhancrm@msn.com