How to fix the economy

By Shahid Javed Burki 17/02/2009

THAT the country is faced with a serious economic crisis is recognised by the current group of policymakers. It is not certain whether they realise how serious the situation is and what could be its consequences. Pakistans 1 ! million people of which one"half are under the age of 1# and about $% per cent li&e in urban areas are becoming resti&e because of the depri&ation caused by the se&ere economic downturn. 'ecurity will not return to Pakistan unless the economy is put on a sustainable growth path. That will need considerable work on the part of the go&ernment and also help from the community of donors willing to come to Pakistans aid. At this time Pakistans economy is faced with numerous problems( most of which are a consequence of poor public policy decisions in the past. The gross domestic product in )%%* is not likely to increase by more than two to ).! per cent. +ith the population growing at 1.! per cent a year this rate of growth will certainly mean increase in the incidence of po&erty to about $% per cent of the population. This means that ! million people will be li&ing in absolute po&erty by the end of this year( an increase of 1! million. ,any of these will be in the urban areas and many in the parts of the country where Islamic e-tremists are trying to establish their control. .rban unemployment will also increase sharply especially in large metropolitan areas such as /arachi( 0ahore( 1awalpindi"Islamabad and Peshawar. These cities ha&e absorbed a lot of surplus labour from the countryside in the past couple of decades. They ha&e also been the fa&oured destination of refugees from Afghanistan. .nless 2obs are pro&ided to the urban unemployed and incomes are transferred to the urban poor( these de&elopments will lead to resti&eness among the urban youth and attract them to e-tremist causes. +hat are the options a&ailable to the state in these circumstances3 There are se&eral. 4f these I will briefly mention four( one immediate and the remaining ha&ing an impact o&er the medium and long term. The go&ernment needs to pro&ide cash transfers( targeted subsidies and temporary employment to the unemployed in both urban and rural areas. 5or all of these there are e-amples a&ailable from se&eral countries around the globe that ha&e successfully implemented such programmes during periods of economic stress. 'e&eral 0atin American countries ha&e created temporary employment opportunities when economic crises increased unemployment le&els. The countries in the ,iddle 6ast ha&e

achie&ed impressi&e le&els of social de&elopment by spending three to four per cent of 78P on social safety nets during periods of economic stagnation. Pakistan needs to make a comparable le&el of commitment to these kinds of acti&ities. 'econd( go&ernment e-penditure needs to be significantly restructured in fa&our of larger amounts of spending on education and primary healthcare. This redirection of public e-penditure would require additional go&ernment re&enues as well as changes in the direction of go&ernment spending. The si9e of the federal go&ernment needs to be reduced( non"de&elopment public e-penditure will need to be drastically curtailed( duplication will ha&e to be eliminated between federal and pro&incial spending( defence e-penditure will need to be reduced. Third( Pakistan needs to get off the roller"coaster it has been on e&er since its birth( with the economy growing at a respectable rate whene&er there were large flows of American assistance to the country :in the 1* %s( the 1*;%s( and the early )%%%s< and slowing down when the flow of funds from +ashington declined. This reliance on e-ternal finance was the consequence of the inability of the country to raise the needed resources from the domestic economy. This has to change. A shift would entail a significant restructuring of the ta- system by the e-pansion of its base and by bringing in all sectors of the economy( including agriculture( into the ta- net. The aim should be to double the ta-"to"78P ratio from the current pitifully low 1% per cent. 5ourth( the go&ernment needs to focus on de&eloping the sectors and lines of products that could help increase e-port earnings. Pakistan has not benefited from the process of globalisation that led to a much higher increase in international trade compared to growth in the si9e of the combined international product. 6-port"led strategies ha&e helped many Asian countries see sustained economic e-pansion for decades. Pakistan will also need to trade more with its neighbours( in particular India and =hina. It is one of three countries :the other two are the relati&ely small nations of >hutan and ?epal< that border on these billion"plus"people countries with dynamic economies. 1ather than ha&e the .nited 'tates as the main trading partner( that position( as suggested by the gra&ity model of trade( should be occupied by India and =hina. 1estoring trading relations with India should also help to reduce regional tensions. These structural changes would need not only the full attention of Islamabad. They would also require a considerable amount of additional e-ternal resources at least for the ne-t half a decade. This is where the .nited 'tates enters the picture. It could pro&ide leadership to a group of donors to fund a large programme of structural change :say @!%bn to @ %bn o&er the ne-t fi&e years< with one half to be pro&ided by the donors and the remaining by Pakistan. The donor contribution should be front"loaded with Pakistan picking up the bulk of the e-penditure at the programmes tail"end. How Pakistan will pro&ide funding should be made clear at the &ery start of the planning process. This will require a ma2or o&erhaul of the ta- structure. The donors should also

carefully monitor the implementation of the programme by creating a consortium chaired either by the +orld >ank or .'AI8. Ten to 1) donors interested in associating themsel&es in this e-ercise may contribute to the establishment of a group tasked with helping Pakistan de&elop a plan for the use of the funds made a&ailable by the donors as well as o&erseeing the implementation of the programme. 5unding should start only after Islamabad has prepared a medium"term programme of structural reform and sustained de&elopment including some of the elements suggested abo&e in this brief article.

Through the economic prism

Wednesday, 18 Mar, 2009 By Shahid Javed Burki IT pays politicians to look at politics from the prism of economics. This is precisely what >arack 4bama did while he was campaigning as a candidate for the .' presidency. In 'eptember )%%;( when the first of se&eral meltdowns that ha&e affected the .' economy occurred( he concluded that what the people wanted was a calm handling of the rapidly worsening situation. He kept his cool and ga&e his responses in highly measured terms. 4n the contrary( his opponent Aohn ,c=ain responded hysterically. He suspended his campaign for a few days( flew to +ashington to assume the leadership of the 1epublicans in the .' =ongress( and tried to persuade the lame"duck administration of 7eorge +. >ush to take action. These two different approaches were seared in the minds of the .' electorate and helped 4bama score a landslide &ictory. +hat was true for the .' last year is true for Pakistan now. There is much hysteria in Pakistani politics today. This( too( must be affecting the way people look at the politicians in general and at different politicians in particular. The uncertainty created by a charged political atmosphere has an economic cost. I do not belie&e this has been fully comprehended by the politicians acti&e in the field today. .ltimately( the side that keeps it cool and e-acts a smaller economic price from the way the crisis is handled will benefit at the polling booth whene&er the people are in&ited to elect their representati&es again. It does not need all that much elaboration to underscore an important point about the current economic situation. The country is in deep crisis( perhaps the worst it has e-perienced in the %"plus years since its birth. A significant part of the cost is being borne by the poor and their situation will get worse if the countrys economic situation continues to deteriorate. >ut that will not happen for as long as the political situation remains highly uncertain.

It is sometimes useful to calculate the economic cost of political agitation to con&ince politicians that hysteria may force their followers to look in a different direction. If that were to happen in Pakistan( and if the mainstream political parties choose to fight it out in the streets( those who are economically stressed as a result of political machinations may opt for something different. They may choose e-tremism. The other day a politician acti&e in one of the two ma2or parties told me with great pride that he and his followers were able to put 1%%(%%% people in the streets of Pun2abs ma2or cities. That assertion led me to do some simple calculations. 6ncouraging a person to take to the street costs that person at least 1sB%% if he is fully employed. 7etting 1%%(%%% people to agitate means a loss of income of 1sB%m. The cost to the economy is perhaps three times as large since the income forgone has what the economists call a multiplier effect. In Pakistans case the gain or loss of one rupee of income means at least the gain or loss of three rupees to the economy. +e are( therefore( looking at a cost of more than @1m to the economy. +ho bears this cost3 Perhaps a good part is met by the political organisation that has ordered its followers to come out on the street. The money that the party spends may come from the sa&ings of its well"to"do leaders. This amount could be deployed in more producti&e enterprises than political agitation. 4r if it comes from corruption( it produces serious distortions in the economy. It is well recognised that in most de&eloping countries political e-penses are paid from the funds not legitimately collected from donors but from the money solicited from beneficiaries of ser&ices pro&ided by those who are in power. This increases the cost of the ser&ice pro&ided to the beneficiaries. Those who pay political bribes will pass on the cost to the consumers of the ser&ice or the product that is being procured from those who( because of the power they wield( are able to pro&ide either or both of them. There is another cost associated with the politics of agitation that produces an e&en greater economic burden for societies where this kind of political beha&iour is pre&alent. Agitation rather than the use of legitimate means for settling disputes according to the law of the land becomes the norm in those places where the institutional structure is weak. This is certainly the case in Pakistan. 4&er time( institutions in Pakistan ha&e weakened to the point at which people ha&e lost confidence in the political system to deli&er in legitimate ways. ?ational and pro&incial assemblies dont settle political disputes. =ourts do not dispense 2ustice. >ureaucrats do not implement decisions taken by policymakers or laws passed by parliaments. 'cores are settled by resort to the politics of the street. This results in a &icious cycle. >ut this is not the only &icious cycle that is taking Pakistan down to unknown depths. It all began in Pakistan in 1*!$ when an authoritarian and unelected head of the state dismissed the =onstituent Assembly because the latter had begun to assert what was its

legitimate right. The go&ernor"generals action was legitimised by the 2udiciary. 6&en after half a century that &icious cycle has continued to define politics. There is an urgent need to break into it. The economist 8ouglass ?orth won the ?obel Pri9e in his discipline by suggesting that economies will not modernise and grow unless they also de&elop the institutional base that pro&ides the foundations on which the country and society must rest. ?orths definition of institutions went beyond organisations that underpin economies. He included in institutions the ways( both formal and informal( in which all human beings interact with one another. These interactions should support the modernisation of economies and societies. 4&er time( the forms of interactions should mo&e forward from the formal to the informal. The politics of agitation is by its &ery nature an informal way of achie&ing ends that should be pursued through formal means. 8oing political business through informal means is disrupti&e and costly. It may produce immediate results for those who choose to go along this path but it does incalculable harm to society and the economy o&er the long run. It is imperati&e that the leaders of Pakistan abandon this path in fa&our of doing business within an established institutional framework. >y bypassing institutions they will bring not only economic ruin to the country. They will also pose an e-istential threat to the state of Pakistan.

Faced with five crises

On the economic side, we face the possibility of a prolonged slowdown in activity that will probably yield a GDP growth rate of no more than two per cent a year.

By Shahid Javed Burki Tuesday, March 24, 2009

TH6 fact that Pakistan is currently faced with a crisis that in terms of its scope( reach and likely consequences has no precedence e&en in our e-ceptionally turbulent history cannot be disputed. There are many dimensions to the problem. 4n the economic side( we face the possibility of a prolonged slowdown in acti&ity that will probably yield a 78P growth rate of no more than two per cent a year. This will mean practically no increase in income per head of the population. That( in turn( will mean a decline in the real incomes of the bottom % to #! per cent of the population. The only segment of the population that may still see some impro&ement in their economic situation are the rich and the relati&ely well"to"do. This will further e-acerbate the poor distribution of income. >y the end of the year the country may add 1% million new poor to the !% million who already li&e in ab2ect po&erty. A

si9able proportion of these will be in the urban areas( in particular the large cities. This will increase the social resti&eness in cities adding to the problem posed by the rise of e-tremism. This the country cannot afford. A growing number of people in the country belie&e that the present structure of society is not ser&ing their interests and presents to them a future they are not prepared to accept. They are willing to resort to almost any means( e&en to limitless &iolence and e-treme cruelty to disturb the e-isting social order and usher in a new one. This is the meaning of the rise of e-tremism which is the second of Pakistans many problems. The failure of the economy to pro&ide adequately to the people at the bottom end of the income distribution scale or li&ing in the more backward regions of the country accelerates the rise of e-tremism. The rise of e-tremism in a country of Pakistans si9e and in which the citi9ens subscribe to a faith which( according to many in the worlds more ad&anced countries( is seen as a threat poses another challenge( the third in my list. The people of Pakistan may consider possible foreign in&ol&ement to be interference in their domestic affairs( but the world( concerned about the impact on them if the Pakistani state fails( will not allow the country to go down. The political and economic order they could impose on the country may not be to the liking of most of the people. The fourth crisis Pakistan faces is the result of se&eral de&elopments in its e-ternal en&ironment o&er which it has no control. In most of )%%;( the countrys economy was under considerable stress because of an unprecedented increase in commodity prices( not only of oil. A number of other commodities that figure prominently in Pakistans imports saw substantial increases in their prices. This strained Pakistans e-ternal payments situation. In the fourth quarter of )%%;( oil and commodity prices fell as sharply as they had risen( thus pro&iding some relief to policymakers in Islamabad. >ut other strains appeared. There was a spectacular downturn in global economic acti&ity( resulting in the contraction of e-port markets for emerging countries( including Pakistan. At the same time( se&ere stresses in international finance resulted in the flight of capital from Pakistan and other de&eloping countries. The fifth challenge is posed by the inability of the political culture to de&elop a system allowing a &oice to the people( making it possible for them to resol&e their differences without resorting to street politics( and creating a structure that could sustain the ine&itable shocks in a politically backward society. Pakistans plunge into political chaos and possible disaster was narrowly a&erted on ,arch 1 by an ele&enth"hour agreement between two contending forces. 4ne of these used the streets to put pressure on the go&ernment( the other used the states coerci&e power to force its will on those who oppose it. >oth failed to use the institutions a&ailable for democracies to reach accommodati&e positions. There is( in other words( a perfect storm which has hit Pakistan. 5i&e different crises ha&e arri&ed more or less simultaneously. +ill the country and its political leadership be able to deal with them3 4r will the country succumb and thus create a situation which would lead

the people to question the &ery idea of Pakistan. That idea( articulated with considerable clarity and passion by ,ohammad Ali Ainnah( was based on the assumption that the ,uslims of >ritish India constituted a separate nation from the ma2ority Hindu population. Ainnah successfully argued that the people of his faith needed a political space of their own in order to li&e according to their own traditions( culture and social norms. The space was pro&ided but the people ha&e failed to define a political system in which they could li&e peacefully( working to better their li&es. 4f and on( Pakistan has been successful economically. >ut time and again it has failed politically. It is also failing to be a responsible member of the community of nations. +e know how to deal with each of these fi&e storms separately. The economys re&i&al requires a combination of stabilisation policies and the re&i&al of pro"poor growth. 'tabilisation on both fiscal and e-ternal accounts should be undertaken without disturbing the medium"term growth prospects. In order to deal with e-tremism( Pakistan will need a combination of targeted de&elopment of the areas that ha&e become &ulnerable to it. It will also require ensuring that people( no matter how disaffected they are( do not question the authority of a legally constituted state. It is only with the adoption of a comprehensi&e approach that the country can deal with this problem. It will in&ol&e economic and social de&elopment on the one side and clear demonstration that the states authority must be respected on the other. 4nly then will the country be able to con&ince the world that it is serious about dealing with the problem of e-tremism. The stresses on the economy because of the global economic meltdown will require making the country more reliant on domestic resources for de&elopment. It will also need the accumulation of foreign reser&es to absorb shocks deli&ered from abroad. 5inally( the propensity to use the street and the coerci&e power of state to settle disputes can only be dealt with by strengthening institutions of go&ernance. These include parliament( the pro&incial assemblies and the legal and 2udicial systems. It is when these crises started to interact one another that we begin to face the possibility of chaos. This was a&erted on ,arch 1 but much remains to be done. C

An approach towards urban policy

By Shahid Javed Burki March 30, Monday 2009

PA/I'TA? needs to de&elop an approach towards addressing the numerous problems faced by its urban population. ?ot unlike other de&eloping countries( Pakistan tends to

underestimate the si9e of its urban population( the si9e of its large and medium cities and the proportion of the population that should normally be classified as urban. 4ther than the usual reasons for the underestimation( there are also political reasons for gi&ing a smaller weight to the urban population. Pakistan was a rural place and a largely rural economy at the time of its birth. 'ince then( starting with the mo&ement of the population that accompanied the partition of >ritish India into independent states of Pakistan and India( the si9e of the urban population has increased at rates between two and half times to three times the rate of increase in population. The country has had one of the highest rates of the urbanisation in the de&eloping world. This should ha&e resulted in the flow of greater political power from the countryside to towns and cities. That did not happen as the powerful landed interests succeeded in pre&enting the urban areas from gaining a larger space in the political system. This is one reason why population censuses ha&e not been held on a regular basis as pro&ided by the =onstitution of 1*#B. There are at this time no firm estimates of the si9e of the population o&erall and its geographic age and gender distribution. >y underestimating the si9e of the urban population and the si9e of the ma2or urban areas( the country has not properly pro&ided the needed urban ser&ices. There is an urgent need for an urban economic and social de&elopment strategy that can pro&ide employment and economic security to its young and growing population. +ithout it( the urban population will become increasingly resti&e. This is particularly the case with the urban youth. ,y guess is that /arachi and 0ahore alone ha&e )% million people who are below the age of )%. 5or designing an urban strategy it may be appropriate to reflect on the economic and social dynamism that shapes urban areas. Policy makers may distinguish among four different types of urban communitiesD the large citiesE the peripheries of large citiesE the medium" si9ed cities and small towns. 6ach of these urban centers has its own dynamic. There are also differences among the large cities.The strategy that might well ser&e the city of /arachi( Pakistans largest( may not e-actly be the same as the one that would be rele&ant for 0ahore( the countrys second largest city. ?onetheless( both cities need better supply of water and sanitation( better transport( better education and health care( more focused attention to pro&iding employment to the people who are constantly mo&ing into the cities from the areas outside( more technological ad&ance to increase the incomes of the employed and better integration with the global economy. +hile the city centres of /arachi and 0ahore and other large cities may need the same kind of public sector attention( their peripheries are &ery different from one another. /arachi has e-panded into its hinter land by e-tending itself into the essentially empty and desert areas to its south and east. Those who ha&e arri&ed in the city in search of 2obs( ha&e found or de&eloped slum"like housing in the numerous Fkatchi abadisG that are located in the citys periphery. Hundreds of thousands of Pathans are li&ing in these cities making /arachi the worlds largest Pathan city( larger than Peshawar and /abul.

There are Fkatchi abadisG in 0ahore as well but its e-pansion has occurred largely by the assimilation of long"settled towns that were all around its e&er"e-panding periphery. Public policy designed to address the problems faced by the peripheral areas of the two cities( therefore( will ha&e considerable differences in their content and ob2ecti&es. The medium"si9ed cities are the product of economic and social dynamics that are altogether different from those that are operating in large cities. ,ost medium"si9ed cities ha&e grown in si9e for three different reasons. They were either important links in the system of transport and communicationE or they were centered on some indus try that used locally a&ailable skillsE or again( they were supplying important ser&ices to the sector of agriculture as it de&eloped in the surrounding countryside. Two medium si9e cities( both in the Pun2ab( illustrate &ery well how different approaches towards industrialisation can influence the shape and growth of urban areas. 1ahim Har /han in the pro&inces south drew a number of large transnational corporations that( taking ad&antage of the import substitution bias in the first $% years after independence when they established their operations in and around the city. The citys choice as a location was influenced by the impressi&e agricultural potential in the surrounding countryside. 0e&er >rothers( a prominent multinational that specialised in the manufacture of basic consumer goods( chose to locate its plant in the city. 6ngro corporation established a fertiliser plant. >ut the city failed to de&elop as an industrial hub especially after the economy was opened to trade and import"substitution lost some of its lustre. 4n the other hand( 'ialkot in the pro&inces centre was able to become a &ibrant urban centre by opting for what economists now call Fcluster de&elopmentG. >y this is meant the location of relati&ely small enterprises in one area producing same types of goods and ser&ices. >eing clustered together makes it possible for them to obtain the inputs( ser&ices( physical infrastructure and ha&e access to the markets that( working indi&idually would be e-pensi&e and( therefore( uneconomical. 'ialkot is an e-ample of the success of this type of cluster de&elopment. The medium"si9ed cities located in the city built a strong e-port business based on traditional skills that were abundantly a&ailable in the area. The citys entrepreneurs also decided not to rely on the go&ernment for ser&ing their area with the needed infrastructure. Instead they ta-ed themsel&es and raised sufficient resources to impro&e roads and e&en build an airport. A single urban de&elopment approach( therefore( would not work for all medium"si9ed cities. 5inally( small towns ha&e their own social and economic characteristics. They are much more integrated with the economic and social situations of the surrounding countryside than the other types of urban communities. They will be affected much more by the policies aimed at the de&elopment of agriculture and by promoting trade in agricultural

commodities. .rban centres grow and flourish I or decay and perish I by de&elopments that are not strictly part of a states urban policy. This should be clear especially to the people of Pakistan. After all( the country was once the site of the oldest urban centers in human history. ,ohen2odaro and Harappa disappeared into history not because the rulers of the day did not ha&e appropriate urban policies. They were the &ictims of circumstances and e&ents o&er which the ancient state had no control. That notwithstanding( Pakistans urban future will depend to some considerable e-tent on how the country builds its economy and how it makes it more producti&e and competiti&e. 5or instance( by encouraging the de&elopment of retail trade and by facilitating the entry and e-pansion of multilateral retail chains( the country may be able to de&elop a number of centres of agricultural processing. This will create new urban poles of economic acti&ity which( in turn( will reduce the pressure on the large cities by holding back some of the surplus workers from the countryside that would ha&e ine&itably migrated to the large cities( further crowding them and further putting pressure on weak urban ser&ices.

Trade with India a small step

By Shahid Javed Burki Monday, !ri" 0#, 2009 TH6 6conomic =oordination =ommittee of the =abinet in its meeting held on ,arch 1*( )%%* took a small step to regularise trade with India. It authorised the ministry of commerce to start building the +agahAttari crossing near 0ahore as an important point of entry and e-it for facilitating trade between the two countries. It also permitted the ministry to increase the number of items that could be e-changed to more than 1*B;( the currently permitted limit. The 6== announcement promised further liberalisation contingent upon the de&elopment of infrastructure on both sides of the border . +hile this is a positi&e de&elopment( it is still a baby step in an area that could do with some bold initiati&es from the leadership in both the countries. The decision by the cabinet committee was presumably taken under the pro&isions of the 'outh Asia 5ree Trade Area agreement :'afta<. The agreement was signed in Islamabad by all countries of the 'outh Asian Arrangement for 1egional =ooperation in Aanuary )%%$. =reating a free trade area in 'outh Asia was an important ob2ecti&e of the 'aarc initiati&e when it was launched in 8haka by the then >angladesh president 7eneral Jia ur 1ahman. ?o progress was made for almost two decades largely on account of the continuing hostility between India and Pakistan( the regions two largest economies. The near"war between two

countries in )%%1"%) when hundreds of thousands of troops were massed on both sides of the Indo"Pakistan border almost killed the entire enterprise. It was sa&ed when the two leaderships recognised that persistent hostility was economically &ery costly for both the countries. The 'aarcs leader wished to create a customs union in the region of the type that had propelled the countries of the 6uropean .nion towards economic prosperity and political tranquility. 7i&en the decades long hostility among the countries of the region( in particular between India and Pakistan( the 'outh Asian leadership wished to be cautious in its approach. The 'afta was designed to mo&e slowly towards the creation of real free trade area( allowing time for the participating countries to absorb the gradual opening up that was en&isaged. It was right for the leaders to proceed &ery deliberately( but not right to be so slow in their mo&ement that the ad&ance they were making did not become apparent to the markets. ,arkets dont respond well when signals are weak and subtle. They look to clear public policy guidance. The 'afta( at least in theory has been operational for a couple of years but it has yet to produce tangible economic effects. In a series of articles I contributed to 8awn while the 'afta was being prepared for ratification by the go&ernments of the region( I argued that Pakistan( being the smaller economy compared to India( would benefit more from the opening of the Indian border to its producers. That was the e-perience of all small countries that entered regional of arrangements with their larger neighbors in other parts of the world. Thus ,e-ico has gained more than the .nited 'tates from ?A5TA( Argentina more than >ra9il from ,ercosur( the smaller countries of 6urope more than the larger ones from the e-pansions of the 6uropean .nion. There is no reason why Pakistans e-perience from 'afta should be any different. The decision by the 6== to e-pand the si9e of the negati&e list was indeed a small stepE no only that( it is in the wrong direction. >y continuing with the Fpositi&e listG approach as the way of controlling trade with India( Pakistan is persisting with a practice that trade economists ha&e long argued is inefficient and permits rent"seeking beha&iour on the part of those who are authorised to regulate the mo&ement of goods at the border. The more efficient and acti&e approach would be to go for a negati&e list by identifying a small number of items. It is not in Pakistans strategic interests or in conformity with its cultural norms to import from India. 5or instance( the import of liquor from India could be banned as it is from other countries of the world. All other items should be allowed( sub2ect to the conditions that go&ern all international trade. 0ong negati&e lists gi&e a great deal of authority to the customs regulators which in&ariably gets misused and( more often than not( turns into corruption.It is also not ad&isable to concentrate on the de&elopment of one point of entry such as the +agahAttari border. There should be se&eral crossings that should be encouraged to be de&eloped. That will allow competition among the pro&inces which would produce with greater efficiency. It may

also be economically more efficient to de&elop a port of entry closer to /arachi( still by far the most significant location for large scale industries. It would be cheaper for some of these enterprises to import machinery and intermediate inputs from India by road. If the response to this initiati&e is quick and does not get bogged down in the bureaucracies on both sides or one side( it could begin to ha&e a significant positi&e impact on the Pakistani side. I ha&e argued on many occasions in this space that it is in Pakistans economic interests to build a strong trading relationship with India. ?o matter how sluggish is the Indian response to the initiati&es Pakistan may take( Islamabad should keep on pressing for more openness from the Indian side. The Indians remain more protecti&e of their markets compared to their neighbours. They are also much more bureaucratic in the way they handle foreign trade. 6&en when they begin to bring down the tariff rates( they use all kinds of legal constraints to restrict trade. The 'afta presents a mechanism where these problems can be tackled. Trade e-perts argue that trade facilitation has become a much more potent tool for promoting international trade than the lowering of tariffs. 6&en in more protecti&e markets such as those in 'outh Asia( the walls of tariffs ha&e come down significantly. ,uch more is to be gained by impro&ing and simplifying non"tariff procedures for the mo&ement of goods across frontiers. In this conte-t it is correct for the 6== to ask for the impro&ement of the facilities on both sides of the +agah"Attari border. =omplaints by countries against their trading partners should be preferably handled by the 'afta secretariat rather than the trade authorities of indi&idual countries. India has resisted the attempts to strengthen the 'A5TA secretariat. It should be persuaded to change its position. In conclusion( following points about the use of public policy by Pakistan in promoting trade with India needs to be underscored. It should use the framework made a&ailable by the 'afta to deal with its much larger neighbour. That way it will be able to deflect the pressures that may come from India if the opening was to be done bilaterally. +ithin the 'afta( Pakistan should be the leader rather than a follower. It should( for instance( take the lead in forcing India not to use the anti"dumping clause as &igorously as it has done in the recent past. 'ince it is e-pensi&e for the e-porting country to challenge the use of this clause( it is almost equi&alent to an increase in the rate of tariff. Pakistan should also press other members of the 'afta to abandon the positi&e lists in fa&our of the negati&e lists thus limiting the role of custom officials as regulators of the flow of trade. Increasing trade with India within the 'afta framework should be an important part of Pakistans international trade policy.

The meaning of the G2 deal for !a"istan

Since capital-short Pakistan has to repeatedly go to the I ! to be resc"ed, it has been s"b#ected to the $ashington %onsens"s conditions. Some of these conditions were right. Some others did damage. !oremost among those that h"rt the economy were the emphasis on ad#"stment over growth, opening the capital markets and not p"tting emphasis on reg- "lating the private sector. &fter the 'ondon agreement to take ideology o"t of economic advice, co"ntries s"ch as Pakistan sho"ld be able to craft their own policy framework.

By Shahid Javed Burki Monday, !ri" 13, 2009 +A' the ability of the 7)% countries to reach an agreement at their second summit de&oted to addressing the problem created by the current economic downturn highly significant3 4r was it 2ust a papering o&er of the differences among the leaders representing the worlds largest economies3 The 7)% had met in +ashington in ?o&ember soon after the election of >arak 4bama as the president of the .nited 'tates. The President"elect did not attend the meeting. 5or that reason alone( the summit was a holding operation( waiting for 4bama to settle down in his office. 4nly then could the world leaders seek to address the problems associated with the global economic downturn. There was considerable apprehension before the leaders sat down for deliberations in 0ondon on April ) that the summit may not produce significant results. There were great differences in the approaches adopted in particular by the .nited 'tates and continental 6urope about the way crisis was best handled. These could produce( if not a deadlock( an agreement that was not worth &ery much. Had that happened it would ha&e been de&astating for the markets in the large countries and that( in turn( would ha&e deepened the recession. The world was spared such an outcome. The communiquK signed by the summiteers produced a euphoric market response. Almost all ma2or stock indices around the globe registered ma2or ad&ances. Howe&er( the agreement came short on one important issueD the need for concerted action by the large countries to stimulate their economies. The .nited 'tates( under 4bama( had taken a ma2or step in that di rection by getting =ongress to agree to a large stimulus package. The amount of money that was to be pumped into the economy was close to @;%% billion following on @#!% billion +ashington had already earmarked for helping the ailing banking and automobile industries. 6&en before the Americans mo&ed( the =hinese had announced a large stimulus package of their own amounting to nearly @ %% billion. The 6uropeans( how e&er( declined to take this

route( concerned that spending of such amounts would result in inflation. The 6uropean resistance was led by 7ermany which had deep memories of hyper"inflation that had contributed to the break out of the 'econd +orld +ar. The 6uropeans wanted the worlds large powers to take a long &iew.They wanted them to regulate their financial sectors more meaningfully. They not only wanted the strengthening of domestic regulatory mechanisms( they also wanted an international institutional arrangement to keep watch o&er all ma2or financial systems and ring the alarm bells if there was apprehension that in some part of the global system there were de&elopments that could threaten world financial stability. The focus on the regulatory systems clearly pointed a finger at the .nited 'tates that had followed the strategy of allowing the pri&ate sector enormous free dom to operate. This was done in the belief that FselfregulationG was much better than regulation by state agencies( in particular in the non"banking sector. If some institutions in this part of the system went off track they will be pulled back by the forces of the market place. This turned out to be a naL&e belief and the entire .' financial system got caught up in greed and unsound practices. The 6uropeans were keen that such beha&iour should be caught early before it infected other parts of the globe as had happened this time around.There was an underlying philosophical difference in the two approaches. The continental 6uropeans wanted to bury for good what they called FAnglo"'a-on capitalismG. The .nited 'tates did not think that the time had come to write an obituary of the system that had bought it immense prosperity. In the end a compromise was reached. The .nited 'tates agreed to strengthen its own system by bringing in non"banking institutions into the regulatory framework. It also agreed to be e-ceptionally &igilant about the workings of &ery large institutions that could not be allowed to fail. =itigroup and AI7 were two e-amples of such institutions that had already recei&ed hundreds of billions of dollars of go&ernment money but were still struggling. Their failure would re&erberate all o&er the world. +hat does the 7)% agreement mean for a country in Pakistans situation3 Although Pakistan was not present at the 0ondon meeting I it is unfortunately one of the few large emerging economies that ha&e not made it to the list of 7)% and thus has no influence o&er its deliberationsI it should closely watch how this group e&ol&es its thinking o&er time and how it begins to reshape the global economic and financial structures. Three de&elopments at 0ondon hold significance for Pakistan.The first is the large increase in the resources a&ailable to the I,5. The 5und was gi&en most of the liquidity that is to be pumped into the global economy. It will recei&e @#!% billion of the @1.1 trillion the group promised to pro&ide for ending the global financial crisis. It will come in two forms. 0arge countries will in2ect new money into the 5und so that it continues to mount the kind of rescue operations from which Pakistan is already benefiting. The 6uropean .nion( Aapan( and the .nited 'tates will pro&ide @1%% billion each while =hina will gi&e another @$% billion.

The 5und will also sell some of its large gold holdings to raise additional amount. In addition the 5und will increase its share capital which will be a&ailable to all countries according to the quota they hold at the institution. The second important de&elopment from the perspecti&e of the emerging world is the conclusion reached by the 0ondon conference that The +ashington =onsensus will be buried. This =onsensus( de&eloped by the institutions located in the American capital( has guided the +orld >ank and the I,5 in their endea&ors in the de&eloping world. 'ince capital short Pakistan has to repeatedly go to the 5und to be rescued( it has been sub2ected to the =onsensus conditions. 'ome of these conditions such as the need to promote e-ports by keeping an appropriate e-change rate and to reduce fiscal deficits to the le&el where they did not cause inflation were right. 'ome others did damage. 5oremost among those that hurt the economy were the emphasis on ad2ustment o&er growth( opening the capital markets and not putting emphasis on regulating the pri&ate sector. After the 0ondon agreement to take ideology out of economic ad&ice( countries such as Pakistan should be able to craft their own policy frameworks. The third 0ondon decision of significance for Pakistan is to pro&ide trade finance where the inability to access credit has affected trade. Pakistan is one of those countries. The 7)% decided to pro&ide @)!% billion for this purpose. It is yet not clear what will be the conduit for this infusion of capital. In sum( it can be said that the 0ondon summit produced useful results for Pakistan. Howe&er( for the country to benefit from 0ondons outcome( it will ha&e to look carefully at the decisions taken by the 7)% and draw up a plan of action to gain access to the additional flows of capital that will soon become a&ailable to Pakistan and other emerging markets that are under considerable economic stress.

#volving strategies for a new phase of capitalism

By Shahid Javed Burki Monday, !ri" 20, 2009 '4,6 crises produce hysteria which leads to inappropriate public responses. 'ome clear the mind and result in fundamental changes in thinking about critical issues. The 7reat 8epression of the 1*B%s produced both responses. The same is true of the financial crisis that began in the .nited 'tates last summer and has affected all countries of the world( including Pakistan. It is leading to some serious rethinking about the meaning of capitalism( globalisation and the role of the state. The new ideas and concepts being de&eloped will ha&e enormous consequences for all nations( including emerging economies. It is especially true for a country such as Pakistan which( because of the inability to generate domestic resources to in&est in the economy(

continues to rely on e-ternal finance. A few days ago after a meeting with the .nited 'tates 'enator Aohn /erry( Prime ,inister 1a9a 'hah 7ilani said that Pakistan did not want conditions attached to the pro&ision of aid. His reference presumably was to political but not to economic conditions that may accompany the flow of capital to his country. The community of potential donors that ha&e offered to aid Pakistan would want to see that the money they pro&ide is handled properlyE that it gets used within a policy framework that can and should contribute to economic stability and progress. It is in this conte-t that the rethinking on the meaning of capitalism gets to be rele&ant for Pakistan. The last occasion when Pakistan had to factor in e-ternal &iews about appropriate domestic economic management and the role of the state was in the early )%%%s. At that time I as is the case now I Pakistan had gone to the I,5 to sa&e it from a se&ere economic downturn( e&en the possibility of default on e-ternal obligations. The 5und came to the help of Pakistan but attached a number of conditions to the use of its money. At that time the policy framework general ly referred to as The +ashington =onsensus was all the rage in de&elopment circles. It called for opening the economy( curtailing the role of state and putting the pri&ate sector on the commanding heights of the economy. Pakistan accepted the offered ad&ice and brought about a ma2or change in the way it looked at these aspects of economic management. The impact of these changes in public policy was to initially slow down the rate of economic growth and allow almost unconstrained role to the pri&ate sector in the sphere of economics. 0ater when the country came out of the 5unds programme and fiscal and monetary policies were eased( the pri&ate sector allocated the sa&ings a&ailable to it from the banking sector or from abroad( into the sectors that produced the highest rates of return for it. 1eal estate( especially lu-ury housing and shopping mallsE telecommunications( in particular mobile phonesE and automobiles( both passenger cars and motorcycles( became the fa&oured sectors. All three grew at &ery high rates and helped the economy to pick up the rate of increase in 78P. >ut the sectors did not generate a significant amount of employment. =onsequently( while the 78P increased at an impressi&e rate in )%%B"%#( the impact on the incidence of po&erty and narrowing of income disparities was insignificant. 7i&en the way the thinking on economic management is e&ol&ing since the financial crisis slowed the global economy( Pakistan will undoubtedly be asked to follow a different approach. +hat is this change in thinking following the burial of The +ashington =onsensus announced by 7ordon >rown at the conclusion of the meeting of 7)%3 How will this new thinking affect the way the Pakistani policy makers manage the domestic economy3 In answering these two questions( I will also reflect on what I heard from the representati&es of the pri&ate sector during my most recent &isit to Pakistan.

In late 5ebruary and early April I chaired two sessions of the Planning =ommissions Task 5orce on Pri&ate 'ector 8e&elopment. This was established in 8ecember last year with me as its chairman. Its mandate is to ad&ise the go&ernment and ha&e it factor in the thinking of the pri&ate sector in the making of public policy with reference to re&i&ing economic growth and modernising the economy. The current economic and financial crisis has led to rethinking co&ering at least three areas. 5irst( there is a consensus that the neo"liberalism of the 1eagan"Thatcher era was not an appropriate policy to be pushed. People dont always beha&e rationally( especially if they are using borrowed funds. This can lead to e-cessi&e speculation since prices dont always reflect the risks that are being taken to producing goods and ser&ices and doing transactions in them. 'econd( unchecked there is a tendency towards monopolistic beha&iour as the firms with good contacts with the policy makers or with built"in efficiencies that cannot be matched by ri&als( rapidly grow in si9e. These firms capture a &ery large share of the market. 5or instance( in >ritain only four grocery chains control #% per cent of the market( lea&ing &ery little space to thousands of small operators.The go&ernment should be e-tremely wary of the strains that can be put the economy if a large firm is considered to ha&e become too large to fail. Third( globalisation of finance means that domestic regulators cannot always control the operations of firms working in the market place. 8omestic regulation has to be supported by an international regulatory mechanism. The ma2or public policy consequence of this new thinking is to allow a much larger role to the state in managing and guiding the economy than was en&isaged by The +ashington =onsensus. The state must properly regulate the economy by ensuring that there is no e-cessi&e risk taking( by pre&enting the de&elopment of monopolies( easing the entry and e-it of firms( and protecting the citi9enry from the predatory beha&iour of enterprises. The +ashington =onsensus ad&ocated a minimal role for the stateE the new consensus lifts the states role towards a much higher profile. The challenge before Islamabad is to redefine the role of the go&ernment and make it more effecti&e as well as prominent. How should this be done3 This is where the work of the Planning =ommissions Task 5orce on Pri&ate 'ector 8e&elopment enters the picture. In the discussions we ha&e had thus far( the pri&ate sector representati&es ha&e made a number of suggestions about the supporti&e role of the state. 4f these the following three are particularly important. 4ne( those representing large enterprises feel that they confront an e-ceptionally une&en playing field in the domestic market place. 'mall operators are able to keep themsel&es out of the ta- net( can a&oid labour and health regulations and dont ha&e to deal with repeated &isits by &arious regulators. As such small businesses can keep their costs low.

'econd( they are of the &iew that their work is inhibited by the absence of appropriate skills in the labour market. 'kill de&elopment is an important matter but since the go&ernment does not ha&e the resources to meet business mens needs( what is required is a public" pri&ate sector partnership. Howe&er( for the pri&ate sector to in&est in skill de&elopment( it needs ta- incenti&es. Third( they are of the &iew that Pakistans unique geographic situation has pro&ided the businesses with opportunities but has also posed problems for them. 6conomic relations with Afghanistan( =hina and India are particularly important but need to be carefully an alysed by the go&ernment working with the pri&ate sector. Afghan transit trade dumps a lot of dutyfree consumer goods in the Pakistani economyE cheap imports from =hina are hurting the domestic industry and slow Indian response to Pakistans initiati&es are not opening up that countrys large market to Pakistans producers. In sum( looking at Pakistans economic situation in the conte-t of redefined capitalism and the countrys own somewhat unique circumstances is now a matter of urgent go&ernment attention. +e will pro&ide an input into these by taking up these matters in the deliberations of Task 5orce on the Pri&ate 'ector 8e&elopment.

$estructuring I%F for an expanded mandate

By Shahid Javed Burki $riday, 27 !r, 2009 PA/I'TA?' presence on the international financial scene will not end with the call it has made on the I,5. ?or will it end with what the finance officials ha&e termed a successful meeting at Tokyo of the F5riends of PakistanG group. The world is focused on the countrys economic problems and has recognised the fact that an important way of addressing them is to pro&ide the country with a great deal of additional finance I additional to what the 5und has already pro&ided and what was pledged at Tokyo. As the worlds finance ministers gathered in +ashington this week for the Fspring meetingsG of the +orld >ank and the I,5( they had a &ery full agenda. Included in it was the restructuring of the 5und. +hat was decided here will matter for countries such as Pakistan that will remain financially stressed for many years to come. ,ore I,5 resources could become a&ailable for Islamabad if it is is able to persuade the organisation that it has de&eloped a strategy for de&elopment that will help all citi9ens. And that it has the capacity to implement such a strategy. >owing to the demands from large emerging markets that fle-ed their economic muscle at the 7)% meeting held in 0ondon earlier this month( the 5und will begin the process of granting additional powers to likes of >ra9il( 1ussia( India and =hina. These four countries

ha&e a nomenclature of their own I the >1I=s.They will ha&e a significantly larger presence on the economic and financial landscape compared to their collecti&e power before the world went into a deep economic crisis. Along with 'outh Africa( 'audi Arabia and ,e-ico( these se&en emerging economies will ha&e a say when countries such as Pakistan appear in the I,5 court asking for financial fa&ours. The process of restructuring that began in 0ondon( gathered pace in +ashington. +hen done( it will lea&e the institution with e-panded authority to act as a global banker not 2ust for the worlds poor countries but also for those that are rich. It will ha&e the power to print its own money on a much bigger scale than it is permitted to do at this time. The 5und has the authority to create 'pecial 8rawing 1ights :'81s<( a currency that ser&es an accounting rather than a transactional purpose. 'ome countries would like to see the '81s become a real currency which could ser&e as a reser&e currency augmenting if not replacing the American dollar. That that should happen was a demand put forward by =hina before the 7)% con&ened in 0ondon. The most important change for the 5und is the way the de&eloping world is beginning to look at it. This change in attitude was nicely summed up by the >ra9ilian president 0ui9 Inacio 0ula da 'il&a( commonly called 0ula. FI spent )% years of life carrying posters that said MI,5 out. ?ow my finance minister says we are going to lend money to the I,5.G 0ula was referring to his countrys decision to pro&ide the 5und @$.! billion as part of the trillion dollar package of resources that was being put into the 5unds coffers. This was a remarkable turn"about for a country which recei&ed a massi&e bailout from the I,5 in the 1**%s. As &ice president in charge of 0atin America and the =aribbean( I was a member of the team of international negotiators who worked out the deal with the country. 'uch was their suspicion of the 5und( that the >ra9ilians insisted that they would only work with the agency if the +orld >ank and the Inter"American >ank were also in&ol&ed. The two banks did get in&ol&ed and >rasilia signed the deal. There was a reason for >ra9ils unease about going to the 5und unaccompanied by de&elopment institutions since the agency had established a record in the de&eloping world that brought it a bad name. That was one reason why President 0ula( when he was a trade union leader( went around carrying posters against the 5und. The institutions current leadership insists that new 5und will be really different from the one that got to be despised in the de&eloping world. If the 5und does reform itself( it will be going through structural change for the third time in its $ year history. It was originally concei&ed as one leg of the three"legged stool that was to underpin the international economic system after the end of the 'econd +orld +ar. It was to maintain stability in the global currency markets under a system of fi-ed e-change rates. The rates were set against the .' dollarE the .nited 'tates agreed to maintain a fi-ed price for gold in terms of its dollars while all other countries fi-ed their e-change rates with reference to the American dollar. 4ther countries could alter their e-change rates with respect to the dollar( something that

was usually done at the ad&ice of the I,5. In ad&ising the countries to change their rate of e-change( the 5und also pro&ided capital to help them tide o&er whate&er difficulties they were faced with at that time. The 5und stepped in with its help since no other country or market would pro&ide the needed financial resources. As such( it came to be known as the lender of last resort. The 5unds mandate changed in the early 1*#%s as President ?i-on delinked the dollar from gold and most countries( in particular those from the de&eloped part of the world( floated their currencies. This was the start of what came to be called the process of FglobalisationG. The process e-posed de&eloping countries to new forms of risks. 1ather than each country getting into difficulties( contagion became common as crises spread from one country to the other. 8e&eloping countries that went to the 5und for help had to sign up to undertake reforms that were part of a neo"liberal economic philosophy that came to be called The +ashington =onsensus. 7o&ernments were required to se&erely limit their economic role by pri&atising the assets they held( some of which were acquired by the nationalisation of the properties owned by the pri&ate sector. This Pakistan had done in the early 1*#%s. +hen Islamabad went to the 5und on a number of occasions in the 1**%s( pri&atisation was one of the conditions to which it agreed. =ountries with 5und programmes were also required to control their e-penditures which many did by cutting their spending on social and human resource de&elopment. This affected the poor. They also had to open their economies by reducing tariffs which often e-posed poor farmers to competition from rich countries. It did not seem to matter to the 5und that many rich agricultural systems were subsidised by the state. +ith latest series of reforms( the I,5 is entering into the third phase. 8ominique 'trauss" /ahn( former finance minister of 5rance and now the 5unds managing director( says that what will emerge after the contemplated reforms ha&e been put in place will be &ery different from the institution that became contro&ersial in the 1*;%s and 1**%s. FThe I,5 is changing( and with it there will be a sea change in the way the world economy is runG( says =. 5red >ergsten( director of the Peterson Institute for International 6conomics that was responsible for de&eloping the +ashington =onsensus. FTheir role will dramatically shift. Houre talking about monitoring fiscal stimulus( mo&ing toward tighter regulations for financial institutions. Houre talking about global economic management in a way ne&er seen.G

Is the economy recovering&

By Shahid Javed Burki Monday, 04 May, 2009

()* economy seems to be on the road to recovery. &t least that is the impression one gets from reading the latest macroeconomic data and the reaction of the I !. Several other observers have reached the same concl"sion.

MPakistan is one of the few countries that en2oys more macroeconomic stability today than it did on 'eptember 1$( the day before the bankruptcy of 0ehman >rothers turned the world upside down. In those prelapsarian days( Pakistans currency was tumblingE its foreign e-change reser&es co&ered barely two months of importsE and the cost of insuring its so&ereign debt against default was almost 1%%% basis points :1% per cent <( wrote The 6conomist in its issue of April )!. The situation has impro&ed considerably since those &ery difficult days. 5oreign e-change reser&es :with the 'tate >ank of Pakistan< ha&e climbed significantly( reco&ering from a low of @B.! billion on 4ctober B1( )%%; to @#.;billion on April 1#( )%%*. 5iscal deficit was brought under control although not by raising re&enues from inside the country but by drastically cutting de&elopment e-penditure. 'ome structural reforms were put in place by remo&ing subsidies on energy. Prices of agricultural products that are still fi-ed :support price< by the go&ernment were raised thus pro&iding incenti&es to the producers but also reducing the burden on the state. 4ne consequence of this may be a bumper wheat crop this year. If that happens( the rate of 78P increase may not plunge to the le&el feared a few months ago. >ut is this trend sustainable3 +ill the reco&ery result in a significant re&i&al of growth( increased employment( particularly for the poorE and( perhaps most important( return in in&estor confidence3 The answers to these two questions depend upon four factorsD continuous a&ailability of e-ternal finance( pace of reco&ery in the global economy( strategic mo&es by Islamabad to address some of the structural problems the country faces( and the go&ernments ability to bring the rise of e-tremism under control. The Pakistani economic and finance team met with the 5und officials during the recently concluded spring meetings in&ol&ing the I,5 and the +orld >ank. The 5und( satisfied by the progress Islamabad had made in stabilising the economy( agreed to release the second tranche of its @#. billion assistance programme. The programme is to run for two years. There was some indication that the amount a&ailable to Pakistan could be increased somewhat if the country continues to proceed on the track it has been following. >oth the +orld >ank and the Asian 8e&elopment >ank are interested in e-panding their programmes( prepared to pro&ide fast disturbing money as well as pro2ect aid. The successful outcome of the Tokyo meeting may pro&ide the country with some additional resources from bilateral sources. Howe&er( the real issue o&er here is Pakistans ability to implement the programmes and e-ecute the pro2ects which interest the donors. This will

need considerable amount of emphasis on building state institutions. This brings me to the second questionD +ould the countrys economic reco&ery be helped by the reco&ery in the global economy3 There are some faint signs that the global economy may ha&e begun to reco&er and the recession may be bottoming out. Pakistans economic problems were more the result of internal de&elopments than the cause of the global downturn. That notwithstanding( sharp deterioration in the global economy had an une-pected impact on Pakistan. ,ost other emerging economies were hurt by the contraction in international trade. Pakistan( with a &ery small share in global trade( was not as deeply affected. >ut it was hurt in a different way. The credit squee9e that followed the problems in the banking sector resulted in a sharp decline in e-ternal capital flows to emerging markets. In the case of Pakistan a significant amount of money came into the stock markets. ?ot only did the flow dry up( the in&estments that were made were liquidated and capital flew out of the country. Islamabad responded by putting a floor under the prices of indi&idual scrips. This had the effect of suspending trading and further eroded the confidence of foreign players in the markets. It will take a long time for confidence to return. There are a number of signs that suggest that impro&ements are taking place. The 6conomist( the >ritish news maga9ine( tracks $) stock markets and in the past si- weeks their &alue has impro&ed by )% per cent. The slump in global manufacturing seems to be ending and some of the ma2or economies are showing une-pected strength. The =hinese economy has begun to respond to the large stimulus pro&ided by the state by a sharp increase in infrastructure spending. The 7erman industrial output appears to be re&i&ing. Perhaps by far the most important de&elopment is the seeming re&i&al of consumer confidence in America. In the data released on April );( the inde- of consumer confidence in the .nited 'tates touched an une-pected high le&el. The American consumer is important for the global economy( in particular for global trade. 'ounding less terrified than they were when they met si- months ago at the annual meetings of the +orld >ank and the I,5( finance ministers representing the worlds richest countries( the 7#( saw Msigns of stabilisation in the global economy. This time they had gathered for the spring meetings of the two institutions. According to Timothy 5. 7eithner( the .' Treasury 'ecretary( Mthere are signs that the pace of deterioration in economic acti&ity and trade flows has eased. These are encouraging signs( but its too early to say that the risks ha&e receded. In a 2oint statement the 7# went further and predicted that economic acti&ity should begin to edge up later in )%%*( but it is too early to say that the risks ha&e receded. If Pakistan continues to reco&er( if the international en&ironment continues to impro&e( would this set in an attitude of complacency that has o&ertaken the policymakers in the past whene&er the end of a particular crisis became &isible3

5oreign capital flows can only pro&ide temporary relief. 5oreign direct in&estment will only come back once foreign players de&elop confidence that the state has been able to establish its control o&er all parts of the population and all parts of the country. 'ustainable growth can only be achie&ed if the country begins to raise resources from within the economy. This will need a significant increase in domestic sa&ings rates and a sharp rise I by as much as !% per cent I in the ta-N toN 78P ratio. >oth changes will happen only with the adoption of the right set of public policies. As mentioned abo&e( domestic and foreign in&estment will return only when there is confidence that the state has established control o&er e-tremist forces who( albeit( not &ery large in number( ha&e managed to scare not only the people of Pakistan but the entire world. 5or that to happen Islamabad will need to show a combination of resol&e as well as imagination. 1esol&e should aim at reestablishing the writ of the state in all parts of the country. Imagination should be directed at persuading people that the go&ernment will do what needs to be done in order for them to de&elop confidence in their future. The worst may be o&er for the economy but sustaining the trend will need a great deal of hard work by the state. The political leadership will ha&e to con&ince a worried and ner&ous population that it is up to the difficult task.

'ay out of the conundrum

P"blic policy will need to be oriented towards ens"ring that the economy does not face the same kind of crisis again.

By Shahid Javed Burki Tuesday, 0% May, 2009 I? the article last week( I suggested why it was critical for Pakistan to win the hearts and minds of the people marginalised by the way the economy has de&eloped o&er the last se&eral decades. It is these people who ha&e been attracted to e-tremist causes since they ha&e lost hope in the states ability to come to their help. They ha&e been promised nir&ana by the e-tremists. Those who li&e in great economic and social stress and see little hope in the future if the state does not change its ways( will go for any alternati&e( e&en one that does not ha&e a record of pro&iding people with what they want o&er the medium and long term. To get out of this conundrum( the Pakistani state will ha&e to reform and restructure itself. +ill it be able to do this3 +ill it be able to lea&e behind past beha&iour and choose an entirely different approach3

The country is seemingly getting out of the woods. ,acroeconomic indicators ha&e impro&ed( foreign e-change reser&es ha&e been built up( the fiscal deficit has been reduced( compression in imports has impro&ed the balance of payments( the rise in consumer prices ha&e begun to moderate. +ill these trends continue3 +ill the impro&ements in the economic situation begin to address the problems( the frustrations of the marginalised people who are seething3 These questions could ha&e positi&e answers if two things begin to happen. Public policy will need to be oriented towards ensuring that the economy does not face the same kind of crisis again. 5oreign resources continue to keep flowing in to help the country tide o&er the se&ere financial problems it has had to deal with in the last couple of years. In fact these two contributions to economic sur&i&al and sustained and inclusi&e growth are linked. The donors will continue to pro&ide support if there is comfort that the money being pro&ided is being put to good use. M8oes aid work3 is a repeatedly asked question in the corridors and conference rooms of de&elopment agencies. It is being asked in the case of Pakistan with a sense of urgency. That is for two reasons that go be yond the normal concerns of de&elopment institutions. The first( of course( is the rise of e-tremism and the threat it poses not only to Pakistan but to the rest of the world. There is now a widespread belief in +ashington and other western capitals that the Taliban are only % miles from Islamabad. If Pakistan falls it will generate a gigantic tsunami that the world is not equipped to deal with. The second concern about the use of aid in Pakistan can be understood by the use of a term popular in finance. =alled Mmoral ha9ard( it refers to the beha&iour of the firms that belie&e that they are too big or important to fail. This pushes them towards taking risks that are hard to 2ustify in terms of con&entional cost"benefit analysis. If the risks materialise and push the firm towards bankruptcy( someone will come along and launch a rescue mission. In fact( this is precisely what happened in the case of se&eral large financial firms in the .nited 'tates that were sa&ed by the state with the in2ection of large sums of money. Pakistan has been in that position on se& eral occasions. 6ach time the country came close to bankruptcy and default it was sa&ed by some foreign pro&ider of finance( more often than not the I,5 but on occasion also the .'( 'audi Arabia and =hina. This has happened again with the I,5 and the 5riends of Pakistan coming to the countrys rescue. Howe&er( will the post"crisis period now be any different from those in the past3 The answer depends in part on how the funds pro&ided by the donor community are deployed. There is the traditional way and then there is a new way( the latter based on Pakistans own e-perience with the use of donor assistance as well as the nature of the problems the country faces. The con&entional way would be to put a significant amount of money directly into the budget in order for the country to bring its fiscal situation close to a sustainable le&el. This is estimated by economists to be four to $.! per cent of 78P. To get there from the present se&en per cent would need a significant amount of fiscal retrenchment that will hurt the public"sector de&elopment programme. The country cannot afford to go on that path. It

urgently needs economic growth without which it will not be able to pro&ide support to the marginalised segments of the population. In addition the donors would like to put their money into social de&elopment plans since Pakistan has fallen way behind the countries at its le&el of de&elopment in terms of human de&elopment. This calculation led the +orld >ank a decade and a half ago to de&elop and finance a 'ocial Action Programme( the 'AP( which pro&ided billion of dollars of donor money for primary education( basic healthcare and impro&ement in the social circumstances of women. These were all worthy causes but almost nothing was achie&ed by 'AP. The bank perse&ered for more than a decade. It e&en mo&ed its super&ision function to Islamabad. >ut the results were pitiful. The donors are about to commit the same mistake again. +hy did 'AP fail and will a similar initiati&e succeed3 Pakistan has yet to create the institutional infrastructure that can efficiently implement 'AP type programmes. +hat is required is a functioning system of local go&ernment that is accountable to the people it ser&es and represents. Pakistan has tried fi&e different systems of local go&ernment in the past % years. 6ach one of these was abandoned for the reason that the political system was not prepared to countenance de&olution of power to lower le&els of go&ernment. 8e&olution is seen in a 9ero"sum conte-tE if those who ha&e power at the centre or in the pro&inces transfer some of it to local go&ernments( the latters gain will mean the formers loss. This is wrong( of course( since bringing the go&ernment closer to the people impro&es o&erall go&ernance and e&eryone benefits. The other reason why a 'AP type of initiati&e will always fail is that the social( economic and political structures in which the poor find themsel&es trapped dont allow them to benefit from social de&elopment programmes. They need to be in better command of their li&es in order for such programmes to work. C

(ost of power outages to the economy

By Shahid Javed Burki Monday, May 11, 2009 TH6 second annual report of the >eaconhouse Institute of Public Policy offers a menu of options for the policymakers in Islamabad. Aoining me as the authors of the report titled M'tate of the 6conomyD 6merging from the =risesG are some of the more e-perienced policy analysts including 'arta2 A9i9( Aisha 7haus"Pasha( Par&e9 Hasan( Akmal Hussain( 'hahid /ardar and Hafi9 Pasha. Here I will deal with one aspect of the analysis offered in the report.The year )%%; witnessed a ma2or increase in the frequency and intensity of power load shedding or outages generally and in particular in the industrial sector. A manifestation of this problem can be seen in the large number of reports in the press of high incidence of outages and protests( by not only the domestic and commercial( but also industrial consumers.

8uring the course of the year( complaints by the &arious chambers of commerce and industry and other industrial associations that the le&el of production in a number of industries has been reduced due to the persistence of outages which apparently ha&e fundamentally disturbed the normal rhythm of the production cycle in a large number of industrial units( especially in electricity"intensi&e sectors like te-tiles( non"metallic mineral products( basic metals( leather products( rubber and plastic products( paper and paper products( etc. The economic costs of power outages in the industrial sector which ac counts for about ); per cent of total power consumption is ha&ing a profoundly negati&e impact on the economy. The magnitude of cost is a basic indicator of the benefits that could be realised from in&estment and impro&ed management of the power sector. ,a2or factors contributing to increased power shortages includeD growth in demand for electricity( particularly domestic demand fuelled in part by subsidised tariffsE inadequate policy response to the increased demand( reflected in the lack of e-pansion and upgradation of power plants and the low priority to public sector e-penditure on the power sectorE lack of impro&ementOupgradation by the IPPs( partly because of the uncertainty created by the ad hocism in the go&ernments pri&atisation policy earlierE o&erall mismanagement of the power sector( reflected both in the accumulation of o&er 1sB#% billion of circular debt and the hea&y line losses and large scale theftE and shortterm supply"demand imbalances due to the seasonality( in particular in hydro power generation. =osts of outages consist of direct costs which primarily comprise the spoilage cost and net &alue of lost production and indirect costs incurred by firms to reco&er at least some of the output lost during and immediately after outages. The particular mechanisms chosen for reco&ering output lost( will( of course( be based on cost minimisation considerations. Typically( types of ad2ustments made by a firm includeD acquiring self"generation capacityE more intensi&e utilisation of capacityE working o&ertimeE working additional shifts( andE changing shift timings. A pattern of response by industrial units increasingly obser&ed( is that of de&elopment of own sources of energy supply through in&estment in generators. 'ome of the key parameters required to estimate the cost of loadshedding for this report ha&e been collected through a sur&ey of a predesigned and tested questionnaire on a purposi&e sample( stratified :by city and industry group< of ! industrial units. The sur&ey re&eals that the a&erage annual hours of outages per unit was 1B#* in )%%;. The a&erage duration per day was four hours and B minutes. The highest incidence of outages in )%%; was between the months of 8ecember and Aanuary and in Aune. Industries which ha&e been affected more by outages are te-tiles( machinery and equipment( food( glass and allied products. Also( continuous"process industries appear to ha&e been less e-posed to outages than batch"making industries. Time losses during the outage plus restart time account for were o&er )% per cent of the total time of operation. About ;$ per cent of the sample units did make an effort to reco&er part of the lost production time. The highest proportion( #! per cent( ha&e done so through self"generation of electricity. +here&er generators ha&e been installed( the e-tent of

substitution has been high( at ;! per cent of the normal power consumption. 5irms which do not ha&e self"generation capacity( either because it is not economically feasible or affordable( ha&e tried to reco&er some of the lost output through other ad2ustments identified earlier. Howe&er( their le&el of reco&ery of lost output is lower( at )* per cent. The reco&ery of lost output is at a higher cost. The a&erage cost of selfgeneration is almost two and a half times more than the cost of acquiring electricity from power utilities. Therefore( the e-tra cost to the industrial sector due to self"generation of electricity is about 1sB) billion. This is also an indicator of the e-tent to which profitability of firms is lower because of load shedding. Also( since such firms reco&ered about ;$ per cent of the output( the cost of output permanently lost is estimated at 1s$) billion. 5irms ad2usting through other mechanisms also incur additional costs which include o&ertimeO shiftOchanging working days premia to labour( additional wear and tear of machinery and spoilage of raw materialOinputs in process. These costs aggregated to 1s billion at the national le&el. 5or such firms( the cost of &alue added lost is 1s## billion. Therefore( aggregate cost to the industrial sector of load"shedding is estimated at 1s1!# billion. This is equi&alent to nine per cent of the industrial &alue added. The loss of industrial output is estimated at se&en per cent of potential production. 4&er and abo&e the direct costs on the industrial sector( a change in &alue added in the industrial sector has secondary or multiplier effects on the rest of the economy. Ad2usting for these forward and backward linkages increases the o&erall costs of industrial load" shedding to the country by 1s!B billion. 4&erall( power loadshedding in the industrial sector has cost the country 1s)1% billion or o&er two percent of the 78P( o&er @1 billion of e-port earnings and potential displacement of $%%(%%% workers. =osts could be e&en higher if impact on other sectors like agriculture and ser&ices are allowed for( which account for almost the same share in power consumption as industry. 5ollowing are some of the recommendations we ha&e made to deal with this situation. The high economic cost of unsupplied electricity 2ustifies a case for e-panding power generation capacity. In fact( there is a stronger case for upgrading e-isting power generation facilities( which can be accomplished at almost one"third the cost of new plants. This will require de&elopment and quick implementation of an accelerated generation in&estment programme( which includes the pro2ect to import 1%%% ,+ electricity from Iran and a comprehensi&e programme to reduce technical losses and impro&e the reliability of the distribution system. 'imultaneously( the enabling en&ironment has to be impro&ed so that IPPs in&estment plans can be encouraged and the problem of circular debt has to be resol&ed on a priority basis 'uch a strategy should focus on a loss"minimising policy. The load"shedding schedule should reflect clear and transparent priorities( in consultation with stakeholders( and be predictable. 'ectors that deser&e priority( in particular should include e-port industries. There is a strong case to de&elop and implement customer outreach programmes to encourage energy conser&ation measures( steps to impro&e the power factor( and methods of limiting peak demand. It is also important that alternati&e sources of

energy( in particular solar energy be e-plored. Pakistan should enhance its capacity to follow international de&elopments on alternati&e sources and promote greater use of renewable energy for light( heating( agriculture and smallscale enterprise. 'ome of the policy recommendations enunciated abo&e can be implemented immediately while others ha&e a medium"term perspecti&e( gi&en the gestation period required for completionOe-ecution of in&estments. >ut one thing is clear. This is a crisis that cannot wait for too long to be sorted. The cost to the economy and to the society are &ery high and their political consequences could be e-ceptionally grim.

For a new transport policy

%hanges in society and the economy have created the demand for different modes of transport. (he sit"ation is highly dynamic and re+"ires both analysis and action by policymakers.

By Shahid Javed Burki Tuesday, May 12, 2009

IT is always useful to reflect on history before planning for the future. I will illustrate this point today by using the case of the transport infrastructure. Three legacies must be recognised to deal with the situation as it e-ists today and for the adoption of a strategy that would ser&e the future. The >ritish( when they constructed the transport system in the area which is todays Pakistan( had in &iew an entirely different set of ob2ecti&es. They wanted the transport system to quickly mo&e troops to the geographical areas that had caused trouble for them as they sought to consolidate their control o&er the northwestern part of their domain. 1ailways were the best form of transport for this purpose. They could transport hea&y equipment relati&ely cheaply to pass through geographical corridors that were not too difficult to protect. Initial costs would be high but so would the returns if the areas the railways reached could be made secure for >ritish rule. The second >ritish strategic interest was to supply the food"deficit areas in the northeastern part of their Indian domain with the food it needed. These pro&inces had suffered a number of famines in the 1*th century and had caused a hea&y loss of life. The >ritish( remembering the 1;!# war( were always sensiti&e to security concerns. They did not want another uprising on their hands produced by hunger. Accordingly( they in&ested hea&ily in de&eloping Pun2ab to produce food grains for the food"short pro&inces in the east. They also in&ested in constructing a network of market towns that could accumulate the

surpluses produced( and in building a road and railways network to transport the surplus from Pun2ab to the northeast. This part of the transport network connected the northwest to the northeast. It was much more e-tensi&e in the distance it co&ered. A railway organisation that went by the name of the ?orth"+estern 1ailway( the ?+1( was the backbone of the system. The third inheritance from >ritish rule was the assumption that the population in what is Pakistan today had neither the wish nor the need to tra&el long distances. ,ost of the people li&ed on the land and if there was need to tra&el it was to the market towns or( at most( to the administrati&e centres. >y putting in place a highly decentralised system of go&ernance( the >ritish administration reduced the need for tra&el to a distance of a few miles from the place of residence. These requirements could be easily satisfied by the use of animal"drawn carriages mo&ing mostly on dirt roads. As against this( the population of what was to become India after independence was relati&ely more mobile. Those who practised Indias many different faiths wished to perform pilgrimages to &arious holy sites. This meant that the state had to facilitate the mo&ement of hundreds of thousands of people o&er long distances. 4nce again railways ser&ed the purpose with the difference that they had to cater not only to the mo&ements of the goods and commodities but also a large number of people. .nlike the Pakistani system( the transport system that supported economic and social life in India was much more comple-. To these legacies( Pakistan added two im perati&es of its own to de&elop the system of transport. The partition of >ritish India resulted in one of the largest mo&ement of people in human history. +ithin a period of a few months around mid August 1*$#( some 1$ million people mo&ed in and out of Pakistan. 6ight million ,uslims came from India to Pakistan and si- million Hindus and 'ikhs went in the opposite direction. ,ost of the people went on foot but a large number also mo&ed by train. 4nce the migration was o&er( there was a dramatic change in the geographical distribution of population. >efore 1*$#( what is now Pakistan had only one urban pole N the well"appointed city of 0ahore. ?ow there were twoE the other( /arachi( ha&ing been chosen as the capital of the country( de&eloped quickly and in four years o&ertook 0ahore in si9e. Two large urban centres( with a combined population of about fi&e million out of a total of $% million( needed transport to ferry people back and forth. This was the case especially since the new additions to /arachis population came not only from India but also from the northeastern and northwestern parts of the new state of Pakistan. /arachi needed workers to build new offices( to run its industry and to ser&e its rapidly growing population. A large number of them came from the northern areas of Pun2ab( from A9ad /ashmir and from the ?+5P. These people did not initially bring their families with them to /arachiE they commuted from the capital to the places of their origin. They used the railways for this purpose. The second important change that had a bearing on the sector of transport was the dramatic reorientation in Pakistans trade that occurred soon after the country became

independent. In 1*$* India declared a trade war against Pakistan and the latter had to quickly find new trading partners to sur&i&e. +ith this change /arachi( the port( rather than 0ahore( the railway hub( became the epicentre of trade and finance. +hile 0ahore was the main trading centre for decades before independence( it surrendered this place to /arachi after inde pendence. =ommerce through 0ahore was dominated by railways. =ommerce centred on /arachi became multi"modal in&ol&ing shipping and road haulage. 'ince a significant quantity of bulk imports and hea&y machinery were needed by the rapidly growing industry in /arachi( haulage o&er short distances was better done on roads than by railways. At the same time( the main trading corridor pi&oted from north to east :from the granaries of Pun2ab to food"deficit areas in >engal and >ihar< to north to south :from /arachi to the Pun2ab<. This was a ma2or transformation with which Pakistan is still learning to cope. 4ther changes in the economy and society affected the demand for different modes of transport. The capital was mo&ed from /arachi to Islamabad. This created a new urban community with a different set of demands for transport. The two wars in Afghanistan N one in the 1*;%s( the other still going on N ha&e created new logistics demands. The current war requires road corridors for supplying American and ?ato troops operating in Afghanistan. This demand by foreign troops is also bringing into being new types of transport firms. The situation in other words is a highly dynamic one( one that requires both analysis and action by those responsible for making public policy. C

%ultiple costs of the war on militancy

By Shahid Javed Burki Monday, 18 May, 2009 In this article( I will discuss the cost to Pakistan of the war on terror( a term used by then President >ush to describe the American effort to beat back the rising threat posed by MIslamic e-tremism. The term has been abandoned by the new American administration headed by President >arak 4bama. This change goes beyond the use of language. +ashington now belie&es that the antipathy felt by a segment of the ,uslim society towards America and the +est is the result neither of the en&y of the success achie&ed by these societies nor because of the desire to insulate the ,uslim populations from the influence of the western culture. Instead the conflict has its roots in the loss of hope on the part of some of the ,uslim youth in their own future. Howe&er( today I will not enlarge upon the moti&es that ha&e prompted some people to take up arms not only against the +est but also against their own go&ernments. I will instead focus on the cost of the conflict for Pakistan.

.ntil recently( the focus on the M+ar on Terror was largely on highlighting the benefits to Pakistan in terms of increased support from the international community( especially the .'. >ut increasingly there is a concern that the costs of participation are rising e-ponentially and leading to se&ere dislocation of economic acti&ity and unacceptably high losses of life and property. The costs can be classified into a number of categories( largely depending on their nature :direct and indirect< and on the time period e-amined :immediate( medium"term or long" term<. Those costs that are short run are more clearly identifiable and potentially less difficult to measure. 6stimates co&ering longer periods of time and focused mainly on indirect costs require numerous assumptions and hence are on less firm ground. The decision to participate in the M+ar on Terror did lead to a ma2or outpouring of international support to Pakistan. In )%%1 Pakistan was emerging from a tough stabilisation programme with the I,5 which( in the process of reducing macroeconomic imbalances had( more or less( Msuffocated the process of growth. Per capita income was stagnant and there was a substantial increase in unemployment and po&erty. 5oreign e-change resources were scarce and at the beginning of 5H )%%1"%)( foreign reser&es stood at @B()B1 million( enough only to finance three months of imports of goods and ser&ices. Participation in the war effort led to a substantial increase in the inflow of concessional assistance( especially in the form of grants from the .'. 'ince )%%1"%) Pakistan has cumulati&ely recei&ed @1).) billion funding from the .'. This consisted primarily :almost #% per cent<( of reimbursement for the costs incurred by the military in counter"terrorism operations. 8e&elopment and economic assistance has aggregated to @B.) billion. The direct contribution to the growth process in the country was limited. Howe&er( the o&erall assistance( including the funding of military operations :mostly incurred in local currency<( contributed to a rapid build"up in foreign e-change reser&es. 8irect costs include the &alue of human li&es lost or of in2uries( the &alue of property or infrastructure destroyed or damaged( and costs of enhanced spending on security. Here( the ma2or conceptual issue relates to the &aluation of the human cost( either in terms of loss of life or of in2uries. In order to a&oid contro&ersy o&er any assumed &alue( we simply compute the cost as the :potential or actual< compensation due to affected families as per a prescribed go&ernment formula. Indirect costs are di&erse in nature and include costs to local economies in the conte-t of areas which are se&erely impacted by terrorism. In addition( due to the heightened sense of insecurity( loss of li&elihood( and damage to shelter( terrorism may lead to internally displaced persons :I8Ps< on whom costs will need to be incurred in the form of relief and rehabilitation. =osts also include greater uncertainty and risk which relates to lost in&estment( both foreign and domestic( due to heightened risk perceptions( especially arising from Mmega"attacks like the assassination of >ena9ir >hutto and the bombing of ,arriott Hotel. In addition( tra&el

and tourism is likely to be ad&ersely affected leading to decline in associated ser&ices by hotels( restaurants( tourist guides( transport operators( etc. 5inally( an important category of costs relates to the higher costs of insurance premium for co&erage against acts of terrorism. Higher transaction costs are those costs which are associated with delays in the mo&ement of goods and consignments. 5irms may also incur costs of higher in&entories to a&oid the possibility of disruption in supplies. In addition( there are enhanced time costs( arising( for e-ample( at airports due to greater security checks( immigration restrictions( etc. If we look at the direct costs starting with the damage to human li&es and property we focus only on the cost of compensation for loss of life or in2ury. 6-penditure on security and defence was higher because of the need to place the armed forces at the western borders and for undertaking counter"terrorism operations( especially in the ?orth. Another aspect of enhanced security is the de&elopment of pri&ate security arrangements. There was a mushroom growth in this ser&ice in recent years. The total costs of fighting terrorism are high( estimated at 1sB;% billion( at the )%%#"%; base. The distributional consequences of these costs need to be highlighted. Higher security e-penditures run the risk of Mcrowding out other e-penditures related to the pro&ision of basic social and economic ser&ices and thereby ha&ing an ad&erse impact( especially on the lower income groups. The negati&e implications for the relati&ely poor include the loss of property and li&elihoods in the affected areas which are among the most backward regions of the country( primarily as a consequence of dislocation of economic acti&ity( including the labour"intensi&e sector of tourism. The human dimension is manifested most acutely not only in the loss of life but also in the emergence of large numbers of I8Ps. 5or the relati&ely well"off( the costs consist of foregone in&estment opportunities and decline in wealth associated with the fall in share &alues( due to heightened le&els of risk and uncertainty. There are also higher costs to the corporate sector in the form of larger premium for insurance co&erage and increased transaction costs. A number of important conclusions can be drawn from the abo&e analysis. 5irst( as the incidence of terrorist acts and counter"terrorism operations has increased rapidly( the benefits of participation in the M+ar on Terror are falling while the costs are rising sharply. In )%%#"%;( the inflow of concessional assistance from the .' was about @1.* billion( whereas the cost was three times higher at @ billion. There was( therefore( substantial under"compensation for Pakistans participation in the M+ar on Terror. This( at least( partly e-plains the lack of some ownership of the war effort. The recent commitment by President >arak 4bama that the .' will pass a bill in =ongress to authorise economic aid to Pakistan of @ 1.! billion per year for the ne-t fi&e years( will raise the quantum of concessional assistance from the .' but the le&el of support will still remain at

less than half the cost of the Mwar. 'econd( the past e-perience with the utilisation of the concessional support is not &ery positi&e. 5rom the &iewpoint of achie&ing sustainable higher growth and promoting employment( especially for alle&iating po&erty( it is perhaps better if Pakistan is also gi&en preferential access to markets( especially for te-tiles( in the .'( 6. and Aapan. +hile the proposal for 1econstruction 4pportunity Jones :14Js< in the affected areas( en2oying preferential access( is worthy of consideration( it is unlikely that in the short run much in&estment will be di&erted to these areas despite the incenti&e gi&en the pre&ailing situation. It is important that as an alternati&e fast"track concessional assistance is pro&ided for public in&estments in infrastructure and basic ser&ices and employment"intensi&e public works in affected areas which are cleared up through military operations. 5inally( the higher direct costs being incurred on the military and police operations against counter"terrorism of almost 1s1B% billion per annum and the concomitant increase in acts of terrorism( highlight the ineffecti&eness of the current strategy being followed. There is need for a comprehensi&e re&iew of the strategy( preceded by the de&elopment of a stronger political consensus and broad"based public commitment to participation in this war. To conclude( the country is paying a hea&y price for the delay in the effecti&e resolution of these enormous challenges facing it. Potentially( 78P could ha&e been higher by almost 1s!*% billion if the problems of security and power shortage alone were not ad&ersely impacting on the economy. The concomitant repercussions for e-ports( employment and po&erty are also si9able. Any further inaction or inadequateOinappropriate policy action can further frustrate the countrys growth potential( which it can ill afford in these times of increasingly unfa&orable global de&elopments.

)earning from Ira*

By Shahid Javed Burki Tuesday, 19 May, 2009 A 716AT deal has been learnt about insurgency and counterinsurgency from Americas se&en"year in&ol&ement in Iraq. ,ore will now be learnt as the struggle between the forces representing the state and the Taliban intensifies. 'ome of Iraqs lessons will no doubt be applied to the conflict in Pakistans north and in the settled districts of the ,alakand di&ision. 0et us start with what Iraq has taught us. The first lesson concerns the use of force. The Americans went in con&inced that the use of disproportionate force would deter opposition to their occupation of the country. They called it Fshock and aweG. This in&ol&ed the use of an e-traordinary amount of firepower to

impress not only the Iraqi armed forces. There was also the e-pectation that what America could throw at the opposition in terms of bombs and bullets would scare the people into submission. >ut the strategy didnt work. It was only in )%%# that 7en 8a&id Petraeus was able to change course and adopt an approach that was to reduce significantly the le&el of &iolence and bring relati&e peace to the country. Iraq has reached a point where the Americans ha&e begun to disengage( political processes ha&e begun to work( and the economy has begun to re&i&e. +hat was the main difference between the earlier American way of dealing with the insurgency and the approach that has produced a degree of normalcy3 The main difference was that the Americans recognised that it is not fear but hope that would pacify an unhappy populace. The use of force had to be combined with in&estment in de&elopment and institution"building that ga&e hope to the people that they could e-pect something better for themsel&es and for their children. Initially a&erse to nation"building( the latter was precisely what the Americans began to do in )%%#. They began with what 7en Petraeus called the FsurgeG. This in&ol&ed the dispatch of an additional fighting force to the country to add strength to the already large American presence in Iraq. 4nce the commanders were sure that they would ha&e enough soldiers a&ailable to them( they would be able to gi&e confidence to the local leaders that after their areas were cleared of insurgents( there would be a strong enough American presence to ensure that the miscreants did not return. This was the area in which the Americans had failed earlier. They had earlier used a great deal of force to push back the insurgents from the pro&ince of 5allu2ah( one of the most troubled areas in Iraq. 8ominated by fiercely independent 'unni tribes who resented the rise of the 'hia leadership in the country( the tribal leaders looked the other way as the insurgents established their control in the area. Howe&er( the insurgents brought with them a culture and social norms that were alien to the people of the area and resentment built up as they introduced their &alues in the system of go&ernance. +hen the American push came( the locals watched the de&eloping situation without taking sides. >ut the .' left after scoring a &ictory o&er the insurgents. They said they couldnt stay since they did not ha&e the manpower to keep the place pacified. This was e-pected to be done by the Iraqis themsel&es. >ut Iraq was slow in de&eloping its own security force. This is where the surge in the American presence made a difference. 4nce the additional troops came( the locals de&eloped confidence in the American willingness to do more than simply fight. The new troops came equipped with the training and the ability to pro&ide the local population with the ser&ices and basic needs it needed. 4nce these came to be pro&ided( the Americans were able to build alliances with the areas tribal leaders who came o&er to the side of the go&ernment and lent their support to the counterinsurgency efforts. The Pakistani Army has to learn the same lesson. It has not only to e-pel the insurgents

who ha&e been defying the states authority( it must also stay on in the area while local leaders re"establish control. As is now recognised by most people who ha&e studied the situation in 'wat( the Taliban initially won some support from the locals in connection with the legal system that replaced the one that operated before 1* * when the district along with 8ir and =hitral were merged to form the administrati&e di&ision of ,alakand. That was when the old princely states became a part of the pro&ince of the ?orth +est 5rontier and adopted its go&ernance system. +ith the merger came the established legal system( replacing the one that was based on the 'haria and tradition. The old system was quick in dispensing 2usticeE the one that replaced it was slow( cumbersome and often corrupt. The demand by some of the religious groups to reintroduce the old system resonated with the people and the Taliban climbed on the bandwagon. 4nce the state made the concession( the Taliban did not stop at that and they pressed forward putting in place other practices that had no tradition and were not sanctioned by the state or religion. They did not confine themsel&es to 'watE they began to push ahead and took o&er >uner and threatened other settled parts of the ?+5P. The +est became ner&ous. It was widely reported in the western press that the Taliban were only % miles from IslamabadE only the ,argalla Hills were in their way before they took o&er the capital city. That( of course( was nonsense but it got Islamabad to take notice. +ith the military operation now underway( those who are managing it must draw lessons from Iraq. 5our of these are important. 4ne( the military must go the entire way and rid the Pakistani territory of insurgency. Two( once the military has reoccupied the areas currently controlled by the insurgents it should only lea&e when the state has de&eloped the capacity to pro&ide security to the local people. Three( an intensi&e effort should then be launched to bring de&elopment to those areas( including programmes and pro2ects aimed at impro&ing womens welfare. +omen were targeted by the TalibanE the state must demonstrate that it has a different set of priorities. 5our( a system of local go&ernment must then be de&eloped based on tradition as well as the need to pro&ide adequate representation to the people. A great deal depends on how this phase of the conflict de&elops. The Taliban ha&e posed an e-istential threat to the state of Pakistan. The state must respond fully and intelligently.

$eshaping the global economy

By Shahid Javed Burki Monday, 2% May, 2009 THI' is a bad time for the world economy and an e&en worse time for the western financial system. >ut this is a good time for speculating about the future shape of the global economic system.

'ome economic historians ha&e identified catch up periods in the world economy when some of the national economies that had lagged behind 2oined the leader( some time e&en o&ertaking it. In the 1;th century 5rance caught up with >ritain( the country that had launched the industrial re&olution. A quarter century later( 7ermany 2oined the two leading economies of 6urope and became one of them. In the late 1*th century it was the turn of the .nited 'tates. It not only 2oined 6uropes leading economies but by the time of the start of the 5irst +orld +ar it had o&ertaken most 6uropean economies in terms of the si9e of its economy and income per head of its population. The )%th century saw more catch up periods. After the 'econd +orld +ar that saw the defeat and de&astation of 7ermany and Aapan( the Americans helped the defeated Fa-is powersG to reco&er. It did this by launching the ,arshal Plan( an unusual response by the &ictor towards the countries it had defeated ?ot only did Aapan reco&er( it 2oined the leading world economies in terms of the structure of economy and income per capita of its population. The pace and style of Aapanese economic de&elopment caught the eyes of many academics( including 69ra Pogel( the sociologist at Har&ard .ni&ersity who wrote a bestselling book titled Aapan as ?umber 4ne. He saw the dynamism of the Aapanese economy so impressi&e that it could( he thought( o&ertake the .nited 'tates within the foreseeable future. Had that happened that would ha&e been a spectacular case of an o&ertake. Aapan with one"half of the .' population would ha&e had to double its income per head to o&ertake America. The ne-t period of closing the gap took place between 1*#! and 1**! when a number of 6ast Asian economies I the +orld >ank called them the Fmiracle economiesG in a celebrated study of 6ast Asia I achie&ed rates of economic growth unprecedented in economic history. +ithin these two decades four 6ast Asian states I 'outh /orea( Taiwan( Hong /ong and 'ingapore I saw a remarkable transformation of their economies. Although they did not approach the income le&els of Aapan and the western economies( they became industrial powerhouses. 6&en though there was a brief interruption in their progress by what came to be called the Asian 5inancial =risis of 1** "*#( they resumed economic de&elopment at about the pace of the pre"crisis period. >efore the start of the global economic crisis in the summer of )%%#( there was much speculation that a new group of Fcatch upG economies had appeared on the global economic scene. >ra9il( 1ussia( India and =hina got their own name( the >1I=s. They were likely to become ma2or economic players. 7i&en the large si9es of their populations( some analysts belie&ed that the centre of global economic acti&ity would mo&e to these countries. There was also a consensus emerging in academic circles that we were witnessing another significant change in the structure of the global economy.

F8ecouplingG was occurring in the global economy and the >1I=s( along with some other large emerging economies( would no longer be affected by the cycles to which the more de&eloped economies were sub2ect. That was not to be so. As the crisis that began in the .nited 'tates in the summer of )%%#( when it reached other shores( it did not spare the >1I=s or other parts of the globe. FThe impact of the crisis will be particularly hard on emerging countriesD the number of people in e-treme po&erty will rise( the si9e of the new middle class will fall and go&ernments of some indebted emerging countries will surely defaultG wrote ,artin +olf( chief economics commentator of 5inancial Times for a special issue of the newspaper. F=onfidence in local and global elites( in the market and e&en in the possibility of material progress will weaken( with de&astating social and political consequences. Helping emerging economies through a crisis for which most ha&e no responsibility whatsoe&er is a necessity.G It is hard to accept this grim conclusion. 'ome countries in the emerging world will be hurt no doubt( and many of them need the as sistance of the international community. 'e&eral( howe&er( will emerge stronger from this e-perience and continue to participate in the reshaping of the global economic structure. Among those that will benefit and thus lead are se&eral Asian economies. To make this point it might be useful to briefly &isit the changes that ha&e occurred in economic thought in the last few decades( especially after the conclusion of the 'econd +orld +ar. The last half century di&ides itself neatly into two periods I neat in the sense of the attention gi&en by policymakers the world o&er for certain ideologies concerning economic management. 'e&eral influential world lead ers did not see the war as a triumph of the .nited 'tates and its allies in +estern 6urope. They saw it as the &ictory of socialism and statism o&er the market place. The remarkable economic growth of the 'o&iet .nion and the growth of its military might were seen as &indication of the way it had managed its affairs. The admirers of the 'o&iet .nion were not confined to the leaders of what came to be called the Third +orld I leaders such as Aawaharlal ?ehru of India( 7amal ?asser of 6gypt( Aulius ?yrere of Tan9ania( /wame ?krumah of 7hana and 'oekarno of Indonesia. 6&en in the &ictorious >ritain( the &oters sent home +inston =hurchill and his =onser&ati&e party in fa&our of the 0abour party and its leader =lement Attlee. The model these leaders fa&oured was that of the mi-ed economy. In Aohn ,aynard /eynes( they had their own philosopher for this approach. The man who ga&e the clearest substance to this line of thought in the Third +orld was Indias ?ehru under whom the state was placed on the Fcommanding heightsG of the economy. A reaction set in to this approach with the election of 1onald 1eagan in the .nited 'tates in 1*;% and the ascent to the >ritish prime ministership of ,argaret Thatcher the year before. 4ther e&ents also contributed to the de&elopment of a new approach in which pri&ate enterprise was to be left alone to its own de&ices. These included the shift in =hina from the

plan to the market under 8eng Qiaoping and the dismantling of the MGlicence ra2G in India starting in 1**1 under the stewardship of then finance minister ,anmohan 'ingh. F7o&ernment(G proclaimed 1eagan( Fwas not the solution to the problem but itself a problemG. The man who ga&e real substance to this philosophy was Alan 7reenspan who ser&ed for 1; years as the =hairman of the .' 5ederal 1eser&e >ank( the countrys central bank. The fer&our with which this economic ideology was supported has been replaced by the fer&our with which it is now being condemned.There is now consensus that the state has a large role to play in the management of the economy. 6&en if it is not placed on the economys commanding heights( it must watch o&er it with great care and diligence. The countries that will do better in this respect are those that did not dismantle the state as an economic o&erseer and most of those are in the emerging world. 5or this reason alone( I find it hard to accept that the entire emerging world has been thrown back almost to the start of the economic race as a result of the economic crisis of )%%#"1%. ,any in this part of the world will reco&er stronger than the weakened economies of the +est.

Have we turned the corner&

By Shahid Javed Burki Tuesday, 2# May, 2009 TH616 are two N perhaps three N nation"building ideas that ha&e been in conflict in 'outh Asia since the >ritish left the subcontinent in the late 1*$%s. 4ne was espoused by Aawaharlal ?ehru( the first prime minister of India who go&erned the country for the first 1# years after independence in 1*$#. This was that e&en in a country with such di&ersity as India it was possible to construct economic( political and social systems that would protect all citi9ens( not only those who constituted the ma2ority. 'unil /hilnani( the Indian historian has called this the Fidea of IndiaG. This idea( howe&er( was re2ected with some &ehemence by ,ohammad Ali Ainnah. He maintained that the land o&er which the >ritish ruled was not inhabited by one Indian nation but by two N one Hindu and the other ,uslim. Ainnah belie&ed that each nation deser&ed its own political space within which it could order the li&es of its citi9ens according to their religious beliefs and social norms. This came to be called the two"nation theory which became the basis for the creation of Pakistan as a homeland for the ,uslims of >ritish India. The American political scientist( 'tephen =ohen has called this Fthe idea of PakistanG.

Howe&er( some re&isionist historians( in particular Ayesha Aalal( ha&e suggested that Ainnah was not serious about the idea of Pakistan. His demand for the creation of a separate homeland for the ,uslim community of >ritish India was meant to obtain protection from the Hindu ma2ority once India became independent. >ut the leaders of the =ongress party granted him his wish and( in Ainnahs own words( a Fmoth"eatenG Pakistan was born on August 1$( 1*$# a day before Indian gained independence. >ut religion as a glue for nation"building turned out to be a weak de&ice. The leaders of +est Pakistan were reluctant to fully accommodate the wishes and aspirations of the citi9ens of 6ast Pakistan. The result was considerable acrimony between the two leadership groups which e&entually resulted in ci&il war. This led to the emergence of 6ast Pakistan as an independent >angladesh led by 'heikh ,u2ibur 1ehman whose Fsi-"pointG formula for the grant of considerable autonomy to the eastern wing had not been not acceptable to the +est Pakistani leaders. The si- points were in fact the third nation"building idea to take hold in the 'outh Asian mainland. According to this ethnicity and culture are powerful attributes of nationhood( e&en stronger than religion.These three ideas ha&e contributed to the persistence of tensions in 'outh Asia. These ha&e been &ery strong in the case of Pakistans relations with India. It is not clear from Ainnahs speeches and the few writings he left behind as to what were his precise intentions with respect to the role of religion in the state of Pakistan. He often spoke about the need to be guided by the teachings of Islam. This was ine&itable since he had used the idiom of religion to make his case for a separate homeland for the ,uslims of 'outh Asia. >ut it appears that he was inclined to lead the country towards a secular democracy( not too different from the one ?ehru and his colleagues were able to enshrine in their countrys constitution. Adopted in 1*!1( the Indian constitution has pro&ed to be a fle-ible instrument of go&ernance. It has been amended scores of times to keep it current with the demands of a society that has seen rapid economic and social change. 5or Pakistan( the case for keeping religion out of politics was weakened by the unanticipated transfer of population that occurred around the time India and Pakistan obtained independence. I ha&e estimated in an earlier work using the censuses conducted by the two countries in 1*!1 that some 1$ million people mo&ed across the border in a few months in the summer and autumn of 1*$#. 6ight million ,uslims migrated from India to Pakistan while si- million Hindus and 'ikhs mo&ed in the opposite direction. >y 1*!1( Pakistan had been Methnically cleansed N a term that was not used then but gained currency when Hugosla&ia fell apart in the early 1**%s. 5or Pakistan the e&ent was traumaticE when the country took its first census in 1*!1( )! per cent of its population of B) million was made up of refugees. +hat was not realised then but pro&ed to be a political trauma in the long run was the M,uslimisation of Pakistan. In the late 1*$%s non",uslims in the areas that are todays Pakistan constituted about a third of the population. Today the religious minorities account for less than fi&e per cent. It was ine&itable that with ,uslims constituting such an o&erwhelming share of the population religion would become a greater force. Howe&er( it neednt ha&e bred religious e-tremism

as it did starting in the late 1*#%s. +hile the idea of India worked in India( it did not keep religion entirely out of politics. The >AP( one of the two national political parties in the country( traces its origin to the 1ashtriya 'wayamse&ak 'angh( founded in 1*)! to protect what were percei&ed to be the rights of the Hindu population in >ritish India. The party gained ground in the 1**%s by drawing upon the grie&ances of those who belie&ed that the Indian state had gi&en too much ground to the lower castes in the population and to the ,uslim minority. The party drew support in particular from the Hindus who had migrated from what was now Pakistan. 0./. Ad&ani( the partys leader in the elections of )%%*( was born in /arachi and left for India at the age of )%. The partys o&ert pursuit of Hindu interests led to the demolition of the >abri mosque at Ayodhya in the state of .ttar Pradesh. The mosque was supposed to ha&e been built on the ground where 1am( one of the most &enerated figures in Hindu mythology( was said to ha&e been born. The assault on the mosque led to riots( in particular in the always resti&e city of >ombay. Thousands of people were killed( many of them ,uslims. The )%%* elections in India ha&e confirmed the longe&ity of the Fidea of IndiaG. The =ongress won handily against the >AP"led alliance as well as the alliance of regional parties that would ha&e liked to see the further weakening of central authority. The decision by the elected go&ernment in Pakistan to send the military to chase out Islamic militants from ,alakand in the north"eastern part of the country may ha&e ushered in a process that could bring the country back towards religious moderation and political modernisation. It would not be an e-aggeration to suggest that the Indian elections in April",ay )%%* and the action against Islamic e-tremists in Pakistan could cleanse the political systems in the two countries of religious influences. It will require leaders from both sides of the 'outh Asian di&ide to take ad&antage of these e&ents.

$egional integration for sustained +national, growth

By Shahid Javed Burki Tuesday, 01 June, 2009 704>A0I'ATI4?( the process that allowed relati&ely free mo&ement of capital( trade and information across national frontiers was meant to create a new economic reality. As the name gi&en to these processes suggests( countries around the globe were e-pected to come together and begin to work as the constituents of one economic order. As Thomas 5riedman wrote in his bestselling book published in )%%)( globalisation had produced a Fflat worldG in which capitalism had triumphed. After a struggle that lasted for se&eral decades( capitalism won against socialism and communism as the most efficient and

effecti&e way for managing economic affairs. That FglobalisationG would reshape the world economy happened but only to a limited e-tent.This was for at least three reasons. 4ne( the worlds smaller nations found that they needed economic mass to deal with the countries that had a larger weight in the global economic system. Two( capitalism may ha&e triumphed but had a number of flaws of its own.These included not enough concern for the less ad&antaged countries in the world and for the world poor. Three( multilateral institutions were needed to regulate global transactions that went beyond the flow of goods and commodities. This was particularly the case for financial transactions where national regulatory systems did not ser&e the purpose. Their absence led to the deep crisis of )%%#")%1%. The first de&elopment that went counter to globalisation was the organisation of hundreds of arrangements in&ol&ing a limited number of states. 'ome countries came together because of geographic pro-imityE some because they shared common historyE and some because of shared culture and religion. 7eography was the most common reason for the organisation of economic and trading arrangements. >y the end of the )%th century( the global economy had acquired another layer by di&iding itself into a number of economic trading blocs. 'outh Asia followed the trend. In 1*; ( se&en countries of the region agreed to form the 'outh Asian Association for 1egional =ooperation( the 'aarc. This was done at the urging of the then president of >angladesh( 7eneral Jia ur 1ahman. His go&ernment did a lot of preparatory work before the countries of the region could be persuaded to subscribe to the 'aarc idea. In 1*;%( the president wrote a letter to all the heads of state indicating why he belie&ed that it was important for 'outh Asia to ha&e a formal arrangement for addressing common issues. He followed up his letter with &isits to all the capitals. The countries of the region agreed but reluctantly. It took them si- years to endorse the idea when they met in 8haka in 1*; for the first 'aarc. President Jia ur 1ahman wanted the 'aarc to launch the process that would ultimately lead to the creation of a free trade area in 'outh Asia. It took 1; years before this process could begin. It was at the 'aarc summit in Islamabad held n Aanuary )%%$ that it was agreed to begin work on the launching of the 'outh Asia 5ree Trade Area( the 'afta. The Islamabad declaration was nothing more than the beginning of a process for the e&entual creation of a free trade area. The first step towards this end was the ratification of the treaty by the member states. That took more time than originally en&isaged. It was only on Aanuary 1( )%% that the process towards creating a free trade area in 'outh Asia was begun with the formal launch of the agreement.

I carried out a study for the .' AI8 on the 'afta in )%%!"% . +ashingtons interest in the matter was related to its desire to bring peace to 'outh Asia that had been long torn by strife. As I will discuss a little later I had been acti&e in a similar way in encouraging the 'outh 6ast Asian countries to create an institutional framework within which they could resol&e their differences. The main purpose of the study was to un derscore the benefits the smaller countries of 'outh Asia could draw from the arrangement and why such an arrangement was beneficial for India( by far the largest economy in the area( as well. The preparation of the study took me to fi&e 'outh Asian capitals I =olombo( 8haka( ?ew 8elhi( Islamabad and /hatmandu. I also met with a number of senior leaders in the capitals I &isited( including President Per&e9 ,usharraf and Prime ,inisters ,anmohan 'ingh and 'haukat A9i9. The only places where I found some enthusiasm for the 'aarc and 'afta were 8haka and /hatmanduE the former because these organisations were( after all( the result of a >angladeshi initiati&e and the latter because it housed the 'aarc secretariat. +hat are the reasons why the 'aarc and 'afta as two ideas for regional cooperation ha&e not worked3 Are there lessons that the countries in the 'AA1= could draw from the e-periences of other parts of the world( in particular from 'outh 6ast Asia3 'ome answers to these questions can be found in the gradual and pragmatic de&elopment of the Association of 'outh 6ast Asian ?ations( the A'6A?. This is now an organisation that includes ten countriesE the original fi&e I Indonesia( ,alaysia( the Philippines( 'ingapore( and Thailand I and later( after the end of the war in Pietnam( three countries of Indochina I =ambodia( 0aos( and Pietnam as well as >runei. ,yanmar was recently admitted mostly for geographical reasons. Historians dont agree as to the original moti&ation for the fi&e founding members to associate themsel&es in a supra"national organisation. According to some( it was >angkok that wished to form a broad coalition of nations in its neighbourhood in order to balance the American influence on the country. Thailand was an important part of the .' effort to contain the spread of communism in the Asia. According to some other( it was in fact the .nited 'tates that was behind the mo&e. It wanted the non"=ommunist countries of the region to work together to work out their differences and to present a slid front to block the ad&ance of =ommunism. After all( the then =hinese president had( in 1* !( urged the people of Asia to rise against their rulers and to bring the masses to power. There may not be a consensus among scholars as toe the moti&ation of the leaders that created the original A'6A? but there is agreement as to what it made it possible for the organisation to de&elop. It was the attitude of Indonesia( the largest country in the association in terms of the si9e of the population as well as the si9e of the economy that made the organisation to become a an effecti&e regional enterprise. +hile it was prepared to be treated as an equal( the smaller

countries were( at the same time( prepared to treat Indonesia as the first among equals. There is lesson in this for India. +hile it is a more dominant economy in 'outh Asia compared to Indonesia in 'outh 6ast Asia( it has to lower its profile in order to pro&ide comfort to the regions smaller countries. At the same time( the regions smaller nations and economies ha&e to treat India as by far the most prominent player. The other important lesson to be drawn from the A'6A? e-perience is the pragmatic response of se&eral generations of leaders that ha&e guided its e&olution o&er time. The original agreement has spawned a number of other institutions and forums in response to the changes in the e-ternal economic and political en&ironment in which the region has been operating. +hat was the political dynamics that moti&ated the member countries not only to remain in&ol&ed but to engineer practical changes for making it more effecti&e3 +hile the original moti&ation may ha&e been political in terms of creating the conditions that would pre&ent the spread of =ommunism( that threat has disappeared. ?ow the member countries find that an association that transcends national interests and makes it easier to deal with the growing competition between two global powers( America and =hina.

Is -outh Asia emerging&

By Shahid Javed Burki Tuesday, 02 Jun, 2009 I5 by Memerging we mean a geographic entity N a state or a region N that has achie&ed political and social stability and economic dynamism then the term cannot be applied to 'outh Asia. It can only be used for India. 4&er the last fi&e years( specifically from )%%$ to )%%#( the Indian economy finally shook off a sluggish past when the country did not run but lumbered on. 78P grew at an a&erage rate of close to nine per cent a year compared to 2ust B.! per cent in the $%"year period after independence. Income per head of the population grew by more than se&en per cent per annum and the incidence of po&erty has declined. 'ome of the cities and states in the country are showing signs of prosperity. The si9e of the middle class increased significantlyE some )%% million people perhaps fall in this category. The middle class e-erts its influence on many aspects of Indian life( with a taste for consumption creating a large market for lu-ury goods. Indian mo&ies and writers ha&e de&eloped audiences and readers outside the countrys boundaries. 5oreign in&estors began to take notice of the country( looking at it as a market they could mo&e into and also as a supplier of trained human resource in a world e-periencing

demographic declines in se&eral places. 0arge quantities of foreign capital arri&ed in the countryE some of these went into reser&es which increased to an impressi&e le&el. In 1**1 then 5inance ,inister ,anmohan 'ingh had taken a load of gold with him to 0ondon and Tokyo to borrow money to keep the country afloat and sa&e it from bankruptcy. That is now a distant nightmare. The IT sector continues to show great strength( making a significant contribution to e-ports. 'ome other sectors of the economy ha&e also de&eloped remarkably well( among them the health ser&ices and pharmaceutical industry. India has become an important destination of what has come to be called Fhealth tourismG. >ut can this progress be sustained3 The country faces many problems which will ha&e to be faced and o&ercome before it achie&es the status of an economic superpower. In an issue gi&ing significant space to the Indian elections recently( The 6conomist pro&ided a re&ealing summary of some of the problems that remain. FIndia is a land of bright promise. It is also e-tremely poor(G it was stated in the lead article. FAbout )# million Indians will be born this year. .nless things impro&e( almost two million of them will die before the ne-t general election. 4f the children who sur&i&e( more than $% per cent will be physically stunted by malnutrition. ,ost will enrol in a school( but they cannot count on their teacher showing up. After fi&e years of classes( less than % per cent will be able to read a short story and more than % per cent will be stumped by simple arithmetic.G ?onetheless( the term FemergingG can be easily applied to India. It cannot be to the rest of 'outh Asia. India at this time has a &ery troubled neighborhood. The most troubled country in the neighborhood is( of course( Pakistan. Its economy is in a freefall. The 6conomist in the issue cited abo&e estimated a 78P growth rate of only %. per cent for )%%* compared to fi&e per cent for India. Pakistans political system is showing signs of life but has a long way to go before it can become stable. ,ost important( the country is faced with what its senior officials ha&e called an Fe-istential threatG. .ntil recently( the leaders of Pakistan showed a lack of resol&e in terms of dealing with the threat Islamic e-tremists were posing to the countrys integrity as a state. Islamabad first endorsed an agreement entered into by the ?+5P go&ernment with a group operating in 'wat and then( when it became clear that the group had no intention of abiding by the terms of the agreement that called for its disarming( the political leadership ordered the military to launch an all"out offensi&e against the militants. In contrast to the Indian societys outlook on its countrys future is the total loss of confidence by the people of Pakistan in their future 0ets look at 'ri 0anka. The go&ernment there celebrated in mid",ay the triumph of its military o&er the 0iberation Tigers of Tamil 6elam. The rebel leader Pelupillai Prabhakaran was killed in the operation. His fight against the 'ri 0ankan state and his quest for an independent country for the Tamils took the li&es of some 1%%(%%% people. The &ictory scored by the military after nearly B% years of struggle can bring stability but the

administration of President ,ahinda 1a2apaksa remains contro&ersial. At a recent meeting of parliament in which he declared &ictory o&er the rebels( )% opposition chairs in the ))!"seat chamber remained empty. They belonged to the Tamil ?ational Alliance( the largest group of parties representing the Tamil minority( elected in the north and east of the island. +ithout full reconciliation with those members of the Tamil community that are prepared to operate within the political system( 'ri 0ankans will achie&e neither political stability nor sustained economic progress. Proceeding northeast from 'ri 0anka along the Indian border and arri&ing at >angladesh( we get to a county that is also struggling to find its feet. There are prospects of positi&e change after the country was returned to the elected representati&es of the people in last 8ecembers elections. 5or two years >angladesh had been go&erned by a caretaker administration that first attempted to factor out established mainstream parties from the political system only to work out an arrangement with them for the transfer of power. This was achie&ed in Aanuary when 'heikh Hasina +a2ed returned as prime minister as the head of a coalition dominated by the Awami 0eague. ?epal is also struggling mightily to define itself after ha&ing shed the monarchial system of go&ernance that had gone awry. Howe&er( it is finding the road ahead a rocky one. 1econciling &arious disparate elements in the country is pro&ing to be a more difficult task than was originally anticipated.All this raises an important issue. =an India afford to keep aloof from the rest of 'outh Asia or does it ha&e to help the countries around its periphery to become stable3 ,y strong belief is that the Indians would do well to pause and reflect on how 'outh Asia in peace and stability would help India achie&e the big"power status. +ithout that the country could stumble.

Trading ideas with neighbours

By Shahid Javed Burki Monday, June 08, 2009 TH6 mo&ement of goods and people across borders can be blocked by the use of administrati&e fiat. This is difficult to do in the case of ideas. This is also true for 'outh Asia. The region has erected all kinds of barriers to inhibit the mo&ement of people and to discourage trade. This is not 2ust the case for the way India and Pakistan ha&e managed their 2oint borders.There is not as much trade among other countries of the region as the gra&ity model of trade will ha&e us belie&e. According to the model( trade is determined by two thingsD the mass of trading partners and the distance among them.The si9e of India and the fact that it shares borders with all countries of the region sa&e Afghanistan and the ,aldi&es( should ha&e meant that India would be the dominant player in the pattern of international trade for the region.That has not happenedE the gra&ity model has not worked for 'outh Asia.

Politics and bureaucratic hurdles I and to some e-tent protectionist instincts of the policymakers I ha&e come in the way. India should be the main destination of e-ports for the countries of the region and also the origin of a significant proportion of their imports. This is not the case for >angladesh( Pakistan and 'ri 0anka. The only countries where this is true are the landlocked >hutan and ?epal. 5or them trade links are the consequence of their geography not necessarily the product of public policy. The 'outh Asian countries( on the other hand( ha&e looked across their borders and learnt a great deal from one another. ,ost of this learning was done by watching what was happening in other countries. There was little formal e-change of ideas by policymakers I e&en by think tanks. The forums from where such e-changes could ha&e been e-changed simply did not e-ist. This was certainly the case with India and Pakistan. There are some links between >angladesh and India but e&en these are sporadic and relati&ely infrequent. There are no such links between( say( Pakistan and >angladesh or between Pakistan and 'ri 0anka. In the domain of ideas( although India has been the main e-porter( >angladesh has also been fairly acti&e. Pakistan also briefly played that role when( during the presidency of 5ield ,arshal Ayub /han( it had begun to be taken seriously as the model of economic success. This was the line taken by the e-perts drawn from the Har&ard .ni&ersitys 8e&elopment Ad&isory 'er&ice who had helped with the de&elopment of the Pakistani approach to economic progress. 'ome of the books they wrote were read with a great deal of interest by the de&elopment community. Pakistan( it appeared( had managed to find a cure to a disease that the 'wedish economist 7unar ,yrdal called the pre&alence of the Fsoft stateG in 'outh Asia. This was the state that neither had the political will nor the bureaucratic competence to deal with the strong &ested interests that were not keen to see structural changes take place in their societies. Initially the main idea imported from India was that of the use of central planning to allocate capital among the users fa&oured by the state. Aawaharlal ?ehru( the first Indian prime minister who remained in that position for 1# uninterrupted years( was enamored of the 'o&iet style of centralised planning. He had bought the 'o&iet belief that the only way time could be compressed for con&erting an agrarian society into an industrialised one was by allowing the state to manage the economy. This was done by ,oscow by nationalising all economic assets owned by the pri&ate sector. This included land agricultural as well as urban. In borrowing the 'o&iet style centralised planning ?ehru did not go that farE he did not nationalise pri&ate property. >ut he did put the Indian state on the Fcommanding heights of the economyG.

+hat the phrase meant was that the state had the right and the duty to control and guide the pri&ate sector I to determine how much it will in&est( where will it in&est( what and how much it would produce( how it will obtain the inputs required for production( and how would labour be compensated and what would be the conditions under which the workers would work. Thus was ushered in the Flicence ra2G in India. +hat it actually meant for the Indian pri&ate sector was described in &i&id detail by 7urucharan 8as( one of the senior e-ecuti&es of a transnational corporation that had large operations in India. 8ass book appeared after the Fra2G was dismantled by then finance minister ,anmohan 'ingh. Pakistan borrowed the idea of central planning from India and started work on the 5irst Hear Plan for the period 1*!!" %. The document could not be produced for the reason that politics got in the way. It was only in 1*!; that the plans draft was produced but it was no longer consequential since the period co&ered by it was almost o&er. Howe&er( the military go&ernment that was in power at that time empowered the Planning =ommission to begin serious work on the 'econd 5i&e Hear Plan for the period 1* %" !. This was done and the plan began to be &igorously implemented. It was a great success in terms of producing an unprecedented rate of growth in the economy. Although the idea of centralised planning came from India( the strategy that Pakistan adopted was not Indian in origin. In Pakistan( the go&ernment wished to focus on igniting growth in the economy and placing its faith in the Ftrickle down effectG for helping the less ad&antaged segments of the society. There was a different set of ob2ecti&es in India. There the constitution obliged the planners to focus on the poor. The constitution had directed Fthe ownership and control of the material resources Rshould beS as best ser&e the common goodG and that Fthe operation of the economic system does not result in the concentration of wealth and means of production to the common predicament.G There were no such constraints on the Pakistani planners. The go&ernment headed by Ayub /han also bought some aspects of the licensing system from India but it was less &igorous than the one the Indians had operated. Pakistan allowed much greater space to the pri&ate sector than the Indians did. It was only after Julfikar Ali >hutto assumed power that the pri&ate sector came to be tightly regulated. >hutto in that sense was a F?ehru&ianG. >ut he went a step further. ?ehru had eschewed nationalisation as a way of increasing the presence of the state in the economy( preferring to do it by e-panding in&estment in industry by the public sector. >hutto( on the other hand( resorted to wholesale takeo&er of pri&ate assets by the go&ernment. The two"year nationalisation spree by the go&ernment in 1*#)"#$ changed in a fundamental way the structure of the economy. In the early 1**%s( both India and Pakistan changed the way they looked at the state as a

player in the economic field. >oth adopted a series of measures to reduce the presence of the state in the economy. In that respect( the policymakers did not borrow from each other but followed what was being ad&ocated by de&elopment economists working in a number of +ashington"based institutions. 'ome of the members of the ,anmohan 'ingh team that instituted reforms in India had worked at the +orld >ank and had participated in the de&elopment of the thinking that came to be known as The +ashington =onesus. 0ater( in the early )%%%s there was a significant amount of borrowing from India by the go&ernment of President Per&e9 ,usharraf as it ga&e e&en more space to the pri&ate sector. The conclusion is clear. +hile the 'outh Asians may not ha&e traded much with one another( they ha&e been quite acti&e in learning from each others e-periences. If this were to be recognised e-plicitly it could perhaps help to impro&e cooperation in other fields as well.

A welcome change
$ith the Swat operation, Islamabad may have initiated a ma#or change in its worldview. ,"t, to s"cceed, there m"st be similar changes in the thinking in $ashington and -ew Delhi.

By Shahid Javed Burki Tuesday, June 09, 2009 H6 decision by the go&ernment to send the military to chase out the Islamic militants from ,alakand may ha&e ushered in a process that can bring the country back to the path of religious mod eration and political modernisa tion. The mo&e represents a ma2or change for the army. According to one analysis( Fthe coming weeks are a reckoning for Pakistans army. TThe T force N long primed for another war against the regional ri&al India N is now fighting an internal conflictG. ,a2"7en Athar Abbas( head of the armys public affairs di&ision( was inter&iewed by the 5inancial Times in which he indicated the change in focus in the militarys thinking. If this persists N and there is good reason to belie&e that it would N it would ha&e enor mous consequences for the countrys rela tions with India and( consequently( for the future of 'outh Asia. FAn e-istential threat in terms of our internal security has grown o&er time. It needs our attention and an urgent response(G he told the correspondents of the >ritish newspaper. The

thinking is changing but the army is aware of the dangers that are in&ol&ed. F>ut we ha&e to be &ery care ful as we are operating against our own people in their own area. +e ha&e to separate the militants from the tribes. +e can afford to fight the militantsE we cannot afford to fight the tribes(G he continued. The operation is proceeding at the time of this writing and it is taking a hea&y human toll. The .? official responsible for looking after Finternally displaced personsG has suggested that the displacement of people by the militarys action in the &alley of 'wat and in the districts surrounding it has reached proportions last seen in the 1wanda conflict in 1**$. 1elief agencies were warning that the number of refugees is not likely to stabilise while fighting continues. 'oon after the e-odus of refugees began from 'wat( the .? estimated that the country required half a billion dollars to pro&ide relief to the displaced people. A donors conference pledged about half that amount. 0ast month( the .' announced an emergency assistance package for @11%m. FPresident 4bama is determined to match our words with our actions because Pakistans go&ernment is leading the fight against e-tremists that threaten their country and our collecti&e security(G said 'ecretary of 'tate Hillary =linton in a statement issued to accompany the announcement for the aid package. This assistance from the .nited 'tates along with that to be pro&ided by other donors will certainly help Pakistan deal with this e-traordinary situation. That said three things need to be underscored in this conte-t. 4ne( Pakistan has e-perienced a large displacement of people in the past. It recei&ed eight million refugees from India soon after the partition of >ritish India and the birth of Pakistan. It hosted three to four million refugees that left Afghanistan and sought refuge in the areas on the Pakistani side of the border. An earthquake in 4ctober )%%! in Pakistans north produced another flow of two to ).! million refugees. All these were near catastrophic situations( but all of them the go&ernment was able to deal with and from all of them flowed political( social and economic consequences that were not antici pated when these displacements occurred. There is no doubt that the 'wat displacement will also ha&e similar consequences. +hat is important is that there is a consensus in the country that this is a price worth paying for dealing with an e-istential threat to Pakistan posed by the rise of Islamic e-tremism. The second area of concern is the nature of Americas deeper in&ol&ement in what the current set of American policymakers ha&e begun to call the Af"Pak area. 5rom the si-year long engagement in Iraq( the Americans are de&eloping a new counter"insurgency approach for this part of the world. That in&ol&es considerable focus on winning the hearts and minds of the people who are economically and socially &ery backward. They need focus on human and physical de&elopment N work which will in&ol&e not only the pro&ision of funds but also technical knowhow and institution"building. The 4bama administration seems keen to mo&e in that direction but by using unmanned aircrafts N the drones N to hunt and eliminate suspected terrorists( it is produc ing collateral damage. 8a&id /ilcullen( who has written on the sub2ect of counter"insurgency

after ha&ing e-periencing it firsthand in 'outheast Asia while working for the Australian military( sees serious problems with the use of the drones as a weapon of choice. 4n a recent &isit to Pakistan( he was told that 1# militants had been killed by the drone attacks while #%% ci&ilians also died. He called a two per cent hit ratio Fnot moralG. Also the use of air muscle reminds the people of this area of the atrocities committed during colonial times. According to the historian Priya 'atia( F4nly a permanent end to the strategy will win the Pakistani hearts and minds back to their go&ernment and to its .' ally. They( like Afghans and Iraqis( are less struck by the strategys futuristic qualities than by its uncanny echo to the pastD aerial counter"insurgency was in&ented in precisely these two regions N Iraq and the PakistanAfghan borderland in the 1*)%s by the >ritish. In the memory of RtheS colonial and political dynamics of T aerial strategy in the region Pakistanis see the drones as Mpost"colonial.G The third concern is e&en trickier than the first one. It is my belief that the rise of Islamic e-tremism and militancy is one of those areas that call for a regional solution. >ut calling the region MAf"Pak does not do full 2ustice to the regional aspect of the problem. The 4bama administrations instincts were correct when the terms of reference it issued for the appointment of 1ichard Holbrooke as a special representati&e to the region implicitly included India. This led to protests from ?ew 8elhi and e-pressions of considerable satisfaction by Indian officialdom and think"tank community when that reference was remo&ed. >ut the Indian in&ol&ement in dealing with the matter is critical not only because that country has suffered from se&eral acts of terrorism( most recently in ,umbai in ?o&ember )%%;( that can be traced to some terrorist groups operating on Pakistani soil . India also needs to ensure that the countries on its periphery are economically( politically and socially stable. 4nly then would the rise of e-tremism in the area be checked. +ith the beginning of the 'wat operation( Islamabad may ha&e initiated a significant change in its world&iew. Howe&er( for the effort to succeed( there must be similar changes in the thinking in other capitals( particularly +ashington and ?ew 8elhi. C

Transition to a new world economic order

.eso"rce iss"es will gain prominence on the international agenda. /nprecedented global economic growth 0 pos- itive in so many other regards 0 will contin"e to p"t press"re on a n"mber of highly strategic reso"rces, incl"ding energy, food and water

By Shahid Javed Burki Monday, June 1%, 2009 5.T.16 is notoriously hard to predict but attempts continue to be made. It would be useful for Pakistans policymakers to recognise what the current thinking is in some influential quarters about the shape of things to come.

The recent and most authoritati&e &iew of the future has come from the .nited 'tates intelligence community( according to which the world is becoming multipolar but in a different way. In ?o&ember )%%;( the .nited 'tates Intelligence =ouncil presented its &iew of the world in )%)! in 7lobal Trends. F>y e-amining a small number of &ariables that we 2udge will probably ha&e a disproportionate influence on future e&ents and possibilities( the study seeks to help readers to recognise signposts indicating where e&ents are headed and identify opportunities of policy inter&ention to change or lock in the tra2ectories of specific e&entsG( says the report. According to it( the international system will be almost unrecognisable by )%)! owing to the rise of emerging powers( a globalising economy( an historic transfer of relati&e wealth and economic power from the +est to the 6ast( and the growing influence of non"state actors. The report accepts the notion that by that time the inter national system will ha&e se&eral poles of economic acti&ity with the .nited 'tates declining in relati&e strength. Historically multipolar systems ha&e been less stable than those that were dominated by one power as was the system since the collapse of the 'o&iet .nion in 1**1. +hat will be the new centres of economic power and how they will interact with one another3 F7rowth pro2ections for >ra9il( 1ussia( India and =hina indicate they will collecti&ely match the original 7# share of the global 78P by )%$%")%!%G says the report. Howe&er( the >1I=s are not likely to work as a cohesi&e group as did the 7# to a considerable e-tent under the leadership of the .nited 'tates. 4ne reason why this group will be unstable is that there will not be one leader in the pack( recognised as such( by other members. This is what the .nited 'tates"dominated 7# did for that group. 4ne of the important changes likely to take place in the ne-t couple of decades is the replacement of the Anglo'a-on model of capitalism with state capitalism that has already produced some remarkable results for the miracle economies of 6ast Asia. 'tate capitalism is a loose term used to describe a system of economic management that gi&es a prominent role to the state. There is a possibility that this model of economic management will also be adopted by some of the de&eloped countries that came under hea&y eco nomic stress as a result of the &ery limited role that was assigned to the state when 1eaganism and Thatcherism held sway. These two almost identical ideologies lost fa&our when the global economy went into a deep recession starting in )%%#. The report recognises the impact of demographic change on the relati&e economic strength of the worlds large economies. F6urope and Aapan will continue to far outdistance the emerging powers of =hina and India( but they will struggle to maintain robust growth rates because the si9e of their working age populations will decrease. The .' will be a partial e-ception to the aging populations in the de&eloped world because it will e-perience higher birth rates and more immigrationG. Howe&er( in my &iew( the impact

on the shape of things to come as a result of a number of une-pected demographic changes will be more profound than the report recognises. 7i&en the steep increase in commodity prices I in particular the price of oil I when the report was being researched upon( the authors place shortages of resources at the centre of their analysis of the future. F1esource issues will gain prominence on the international agenda. .nprecedented global economic growth I positi&e in so many other re gards I will continue to put pressure on a number of highly strategic resources( including energy( food and water( and demand is pro2ected to outstrip easily a&ailable supplies o&er the ne-t decade or soTAs a result of this and other factors( the world will be in the midst of a fundamental energy transition away from oil toward natural gas( coal and other alternati&es.G Among the alternati&es wind and chemical power seem to hold the most promise. Howe&er( this wont be the first time that the global economic system would be making such a transition. 'uch transitions occur about e&ery hundred years or so. 6ach transition produced a new economic order. The industrial re&olution saw the transition from wood to coal and thus to steam power as the source of energy. The ability to produce electricity and transmit it o&er long distances contributed to the rise of the .nited 'tates as a leading global economic power. The current transition will also shake up the global economic order. 6nergy is not the only resource that has come under pressure. +ater is another. F0ack of access to stable supplies of water is reaching critical proportions( particularly for agricultural purposes( and the problem will worsen because of rapid urbani9ation worldwide and the roughly 1.) billion persons to be added o&er the ne-t )% years. Today e-perts consider )1 countries( with a combined population of about %% million to be either cropland or freshwater scarce. 4wing to continuing population growth( B countries( with about 1.$ billion people( are pro2ected to fall into this category by )%)!.G This includes Pakistan. .nderstandably the report also included climate change as a cause for global restructuring since its consequences will be spread une&enly across the globe. The >ush administrations skepticism not withstanding( a consensus has been reached among economists as well as scientists that climate change is real. A number of reports ha&e been issued including the one authored by 0ord ?icholas 'tern on >ritain who de&eloped estimates of both the cost of not taking action to arrest global warming as well as the benefits if such actions were taken.The intelligence community ga&e this matter the attention it deser&es. F=limate change is e-pected to e-acerbate resource scarcities. Although the impact will &ary by region( a number of regions will begin to suffer harmful effects( particularly water scarcity and loss of agricultural production.G =limate change will add to the growing food problemE the prospect of regional shortages was real. The +orld >ank had estimated that demand for food will rise by !% per cent by )%B% as a result of growing world population( rising affluence( and the shift to +estern dietary preferences by a larger middle class.G This also happening in Pakistan. In the &iew of the intelligence agencies( future global conflicts would be the result of the

pressure on scarce resources because of the shifting pattern of demand for a &ariety of goods and commodities and not because of ideological differences. The threat posed by Islamic e-tremism was downplayed by the report e&en though Fin the absence of employment opportunities and legal means for political e-pression( conditions will be ripe for disaffection( growing radicalism and possible recruit ment of youths into terrorist groupsTIn those countries that are likely to struggle with youth bulges and weak economic underpinnings I such as Pakistan( Afghanistan( ?igeria( and Hemen I the radical 'alafi trend of Islam is likely to gain traction.G >ut e&en then( some of the countries most affected by the rise of Islamic e-tremism seem to be tiring of it. Those that had large middle classes such as Pakistan and 6gypt were an-ious to shake off this legacy and 2oin the global economy and the e&ol&ing global go&ernance system as responsible players. In light of all this how was the world likely to structure itself3 It seemed unlikely that a big and cohesi&e world order would emerge and would be centred around the emerging centres of economic power. F7reater Asian regionalism I possible by )%)! I would ha&e global implications( sparking or reinforcing a trend toward three trade and financial clusters that could become quasi Iblocs with the ability to achie&e +orld Trade 4rganisation :+T4< agreements. 1egional clusters could compete in setting trans"regional product standards for information technology( biotechnology( nanotechnology( intellectual property rights( and other aspects of the Mnew economy. 4n the other hand( an absence of regional cooperation could help spur competition among =hina( India( and Aapan o&er resources as such as energy.G

'unday( ?o&ember 1%( )%1B %!D$* P, :7,T U!<

='' 5orums V 7eneral V ?ews W Articles

Shahid Javed Burki ar&ic"e

'o(e )e*is&er +ards ,o((uni&y

/e+s 0

r&ic"es Here you can share ?ews and Articles that you consider important for the e-am

'hare ThreadD

$ace1ook

T+i&&er

2oo*"e3

#31 Tuesday, June 16, 2009

Predator
'enior ,ember

(ases of state failure in Asia

By Shahid Javed Burki Tuesday, 1# Jun, 2009

6A'T Asia( =hina and India are some e-amples that demonstrate the successful de&elopment of political effecti&e state.

+ithout a reasonably efficient state( these three parts of Asia would not ha&e written the narrati&es of ec successful e-amples of statecraft are those of the failure or near"failure of the state.

The most glaring e-ample of state failure is Afghanistan which has not been able to put together a politic of its basic functions. These include ensuring security of life and property( protecting territory from foreig needs. 'ome of those who ha&e studied the country suggest that it was ne&er really a functioning state b the central authority was allowed only a &ery limited amount of authority.

'ome e-ternal powers tried to impose order on this highly fragmented political system. The 'o&iet .nion suffering a ma2or military defeat and withdrawing from the country. This was also the intention of the .' President >arack 4bama( after assuming the American presidency this year( indicated that his administra Afghanistan. It would not attempt nation"building and only aim at the total defeat of Al Xaeda.

+hile the failure of the state is complete in Afghanistan( in a number of other places in 'outh Asia the st both the nation and the state are still struggling to be born. Pakistans failure to create a nation based on in some of my earlier writings. ,ohammad Ali Ainnahs two"nation theory on the basis of which Pakistan ,uslim community of >ritish India was tested within a few years of the founding of the state.

0ess than a quarter century after the birth of Pakistan( the countrys eastern wing parted company and b +hat was left of Pakistan was at least geographically contiguous but e&en then a nation and a state were Pakistani people found it difficult to find a basis for nationhood. This is an interesting phenomenon deser

If Pakistan was founded on the basis of an unworkable proposition it is not unique among the worlds )%% a colonial legacyE for them the colonial rulers simply drew lines on the map which cut across well"defined why Pakistan still cannot be declared a success is that ha&ing been created on the basis of an idea N tha should ha&e their own political space N it was required to demonstrate that the idea was workable. Israe idea( is also going through a similar struggle.

A strong Pakistani state could ha&e brought stability to the country. Pakistan could ha&e followed the 6as of a fulfilled promise to deli&er economic benefits to the citi9enry. This was done not only in the miracle e =hinese leadership is always an-ious to keep the economy e-panding at a rapid rate so that the rewards the population then at least to most of them.

The pursuit of economic growth as a nation"building ob2ecti&e was followed e-plicitly by President Ayub / implicitly in the early )%%%s. In his autobiography( published after a decade of rule( Pakistans first milita throwing out the ci&ilians was their failure to adequately de&elop the economy. This conclusion was also economists of the day( in particular 7unnar ,yrdal of 'weden.

In his seminal work( The Asian 8rama( ,yrdal de&eloped the concept of the Fsoft stateG. This( he though political muscle to bring about structural changes in the economy and the society without which sustaine The countries in 'outh Asia had such soft states. They were under the influence of &ested interests that these countries. Ayub /han drew comfort from such findings by prominent academicians. They ga&e him Fbasic democracyG N legitimacy.

President Per&e9 ,usharraf also wrote his biography when he was confident that his rule had brought ec Ayub /han and ,usharraf lost power two years after the publication of their autobiographies. The ob&iou not write their memoirs. +hat their separate e-periences demonstrate is that high rates of economic gro requirements are met.

4ne( the working of the state must draw strength from institutions that will remain in place o&er time. Th democratic structures. They can be part of the semi"democratic :or semi"authoritarian< structures as wa Asia or as is the case in =hina. >ut they must ha&e a reasonable life span. Two( the system must permit Albert 4. Hirschman pointed out in one of his important works on de&elopment( not allowed a &oice thos bring it down. Popular discontent brought down the two leaders( the first by street agitation( the second

>angladesh is the third e-ample of the weakness of the state and its consequences for sustainable econo reasonably well( there is considerable uncertainty about the future. 'ome >angladeshi analysts suggest t its identityD is it a state created on the basis of ethnicity and culture or on the basis of religion3

There are ob&ious problems with both suggestions. If the common element is ethnicity then there are a l

especially in the Indian state of +est >engal. If religion is the common element( then why did the countr 'outh Asia N India being an e-ception N is still in a formati&e stage. ,uch depends on its ability to de&e success. YYYYYYYYYYYYYYYYYY ?o signature...
#32 Monday, June 22, 2009

Predator
'enior ,ember

.emographic change and windows of op

By Shahid Javed Burki Monday, 22 Jun, 2009

6=4?4,I'T' ha&e yet to fully recognise the impact demographic changes play in economic de&elopmen If population has figured in their work( it has done so mostly as an inhibitor rather than a promoter of gr the earlier phase of de&elopment thinking when high rates of population growth were seen as hurting the

In the early post"+orld +ar II period( as health and hygiene impro&ed in de&eloping countries( there wa increase. ,ortality rates declined rapidly. In India :which has better statistics than most other de&eloping thousand per 1%%% at the start of the century to 1! by the early 1*#%s. There were similar changes in ot

5or decades( this decline was not compensated by reductions in the rate of fertility. There was a belief am preference and high rates of infant mortality was the reason why parents chose to ha&e large families. In ha&e at least two sons to sur&i&e to adulthood and that meant ha&ing si- to eight children. >ut the famili rates of mortality had increased the probability of sur&i&al of boys. Inertia and hard"to"break habits mad not reacting on their own( there was a broad consensus that the state had to inter&ene to reduce family

Population e-plosion became a great worry for de&elopment economists in the F %s and M#%s. 7o&ernme Asia I were encouraged to adopt family planning programmes. The +orld >ank created a new departme ,any countries took the ad&ice offered by the bank and other de&elopment institutions.

In the mid"si-ties( President Ayub /han ignored the ob2ections of the religious parties and launched an a appointed 6n&er Adil( a ci&il ser&ant known for his energy and dynamism( to head the effort. 5oreign ass

It is hard to say whether these programmes worked or whether the de clines in the rates of fertility happ there ha&e been significant declines in the rates of fertility in the de&eloping world including the countrie but at different rates in different parts of the region. In 'outh Asia( the process began in 'ri 0anka se&er in particular in the states in the south of the country where the le&el of human de&elopment was relati&e better than in other parts of the country( and that had high rates of emigration. It started in >angladesh different reasons.

The rapid de&elopment of the garments industry resulted in the impro&ement of the social and economic workforce( had sources of income not dependent on their husbands or fathers and also began to look for

no longer had the decisi&e say in determining the si9e of the family. The mo&e towards fertility decline h perceptible in the early )%%%s but still has a way to go before Pakistan catches up with other coun tries i high in Afghanistan( a trend seen in other countries e-periencing conflict. 5or ob&ious reasons a feeling o

4ne important consequence of this declining trend in the rates of fertility is that it will create a window o which the number of acti&e workers would far outnumber those who are dependent on them. 8uring this of caring for those who cant be looked after by the working members of the families. The accompanying which the window will remain open. 'ince the decline in the rates of fertility are slower than other countr transition( periods of opportunity a&ailable to the 'outh Asians are much longer. 5or India( it will remain the number of people reaching the working age will begin to decline.

.sing the same methodology as applied by the +orld >ank for determining the time o&er which the wind that the duration for the country will be !% years.The window opened in 1**! and will not close until )%$

=ould Pakistan( using this window of opportunity( build a future for itself and create some space in the e& de&elopment of( say( modern ser& ices3 =ountries with large and young populations ha&e a comparati&e Another set of numbers helps us to answer this question.This is on the median age of the population. Pak large countries. As population growth rates increase( the median age of the population I meaning the ag the number of older people I begins to decline. This is what has happened in Pakistan. The median age i to only 1;.) years( a decline of fi&e years.

The population had become much younger. The median age in 1**% was almost three years less than th same as that of >angladesh which was 1;.) years. The rapid demographic transition that has occurred in increases in the median age. >etween 1**% and )%%!( it increased by 1.; years in Pakistan( by two year >angladesh.

If the changing character of the economies of todays rich countries is any guide( much of the future grow ser&ices. These are labour intensi&e to produce and pro&ide( and some of the more modern ones need hi

>oth the state and the pri&ate sector will need to in&est in the youth to draw the most benefit from the w opened up in recent years in many countries. Those that ha&e serious resource constraints I as is the ca play a more acti&e role.

>ut the state needs to take the lead in factoring this de&elopment into the making of public policy. As the towards the preparation of another de&elopment plan( it would do well to use this window as an opportun alle&iate po&erty and impro&e the distribution of incomes.

YYYYYYYYYYYYYYYYYY ?o signature...
#33 Tuesday, June 23, 2009

Predator

'enior ,ember

/udget in tough times

By Shahid Javed Burki Tuesday, 23 Jun, 2009

TH6'6 are e-tremely difficult times for Pakistan. It is not only the challenge thrown at the state by Islam inside and outside the country.

,any people that ha&e influence in shaping world politics ha&e called this challenge an Fe-istential threat issuing the warning that unless Islamabad realises the enormity of the threat e-tremism poses to the &e simply unra&el.

There is certainly some e-aggeration in this assessmentE it was made( most probably( to draw the attent ha&e ser&ed that purpose. 0ast month the military was ordered into 'wat and it seems to ha&e taken the forces ha&e now been told to go after the leadership of the Taliban.

There is a reason why I ha&e begun this article on the budget with a reference to the ongoing struggle b I said that e-tremism is not the only problem the country faces. There is also the problem of an economy shock in the countrys history.

The budget is supposed to address that situation and bring the economy back to health N or at least set in this space a few weeks ago I had suggested that the gross domestic product is not likely to grow by m that was then predicted by the go&ernment. ?ow the go&ernments own estimate is that the rate of 78P this in order to underscore an important way in which downturns grip economies. +hen a decline occurs precisely what has happened in Pakistan. +hen the final numbers for )%%;"%* are posted( I will not be s the one indicated in the Pakistan 6conomic 'ur&ey )%%;"%*( released a few days before Hina 1abbani /h Assembly. In fact( the economy may not show any increase at all.

1e&i&ing the economy( therefore( is an urgent task for the go&ernment. If it succeeds( this will aid its eff dri&e more young people towards e-tremist causes. This is one reason why the two struggles N against so closely together. 5ailure of one will lead to the failure of the other.

Although ,s /har in her speech tried to draw some cheer from an otherwise cheerless situation( it was a audience. +hat she thought should bring comfort to those who were desperate to see Pakistan modernis Ages was the fact that she was the first woman in the countrys history to present the budget in an Asse ser&e as speaker. FThese are important milestones in our quest for women empowerment and gender eq

8oes the budget re&eal a strategy aimed at economic re&i&al3 I belie&e gi&en the grim situation the coun done a credible 2ob of focusing on the right areas. I can identify si- of them( two of which I will discuss to 5irst( the go&ernment has pointed out to the people the enormous cost to the economy of continuing ter support for the action by the army. According to ,s /har( the cost to the economy is of the order of @B! And it is increasing. F+e ha&e to meet the maintenance and rehabilitation costs of almost ).! million bro of the insurgency(G she said.

The go&ernment has allocated @ .)!bn for Frelief( rehabilitation( reconstruction and securityG as part of i of 78P. Adding that to the cost of terrorism means that the fight against e-tremism is costing the countr own resources notwithstanding( the go&ernment is banking on recei&ing a fairly generous amount of assi message from Islamabad( in other words( is clear. The war against terrorism is not 2ust Pakistans war. I behalf of the world. The country is prepared to sacrifice but it is incumbent upon its many friends to be g country did not need foreign soldiers but foreign aid.

This indeed was the second message of the speech. Pakistan recognised that it had not done enough to r growth. FIn the outgoing year we were only able to attain ta- re&enues equi&alent to nine per cent of ou indicated that would be taken to remedy the situation but that would take time. 1ead any speech by a Pa three decades and one can find many references to the need to increase the ta- base and reform the taha&e written reports on how the ta-"to"78P ratio could be impro&ed.

?one of this has worked. The trend continues to be downward which means that growth in the economy from outside the country. This is what has produced a roller"coaster ride for the economy. The economy e-ternal flows are a&ailable. The growth plunges when e-ternal sa&ings decline. The fact that this time a significantly despite the flow of large amounts of foreign money is e&en more worrying.

'ome simple arithmetic would illustrate Pakistans dependence on foreign flows. If the war against terror and if the e-penditure on one of the programmes aimed at caring for the poor N the >ena9ir Income 'up 78P( then not much is left with the go&ernment N only ).B per cent of 78P NI e&en if it raises the ta-" other words( is grim from the perspecti&e of go&ernment finance. YYYYYYYYYYYYYYYYYY ?o signature...
#34 Monday, June 29, 2009

Predator

'enior ,ember

$ethin"ing about foreign trade

By Shahid Javed Burki Monday, 29 Jun, 2009

TH6 current economic crisis shows no sign of easing. It has demonstrated a number of structural flaws in they are related to each other. The first is the e-cessi&e dependence of the economy on foreign capital flows and the other is an e-port has concentrated on the selling of the products that dont ha&e a growing demand in the international m

If there was a dynamic e-port sector it would be able to pay for the imports it needs through e-ports. Th =onsequently( the country continues to run large balance of payments deficits which require whoe&er occ the donor community for financial support.

Another consequence of this way of running the economy is to make Pakistan e-traordinarily susceptible e-ternal affairs. The conclusion that one reaches after making these obser&ations is clearD a way must be

How this could be done will become apparent once one &iews the structure of international trade. There a structure. The first one is the concentration of e-ports in a few product groups. At the product le&el( usin we see that $! products account for ;B per cent of e-ports with 1% products representing more than one problem. It is a greater problem if the concentration of the products is in the areas in which there is not there is intense competition.

In Pakistans case( basic te-tiles and cheap garments account for about one"half of total e-ports with foo four per cent respecti&ely. :'ee table.< As a recent +orld >ank paper puts it( while te-tile and engineerin global trade respecti&ely( their share of Pakistans e-ports is in re&erse proportions( !! per cent and less

That said( there ha&e been some positi&e de&elopments e&en within these product groups. Pakistan was e-porter of cotton yarn. It is now using a significant amount of the domestic production of these two item e-ports fell from ; per cent in )%%B"%$ to !! per cent in )%%#"%;. At the same time( shares of manufac

The direction of e-ports is also concentrated. The .nited 'tates is the largest importer of Pakistani produ cent of Pakistans total e-ports. ,ost of the .' purchases are of te-tile products although( because of th America e-ports to what are referred to as the ethnic markets are picking up.

The direction of Pakistani e-ports flies in the face of the Fgra&ity model of trade(G according to which the from the concerned country are the two most important determinants of the quantum of e-change. Appl India and =hina should be the largest trading partners for the country( not the distant .nited 'tates. The the small amount of trade between India and Pakistan.

+hen the two countries achie&ed independence in 1*$#( the areas that became todays Pakistan had Ind was the source of more than !% per cent of imports. That changed suddenly because of the trade war be structure of the Pakistani economy would ha&e been &ery different had the relations between the two cou ended up fight ing two ma2or wars I in 1* ! and 1*#1 I and near"wars in recent years.

How could Pakistan tackle its precarious resource situation and in dealing with it how could it use the e-p economy needs3 This is a big question which will take more than a newspaper article to answer. ?onethe handled can be easily identified. Today( I will focus on three of these. 5irst is the role of the state.

Although the state has been in&ol&ed in the making of trade policy( it has not been as acti&ely engaged i Asia. Promotion of trade requires a number of acti&ities including identification of the products in which t about the potential markets for the products( de&eloping technological support for the production and de finance for pri&ate entrepreneurs who may be interested in producing the product lines( and keeping wat demand in the product lines being promoted.

'ome of these initiati&es were taken by some agencies established by the go&ernment( including the 6-p a detailed strategy. ,uch of the emphasis in the past was on ta- incenti&es of &arious kinds offered to th distortions in the allocation of resources and is one reason why the te-tile sector has failed to include hig The present go&ernment has decided not to issue annual trade policies but to work on a more comprehen international trade. This is a mo&e in the right direction.

The second important area needing go&ernment attention is the promotion of regional trade( in particula treaties in place to promote trade with =hina and India. In the case of the former( it has concluded a free helped a great deal in promoting Pakistani e-ports to that country.

In the case of India( Pakistan is a member of the 'outh Asia 5ree Trade Area( the 'A5TA( which has done countries. ?either Pakistan nor India I 'outh Asias two largest economies I seem committed to using th regional trade.

Pakistan seems much more focused in de&eloping the markets in 6urope and ?orth America for its tradit an arrangement with the countries in 'outheast Asia. Thus distracted they seem much less interested in

The third area for go&ernment attention is what e-perts call( Ftrade facilitationG. The argument for this is mean that duties on imports and e-ports ha&e lost their significance in promoting :or retarding< trade. T

to facilitating trade. This includes such acti&ities as impro&ing infrastructure( handling of trade at the bor documents( studying what causes delays at the borders and remo&ing or lowering the obstacles.

There are se&eral other issues that need to be addressed. The important point to make here is that the g e-panding trade in a comprehensi&e fashion and in a way that results in the adoption of a long"term app issuance of annual trade policies dont help to de&elop a steady approach towards trade promotion. YYYYYYYYYYYYYYYYYY ?o signature...
#35 Tuesday, June 30, 2009

Predator

'enior ,ember

(aring for the poor

By Shahid Javed Burki Tuesday, 30 Jun, 2009

H4+ should Pakistan care for its poor whose number is increasing at an alarming rate3 +ith &ery little 7 increase in income per head of the population. +e know from the empirical work done at some de&elopment institutions that the 78P must increase at population for the incidence of po&erty to remain unchanged. 5or the incidence to decline( 78P increase times the rate of population growth. It needs to be e&en higher when income distribution is inequitable(

5or Pakistan this translates into a growth rate of si- to se&en per cent a year. The economy is failing in t performance of the economy in )%%;"%* must ha&e added to the number of people li&ing in po&erty. The to !! million.

As was indicated in the budget for )%%*"1%( only a small increase in 78P is likely in )%%*"1% and for a co hold( there will be a further growth in the number of poor( perhaps by 1% per cent a year. This rate of inc population which means that the proportion of poor in the population will increase significantly.

The increase will be e&en higher in the less de&eloped parts of the country. This is clearly an untenable s social consequences. A rising incidence of po&erty means a higher rate of unemployment( particularly in

In Pakistans case( there is a &ery young population N the median age now is 1;.) years. This means a & producti&e 2obs. The problem Pakistan faces today has two dimensions. The state needs to assist the poo engage the youth in producti&e work. How does the go&ernment plan to address the problem3 An answe adding additional resources to a number of programmes aimed at alle&iating po&erty as well as pro&iding

,uch of the effort will be focused on a relati&ely new mechanism created by the present go&ernment and :>I'P<. .nder this( the go&ernment is pro&iding direct cash transfers to the poor.

This is in keeping with the approach de&eloped in institutions such as the +orld >ank that fa&our cash pa

poor. 8e&elopment institutions ha&e learnt through e-perience that subsidies( more often than not( dont such as Pakistan( where the state is weak( there are enormous leakages in such programmes. =ash tran

The component of Fconditional cash transfersG is being added to the >I'P( I suspect at the urging of the se&eral countries in the ,iddle 6ast that ha&e fallen behind the rest of the de&eloping world in terms of h to families in return for taking action such as sending girls to schoolE keeping children in school for perio learn to read and write but also to make them responsible

citi9ensE and immunising children against communicable diseases. There is one additional ad&antage to a use the pri&ate sector for obtaining some of the ser&ices on which cash flows are conditioned. In this the is &ery weak in countries such as Pakistan.

'ome of this has already begun to happen. 4&er the last couple of decades( the pri&ate sector has becom and health which were pre&iously the concerns of the state. +hile much of this is being done for profit( t go&ernment sector in education and health.

6&en when the pri&ate sector is doing this for generating incomes for itself( it is not targeting its acti&itie e&en in the &ey poor areas are prepared to pay for health and education( the pri&ate sector is bringing se programme the go&ernment is now including in its on"going efforts will pro&ide the poor additional incom encourage further pri&ate enterprise in the social sectors.

The go&ernment is making a &ery large commitment to the >I'P. F8uring fiscal year )%%;"%*( 1s))bn w Hina 1abbani /har( state minister for finance( in the budget speech. F8uring fiscal year )%%*"1%( it is pro 1s#%bn ...this would constitute more than a )%% per cent increase T and fi&e million families would bene a&erage( 1s1$(%%% of cash in )%%*"1%. This is 1$.! per cent more than the 1s1)())) pro&ided in the pre

As is the e-perience in other parts of the world where such programmes ha&e been tried N they are pop care needs to be taken to ensure that money reaches the right pockets. A number of targeting mechanis worked.

Those that ha&e succeeded are based on good information about the poor. This is done by building what and household sur&eys. The go&ernment seems to be mo&ing in that direction. According to ,s /har( Fa in 1 districts of Pakistan as a pilot to benchmark incomes. This would be e-tended to the entire country 'upport cards would ser&e as &ehicles of transparent management and addressing the needs of the &uln

The go&ernment has also indicated the willingness to commit resources to public works programmes in b temporary relief to the urban unemployed. These programmes work well when there is good o&ersight. I local go&ernment institutions.

All these are palliati&es( howe&er. The real solution to the po&erty problem lies in getting the poor engag earners and that will need both a high rate of 78P growth as well as the de&elopment of labour"intensi&e YYYYYYYYYYYYYYYYYY ?o signature... The $o""o+in* 4ser Says Thank 5ou &o .reda&or $or This 4se6u" .os&7 ?onchalant :Tuesday( Aune B%( )%%*<
#36 Monday, July 06, 2009

Predator
'enior ,ember

-etting priorities for industrialisat

By Shahid Javed Burki Monday, 0# Ju", 2009

THI' may be a good time to reflect on some of the basic assumptions that ha&e go&erned the making of It is now recognised by economists and policy analysts that industrialisation I its pace( scope and conten

This is one reason why Islamabad( working closely with the pri&ate sector( should carefully define the co direction the country should take. The focus should be on three aspects of structural change in the secto what should industries produce3

+here should industries be locatedE should industrialisation be used to lift the more backward regions of of President Ayub /han :1*!;" *< or should the question of location be left to the pri&ate sector3

And( where should the products of industrialisation be sold3 The last question leads to another issueD how promotion as an ob2ecti&e of industrialiation3

6conomists ha&e also begun to recognise that since countries ha&e different histories and different struct differ and e&ol&e differently. There is no one"side"fits all public policy approach to industrialisation.

In Pakistans case( the initial direction of industrialisation was influenced by the trade war with India that e-change between the currencies of the two countries. 5or legitimate reasons( Pakistan had refused to d step that was taken by all countries of the >ritish =ommonwealth.

That changed the rate of e-change between the two currencies from parity to 1$$ Indian rupees for 1%% India. +hen trade with India stopped( Pakistan was forced to industrialise quickly by emphasising the pr

'ince the Pakistani state at that time was weak and was short of funds( it relied on pri&ate initiati&e to le profound consequence for the de&elopment of the structure of the industrial sector. .nlike India( Pakista pri&ate initiati&e while India put the public sector on the commanding heights of the economy and in&est

The other significant historical influence on the industrial de&elopment was the decision by the administr ownership of industrial assets by using the go&ernments licensing mechanism for in&iting new comers an sanctioned units in the underde&eloped areas. This approach checked the growth of /arachi as the count

This policy also had a profound consequence for the structure of industry( particularly of te-tiles. >y sanc spindles( the country de&eloped an industry that did not ha&e the scale to become competiti&e. It also re industries.

The structural consequences of Prime ,inister Julfikar Ali >huttos nationalisation of large"scale industrie factored into the understanding of the character of the Pakistani industrial structure.

+ith this as the background( we will begin to find answers to the questions posed abo&e. Analytical work relationship between industrial sophistication( structural change and growth.

According to the institutions latest +orld Industrial 1eport( Fresearch findings confirm that di&ersifying a

ladder in industry are important dri&ers of de&elopment.G >ut sophistication need not imply the productio number of different sub"sectors. +ith the changes in the international industrial structure that ha&e resu information and communication technologies( the production process has been decomposed into a series the comparati&e ad&antage of &arious production centres.

5or countries such as Pakistan that ha&e missed out in the initial phase of industrialisation that produced Asia( it may be more appropriate to concentrate on building a task based industrial economy.

1esearchers who ha&e studied the de&elopment of this approach to industrialisation and compared them conclusion reached is that the concentration on tasks is no less sophisticated than the one where industr

That is said e&en when an entire product is produced in one location I mens shirts in >angladesh for ins The garment producers( for instance( buy buttons from =hina which are most probably produced in Xiaot The world is mo&ing rapidly towards greater integration of industrial processes.

The ne-t issue is of location. ,anufacturing industries and ser&ice acti&ities tend to concentrate in geogr According to .?I84( Fthe economic literature on high and middle income countries pro&ides persuasi&e e economiesTindustrial agglomeration is also important for de&eloping countries. Producti&ity is higher if m economics has become an important sub2ect of study e&er since the pioneering work done by ,ichael Po e-amples of clusters whose de&elopment was not induced by public policy but by organic growth. 'ialkot industries( is one e-ample of a cluster. 7u2ranwala :electric motors and electric fans<( 7u2arat :furniture< :leather< are some other. Xiaotao( =hinas :and the worlds< button capital is the most intensi&ely analys

As indicated( the de&elopment of clusters in Pakistan was not the outcome of public policy directed at the to help the industries located in the clusters( it will need to pro&ide help to upgrade technology( pro&ide new sources of finance such as pri&ate equity and &enture capital funds. The most important contribution knowledge de&elopment.

'ome of the more successful clusters in the de&eloped world are located in close pro-imity to the institut presence of 'tanford .ni&ersity and the >erkeley =ampus of the .ni&ersity of =alifornia that resulted in t 'ilicon Palley. 7i&en the close pro-imity of 'ialkot( 7u2ranawala and 7u2rat( the go&ernment could work engineering somewhere in the area.

The third question concerns the link between e-port and industrial de&elopment. >oth macro e&idence as case studies suggest a strong association between the two. Trade in manufactures has continued to grow And the share of de&eloping countries has increased. Their manufacture e-ports increased from @1.$ trill

The growth in the trade in tasks was e&en more impressi&e. In the period 1*; "1**%( imported intermed world manufacturing output and ) per cent of total intermediate imports. >y )%%%( these figures had ri )%%*( more than one"half of the intermediate products going into final production are imported. The prop conclusion is clear. Pakistan by focusing on tasks rather than the production of final products will not lose it has been delayed.

The need for sophistication brings together the three factors we ha&e discussed abo&e. There is plenty of done well economically ha&e left behind low"sophistication e-port sectors and entered into more sophisti same place or ha&e mo&ed in the opposite direction. The challenge faced by the policy makers is clearD t sophistication. In Pakistans case the sophistication will be in de&eloping tasks rather than final products. YYYYYYYYYYYYYYYYYY ?o signature...
#37 Tuesday, July 07, 2009

Predator
'enior ,ember

America,s new reach

By Shahid Javed Burki Tuesday, 07 Ju", 2009 A,61I=A' sometimes on and sometimes off relationship with Pakistan is set to change. This is likely to

The legislations that ha&e worked their way through the two chambers of the .' =ongress will place the foundations. The roller"coaster ride should end and greater certainty should be introduced in the way +a

The bills that ha&e cleared the House of 1epresentati&es and the 'enate promise a long"term .' commit year time hori9on during which assistance will be pro&ided at an annual rate of @1.!bn. In the 'enate &e amount but the time frame is open"ended. The two bills will be reconciled by a conference committee tha

The second significant departure from past practices is the clear di&ision N each with its own set ob2ecti& conditions will be attached to the formerE far fewer to the latter. In fact the 'enate &ersion of the bill is p by the house has se&eral conditions attached to the timing of disbursements as well as their amounts.

The house bill reflects the work of the &arious lobbies that ha&e an interest in the outcome. The most act made up of non"resident Indians( the ?1Is. This lobby has emerged as a well"organised and well"finance percei&ed interests of the homeland. This lobby worked effecti&ely in getting =ongress to support the adm nuclear agreement it signed with the =ongress party go&ernment headed by Prime ,inister ,anmohan ' diasporas in the American political system a little later in this article.

The third important difference between this approach and those followed in earlier periods is that the neg Pakistan rather than with an administration dominated by the military. The three pre&ious periods of larg military was in charge of politics. This was the case during the periods of Ayub /han :1*!;" *<( Jiaul Ha when large amounts of American assistance flowed into the country. A significant proportion of this was this time.

?either of the two bills will actually spend the moneyE they authorise the ma-imum spending limit and a spending. The actual spending le&els and possible further conditions will be determined by the rele&ant s in each of the two chambers and the final appropriations bill. It is the sub"committee process that will be interested lobbies acti&e on the Hill.

The 'enate &ersion of the bill has the support of the +hite House. In its original formulation( it was signe >iden and Hillary =linton. It passed the 'enate by a unanimous &ote( a relati&ely rare occurrence in the A

was appro&ed by a narrow margin( reflecting the fact that some of the representati&es more sub2ect to t con&inced about the form and scope of the aid that was being offered to Pakistan by the .'.

The 'enate &ersion would triple non"military aid to Pakistan to @1.!bn a year as a long"term pledge to th N the 6nhanced Partnership with Pakistan Act of )%%* N reflects the o&erall ob2ecti&es of the senators. T years :)%%*"1B< and clearly de"links military from non"military aid.

In the past( security assistance o&ershadowed de&elopment aid. The Pakistani military could bypass ci&il own institutional de&elopment. 1ather than locking in a le&el now for military aid which might not be in li and commitment( the bill buys fle-ibility for the .' administration by lea&ing the quantum and content o by"year basis.

The final shape of .' assistance to Pakistan will be determined by the political process in which ethnic lo appropriate to discuss the political roles of the &arious 'outh Asian diasporas in the .'.

'outh Asia now has a large number of people li&ing and working in se&eral parts of the world. 5ormed o& about $% million people( )B million from India and 1 million di&ided almost e&enly between >angladesh

7i&en the si9e of the diasporas and their economic strength( it is not surprising that they ha&e begun to considerable political presence in all the continents of the world( while the Pakistani community is better the economic presence of the Pakistani community is considerable. ?umbering about a million people in ha&e a combined income of @!%bn( a sa&ings rate of @1%bn a year and economic assets of about half a t

'ome of this income and some of these assets are being put to use for both economic and political purpo many ?1Is as the Pakistani community. Their assets and incomes are proportionately larger. .nfortunate influence .' politics. This has happened in particular with reference to the .' approach towards /ashmir assistance to Pakistan.

It is important for the two diasporas to recognise that aid to Pakistan legislation as drafted by the 'enate focuses on the economic and social de&elopment of the country. The main .' purpose as reflected in the in Pakistan. That should also be the Indian concern. YYYYYYYYYYYYYYYYYY ?o signature...
#38 Monday, July 13, 2009

Predator
'enior ,ember

Industrialisation ensuring level play

By Shahid Javed Burki Monday, Ju"y 13, 2009

TH6 Planning =ommission may ha&e to look at a number of issues as it begins to focus on pro&iding the needs. To begin with( what kind of direction and help should the state pro&ide to the industrial sector in global economy and the e&olution of the worlds industrial production system3 In its most recent report( the .?I84 has indicated that concentration on FtasksG rather than on the prod opportunities to the countries such as Pakistan that ha&e been left behind in the process of industrialisat assistance in producing the final products rather than the products themsel&es. If there is some substanc it3

In focusing on the future structure of the industrial sector( policy makers must bear in mind the competit operating. 4f these none is more important than the competition emanating from =hina. Trade with =hin businesses. 'ome ha&e concerns while some others see opportunities. The conclusion is ob&iousD the dyn carefully by the public and pri&ate sector working together and recommending policy actions for the state achie&e better integration between the =hinese and Pakistani industrial systems.

>usinesses in Pakistan also belie&e that an important aspect of the trade policy is the PakistanAfghanista /abul with an outlet to the sea is important( the agreement should not create opportunities for enormou continue to occur at present. The modalities of this trade needs to be determined in a way that Pakistan

0arge businesses feel that the growth of the black economy is hurting de&elopment of the industrial econ playing field for enterprises of &arious si9es. At the moment( small enterprises( by a&oiding to pay ta-es regulations( ha&e increased their market share in the local market place at the e-pense of large firms. Th with ',6s.

The ',6' can also deal with energy and water shortages by making under"the"table payments to officia +hile the de&elopment of the ',6 sector is &ital for the countrys economic future it should add to the o une&en field reduces the economys efficiency. How can a le&el playing field be produced for all businesse

4ne way of doing it is to re&iew laws and regulations that are in place. 'uch a re&iew will re&eal that ma for putting them on the books was to realise a particular goal or sol&e a certain problem. 5or instance( th were originally written to protect the ,uslim peasantry and small landholders from the non",uslim shopk but they remain on the books. A re&iew done 2ointly with the pri&ate sector would indicate that many law opportunities for the regulators. They ser&e no particular economic or social interest.

Ta-ation and re&enue generation is one particular area where a great deal of cleansing of laws and regul the recent budget speech( it is of &ital importance for increasing the ta- to 78P ratio. ,any among the p should be carefully studied by a 2oint working group of officials and pri&ate sector people.

It is also important to de&elop international trade as an important determinant of efficient industrialisatio approach to policy making.This is another area where the pri&ate sector could work with the go&ern men create a pro"e-port orientation and( :b< identify the institutions that need to be impro&ed or established

>usinesses are deeply concerned about the state of physical infrastructure which has lagged behind the d the needs of a trading nation. They ha&e taken cognisance of the fact that India( ha&ing lagged behind P rapidly catching up. Indians ha&e de&eloped an ambitious programme for de&eloping a national highway users will be required to pay for the facilities they use. The pri&ate sector should be asked by the go&ern action plan that would in&ol&e it in the de&elopment of this &ital sector of the economy including the pros in&estment in the sector.

>elonging to the sector of infrastructure but demanding a separate treatment is shipping( an area in whic but has allowed the industry to run it down.

Absence of appropriate shipping facilities imposes enormous burdens on e-porters( adding significantly t

The businesses recognise that Pakistan has not gi&en the sector of agriculture the attention it deser&es. ma2or source of e-ports( not only of grain and other low &alue" added products. Pakistan could car&e out >ut this will need in&estment by the state in infrastructure :cold chains( for instance<( technology to incre products( finance and market ad&ice. 4nce again( the public and pri&ate sectors could be partners.

7i&en the serious shortages that ha&e de&eloped in recent years in supply of energy( the go&ernment ne ensure that supply keeps up with demand. It is clear that the gap between supply and demand cannot be

in&estment from public funds. There has to be a partnership between the public and pri&ate sectors.

Pakistan has seriously lagged behind de&eloping the technological base of the economy. There was eloqu )%B% statement about pro&iding the economy a strong technological foundation. That goal is still searchi strategy is needed and how could the pri&ate sector support it3 'hould the de&elopment of e"go&ernmen and whether ego&ernment could ser&e as the catalyst for ad&ancing the pace of technological de&elopme YYYYYYYYYYYYYYYYYY ?o signature...
#39 Tuesday, July 14, 2009

Predator

'enior ,ember

The !a"htun conundrum

By Shahid Javed Burki Tuesday, 14 Ju", 2009

8T was not empty talk N pure electioneering( as many belie&ed N when >arack 4bama declared that he to win the election and become Americas ne-t president. He had re2ected his predecessors approach.

5or 7eorge +. >ush( the war in Afghanistan was a sideshowE for him the real war was in Iraq. His admin After ha&ing quickly o&errun the country in the fall and winter of )%%1( and placed Hamid /ar9ai as the li thought the 2ob was done. The main ob2ecti&e then was to keep /ar9ai in place in the hope that the Afgh en&ironment in which a limited number of western troops would be able to keep the Taliban at bay.

5or some time the strategy seemed to work and Afghanistan N at least compared to Iraq N was in relati kidnappings but these were seen as the products of a &iolent society learning to ad2ust to a different way go&erned. The economy began to re&i&e with 78P increasing at double"digit rates. The Afghans once aga borders. The long"standing transit arrangement with Pakistan began to work once again as the traditiona through /arachi with the outside world was re&i&ed. The term normal has always been difficult to apply t returning towards some kind of normal functioning.

+hile the central go&ernments power was limited to /abul and while the pro&inces were largely in the h Mwar lords could be comfortably applied( this way of go&erning was not much different from what the cou

And the Taliban were lurking in the wings. At one time Per&e9 ,usharraf( then Pakistans president( had themsel&es the Taliban should be painted with the same brushE not all Taliban were terrorists. ,any wer way Hamid /ar9ai was managing the country. >ecause of the circumstances of the liberation of Afghanis by non"Pakhtuns far outweighed their proportion in the population and their economic strength.

,usharraf argued for separating the Pakhtuns opposed to the /ar9ai go&ernment in two groupsD the Tali to any ci&ilised society( and those who could be made to work in the system that was e&ol&ing. >ut by th the world from the perspecti&e of Mgood and Me&il. This approach only helped strengthen the diehard elem

>y the time the American election campaign was entering its final phase( Afghanistan had begun to unra country than in Iraq where the counter"insurgency strategy de&eloped by 7en 8a&id Petraeus had begun was to gi&e space within the new system to elements in the 'unni community( in particular those who ha country by the Americans.

4nce this approach was accepted( it became clear that a large number of 'unni insurgents were prepare American side. 4nce the switch was made( the le&el of &iolence in Iraq began to decline rapidly.

The same approach could ha&e worked in Afghanistan but for the long"enduring problems between the A Pakistan. The two had always pursued different ob2ecti&es. /abul( under the traditional elite( wished to b the border N the 8urand 0ine N under its control. Pakistan( always fearful of Indias designs with respec end the old Afghan"India entente in its fa&our. This conflict( therefore( ga&e the /abul regime under Ham e-planation for its own failures.

There was some substance in the Afghan belief that unless the border between Afghanistan and Pakistan the escalating war against the resurgent Taliban. The sealing of the border was needed to stop the Taliba from withdrawing into their sanctuaries on the Pakistani side of the border. 4nce there( they could rest( elements within the Taliban community that Pakistan did not wish to gi&e up since it was one way of reta were percei&ed as Indias designs.

There are( therefore( four features of the Pakhtun conundrum that need to be addressed in order to bring that there are many genuine grie&ances felt by this community concerning the way power has been appo segments of the Afghan society. 'econd( Pakistan has to show resol&e that it will not allow those now ge their own agendas against the countrys neighbours. Third( it also needs to make sure that the law of the This means that the country will not allow itself to be fragmented to accommodate those not happy with

5inally( there must be a clear understanding with India on what are its legitimate interests in Afghanistan regional power with regional interests. At the same time India has to pay heed to Pakistans security inte YYYYYYYYYYYYYYYYYY ?o signature...
#40 Tuesday, July 21, 2009

Predator

'enior ,ember

Global crises0 discussions without

By Shahid Javed Burki Monday, Ju"y 20, 2009

(he G12 comm"ni+"34s iss"ed after the two meetings showed considerable "nderstanding o the ways to manage a more diversified global economy with many more national and regio

TH6 7roup of 6ight assisted by the 7roup of 5i&e has 2ust concluded its meetings in Italy. The first group the second of the large emerging markets. They did not achie&e much other than the promise to pro&ide aid to the de&eloping world for food produc failing to act in unison to find a cure for the ailing global economy3

The economic crisis that began in the .nited 'tates in the summer of )%%# and quickly spread to the fou important de&elopments that ha&e taken place since the inauguration of the >retton +oods system.

4ne( the world was much more integrated now than was the case in 1*$$. 'hocks are quickly transmitte opportunities that are a&ailable in the &arious parts of the world is quickly made known.

Two( there are now more contenders within the global economic system than was the case at the end of the con&ersation was between the .nited 'tates and its 6uropean allies with the other participants taking participants at this time.

Three( despite the creation of stabilisers in the global economic system I the International ,onetary 5un >ank 7roup and the associated regional de&elopment banks I economic and financial crises spread fast a

How to manage the system as it e-isted in the early )%%%s( therefore( has become the primary concern lead large economies. As the economic crisis deepened( tremendous energy was consumed to find an an profound in its institutional imperati&es as was the result of the deliberations at >retton +oods ! years

This time around( howe&er( the world leaders chose not to summon a meeting of the large powers as the forums that already e-isted. The initial deliberations began in +ashington in ?o&ember )%%; when the g discuss what could be done to resol&e the crisis and to ensure that it did not occur again. The 7)% met a Pittsburgh for the third time in 'eptember.

The communiquKs issued after the two meetings showed considerable understanding of the nature of th more di&ersified global economy with many more national and regional interests than was the case in 1*

'oon after the April meeting of 7)%( the +orld >ank and I,5 met for their usual Fspring meetingsG. 4nce e-change of ideas but no concrete results were produced about the structure of the global economic orde

In Aune )%%*( the 'hanghai =ooperation 4rganisation :'=4< held its annual summit in the 1ussian city o study of an effort by the non"traditional world economic pow ers to find a &oice in the international syste conflicting interests on the part of Asias ma2or powers.

The fact that it has sur&i&ed is a good indication of how countries are attempting to find a way of resol&in and institution building. The '=4 began life in 1** as the 'hanghai 5i&e I =hina( /a9akhstan( /yrgy9sta name after .9bekistan 2oined the group in )%%1.

That 1ussia would ha&e agreed to ha&e =hina make such a bold mo&e into the geographic area it conside e-traordinary de&elopment. It reflected 1ussias weakness at that point and =hinas growing asserti&ene power.

1ussia sought to dilute =hinas influence by persuading other '=4 members to grant obser&er status to I associated for decades. This was agreed to on the condition that Pakistan was also gi&en the same status

Iran and ,ongolia are the two other obser&ers. >oth countries had for decades strong connections with 1 themsel&es from ,oscow. ,ongolia had drawn closer to =hina since the collapse of the 'o&iet .nion.

A third category was created to bring in >elarus and 'ri 0anka as Fdialogue partnersG while the Fguest st

the =I'. The '=4 is an interesting case of how the non"traditional economic powers are impro&ising to g

The )%%* '=4 meeting was significant since on its sidelines the four largest emerging markets I >ra9il( 1 first summit. This group has its origin not in any political or economic imperati&e as do most other group 7oldman 'achs study that these four will ha&e a commanding presence in the global economy in the nethese four countries had $% per cent of the worlds population and )! per cent of the worlds area. The st )%!% would e-ceed that of the present rich countries.

,ore meetings were held after the two 7)% concla&es( the '=4 gathering and the first summit of the >1 once again attempted to redesign the global economic system. The Italians pressed for the e-pansion of order to make the original grouping more representati&e. The original 7! was made up of =hina( India( > The Italians wanted to bring in 6gypt as a representati&e of the ,uslim world.

Pery little of substance was achie&ed at the 7; meeting in spite of the strenuous efforts by >arack 4bam this was the first 7; meeting and he and his associates felt it was important for him to establish his I an global economy.

>ut in spite of the crisis that all countries assembled around the table faced( they were not able to define The effort goes on. YYYYYYYYYYYYYYYYYY ?o signature...

India,s challenges
By Shahid Javed Burki Tuesday, 21 Ju", 2009

TH616 are moments in the li&es of nations when those who rule can bring about profound changes in the li& when then finance minister ,anmohan 'ingh( facing an economic crisis of immense proportions( chose to b

+ith a few bold strokes he demolished the Mlicence ra2 that had been put in place with tender lo&ing care by ra2 had kept India stuck in an economic groo&e that produced what its own economists called the MHindu rat population was increasing by almost two per cent a year.

That didnt lea&e much room for the poor( and the latter( in whose name the ra2 had been established( suffe impo&erished( with $% per cent of the population li&ing in absolute po&erty. That proportion introduced a ne

+ith reforms in 1**1( India went on a different track. The rate of economic growth more than doubled( the increased in si9e( and some parts of the economy got well integrated into the global economic system. >y lo entry of foreign capital( India opened its economy to foreign influences.

The Indian brand name became &alued in IT( pharmaceuticals and automobiles N e&en in literature( music global economic power. The slogans M'hining India and MIncredible India coined by in&enti&e Indian minds d economy went into a spin and affected India.

5or a decade or so many serious economists N those from India included N had concluded that the global e meant that a number of emerging economies were no longer as dependent on the markets of rich countries These were the factors that produced the miracles in 6ast Asia and turned =hina into an economic power ho economies had built strong economic links among themsel&es. Trade among them had increased and they h to protect themsel&es from the &agaries of the international financial market. If the +est was sinking under the weight of its financial folly( emerging markets would not go down with it.

The decoupling hypothesis held sway during the good times. +hen these turned bad( it was clear that the d 6merging markets soon found themsel&es in the grip of a credit crunch. The decision by .' authorities to le unintended consequences. Among these was the hoarding of cash by the large institutions to prepare for an

=redit fro9e( including that needed by traders to finance their operations. Turning o&er fast N typically rang yearly flows amounted to @1%tr. ?o matter what the destination of these e-ports( the countries that relied h badly hurt them. 4ne of the largest plunges in 78P growth rates occurred in 'ingapore and Taiwan( two cou the economy.

The crisis came to India through an entirely different channel. Its banking sector( mostly under the control o Its trade to 78P ratio was relati&ely low. >ut the more &ibrant parts of its economy N the IT sector and the with the +est through the links forged o&er time between its own enterprises and the large corporations ab the more dynamic sectors of the Indian economy suffered. India lost close to ).! percentage points in its ra about nine per cent a year in the fi&e"year period before the crisis hit the world economy to .# per cent in

The Indian economy is showing another weaknessD the widening in income disparities( both interpersonal as in a study sponsored by the Asian 8e&elopment >ank.

According to it a clutch of domestic billionaires control as much as )% per cent of the countrys 78P and ;% >ombay stock e-change. A significant part of this wealth was accumulated in the last couple of decades whe the world outside. An important part of this model was to push the state to the back seat of the economy. A from the western part of the country. In other words the new riches are associated with the western econom operate at some distance from the go&ernment.

A &i&id portrayal of the problem comes from the no&elist Arundhati 1oy in her latest book( 0istening to 7ras selling off the nations assets in chunks( the other to di&ert attention( is arranging a buying( howling and de proclaims. 'he discusses the recent economic boom as ha&ing merely created Fa &ast middle class punch dr comes with it N and a much( much &aster underclassG. 'he is e-tremely concerned that unless the state ste ha&e to face a serious socio"political situation. YYYYYYYYYYYYYYYYYY ?o signature...
#42 Monday, July 27, 2009

Predator

'enior ,ember

.eteriorating economic competitive

By Shahid Javed Burki Monday, Ju"y 27, 2009

+HI06 there is not a great deal of academic interest in Pakistan( its economy is being studied and analysed The +orld >ank continues to issue reports on the countrys macroeconomic situation and on some of the mo In&estment =limate Assessment( )%%* is one of the recent +orld >ank efforts focusing on some of the salie

The most recent entry into this genre of reports about the prospects of the economy is the 'tate of Pakistan the .nited 'tates by 'haukat Tareen( Pakistans de facto finance minister. The report should be of tremend the picture in Pakistan in the conte-t of a comparati&e country framework.

?ot unlike the +orld >ank report on in&estment climate( the =ompetiti&eness 1eport by the Islamabad " ba and bad news about the economy. It uses the methodology de&eloped o&er the years by the +orld 6conom perhaps best known for its annual meeting in 8a&os( 'wit9erland. +65 also publishes comprehensi&e report technology( gender and tourism.

The 7lobal =ompetiti&eness 1eport published by the institution is( F the most widely read and respected ran its inception B% years ago.G The most recent report e-amined 1B$ countries across 11B different macroecon are grouped into what the +orld 6conomic 5orum calls( the FpillarsG. The assessment about the performanc data and sur&eys. 0ast year 1)()*# business leaders were sur&eyed across the de&eloping world.

The bad news for Pakistan is that its o&erall ranking has slipped by nine places( from *)nd out of 1B1 count 1%1st out of 1B$ countries e-amined in )%%;"%*. +hat is e&en more troubling is the fact that this slippage indicators. 8eterioration has occurred in all the categories into which the 1) pillars are grouped. These are F Finno&ation and sophistication.G In terms of Pakistans place in the array of countries( the most significant s market sophisticationG where the countrys position has dropped by )B places. In Fgoods market efficiencyG macroeconomic stability by 1! placesE in inno&ation by 1B placesE and in both infrastructure and tech nolog surprisingly( the least amount of slippage has occurred in market si9e where Pakistan has dropped by one p population.

Another way of reading the results is to look at those pillars of competiti&eness in which Pakistans place is these.. Again( not surprisingly( the country does &ery poorly in the area of Fhigher education and trainingG w included in the analysis. F0abour market efficiencyG( with a rank of 1)1st is the ne-t worst followed by Fmac educationG where the rank for both is 11 th. In what lends importance to this work is that it pro&ides a rich array of public policy tools( Islamabad could to a higher plane. In that conte-t the )%%* report includes information from some other areas sur&eyed by 7lobal 6nabling Trade 1eport( where Pakistan ranks ;$th out of 11; countries included in the sur&ey.

In terms of the indicators used in this analysis( Pakistan has the worst ranking Y the 1%%th "" in what the au the importance( both public policy makers and the entrepreneurial class attach to trade. The best reading in country ranks $%th.

The 7lobal Information Technology 1eport is the second +orld 6conomic 5orum document from which the a Here Pakistan ranks *;th among the 1B$ countries included in the sur&ey. The troubling feature of this repo last three years( from #th in )%%!"% to *;th in )%%;"%*. The number of countries e-amined increased by Pakistans drop of B1 places cannot be e-plained entirely by the e-pansion in the si9e of the uni&erse sur&ey

According to the report( the deterioration in Pakistans relati&e position was Fled largely by steep falls in the technology :a drop of )B places<( business readiness :a drop of 1!< and political and regulatory en&ironmen

indicators declined e-cept the indi&idual usage indicator which increased by nine ranksG.

The news for Pakistan gets really bad when the )%%* report brings in information from the 7lobal 7ender 1 de&elopment community belie&es is happening in Pakistan.. . According to the report( Fdespite the notable e +orld 6conomic 5orums hard data and sur&eys show that Pakistans ranks 1)#th out of 1B% countriesG.

8iscrimination against women is across many fronts( particularly in education( health care and economic pa women I enrollment in primary education Y Pakistan now ranks 1)#th out of 1B% countriesE in terms of wom economic participations and opportunity( it is 1);th.

=ulture is an important contributor to womens backwardness but it is not the only reason. Poor policy has p the budget for )%%*"1%( Hina 1abbani /har pointed with some pride in her budget speech to the fact that sh Pakistans history and she was doing it in front of the first female speaker of the national assembly. +omen that presence had not translated effecti&ely into public policy for importing womens wellbeing.

The broad conclusion one reaches from the findings in these important reports is that Pakistan has to do ha competiti&eness of the economy. YYYYYYYYYYYYYYYYYY ?o signature...
#43 Tuesday, July 28, 2009

7hulamhussain
,ember

Aoin 8ateD Aul )%%* 0ocationD .nder motherZs feet PostsD #! ThanksD 1* Thanked 1* Times in 1 Posts

,hina9s econo(ic i(!ac&

,y Shahid 8aved ,"rki Tuesday, 28 Ju", 2009 =HI?A' economy is being restructured in se&eral different ways. 'ome of these are &isibleE some are more difficult to discern. How this happens will ha&e great consequences for the rest of the de&eloping world( especially for a country such as Pakistan. Today I will focus on three aspects of this changeD one( =hinas likely role in the e&ol&ing global economic orderE two( the re&i&al of the countrys economy at a rate not anticipated by most =hina e-pertsE three( the process of urbanisation in the country and how that might impact on the structure of the economy. 5or the last se&eral months( =hina is playing an acti&e role in se&eral different forums. These include the 7)%( the 7;U7! and the 'hanghai =ooperation 4rganisation. 5or se&eral reasons these organisations are unlikely to be the real dri&ing forces in the global economic system. The 7)% was being built on top of a system that had creaky foundations. The focus remained on the .' and +estern 6urope. The latter in particular is no longer the most &ibrant part of the global economy. There may not( after all( be such a widening of influence and reshaping of the global economy as was belie&ed would be the case only a few months ago. 7;U7! has

demonstrated its inability to take important decisions on global economic matters. The '=4 is an Asian organisation that cant work for the entire world. +hat is likely to emerge is 7)( a formal or informal arrangement between the .' and =hina. The slow mo&e towards multipolarism may be pre"empted by the continuing strength of the economy of the .' and the rise of =hina. There is now consensus among policy analysts the world o&er that =hina is well on its way to becoming a power house in the global economy. 6&en if it does not become the worlds largest economy in three to four decades( as some belie&e it might( it will certainly be the second largest after the .'. The fact that the countrys economy has begun to reco&er at a faster pace than was e-pected in the spring of )%%* is a testimony to its strength. This may happen while the rich countries are finding it difficult to shake off their economic malaise. +hen the global economy was in a deep recession =hinese dependence on the markets in de&eloped countries was e-pected to hurt it badly. That did not happen. The +orld >ank has now forecast =hinas growth rate at #.) per cent in )%%*. +hile this is a long way down from the 11.* per cent in )%%#( it is still remarkable( gi&en the sluggishness in other parts of the world. =hina is likely to achie&e this impressi&e rate of growth in spite of a fall in the rate of e-port growth from )% per cent in )%%# to eight per cent in )%%; and to a forecast of minus 1% per cent in )%%*. The country( it appears( is no longer that dependent on e-ports for growth as was belie&ed before the present crisis hit the globe. It may lead the emerging economies towards Mdecoupling( a concept according to which these economies are no longer &ery dependent on the worlds rich nations. How will this new =hina affect the global economy and its political system3 The current thinking in the .' emanating from a number of policy institutions on both coasts of the country sees the coming global arrangement from the bipolar perspecti&e( in part because such a system is familiar to policymakers as well as policy analysts. This is one reason why the administration of President 7eorge +. >ush paid so much attention to culti&ating a new relationship with India. There is a simple idea behind this. 8e&eloping India as a counterweight to =hina will further Americas interests in Asia. Among the features that will mark =hinas rise( se&eral ha&e no historical precedent. Take for instance the pattern of urbanisation in the country. =hinas urban future will be shaped all along the countrys east coast( from 8alian in the northeast to 7uang9hou in the southeast. +ithin the ne-t few decades( we will probably see !%% million people li&ing in this narrow strip of land with a combined income of @1%tr and income per capita of @)%(%%%. The concentration of such a large number of people with high incomes in a narrow strip of land will ha&e enormous consequences for =hinas own economic growth pattern as well as on the global economy. 5or instance( =hina is unlikely to concentrate on the de&elopment of land"intensi&e economic acti&ities. This doesnt only mean a mo&e away from agriculture but also from the land"intensi&e patterns of manufacturing. =hinas economy in terms of space use will go &ertical and this will mean mo&ing away from economic acti&ities that need a great deal of Mflat space towards those that can be carried out in high"rise factories. +hat this implies is the shift not only from agriculture but also from traditional manufacturing. =hina will concentrate more and more on knowledge"intensi&e production

systems. In fact it is encouraging this mo&e by in&esting large amounts of public resources into de&eloping the needed human resources. +hat does all this suggest for Pakistan3 'ome conclusions are ob&ious. Islamabad must culti&ate a close economic relationship with =hina and it should be based on a carefully worked out strategy. Pakistan can support =hinas de&elopment as a country with a high population density along the countrys east coast by getting engaged in the pro&ision of goods and commodities that will be needed. Pakistan could also concentrate on the acti&ities that =hina will not be able to do on its own. That would mean highly linked industrial sectors( with Pakistan supplying parts and components to the =hinese industry. +hat is needed is a relationship based on careful thought and planning.
#44 Monday, August 03, 2009

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

How can the economy get off the rollercoaster ride&

By Shahid Javed Burki Monday, 03 u*us&, 2009 TH6 economy has been on a rollercoaster ride e&er since the country gained independence more than si- decades ago. At this time it is going through one of its periodic downturns. This one is more se&ere than many e-perienced in the past. The reason is not hard to understand. The country is passing through a perfect stormE dealing simultaneously with a number of crises. All of these are not related to economicsE some ha&e their origin in politics( some in the structure of the society and some in the rise of Islamic e-tremism. The questions the policymakers must address are ob&ious. 4ne( how to pull the country out of its present economic mess3 Two( how to ensure that it gets off the rollercoaster and gets on to a path that would take it towards higher and sustainable rates of economic growth and social de&elopment3 There are se&eral answers to these two questions. The most tempting one the policymakers ha&e always gi&en is to suggest that the country needs a larger flow of e-ternal capital to augment the pitifully low rates of domestic sa&ings and ta-" to" 78P ratio. +hene&er the geopolitical situation was conduci&e( Pakistan managed to obtain large doses of foreign money. 7i&en the ongoing struggle with Islamic e-tremists in which Pakistan now has taken a decisi&e position( Islamabad will manage to recei&e a significant infusion of capital. This will come mostly from official sources and will go largely to the go&ernment in support of the budget and of the &arious programmes and policies fa&oured by the donors.

Pri&ate capital flows needed by the entrepreneurial classes will only become a&ailable when the country becomes an attracti&e destination for the in&estors. 5or that to happen( the go&ernment will need to do a great deal of hard work. 'ome of this is needed to make the economy more competiti&e. 0ast week( I used the latest report issued by the Islamabad"based =ompetiti&e 'upport 5und to point out the numerous weaknesses in the current structure of the economy. These had resulted in Pakistan slipping by nine places in the ranking of the countries on the competiti&e scale by the +orld 6conomic 5orum. These weaknesses need to be remo&ed in order to place the economy on a higher plane of growth and de&elopment. 4ne way of doing this is to bring to the economy the capacity to inno&ate. This is largely absent at the moment although( as the report points out( there are inherent ad&antages present which include a &ery young population . The median age of Pakistans population is 1;.) years I which means that tens of millions of young people are entering the workforce e&ery year. Properly equipped with education and appropriate skills( they could lend enormous dynamism to the economy. 0eft alone to their de&ices they will only swell the ranks of the disgruntled. The other ad&antage Pakistan has is the capacity to adapt new technologies and new ways of doing things when conditions are right. This was amply demonstrated in the late Msi-ties and the early Mse&enties when the farming community I in particular the medium si9ed farmers I quickly adopted the technology associated with high"yielding seeds de&eloped in ,e-ico :wheat< and rice :the Philippines<. The go&ernment headed by President Ayub /han had a great deal to do in facilitating the arri&al of what came to be called the Fgreen re&olutionG. The go&ernment I a different one I also had a great deal to do with the failure to bring another re&olution which changed the agricultural economy of India. +hile ?ew 8elhi facilitated the adoption of biologically engineered cotton( the >t( Islamabad discouraged it. The result was that India went from a cotton importing to a cotton e-porting country while Pakistan mo&ed in the opposite direction. The importance economists ha&e begun to place on inno&ation as a dri&er of growth and de&elopment is of relati&ely recent &intage. 8e&elopment economics began its life as a separate discipline by suggesting that by the transfer of low producti&ity labour from the countryside to industry and modern commerce personal incomes would increase( markets would e-pand( and new opportunities would become a&ailable. All this would increase the rate of economic growth. >ut the de&elopment of the modern sector needed more than the transfer of labour from less to more producti&e part of the economy. It also needed capital. This led to the de&elopment of production functions in which labour and capital were the two &ariables. It is only recently that economic model builders ha&e introduced knowledge I and hence inno&ation I as a direct determinant of growth. This represents an enormous change in thinking which has not been fully factored in the work of economic policymakers. At this critical time in its history( the country certainly needs a lot of foreign capital. >ut to mo&e towards an economic structure that will sustain high le&els of growth( it also needs an economy that can inno&ate. I will conclude with a quotation from The 'tate of Pakistans =ompetiti&eness 1eport( )%%*(

that &ery well summarises what the go&ernment could do to increase the rate of economic growth by focusing on inno&ation as an important contributor of change. F>uilding a national inno&ation ecosystem for Pakistan is a comple- and nuanced process containing many components. These include ta- policies( go&ernment procurement( and protection of intellectual property rights.They include building the infrastructure for inno&ation and industry"uni&ersity linkages. They include supporting entrepreneurs and businesses in general and in their technology identification and acquisition efforts. They include specialised support( such as business incubators and tech parks. They include strengthening education at all le&els to encourage inno&ation and strengthening the ability of the financial sector to support commercially &iable inno&ation. They include policies as straightforward as support for those wishing to file patents to more comple- initiati&es such as changing cultural attitudes towards risk.G This is a long and comprehensi&e list for what the go&ernment needs to do. Howe&er( as in so many other things it is not the dearth of ad&ice that has pre&ented Pakistan from adopting the right course. It is the go&ernments poor capacity to implement what are the right sets of policies and initiati&es. +hene&er the .nited 'tates go&ernment needs to take urgent and comprehensi&e action it appoints a Fc9arG to coordinate. ,ore often than not this strategy has worked( most recently in restructuring the auto industry. The man gi&en the responsibility did his 2ob and has announced his intention to lea&e the go&ernment. Pakistan could perhaps do something similar in the area of inno&ation. YYYYYYYYYYYYYYYYYY ?o signature...
#45 Tuesday, August 04, 2009

7hulamhussain
,ember

Aoin 8ateD Aul )%%* 0ocationD .nder motherZs feet PostsD #! ThanksD 1* Thanked 1* Times in 1 Posts

ne+ 1e*innin*:
,y Shahid 8aved ,"rki ("esday, 27 &"g, 1226 TH616 ha&e been few such moments before N moments when the different countries in 'outh Asia may ha&e seen national and regional interests mo&ing them in the same direction. 'uch a moment may ha&e arri&ed in the summer of )%%* when( with the establishment of democratically elected administrations in the three large countries of the 'outh Asian mainland( the conflict"torn area may be able to work towards regional cooperation and e&entually towards regional integration. 7o&ernments responsi&e to the wishes of the citi9enry are more likely to gi&e more weight to economics than administrations dominated by the military. 5or a considerable part of

their respecti&e histories( >angladesh and Pakistan were directly or indirectly ruled by their armies. 'ince the armed forces did not ha&e to gain and retain power through elections they were not compelled to gi&e economics N and( therefore( po&erty alle&iation and impro&ements in income distribution N much consideration in the way they go&erned. 'ometimes the quest for legitimacy made the military go&ernments adopt policies they belie&ed would win them fa&our with their populations. In the conte-t of much of 'outh Asia( the anti"India stance was such an approach. This was adopted with enthusiasm by the military"dominated countries. It was 2ustified at least in the case of Pakistan by the belief that India still had not accepted the creation of a separate ,uslim state as a legitimate aspiration of a large segment of the population of >ritish India. The other important de&elopment in the region was the realisation that religious e-tremism and the focus on ethnicity as a basis for nationhood posed a real threat to the long"term interests of the people of 'outh Asia. +hile the Islamists are currently at the forefront of the use of &iolence against both the state and ordinary people to promote their interests and agendas( other religious e-tremists ha&e also been acti&e in the region. The threatened encroachment of Hindu e-tremism on the Indian state was checked by the elections of April",ay )%%* in India that une-pectedly ga&e a much larger margin of &ictory to the secular =ongress party and to ,anmohan 'ingh( the partys candidate for premiership. This may pro&e to be a defining moment for the e&olution of secular democracy in India. The Pakistani elections of )%%; may also pro&e to be as much of a turning point in the history of 'outh Asia. In Pakistans case( the military was shown the door and it is likely to stay out of politics unless something e&en more dramatic happens than the decision by Islamabad to use the military to defeat the e-tremists in the country. The 'ri 0ankan militarys triumph in the long struggle with the Tamil separatists and the support it recei&ed from the people is an indication that there is a limit to tolerance in the pursuit of ethnic rights. +ith these and other e&ents( 'outh Asia may ha&e begun to turn the corner( mo&ing away from a total adherence to the pursuit of national interests e&en at the cost of doing damage to the regions long"term prospects. 'hould the meeting at 'harm 6l 'heikh be &iewed in this conte-t3 If the short statement issued after the meeting is to be read as the shape of things to come( ?ew 8elhi seems to be correctly reading the change in the mood of the Pakistani population and the course the elected representati&es wish to take. 7i&en Pakistans precarious economic situation and the strong desire of the people to ha&e their economic problems urgently addressed( there is a growing sentiment in the country that a hard stance towards India will not yield any reward. 4n the other hand( it would further burden the economy that is already straining under many pressures. People are doing a cost"benefit analysis and seem to ha&e concluded that the balance is in fa&our of a ma2or impro&ement in relations with India. .nfortunately the same cant be said about the sentiment in India. It is in Indias interest to reach out to Pakistan and restart the process for sol&ing some of the ma2or issues it has with its neighbour. +ithout bringing a degree of tranquillity to the region( Indias ambition to be regarded as a ma2or global power would be difficult to

achie&e. Its leadership must ha&e realised that while Pakistan may ha&e initially encouraged the 2ihadists to balance Indias enormous superiority in con&entional arms( the strategy backfired. The Islamic e-tremists that once had the support of the state ha&e turned on the state itself. The human cost to Pakistan of this misad&enture is a multiple of that borne by India because of the attacks for which responsibility has been assigned to these groups. >oth countries would undoubtedly benefit if the persistent tensions between them were eased. >y doing so they would be remo&ing one of the causes the 2ihadists ha&e espoused. The 'harm 6l 'heikh pronouncement is a sub2ect of e-tensi&e analysis on both sides of the border( particularly in India. =onsiderable attention has been gi&en to it for two reasonsD one( because ,anmohan 'ingh agreed to delink the dialogue on the issues that ha&e created mutual tension from Pakistans attempts to bring Islamic e-tremists under controlE and two( because of the reference to >alochistan in the 2oint statement. 'e&eral serious Indian analysts ha&e chided their prime minister on these two positions. The fact that the 'harm 6l 'heikh meeting was on the sidelines of a summit that in&ol&ed a large number of leaders from the de&eloping world( points to an interesting N and disturbing N fact about the nature of the relationship between Islamabad and ?ew 8elhi. 'uch meetings should not be held on the sidelines of other meetings but should feature prominently and regularly between the leaders of the two countries.
#46 Monday, August 10, 2009

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

Focusing on ethnic mar"ets

By Shahid Javed Burki Monday 10, u*us& 2009 TH6 go&ernment announced last month a policy for increasing the contribution trade makes to economic growth and po&erty alle&iation. The policy was first appro&ed by the federal cabinet and then announced by the commerce minister in late Auly with the support of the political masters who currently go&ern from Islamabad. This is( of course( a positi&e de&elopment since in the past trade policy was largely made by the bureaucracy with little political input. I will concentrate on some of the issues that ha&e not been touched upon by trade policy analysts. I will look at how the policy has presented the current situation( what is proposed to be done in the ne-t three years and what are some of the omissions.. The commerce minister presented a somber picture of Pakistans situation in terms of its participation in international trade.The way the situation was analysed( it is clear that those

behind the formulation of the policy are well aware of the changes that are taking place in both the system of international trade as well as in the system of international production. This was not always the case. I ha&e argued for some time that the policymakers need to be fully informed of the economic en&ironment in which they are operating before they can impro&e the situation. The minister underscored the important but depressing point that Pakistan had gradually lost e&en the little bit of space it had in the international market place. Its share in international trade declined from a low of %.)1 per cent in 1*** to %.1B per cent in )%%*( a drop of almost B1 per cent. As against this( both =hina and India I the former more than the latter I ha&e increased their shares. +hy did this happen3 The policy answered this question implicitly. Had it been more e-plicit about the reasons for the slippage( it would ha&e focused more public policy attention on some of the areas that were not co&ered. I will get to this point later in the article. The data presented in the policy document suggest that the country has done poorly in all the items of e-port which were the sub2ect of much public policy attention in the past.+hile the &alue of e-ports declined by .; per cent in )%%* compared to the year before( the declines were much sharper in the case of traditional e-ports. Te-tile e-ports declined by *.$ per cent. +ithin this group there were some significant reductionsD the &alue of e-port of readymade garments declined by )1.# per cent( yarn by 1! per cent( and bed"linen by 1%.) per cent. There are se&eral reasons for these reductions including the se&ere global recession( particularly in the markets of the countrys main trading partnersE increasing competition from other suppliers( particularly from =hina and IndiaE and the concentration of e-ports in the items that are losing shares in international trade anyway. The conclusion from this brief analysis is that in order to ha&e a dynamic e-port sector( Pakistan has to concentrate the attention of public policy on other sectors and items( those the trade policymakers usually refer to as non"traditional items. Pakistan has done well in increasing the e-port of rice since it produces a &ariety I the basmati rice I that en2oys a large and e-panding market.There is an important lesson in this for the policymakers. ,arket sur&eys ha&e shown that e&en during periods of economic stress( the commodities and products that ha&e appeal for the relati&ely well"to"do segments of the population continue to do well. 6&en those who cant spend too much on lu-ury items( tend to economise on low quality and low price items than those of better quality and higher price. >asmati rice falls in this category. Pakistan( in other words( would do well to concentrate as much rice acreage as possible on growing this type of rice. >ut that is not all the country can do for this important e-port commodity. There is anecdotal e&idence to indicate that some of the packaged basmati rice that sells in the ethnic markets of the .nited 'tates and >ritain I the markets that cater to the needs of the people from 'outh Asia I is produced by Indian e-porters operating out of 8ubai. They buy the Pakistani rice in bulk( package it in smaller lots( and then e-port it under their brand names. They thus capture the &alue added in this trade( lea&ing the Pakistani producers with relati&ely lower earnings. The trade policy incorporates a number of financial incenti&es and proposes to establish a number of new institutions to push the e-port sector towards greater modernity and dynamism. It also promises to strengthen the go&ernments capacity to do analytical work in the area of trade. An effort will be made to understand the underlying dynamics of

international trade and relate that to Pakistans potential in some of the products for which there is a growing market e&en in difficult times. 4ne area where the go&ernment should concentrate some effort is on analysing the ethnic markets and de termine how these could be ser&ed by the producers in Pakistan. I will illustrate this point with one other impression. I am presently working on a book at 'ingapores Institute of 'outh Asian 'tudies.There is a large population of 'outh Asian origin in this country which shops for ethnic products. Howe&er( my &isits to many stores shows clearly that Pakistani products are mostly absent from the shel&es. Has an effort e&er been made to promote Pakistani products in this &ery rich market and introducing the retailers here to what the Pakistani producers and e-porters could pro&ide3 If such an effort was made why hasnt it produced results3 I will close with a brief reference to an item that is totally missing from the trade policy. I did not find any reference whatsoe&er to the 'outh Asia 5ree Trade Area. Pakistan is one of the few countries around the world that has ignored the gra&ity model of trade in determining its trade policy. This model suggests that much would be gained by promoting trade with India. 7i&en Indias tendency to be protecti&e( it would be better if Pakistan does this in the conte-t of a regional arrangement such as 'A5TA. +hy are we ignoring this arrangement as one way of increasing e-ports3 YYYYYYYYYYYYYYYYYY ?o signature...
#47 Tuesday, August 11, 2009

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

Trade and the state

By Shahid Javed Burki Tuesday, 11 u*, 2009 I? the article today I will discuss the role of the state in economic management and how this relates to the making of trade policy. It is important to de&elop this understanding in order to fully comprehend what the go&ernment is attempting to accomplish in the important area of international trade. 6conomists since the days of Adam 'mith and 8a&id 1icardo( the pioneers of the discipline( ha&e belie&ed in the rationality of the indi&idual. They argued that each person beha&es in a way that is in his or her own best interest. They also thought( nai&ely it would now seem( that when these indi&idual actions came together the larger interest of the community and society would be well ser&ed. 'ome called it the social utility of greed. Howe&er( it took a while before economists 2ourneyed from the micro to the macro( from the beha&iour of indi&iduals and firms to that

of the entire economy. The term Mmacroeconomics first appeared in 1*$!. It was coined by Aacob ,arschak to e-plain how national economies worked. ,uch of his work was based on that of Aohn ,aynard /eynes who( a decade earlier( had questioned the rationality assumption as applied to both indi&iduals and markets. >ut some of the work done by /eynes and his followers was forgotten once mathematics in&aded the domain of economics. 1ationality was easy to model mathematicallyE irrationality less so. This line of thinking and this way of doing economic work e&entually led to the de&elopment of the Mefficient markets hypothesis or the 6,H in the 2argon of economists. In 1*#;( ,ichael Aerden( the American economist boldly declared that Fthere is no other proposition in economics which has more solid empirical e&idence supporting it than the 6,HG. An important byproduct of this way of theorising was the reduction of the role of the state in the making of economic policy. A belief de&eloped that indi&iduals( firms and markets should be left to their own de&ices( allowed to do what was best for them. +hat will result from this will be good not only for components of the economy but also for the economy as a whole. This was an attracti&e way of thinking and also elegant since it could be embedded in sophisticated economic models. 'uch an approach was attracti&e for what I would call la9y go&ernments N go&ernments that did not ha&e the intellectual equipment or political pressure to use public policy to guide the workings of firms and markets or the beha&iour of indi&iduals. There were many areas of economic acti&ity where the go&ernments could and should ha&e inter&ened but chose not to do so since economic theories supported a stand"off approach. Trade was one such area. Acti&ist go&ernments in 6ast Asia took a deep interest in trade( in particular international trade( but la9y go&ernments largely stayed away from this area. 'ome of these were in 'outh Asia. Pakistan was one such country where the go&ernments chose to do little to influence the content of e-ports and the direction in which they were sent. >ut economies are like complicated li&ing organisms. +hat happens in one part of the body can ha&e a deep impact on other parts. 6&en weak and la9y go&ernments make fiscal policy and what they do with the structure of ta-es deeply affects the pattern of trade. 6-port promotion may not become an important ob2ecti&e of go&ernment policy but whether a country creates an important space for itself depends to some e-tent on fiscal policy. In 6ast Asia( for instance( by combining ta- policy with some direct inter&entions( the state was able to create an impressi&e amount of space in the global markets for domestic producers. 'ome other areas of public policymaking also influenced the pattern of trade and its importance for the economy at large. Industrial policy was one such go&ernment endea&our that had important consequences for what a country did in international trade. 0a9y go&ernments produce la9y economic actors. It is easier to continue to support the established order through ta- and industrial policies. 8oing anything different meant e-posing economic actors and go&ernments to risk. Inno&ation can produce attracti&e returns for those who succeed and for the economy as a whole but the road to success is often pa&ed with failures. This is one reason why la9y go&ernments prefer the status quo. If the state is to get acti&ely in&ol&ed in promoting trade what is it that should be done3 A good trade policy has at least four components. It must be based on a good understanding

of the international marketplace. There are profound changes occurring in the way countries trade( the products they produce and the relationships they de&elop with other nations. .nderstanding all this requires careful analysis and production of current data and information on many aspects of international trade. 'econd( the state must be aware of what the economy is capable of producing. If there are opportunities a&ailable in the international marketplace( can they be successfully e-ploited by firms engaged in production and marketing3 If there are ma2or gaps between opportunities and capabilities what kind of ta- and industrial and other policies could be adopted to bridge them3 Third( to be effecti&e( the making of public policy must not be 2erky. This means that the &arious actors in the economy must familiarise themsel&es with the public policy milieu in which they are operating. 4nce a broad framework has been established( changes in public policy must be at the margin. 5ourth( there should be broad public support for the approach being adopted. 6conomic policies work well when citi9ens ha&e some say in their formulation( when they are understood by the citi9enry and when citi9ens ha&e the means to watch o&er their implementation. The new trade policy has met some but not all of these ob2ecti&es. I will return to this sub2ect in a later article. YYYYYYYYYYYYYYYYYY ?o signature...
#48 Monday, August 17, 2009

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

$ental power plants0 a crisis1driven remedy

By Shahid Javed Burki Monday 17, u*us& 2009 T4 dispel misapprehensions( go&ernment decisions need to be transparent as it closes the deals on rental power plants. These are floating barges that carry large generators which can be hooked into the distribution or transmission systems. They produce anywhere between 1%% to )%% ,+ of power. Policymakers ha&e a tendency to act in the field of energy during periods of e-treme crises when serious shortages appear. 'hortages cause distress and considerable economic loss. They create space within which the go&ernment can act without heeding criticism. The present crisis is perhaps the most serious the country has e&er faced( e&en more serious than the one caused soon after the countrys independence by India. Then the

Indians decided to switch off the supply of power on which 0ahore( the countrys largest city depended. It caused a great deal of discomfort and some economic loss. Pakistan then was an agricultural economy and *% per cent of its people li&ed in the countryside. 6lectricity did not reach most &illages and few people depended on it to lead normal li&es. The go&ernment of the day reacted by formulating a strategy for de&eloping domestic sources for the supply of power and to meet the demand of an economy that was e-pected to grow much more rapidly than the rate of 78P increase during the colonial times. Producing hydroelectricity was at the core of the go&ernments approach and resulted in the de&elopment of the site at +arsak on the /abul 1i&er. A couple of power plants were also built at the canal heads in central Pun2ab. The other power crisis was in the Mnineties caused by the go&ernments failure to see that the economic growth of the Meighties will put pressure on electricity supply which was increasing much less rapidly than the increase in national output. The go&ernment headed by Prime ,inister >ena9ir >hutto launched an ambitious programme to ha&e power generated by the power sector. It pro&ided generous incenti&es to a couple of do9en Findependent power powersG which included the commitment to purchase whate&er was produced at a pre"determined price. The result was electric. +ithin couple of years( Pakistan from being a power"deficit( ad&anced to a power"surplus country. >ut that strategy left the country with a problem. Its dependence on imported fuel increased since most of the power plants used this form of input. How should the go&ernment respond to the new crisis3 It makes sense at this time to include rented power in the package of relief measures that need to be adopted to ease the shortage of power. >ut the resort to this source of supply has to be as temporary as the peoples use of small and highly inefficient generators to supply power to their houses( shops and places of work. The important thing to watch is that the use of these stop"gap measures will not introduce serious distortions into the economy.That wont happen with pri&ate generatorsE they will be switched off and stored away once the supply of power from the national grid becomes reliable. People are better at making choices based on a cost"benefit analysis. 7o&ernments generally do a poor 2ob of factoring in such calculations in the making of public policy. It makes sense as 8awn did in its editorial of August 1% by asking the go&ernment e-actly how much it will pay for each kilowatt hour of power it purchases( how this supply will be switched off once cheaper power becomes a&ailable( and whether long"term assurances are being gi&en to those who are entering the power rental business. If the purchase agreements are being done to last o&er a long period of time( the go&ernment will be seriously distorting the picture. It should be understood though that depending on rented power is essentially a relief measure( not a longterm( not e&en a medium"term solution to the problem the country faces. As the Americans say( crisis pro&ides an opportunity that must not be wastedE it should be used to put in place a well"thought out strategy. Islamabad has some plans briefly reflected in the budget speech for )%%*"1%. >ut some careful work needs to be done and( using the parliament and pro&incial assemblies( once a strategy has been de&eloped( it needs to be debated so that it has the backing of the

people. The strategy must encompass a number of areas. The most important of these( of course( is the choice of the source to be used for generating power. 'ince in recent years the energy sector was de&eloped in response to crises( the country has not de&eloped an energy sector that ma-imises the use of domestic resources while opting for the least"cost solutions. In calculating costs( what appears attracti&e o&er the short"term may pro&e to be e-pensi&e o&er the longterm. This is why it is not prudent to rely on imported fuel as a ma2or source of generating power. It has been known for a long time that Pakistan has the capacity to produce &ery large amounts of power using its ri&ers and canals. 'e&eral estimates put the potential at between $%(%%% and !%(%%% ,+. +hat has pre&ented the e-ploitation of this resource is the inability of successi&e go&ernments to satisfy all the pro&inces that a fair deal can be worked out. +orking on one pro2ect at a time in this conte-t is not a good strategy since it creates winners and losers whose interests cannot be balanced. A multi"pro2ect framework is needed to settle the differences among the &aried interests of the pro&inces. A strategy aimed at de&eloping the full potential of hydroelectricity needs to be worked out and placed before the representati&es of the people for discussion and appro&al. =oal is the second mostly untapped source of electric power. 'ince what is a&ailable in the e-tensi&e deposits in 'indh and >alochistan is said to be of low quality and since( gi&en the increasing concerns about global warming( coal is losing its popularity as source for power( once again a well"de&eloped strategy is required. +hat I am arguing is for the go&ernment to apply itself seriously to de&elop a plan that would shift the focus to the long"term and increase the countrys reliance on domestic sources of energy. =risis sol&ing should not be the basis for finding a &iable long"term solution. YYYYYYYYYYYYYYYYYY ?o signature...
#49 Tuesday, August 18, 2009

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

Tas" of implementation
By Shahid Javed Burki Tuesday, 18 u*, 2009 +HAT I am writing today is based on personal obser&ations as well as what I ha&e heard from some people. 4ne of the most important problems the country faces today is the inability of the state to pro&ide to the people what they need.

The go&ernment seems to know what it should do but seems unable to actE it appears stuck in a groo&e from which it is finding difficult to get out. Implementation is currently the go&ernments greatest challenge. I will illustrate this point with three e-amples. 0et me begin with a personal obser&ation. A few weeks ago my wife and I( ha&ing spent two weeks in Pakistan( returned to 'ingapore to continue work on a book I am writing for the Institute of 'outh Asian studies. +e were tra&elling on a 'ingapore Airlines flight from 0ahore to 'ingapore. 4ur time of departure coincided with that of a couple of other flights destined for a couple of points in the ,iddle 6ast. I would ha&e thought that handling a few flights within an hour or so should not ta- the capacity of a relati&ely new and modern airport. >ut that did not turn out to be the case. 5rom the moment we were dropped outside the main &erandah of the departure lounge to the point when we reached the sparsely appointed upper class lounge we were in the midst of enormous chaos and confusion. There were no porters a&ailable to help us with our bags so we put them in a trolley and began to mo&e towards the entrance gate manned by half a do9en security officials. It took us an hour to negotiate the few metres of space. +here there should ha&e been one line there were fi&e. +here there should ha&e been only passengers in between the railings that were supposed to regulate those entering the departure area( there was a generous mi-ture of passengers and those who had come to say goodbye. To say that there was a great deal of sho&ing and pushing is not to adequately represent the mayhem through which we went. +hen we finally got to the point of entry( I asked one of the security personnel why he was 2ust standing there looking bemused. His response was simple and illustrati&e of the situation that tra&ellers must confront daily. FHeh dande ki qaum hai(G he said to me and turned his face away indicating that there was nothing more to say or do. +hat would it take to sort this situation3 A simple but robustly enforced requirement that only passengers will be allowed in between the rails( that they will form one line not se&eral( and that they will not enter the queue where&er they saw a bit of opening would suffice. I am sure one security guard could enforce these simple rules but it would require somebody in authority to ensure that they were obser&ed. 4nce lined up in front of the airline desk to get our boarding passes I encountered the same lack of respect for the queue discipline. It was ob&iously a part of our e&ol&ing culture. There was one difference though. This time the airline official was watching the show from behind his counter( refusing to ser&e those who in his &iew had beaten the line. This did not particularly please those who had taken the trouble to plough their way to the front. ,y second e-ample of go&ernance ha&ing gone awry comes from the con&ersation I had with a senior person of the +orld Health 4rganisation who said that in spite of the efforts made by his organisation to ha&e Pakistan prepare itself for the flu epidemic that could take a nasty turn any time( there was no sense of urgency in Islamabad. 'e&eral meetings had been held with the health officials but the recommended strategy had not been put in place. According to him Pakistan ranks 1B*th out of 1$% countries in terms of preparedness. I draw the third e-ample from the work I am doing at the go&ernments behest on the in&ol&ement of the pri&ate sector in the de&elopment of the economy. At one of our meetings a senior te-tile mill owner said that he was able to compete with any producer

around the globe for the specialised fabrics he produces. In fact *% per cent of his output went to some of the most demanding buyers. He was required to meet a number of conditions N that the water he used was cycled back into his operations( that his workers were properly housed( and since he employs a large contingent of women( that he pro&ided their children with appropriate education on site. In spite of these requirements( he is able to beat competition. Howe&er( he has a much more difficult time dealing with the small firms who compete with him in the domestic markets. FThey dont pay ta-es( steal electricity and water( dont obser&e labour laws and ha&e no regard for intellectual property rights(G he complains. The last point is particularly significant for him. He has a world class design centre but the designs the centre produces for his products get copied within a week and hit the markets soon after he has put out his own. His main plea to us is to persuade the go&ernment to ensure that there is a le&el playing field for all producers( big( small and those in between. The three e-amples I ha&e taken from three &ery different fields point in the same direction. There is a growing disregard in the country for carrying out assigned duties. 'ecurity personnel ha&e no interest in ensuring discipline( the pri&ate sector is looking for ways to beat the system and go&ernment functionaries are casual when it comes to ser&ing the people. +hat is at the bottom of all this3 Perhaps a tolerant culture and an educational system that doesnt instill in the people the difference between rights and duties. YYYYYYYYYYYYYYYYYY ?o signature...
#50 Monday, August 24, 2009

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

Govt intervention and competence

By Shahid Javed Burki Monday 24, u*us& 2009 6=4?4,I'T' ha&e once again turned their attention to the role of the state in managing not only the macro but also the micro economy. The state should not only be in&ol&ed in minding the fiscal and monetary policies but can I in fact should I take o&er firms and the entire sectors of the economy whose demise could seriously hurt the national economy. It took a ma2or economic crisis in the +est to recognise that the state could not be sho&ed on to the back burner. President 1onald 1eagans statement a couple of decades ago that go&ernment was not the solution to economic problems but the problem itself seems so out of place now. That point of &iew was shared by Prime ,inister ,argaret Thatcher of >ritain and the two working together were able to put in place an entirely different set of policies

aimed at managing the economies not only in the de&eloped but also in the de&eloping parts of the world. These sentiments led to the formulation of sets of policies that together came to be called The +ashington =onsensus. They represented a consensus among a bunch of economists who were worked at a number of economic and financial institutions based in +ashington. The policies the =onsensus promoted touched upon two things in particular. 4ne( the state should lea&e most economic decision"making in the hands of the pri&ate sector. 6&en the regulatory aspect of economic management should be handled by the state as the last resort. It was in the interest of the pri&ate sector to regulate itself. If it did not( it will lose the respect of the market place and suffer economically. 'econd( the economies should be open to the world outside. ,o&ement of trade and capital should be as free as possible. The state should not be allowed to place obstacles in the way of these flows. The same theory should ha&e been applied to the mo&ement of people. >ut here an e-ception was made. The owners of most capital and a significant proportion of tradable products were the worlds richer countries. It suited them to ad&ance the &iew that capital and tradable products should go to the markets where they fetched the highest return. This would increase general welfare and e&erybody would benefit 6-actly the same logic should ha&e been applied to the mo&ement of people. Howe&er( since the bulk of the worlds people li&ed in poor countries( the worlds richer countries had no problem in de&iating from the philosophy of openness that was being sold in the case of other types of flows. As the world became increasingly open in trade and capital flows( more and more constraints were applied to the mo&ement of people. The deep economic malaise that began in August )%%# in the .nited 'tates and quickly engulfed the rest of the world( brought the state back to the front burner. The state is no longer seen as the problemE it has become the solution. America had gone the furthest in e-pelling the state from economic matters. ?ow re&ersing the course( it is the most aggressi&e in bringing the state back. President >arack 4bama has succeeded in getting the state in&ol&ed in recapitalising the financial sector. +ithout public money going into the banks( credit would ha&e remained fro9en and the economic slump deeper. The American go&ernment also rescued the automobile industry from going out of business. +ashington is now the largest share holder in 7eneral ,otors( its largest automobile company. ?ow the state is being used all o&er the world to sa&e the pri&ate sector from its greed. 7o&ernments ha&e poured e-traordinarily large amounts of money to sa&e their economies from slowing down and bringing with it increased unemployment. This has been done not only in the countries such as the .nited 'tates and >ritain that were at forefront of the earlier thinking on economic matters. It is also being done in se&eral large emerging economies. =hina showed great boldness in pumping large amounts of public money in building infrastructural pro2ects so that more people will not lose 2obs. India( although with a large fiscal deficit to manage( it also used a stimulus package to keep the economy growing at a pace needed to keep more people going into the already large pool of po&erty. Indians are also using public finance to pro&ide support to the people who cant find work in the pri&ate sector. 6&en before the Indian state got in&ol&ed in helping the economy maintaining the rate of

growth at a reasonable le&el( it was acti&e in sa&ing the collapse of 'atyam( one of its largest IT companies. The state took o&er the company temporarily and then engineered its sale to another company engaged in the same business. This inter&ention helped to sa&e the reputation of the IT sector on which so much of the Indian economy depends( particularly for bringing large amounts of e-ports and for also attracting foreign direct in&estment. >ut Pakistan has not taken this route of acti&e state participation in economic re&i&al. To the multilateral financial and de&elopment institutions and bilateral donors that are in&ol&ed in helping Pakistan na&igate its way out of the current economic crisis( it is clear that the state is much too weak to handle some of the tasks that are being done by it in other parts of the world. The Pakistani state in its present form cant be trusted to handle the distressed economy. It is clear that Islamabad needs to focus on its present economic difficulties and prepare for the future. +hy is the state weaker than is the case with the state in other countries at the same stage of de&elopment3 The answer comes from a careful study of the countrys economic history which is beyond the scope of this article. The state is e-ceptionally weak for the reason that it has seen so many different hands that ha&e guided it in the past % years. +ork on rebuilding it has to be gi&en a &ery high priority now that a new political structure has begun to take shape. The work should start immediately. YYYYYYYYYYY

By Shahid Javed Burki Monday, 31 ;c&, 2011

#252 Monday, Novembe 07, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

ne+ !aradi*(
By Shahid Javed Burki .u1"ished7 /ove(1er 7, 2011 The decision on ?o&ember ) by the Pakistani cabinet to grant the M,ost 5a&oured ?ation :,5?< status to India in matters pertaining to trade is a tectonic shift in the countrys relations with its large neighbour. India awarded the ,5? status to Pakistan in 1** soon after 2oining the +orld Trade 4rganisation. Pakistan was also obliged to gi&e to all members of +T4 N and that included India N the same status. >ut Islamabad refused to act( in the mistaken belief that it could use it as a le&er to get concessions from ?ew 8elhi on /ashmir. As most economists ha&e argued( impro&ing trade and economic relations with India would bring greater benefits to Pakistan( the smaller of the two economies( than to India. If trade were to be used as a le&er( India has greater power than its neighbour( Pakistan. The Pakistani decision concerning the grant of ,5? status was recei&ed with enthusiasm by the Indian leadership. Anand 'harma( Indias commerce minister( hailed it as part of a Fparadigm shiftG and said that ?ew 8elhi Fdeeply appreciatedG the mo&e. It will be beneficial for both countries( he said. Pakistans initiati&e had the support of its powerful military which had continued to look at India with suspicion. The Pakistani militarys appro&al was implied by 5irdous Ashiq Awan( Pakistans information minister in announcing the cabinets decision. FThis was decision was taken in the national interest and all stakeholders( including our defence institutions were on boardG she told the press. The business community on both sides of the border applauded the mo&e. ,any belie&ed that there will be almost immediate benefits in terms of reducing the transaction costs of doing business between the two countries. The 5ederation of Indian 6-port 4rganisations estimated that trade between the two nations could double from current le&els of about @).# billion a year simply by the rerouting of goods currently sent &ia 8ubai and through some other channels. >ut according to one newspaper report( Fthe =onfederation of Indian Industry cautioned that road blocks such as stringent &isa rules( non"tariff barriers and communication problems still need to be dismantled and more trade routes opened upG for full benefits to be realised. >ut the real significance in this breakthrough will go much beyond increasing India"Pakistan trade. It will pro&ide foreign policymaking in Pakistan with a new base( mo&ing the country

away from total preoccupation with the .nited 'tates. At this time( relations with America ha&e become highly strained. Impro&ing relations with India will certainly help to place the dealings with +ashington in a new conte-t. Although the ground on which Pakistan has sought to structure its relations with the .nited 'tates o&er the past si- decades has continuously mo&ed( it always included concerns about India. Pakistan got close to America as a part of its effort to build its defences to protect itself from the threat it then percei&ed was posed by India. That was essentially the reason why Ayub /han( first as defence minister and later as the countrys president( negotiated a series of defence agreements with the .'. Pakistan bound itself in arrangements that co&ered a wide geographic front( stretching from the ,editerranean to the Pacific. 7ood relations with +ashington also brought economic help to the country at the time Pakistan was attempting to speed up the rate of economic growth. That was a by"product( not the real moti&ation behind the effort to get close to +ashington. 0ater( during the presidency of 7eneral Jiaul Haq( while economic assistance from the .' became the main moti&e for association with +ashington( concern with India remained at the back of the policymakers mind. >oth economic considerations and the need to strengthen its defences against India were the reason why Jia famously turned down the offer of help by President Aimmy =arter in return for Islamabads assistance to throw the 'o&iet .nion out of Afghanistan. He famously called the American offer FpeanutsG. Islamabad wanted more from the .' than =arters America was prepared to gi&e. =arters defeat in the elections of 1*#* brought 1onald 1eagan to power in +ashington. The new head of the American state was prepared to do much more than his predecessor to destroy what he called the Fe&il empireG( the 'o&iet .nion. Pakistans willingness to align itself with America to achie&e this ob2ecti&e was welcome news in +ashington. In return for Islamabads support to e-pel the 'o&iet .nion from Afghanistan( America was prepared to pro&ide copious amount of military and economic help. >y becoming a member of the American alliances in the 1*!%s and the 1* %s( Pakistan was making a hypothetical commitment. It would support the .' in any acti&ity directed to stop the ad&ance of communism in Asia and the ,iddle 6ast. Howe&er( in the 1*;%s( association with the .' meant pro&iding acti&e support in a military campaign N the one fought by the .' in Afghanistan with the help of a number of pro-ies. This change produced a new dynamics in Pakistans situation. It shifted focus to Afghanistan in the making of policy and( at the same time( the country had to contend with many unanticipated consequences( being an acti&e player in a battlefield close at hand. Among the latter were the rise of Islamic e-tremism in the country( weaponisation of Pakistani society and culture and ethnic conflict between some of the communities in the country. The large"scale migration of Afghans to Pakistan was to increase the Pashtun population in /arachi. The consequence of this particular de&elopment is still being felt in Pakistans largest city. +hile the persisting concern with India was at the base of Pakistans Afghan policy( the entry of Afghanistan as a &ariable in the making of policy was to acquire increasing significance after the terrorist attacks on the .'. .nder 7eneral Per&e9 ,usharraf and( after his departure( under the successor ci&ilian go&ernment( curbing the rise of Islamic e-tremism and international terrorism associated with it became the basis of relations with the .'. Howe&er( with the easing of tensions with India( relations with the larger neighbour will become less of a factor in the crafting of foreign policy. A different kind of relationship with India would introduce a new &ariable in the way Pakistan looks at the world outside its

borders. This will affect the countrys relations with the .' as well. Source7 /e+ .aradi*( YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#253 Monday, Novembe 14, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

cco((oda&in* a risin*
By Shahid Javed Burki .u1"ished7 /ove(1er 14, 2011

sia

There is a reason why it has been so difficult for the +est and Aapan to find a solution to their growing problems. This was not the case after the 'econd +orld +ar when the &ictors assembled in a small resort in the .nited 'tates to craft a new world economic order( which came to be called the >retton +oods system. Politics then was on the side of economics. It was not hard to argue and hence con&ince the &oters that it would not pay to punish those who were defeated in the conflict. That was done after the 5irst +orld +ar and the result was another global conflagration. The first order of business at >retton +oods was to rebuild 6urope and since the .nited 'tates was the only country with the resources to do that( it took the lead. Aohn ,aynard /eynes pro&ided the intellectual underpinning of the Mbig idea de&eloped at >retton +oods. It was not hard for him to persuade those attending the conference that the disaster left by the about"to"be concluded war could only be dealt with by the states working together. That work had to be done in the fields of finance and de&elopment( and that would need new institutions. These were founded and became the International ,onetary 5und and the +orld >ank. The current crises in the global economy are different. They are the consequence of large changes in the make"up of the societies of the richer parts of the world. These changes ha&e crept up slowly but coming together ha&e produced a situation that can be resol&ed only by the articulation of a new Mbig idea. This idea has to deal simultaneously with four de&elopmentsD aging of the populations in Aapan and the +est( growing income inequalities in these countries that cannot be sustained in democratic societies( e-pectations that the state will pro&ide security to those not in the work force and loss of confidence in the

working of the state. That there are contradictions in some of these e-pectations can only be brought home to the &oting population by leaders who are prepared to lead. Those dont seem to be around at this time. It may be a bit of a stretch to suggest that the future of the global economy could be dri&en by Asia. The continent may ha&e some of the largest economies in the world but in terms of per capita income its citi9ens are about one"tenth as rich as the +est and Aapan. >ut the Asian continent is on the right side of the de&elopment equation. It has young populations( relati&ely strong states( large foreign e-change reser&es and strong economic links with the worlds older economies. The last of these three is what gi&es Asia the le&erage to author the big idea. It has become clear that no single country can pro&ide the resources needed by 6urope to sa&e some of its parts from bankruptcy. Asia has the financial wherewithal to fund the facility the 6uropeans ha&e put in place to aid the countries e-periencing stress. The =annes summit failed to pro&ide the 6uropean 5inancial 'tability 5acility the financial resources it needed. Appeals were made to the >1I= leaders attending the summit to use their large surpluses to help 65'5 but they demurred. It was right for them to show reluctance. They were being asked to either fund the 65'5 directly or by e-panding the resource base of the I,5. 8oing the former would ha&e made some economic sense since the returns on these resources would be much higher than those a&ailable from other relati&ely safe in&estments such as .' treasury bonds. The latter would ha&e made some political sense since the >1I=s( in return for help( could ha&e asked for a larger role in the running of the I,5. >ut that would ha&e been incremental change. The .nited 'tates leadership has noted the rapid change in the structure of the global economy brought about by Asias rise. In an article titled FAmericas Pacific =enturyG published in the ?o&ember issue of 5oreign Policy( the .' secretary of state pro&ided reasons why harnessing Asias growth and dynamism should be central to American economic strategic interests and a key priority for President >arack 4bama. The article appeared on the e&e of the American presidents third &isit to Asia since coming into office. This &isit took him to attend and the 6ast Asia 'ummit in >ali( Indonesia as well as to the Asia Pacific 6conomic =ooperation summit in Hawaii. The .nited 'tates is working on bringing about an incremental change in the institutional structure of the global economy in order to accommodate rising Asia. +hat is needed( howe&er( is a new institution in which the emerging world has a large &oice( much more than seems possible in the >retton +oods institutions. The older economies are reluctant to yield power to the emerging states. This was amply demonstrated when( following the resignation of 8ominique 'trauss /ahn( a 5rench politician( the international community went looking for a new head of the I,5. It chose another 5rench citi9en( this time a woman who had ser&ed as finance minister in the go&ernment headed by President ?icolas 'arko9y( to replace 'trauss /ahn e&en though there was e-pression of interest in the 2ob by the citi9ens of some of the large emerging markets. The established order was not ready to pass on the baton. 'e&eral emerging markets( in particular those in Asia( now ha&e the financial clout to play a more meaningful and asserti&e role in the arena of international economics. They can also persuade the +est to adopt some of the policies that would ease its economic difficulties. This is precisely what the +est did when some of the important emerging economies were affected first by the 0atin American debt crisis and later by the financial crisis in emerging Asia. In retrospect( it was a mistake to impose on these countries the role of the state which did more damage than good not only in the emerging world but later in rich countries as well. The shoe now is on the other foot.

Source7 cco(oda&in* a )isin* sia YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#254 Monday, Novembe 21, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

)easona1"e !o"i&ics, 1ad econo(ics

By Shahid Javed Burki .u1"ished7 /ove(1er 21, 2011 Pakistan once again stands at a crossroads as it struggles to strengthen the participatory system of democracy it reinstated in early )%%;. It is also attempting to straighten the economy and ensure that it does not collapse altogether with its &arious pieces falling into a deep abyss. There is serious social discontent( particularly in the countrys urban areas N and within the urban areas( in the large cities Nthat could e-plode into street &iolence of the type seen in the Arab world o&er the last one year. Pakistan has lost nearly all respect among the members of the international community. That community itself is in a state of stress and is looking hard to find a way out. Pakistan( although now the worlds si-th largest country in terms of the si9e of its population( has not been in&ited to participate in the deliberations taking place to fashion a new global economic and political order. The country is isolated as ne&er before in its more than si- decades of history. +hich of the se&eral roads should or could or would Pakistan take out of the crossroads3 There has been much written recently on the country in foreign 2ournals( maga9ines and newspapers to answer this question. ,ost of the writings suggest( either e-plicitly or implicitly( that the country is faced with a serious e-istential threat. A few serious books ha&e also appeared that come to different conclusions about the countrys future. 5or instance( Anatol 0ie&en in his book( PakistanD A Hard =ountry( decides that there are certain things about Pakistans society that would make it possible for it to sur&i&e e&en though the times are difficult. It is a hard country to understand but also a hard country to collapse and fall apart. >ruce 4 1iedel( once a close ad&iser of President >arack 4bama and his administration on Pakistan and Afghan affairs( reaches the opposite conclusion in his book( 8eadly 6mbraceD Pakistan( America and the 5uture of 7lobal Aihad. Pakistan( he belie&es( wrongly I think( will not be able to carry the weight it currently bears and simply collapse from fatigue and lack of endurance. >y collapse he means the destruction of the liberal

political and economic order that will not be able to withstand the force of radical and e-tremist Islam. +hile 0ie&en who knows Pakistan well( ha&ing written on the country for many years for the 5inancial Times( and understands well the internal political and economic dynamics( 1iedels knowledge of the country is considerably more superficial. As the title of his book suggests( his focus is on Pakistans stance towards what was once called Americas Fwar on terrorG. It would be right to round of this discussion with some of the recent writings on Pakistan by reference to ,aleeha 0odhis compilation of the writings of a number of serious Pakistani scholars. The book with an important contribution by the editor( appeared under the title of PakistanD F>eyond the =risisG. As the title suggests( the county is in a state of crisis N a serious one as analysed by the &arious contributors to the &olume N but the Mbeyond is more hopeful than indicated by 1iedel and se&eral other pessimists. The country will pull through by the adoption of intelligent policies by a wise leadership working within a participatory system of go&ernance. The three key phrases in this formulation are the Msystem of go&ernance( Mwise leadership( and Mintelligent policies. These will be the three constructs on which I will base my analyses. 0et me begin with the system of go&ernance. After more than si- decades of e-perimentation( Pakistan seems to be settling down in politics. The earlier attraction for strongman rule is no longer there. There is now a consensus that competiti&e politics is the way to go. This means winning peoples support by e-citing their interest in what elected politicians can do for them once they attain office. If there is a perception that those who ha&e been &oted into power are failing to deli&er what they were e-pected to pro&ide( they can be replaced when the time comes to go back to the polls. In between elections( a free media and free ci&il society can be e-pected to keep some check on the working of the political system. This is the way democracy is supposed to work and has begun to work in Pakistan. >ut there is more to democracy than periodic elections and the watchful eye of the media and ci&il society. This was underscored by 5areed Jakaria some years ago in a powerful book about the needs of a true liberal democracy. It needs more than periodic free and fair elections. It requires rule of law( which ensures accountability on the part of those who occupy public positions. This can only be pro&ided by a legal system that has a 2udiciary that can dispense 2ustice without fear or fa&our. This condition is not fully met in Pakistan in spite of the hard"won independence by the upper echelons of the 2udicial system. The part of the legal system that comes into contact with the ordinary citi9en is still not deli&ering 2ustice in Pakistan. The citi9enry is not being well ser&ed by the lower le&els of the legal system. There is also much talk of corruption and lack of accountability at all le&els of go&ernment. Imran /han( in his well"attended public meeting in 0ahore( had a great deal to say about corruption( knowing full well that that is what people wanted to hear. >ut how to translate the desire for clean go&ernance into some kind of policy and institutional framework3 India( across the border( is also struggling with these questions although its go&ernance structure is more de&eloped than that of Pakistans. In other words( while the system of go&ernance in Pakistan now has the trappings of a dramatic structure( it is still underde&eloped. ,uch more needs to be done. +ill the political leadership ha&e the wisdom to mo&e forward in the right direction3 Take the right road out of the crossroads3 Source7 )easona1"e .o"i&ics, Bad <cono(ics YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga

,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga

#255 T!u sday, Novembe 24, 2011

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

!olicy stance in a changing world

By Shahid Javed Burki Monday, 07 /ov, 2011 TH6 6uropean crisis was only partly and temporarily addressed on 4ctober ) when the continent[s leaders agreed to raise additional resources to build a firewall around the economies that were heading towards financial collapse. The markets around the globe reacted to the agreement with enthusiasm. In the .nited 'tates( 8ow Aones Industrials rose by B$% points( a ).* per cent increase( taking the indeto beyond 1)(%%%. There was a similar reaction by the markets in 6urope. >ut this initial enthusiasm quickly dissipated as the markets and analysts began to see that the agreement did not ha&e enough substance in it. It was built on a series of promises that were not likely to be realised in the way the continent was politically structured. 7reece seemed to be walking away from the agreement. The agreement had neatly dealt with the issue of 7reece[s so&ereign debt. It was recognised that no amount of belt tightening will enable the country to meet its obligations. The banks holding 7reece[s debt were persuaded to accept a [haircut[ of !% per cent( terms which are usually a&ailable to bondholders following default. In other words( 7reece was allowed to effecti&ely default with"out calling it that. The second part of the agreement sought to recapitalise the banks( increasing the ratio of capital to assets. This will ha&e implications for the banking industry since it will result in reducing its profit and raising interest rates. There was understandable concern that the emergency fund( the 6uropean 5inancial 'tability 5acility( had used mirror and images in order to pro&ide comfort to the market. An amount of @1.$ trillion was mentioned as the si9e of the resources the 65'5 will be able to use to stop crises in indi&idual countries from becoming systemic. >ecause of 7erman insistence( the facility[s initial si9e was capped at @ %% billion of which a bit more than @)!% billion was tied up in loans to troubled countries. This left about @B!% billion for future operations. Howe&er( by indicating that the 65'5 will guaranteeupto)%percentofthe bonds floated by members( the a&ailable amount was to be

le&eraged at a ratio of one to fi&e. There was a hope that some of the countries that had large foreign currency reser&es will be prepared to in&est in the facility. 1ight after the agreement was signed( /laus 1egling( head of 65'5( went to >ei2ing to get =hina to make a significant contribution to his facility. An amount of @1%% billion was talked about. It was indicated that if capitalsurplus countries such as =hina( >ra9il( India( 1ussia( 'outh /orea and 'ingapore were to make significant contributions to bolster the resources of 65'5( it could spin off a subsidiary to be managed by the I,6 If this happens these emerging markets will ha&efinally found a role for themsel&es in international economic affairs. It is suggesti&e that the same issue of the 5inancial Times :?o&ember 1< carried two stories( one about Pakistan[s troubled economic situation and the otherabout India[s increasing economic influence in the global market place. In an inter&iew with the newspaper( Hafee9 'heikh( Pakistan[s finance minister( announced the decision by his go&ernment to forfeit the remaining part of the@11.B billion loan the country had negotiated in late )%%;. An amount of @B.# billion remained undisbursed from the negotiated amount. The minister acknowledged that disagreements with the 5undo&er fiscal management led to the programme[s suspension at the end of )%1%. He said the country walked away from the 5und since the +ashington"based financial institutions [demands had become too tough and the go&ernment would instead press aheadwith a homegrown fiscal programme[. Pakistan appeared to ha&e settled for a much more modest economic goal. The minister argued that a resilient Pakistani economy growing at about B.! per cent thisyear did not need the I,5 lending and that go&ernment had resources of its own to take care of its obligations. These include payments to the I,5 that would begin in early )%1) with a transfer of @1.) billion to the institution to ser&ice the amount it has already recei&ed. The minister confirmed that his go&ernment was approaching =hina for economic assistance. Although not mentioned by ,r 'heikh( it is known that Pakistan is about to sign a @$.! billion swap agreement with >ei2ing that will run for three years and make it possible for the country to ser&ice its large trade imbalance with its large neighbour without paying out in dollars. +hile Pakistan was settling for a rate of growth less than one"half that of neighbouring India[s( ?ew 8elhi was increasing its economic clout in international economic affairs. It has already gi&en large grants and credits to Afghanistan and >angladesh( was planning to pro&ide assistance to some of the resource"rich countries of Africa( and had established its own aidgi&ing agency. It was now seriously considering pro&iding capital to augment the resources needed by 6urope to address the continent[s mounting economic problems. In an inter&iew with the 5inancial Times( ,onetk Ahluwalia( deputy chairman of India[s Planning =ommission( laid out the conditions for Indian sup"port. He said that India along

with other >1I=' countries in return for helping 6urope will demand a larger &oice in international economic affairs( in partieular in determining how the I,5 operates. [The principal agency that is responsible for bringing about international stability is the I,5( he said. [+e would certainly support the I,5 in pro&iding resource support to 6urope. It seems to me that the I,5 should be strengthened but be e&enhanded.[ The 5und( he said( should apply the same rules to both rich and poor countries. In a way the Indian official was making the same point made by the Pakistani minister. >ut there was a difference. The Pakistani was speaking as a supplicantE the Indian as a potential global economic master. The di&ergent paths on which India and Pakistan are proceeding means that Islamabad has no problem in being sidelined in international economic affairs while India continues to car&e out a prominent role for itself. Accepting that India is now in a different economic league compared to Pakistan should not be a problem but this recognition should come with a change in policy stance. Among the changes needed is the willingness to trade more with India and also to accept in&estment by that country in particular its pri&ate sector in the Pakistani economy. Policy stance in a changing world \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...
#256 T!u sday, Novembe 24, 2011

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

G2 2s failure at (annes
By Shahid Javed Burki Monday, 14 /ov, 2011 TH6 world now stands at a crossroads. The future looks grim. It is also in search of leadership and a new economic theory. In )%1)( the American economy is set to grow at only 1.; per cent while the 6uro9one made up of 1# countries that ha&e a common currency will see its economy increase by %.B per cent. The problems the global economy faces are clearD slow pace of reco&ery( high rates of unemployment in most large industrial countries( large trade imbalances that ha&e created equally large sa&ings imbalances( and inflationary pressures in se&eral large emerging economies. 'ome of these problems are linkedE a problem in one part of the world contributes to the creation of a different problem in another. There is also the need to de&elop a new theory of economic management during periods of stress. 'uch a theory was authored by the >ritish economist Aohn ,aynard /eynes to guide

the go&ernments during the period of the 7reat 8epression. His thinking helped to de&elop the >retton +oods system of global economic management. It also assigned a ma2or role to the state( particularly during periods of economic stress. The modern world has no /eynes at this time with an authoritati&e &oice. There is also a growing concern that the era of multilateralism inaugurated by the founding of the >retton +oods system in 1*$$ is gi&ing way to a new wa&e of nationalism. According to one interpretation( [Thomas Hobbes is now pre&ailing o&er Immanuel /ant in the reordering of the global system[. >ut there is a parado- in this mo&e. [7o&ernments ha&e cededpower to mobile financial capital( to cross border supply chains( and to rapid shifts in comparati&e ad&antage. =ontrol of information now belongs to )$"hour satellite tele&ision( and the cacophony that is the web. The consequence is the crisis of politics. =iti9ens e-pect national politicians to protect them against the insecurities economic( social and physical that come with global integration. Het go&ernments ha&e lost much of the capacity to meet the demand.[ 4f particular concern for the management of the world economy is the role that should be assigned to the state in &arious partsof the world( in particular in the +est. There cannot be sustained globalisation without truly multilateral institutions to guide it. >ut this is pro&ing hard to do. There was a brief period of hope that the &arious [7s[ the 7# group of rich nationsE the 7; that added 1ussia to the 7# group of the world[s largest economiesE the 7)% group of the world[s largest economies( including se&eral from the emerging parts of the world could be trusted to guide the go&ernments around the globe to walk in step. In April )%%*( the 7)%( meeting in 0ondon( was able to craft a response to pull out the global economy from the deepdownturn from which it was suffering because of the working of the financial sector. The group then agreed on a massi&e go&ernment spending plan that briefly had =hina( 6urope( the .nited 'tates and others pulling in the same direction. In the words of >arack 4bama( [because of the coordinated action the 7)% took then( the global economy began to grow again. 6merging economies rebounded. In the .nited 'tates( we[&e had 1* straight months of pri&ate sector 2ob growth and added more than ).! million pri&ate sector 2obs[. >ut he emphasised that much remained to bedone and that needed international cooperation. [The 7)% nations must deepen cooperation on the range of global challenges that affect our shared prosperity...+hen we met in 0ondon two years ago( we knew that putting the global economy on the path to reco&ery would be neither easy nor quick. >ut together( we forged a response that pulled the global economy back from the brink of catastrophe. That[s the leadership we[&e demonstrated before. That[s the leadership we need now to sustain economic reco&ery and put people back to work( in our own countries and around the world.[ >ut that leadership was missing at =annes( 5rance where the 7)% leaders met once again for their semi"annual summit. According to ,oises ?aim of the =arnegie 6ndowment for International Peace( a +ashington think"tank( the stimulus agreement reached in 0ondon [pro&ided the &ery strong sense that indeed it was the committee that ran the world.

After that e&ery single meeting has been less impactful than the prior one.[ 'ome go&ernments decided not to wait for collecti&e action to materialise. The 'wiss( for instance( decided to place a limit beyond which their highly sought after currency would not be allowed to go. 4n the e&e of the 7)% meeting in =annes( the Aapanese inter&ened massi&ely to keep in check the persistent rise in the &alue of their currency. +ith these unilateral actions in place it became difficult to put pressure on =hina to let its currency rise in &alue and thus help address the problem of global imbalances. According to one analyst( [as they arri&ed in =annes( the leaders of the countries representing ;s per cent of global output found the agenda dominated by political turmoil in 7reece and a 6uro"9one crisis too hot for the 7)% to handle. It produced an action plan for growth and 2obs that committed countries to almost nothing they were not al"ready pursuingE and left the international monetary system almost unchanged[ They had little success in making progress on their medium"term goals[ The =annes 7)% summit ended on 4ctober ); after issuing a communiqu]^ that had more negati&es than positi&es about the role the group was willing to play in addressing the problems faced by the global economy. The document recognised that the 8oha round of trade negotiations was not likely to succeed in meeting its de&elopment ob2ecti&es. There was no agreement on funding the 6uropean 5inancial 'tability 5acility either directly or through the I,5 The conferees did what is normally done when a consensus cannot be reached. They postponed action to a later date to the meeting of the finance ministers scheduled for 5ebruary )%1). According to one newspaper account( [putting a bra&e face on the lack of agreement( a grim"faced ?icholas 'arko9y( 5rench president( said the communiqu]^ mentioned increased funds for the I,5[s special drawing rights. The latter( ,r 'arko9y added( was likely to be the option adopted in 5ebruary probably. +hile all the 7)% agreed that [e-change rate regimes that are currently relati&ely infle-ible will be made more fle-ible( more swiftly( including =hina[ >ei2ing did not commit itself to any fundamental change. The =hinese( instead( repeated their demand for better management of fiscal affairs by the economically more ad&anced countries in America and 6urope. 'ome nations with sound public finances Australia( >ra9il( =anada( =hina( 7ermany( Indonesia( and 'outh /orea committed to [additional measures to support demand if the economic situation worsens[. This was tepid response to a difficult situation that called for resolute actions. There were many promises at =annes but meagre results. 7)%[s failure at =annes \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...
#257 Monday, Novembe 28, 2011

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

8n a s&a&e o6 6"u=
By Shahid Javed Burki .u1"ished7 /ove(1er 28, 2011 It would not be an e-aggeration to say that Pakistans political situation is in a state of flu-. There is low &iscosity fluidity. The tide that is building up can go in many different directions. +hile natural tides are not sub2ect to human control( the political one that is gaining strength in Pakistan can be managed by political forces. As politicians and the groups they lead get ready to bring about change( they are working to raise passions among the populace by using populist slogans. They ha&e understood that phrases such as persistent po&erty and corrosi&e corruption ha&e emoti&e &alues. They use them to e-cite the masses they hope to lead. Howe&er( they ha&e said little as to how they will address these problems once the masses ha&e placed them in power. There are precedents in Pakistans turbulent political history of the use of populism as an easy way to power. It was done by 'heikh ,u2ibur 1ahman in the late 1* %s by using the Msi- point programme to gain autonomy for 6ast Pakistan. The momentum he built"up led to a brutal ci&il war and the e&entual break"up of Pakistan. It was used by Julfikar Ali >hutto to build popular support for him and his new political grouping( the Pakistan Peoples Party. >huttos Mroti( kapra( makan was a powerful slogan that mobilised the masses and brought him to power in what was left of Pakistan after the emergence of 6ast Pakistan as the independent state of >angladesh. The important lesson to be learnt from these two incidents of the use of populism to gain power is that the results can be destructi&e unless the slogans used are accompanied by solid programmes. >oth ,u2ibur 1ahman and >hutto came to power without understanding how they would deli&er what they had promised. >oth created chaosE political in the case of 1ahman( economic in the case of >hutto. >oth paid with their li&es for the mistakes they made. There are some important differences between the 1ahman">hutto eras and the one politicians face today. Thanks to the e-traordinary increase in the flow of information and the a&ailability of means to access it( people are much better informed about their relati&e situations than they were four decades ago. As political scientists such as 'amuel Huntington and political"economists such as Albert Hirschman wrote in the late 1* %s( perception of relati&e depri&ation is a powerful political moti&ator. It can lead to e-treme political instability( sometimes e&en to re&olution( if institutional means for dealing with it are not found by those who are in positions of power.

The other important difference is that the &arious means of social"networking can be used and( ha&e been used by those who feel depri&ed( to get organised to challenge the established order. This was done not only by those who brought the Arab 'pring and with it regime change in se&eral countries in the ,iddle 6ast but it also helped organise the uphea&al in 0ondon this summer against the policies of the ruling =onser&ati&e Party. It is also what has made the on"going 4ccupy +all 'treet mo&ement in the .nited 'tates a powerful e-pression of discontent. Technology( therefore( has increased the attention span of the citi9enry but reduced their tolerance. If they percei&e that their situation with respect to the others is not to their satisfaction( they will react( sometimes e&en with &iolence. 1elati&e depri&ation can be with respect to the other( more fortunate people in the same society. It can also be with respect to people in other parts of the world. Pakistans politicians ha&e to grasp the important fact that the citi9enry is not only deeply concerned about the growing inequality in their own country( as well as but also the ground their country is losing to other nations around the globe. Perception about depri&ation has se&eral other dimensions. It is not only income and wealth inequalities that become the sub2ect of great concern with people. Inequalities in opportunity also become the source of unhappiness. 1eadily a&ailable information tells people of the kinds of opportunities that are a&ailable to the more pri&ileged ones who inhabit the same geographic space. In recent days and weeks( we ha&e been treated to reams of newspaper articles about how important it is for politicians to come up with ideas( preferably embedded in party manifestos( on how they will cure the society and the economy of the many ills from which they suffer. >ut the ad&ice has not been taken. In the two well"attended meetings held by political parties currently in opposition to the Islamabad coalition( the leaders stuck to generalities. ?o indication was pro&ided as to what precisely will be done when they attain power. To help them along( it may be useful to list some of the problems the country faces at this time. 0et me list half a do9en of these( each needing a well"thought"out approach. It is possible to identify a number of glaring failures of public policy o&er the last two to three years( especially since democracy returned to the country. Among them( the following si- are particularly important. At the urging of the International ,onetary 5und there was e-cessi&e concentration on attaining fiscal stability e&en at the e-pense of sacrificing growth. There was focus on personal rather than social gains. There was indifference towards defining long"term strategic priorities( which meant concentration on short"term problem"sol&ing. There was almost total disregard of increases in personal and regional income inequalities. ?o attention was gi&en to building institutions that are regarded as critical for obtaining sustainable economic and social de&elopment. And( there was no attention paid to the ground Pakistan was losing in terms of positioning itself in the rapidly changing global economic and political order. If this is a reasonably accurate list of what ails the Pakistani economy at this critical time in the countrys history( then this is what politicians seeking power should be focusing on. A well"informed electorate will reward those who look at issues such as these in appealing for support. It is in the conte-t of this kind of list of past failures that their performance will be 2udged( were they to attain power. Source7 8n a S&a&e o6 $"u= YYYYYYYYYYYYYYYYYY

/on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 2 4sers Say Thank 5ou &o rain007 $or This 4se6u" .os&7

maryammalik :,onday( ?o&ember );( )%11<( 'hahba96llahi :,onday( ?o&ember );( )%11<
#258 Monday, "e#embe 0$, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

/arra&ives 6or &he ne=& e"ec&ions

By Shahid Javed Burki .u1"ished7 >ece(1er %, 2011 'e&eral new de&elopment narrati&es should emerge as the date for the ne-t general elections draws near. 4ne would hope that out of these different lines of thinking at least two distinct programmes programs N perhaps e&en more N will surface for addressing current economic woes. These would offer distinct choices to the people as they go to the polls. People should know not 2ust who they will be &oting for but also what they will be &oting for. I happen to belie&e that the nature of politics is changing in Pakistan. In a recent book( Anatol 0ie&en described Pakistan as a hard country I hard to understand( but also hard to put down as a failure. He argues that while the Pakistani state is weak and is becoming weaker by the day( its society is strong. +hat lends strength to the society is peoples allegiance to small groups and communities. That makes it possible for the society to workE the leaders of these groups work with another. They thus produce a pyramidal structure that has a great deal of strength. This is what is meant by baradari politics. >ut that is set to change. =hange will come as people gather more information about what is happening around them and what they are losing by ha&ing a weak state. In the forthcoming elections( a larger proportion of people are likely to depart from caste and baradari interests and &ote on the basis of what they consider to be good for the larger society. >y weakening the politics of baradari( they may be able to strengthen the Pakistani state. This will mean a ma2or change in the structure of politics that has endured for centuries. >ut for this change to proceed( the people must ha&e confidence that as the larger state displaces the smaller communities and baradris( their own interests will be well

ser&ed. 5or that to happen they must know what is being promised by the politicians who are seeking power. Howe&er( a good part of the rhetoric emanating for politicians is focused on foreign relations( in particular relations with the .nited 'tates. +hile this is an important matter and will ha&e consequences for the countrys future( the discourse of economics is where attention needs to be gi&en. To help the de&elopment of this discourse( it would be useful to pose some questions to those politicians who are trying to gain the attention of the countrys citi9ens( by appealing to them on the basis of issues rather than on cementing community and baradari ties. 'canning what the politicians are saying these days about economics( it is surprising that the question of re&i&ing growth in Pakistans faltering economy has not yet entered public discourse. Those who are currently acti&e on the political stage should know that the most serious problem the countrys economy faces today( is that it continues to mo&e forward at a tepid base. 5or the three"year"period between )%%; and )%11( the rate of 78P growth is likely to a&erage only three per cent a year. +ith the population still growing at an e-plosi&e rate of two per cent per annum( income per head of the population is increasing by a paltry one per cent. +ith this low rate of economic e-pansion we can e-pect that a number of difficult economic( social and political problems will surface. Those working hard to take away political power from those who currently wield it should be focusing their attention on the question of growth. They need to ask a number of questions. +hy growth remains poor( why the economys slow e-pansion is mostly the consequence of public policy( and why the problem of sluggish growth( will create e&en more problems in the future3 Ha&ing raised these issues they should then clearly indicate what they will do to re&i&e growth. Those who are in power now and ha&e been responsible for making public economic policy will ha&e a lot of e-plaining to do. +hy is it that Pakistan today is 'outh Asias sick man( growing at a rate less than half of that of >angladesh and a quarter of that of India. They will undoubtedly attempt to place a great deal of blame on the poor security situation in the country and argue that the uncertainty that is created affects both domestic and foreign in&estment. They will also put emphasis on the destruction caused by recurrent natural disasters N two de&astating floods in two successi&e years that ha&e taken a hea&y toll on the economy( in particular on the sector of agriculture. They will also blame the uncertainty created by the continuing turmoil in the global economy and its ad&erse impact on the domestic economy. In other words( the focus of the people in power will be on the factors o&er which they had little control( while those on the other side of the political di&ide will blame the policymakers in place today for much that has gone wrong. In this ongoing debate( the truth lies nearer the position taken by those who blame policy for the disaster in economics. The e-ternal en&ironment and natural disasters played a role but nowhere as much as was done by poor go&ernance. +ith the focus shifting to economics( the first issue that has to be taken in hand is that of the re&i&al of growth. Here it should be emphasised that the traditional model that focuses on capital accumulation with most of the needed capital coming from abroad( will not work. The model Pakistan needs to adopt must include a number of other things N de&elopment of new institutions and strengthening of those that continue to function. +hiche&er leader( supported by whiche&er group( takes command( will ha&e to take many decisions to orient

the economy in a different direction. The leader will ha&e to decide which economic classes should be placed in the lead of which sectors of the economy( in which sectors of the economy should the state work with the pri&ate sector and how much emphasis should be gi&en to the de&elopment of some of the newer sectors. These are important questionsE I will touch upon them in this space in the ne-t few weeks. Source7 /arra&ives 6or &he /e=& <"ec&ions YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#259 Monday, "e#embe 12, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.u&&in* *ro+&h on &o! o6 &he a*enda

By Shahid Javed Burki .u1"ished7 >ece(1er 12, 2011 A de&eloping country without robust economic growth cannot know social peace and political tranquillity. This is especially so( if the country also has a high rate of population increase. This is certainly the case with Pakistan. =urrently( the rate of 78P increase is stuck in the three to B.! per cent range( while the countrys population is still increasing at a rate of close to two per cent a year. This means that the income per head of the population is growing at a rate of no more than 1.! per cent per annum. The rate of increase could be as low as one per cent a year. 'ince the distribution of income is becoming increasingly unequal( much of the growth in national income is being captured by the rich and the &ery rich. The poor and the not"so"poor are left with &ery little. There cannot be any doubt that the number of people li&ing in absolute po&erty is increasing at a rate higher than the rate of increase in population. Therefore the proportion of the poor in the population is increasing N perhaps increasing &ery rapidly. Pakistan is creating conditions that could produce political and social uphea&al in the not"too "distant future. The only way to address this problem is to mo&e the economy forward at a rate much higher than the one at the present. This could be done but( it will need serious reflection on the part of policymakers and hard work by people in power. It would not be too ambitious to aim at a rate of growth twice the present rate N to set the goal at .! to # per cent a year. This leads me to ask two ob&ious questions. Is such acceleration possible3 If it is possible( how soon can this target be reached3 I will take up the second question first.

,y own si-"year e-perience with 0atin America at the +orld >ank( from late 1**B to late 1***( left me with some understanding about how fast economies that had faltered can reco&er. This can happen once policies are set right and once the right kind of people begin to walk the corridors of power. I saw the economies of Argentina( >ra9il and ,e-ico reco&er rapidly when the policymakers began to pursue the right set of ob2ecti&es with the right sets of policies. In all three cases( the command of the economy was taken o&er by new groups who could quickly reorient their economies. In other words( sluggish economies can bounce back reasonably quickly. There is another e-ample close to home of a sluggish economic bounce back. >eginning in 1**1( India completely altered the model of economic management. It ga&e up the Mlicense ra2 that had put the state on the commanding heights of the economy. Instead( the pri&ate sector was allowed almost all the room it needed to take hold of the economy. The result was electric. +ithin a few years( the rate of increase in Indias 78P almost tripled. This rate of increase had begun to be called the Hindu rate of growth. Pakistan( too( can achie&e the same kind of bounce"back o&er the same kind of period N three to fi&e years. +hat are the policies that need to be put in place to get Pakistans economy to pick up speed3 The list is a long one and cannot be co&ered in one newspaper article. I will take up 2ust one issue todayD rampant corruption. To begin with( Islamabad needs to pro&ide good go&ernance and encourage the pro&inces to do the same. The go&ernment has failed( or is failing in almost all the areas that should be its responsibility. ,uch of the talk about go&ernance is cantered on corruption. 6radication of this social and economic disease has begun to appear prominently in the agenda of at least one political party N Pakistan Tehreek"e"Insaf N and promises are being made by its leader that( if he and his associates gain power( they will go after corruption and those who ha&e indulged in it with &engeance. Imran /han( the partys founder and its inspiration( has set the stage by declaring the &alue and location of his assets. He has claimed that he can account for all that he has spent on creating his asset base and unlike some other leaders( he does not hold assets outside the country. This is a good beginning. It places the responsibility squarely and fairly on the shoulders of those who aspire to lead the country. >ut corruption is a comple- phenomenon. It cannot be totally eradicated. It e-its e&en in de&eloped and rich societies N the societies that ha&e highly de&eloped institutions of go&ernance. +hat needs to be addressed are those aspects of it that hinder economic growth and de&elopment and place a great deal of burden on the poor. =orruption is present in all societies( old and new( de&eloped and de&eloping. It is present( for instance( in the .nited 'tates. A few days ago( 1od >lago2e&ich( the ousted go&ernor of Illinois( was sentenced to 1$ years in prison. Among his 1; con&ictions is the charge that he tried to le&erage his power to appoint someone to >arack 4bamas &acated 'enate seat in e-change for campaign cash or a high paying 2ob. India( ne-t door( is politically more de&eloped than Pakistan. It( too( is tackling the problem of rampant corruption that has in&ol&ed people ser&ing in the lowest rung of the administrati&e structure to those who occupy high positions. 'ome of the amounts in&ol&ed in corrupt practices in India are staggering. In one deal pertaining to the award of licenses for cellular telephones( a minister cost the country some @$% billion of lost re&enue. The minister has landed in 2ail. These two e-amples N one from a de&eloped and the other from an emerging economy N show that an important part of dealing with corruption is to create institutions of accountability. Pakistan has tried to do that but with little success. 'ome of the institutions

created in the past themsel&es became arenas of corruption and political e-ploitation. People in high places ha&e been charged but ha&e escaped punishment. How should the institutions which need to be set up for ensuring accountability themsel&es become accountable3 Source7 .u&&in* 2ro+&h on To! o6 &he *enda YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#260 Monday, "e#embe 12, 2011

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

/lac" swans2 in an interconnected world

By Shahid Javed Burki Monday, 12 >ec, 2011 I? a global economy( effects of crisis in one part of the globe get quickly transmitted to the other parts. The world is now interconnected in ways ne&er seen before. 'ome of it happens because of the de&elopment of modern communication technologies. ?ews tra&els fastE those with access to mobile phones and tablets remain connected with other parts of the world.This is why the youth most likely to use these technologies and the instruments based on them ha&e become so restless. This was seen in the rapid spread of what came to be called the Arab 'pring that has already resulted in the demise of se&eral long"enduring regimes while threatening many more. This( howe&er( is not the only reason for the interconnectedness of the global society and economy. 4&er the last couple of decades the system of industrial production has been profoundly altered. ,ost finished products meant for both domestic and international markets are now made from do9ens( if not hundreds( of components made in many other parts of the world. Apple[s iconic I Pad is one e-ample ofa product that is made this way. It was designed by Apple in the .nited 'tates but is made in one of the world[s largest factories in south of =hina. That factory brings in parts from se&eral countries most of which are in 6ast Asia. =ars and computers are also manufactured in this way. >oeings newest plane the 8reamliner or #;# is assembled in the .nited 'tates but from the parts made in 6urope( Aapan( and =hina.

The de&elopment of this production system has created long supply chains that can be disrupted by unforeseen de&elopments in some part of the world. This happened when an earthquake produced a tsunami in Aapan and caused ma2or problems in the .nited 'tates. These problems slowed down the rate of economic growth in the .'. ,a2or floods in Thailand this summer caused a significant fall in the production of lap tops and desk computers in many production centres all around the world. The Thai floods e&en affected Pakistan. 4ne of Pakistan[s largest IT firms( the 0ahore"based ?etsol( has a large centre located in >angkok that caters to the demands of a number of customers in 6ast Asia. 8isruptions caused by the floods resulted in a decline in ?etsol[s operations. These connections in the industrial production system mean that interna"tional trade has to be free of obstacles that countries used to erect to protect their domestic manufactures. 4&er the last se&eral decades( the flow of international trade has become relati&ely free. =ountries around the globe ha&e brought down significantly tariffs on imported goods. They ha&e also dismantled other barriers to trade such as quotas on imports and pro&iding large subsidies to domestic manufacturers. That notwithstanding( the sector of agriculture in most rich countries continues to en2oy some protection from imports from de&eloping countries. The remo&al of this fa&oured treatment was one of the ob2ecti&es of the now"stalled 8oha round of trade negotiations. That said changes in public policies around the globe and de&elopment of many global institutions ha&e meant easier flow of trade among the nations around the globe. Trade now flows substantially unhindered among nations( as required by +T4. Trade is not the only defining part of the process of globalisation that has gathered pace in the last couple of decades. =apital now flows almost freely among different economies( de&eloped and emerging. >illions of dollars mo&e across national frontiers at the flick of a computer[s switch. 4pportunities for making large profitsarise and are made use of by operators around the globe. +ith the de&elopment of new financial centres around the globe( the world of finance ne&er sleeps. It is open )$"hours a day( se&en days a week( 1)"months a year.A slight change in the en&ironment e&en in countries that are less well connected with the global system can result in the flow in and flow out of large sums of money. 5or instance( the news that President Asif Ali Jardari had possibly suffered a heart attack and was flown out of Islamabad to 8ubai caused capital to flow out the /arachi stock market.There is now e&en freer mo&ement of people across national boundaries than was the case some decades ago. 6&en the anti" immigration sentiment in 6urope and the .nited 'tates has not kept out those who are determined to enter rich countries in search of better economic opportunities. ?o amounts of barriers to the mo&ement of people ha&e kept people out. 7o to any frequented tourist stop along the ,editerranean in 6urope( and you will come across people from such populous Asian countries as Pakistan and >angladesh selling umbrellas and trinkets in make"shift stalls that can be quickly remo&ed when law enforcement officials

arri&e. ,ost of these peddlers ha&e entered illegally. There are therefore opportunities and risks for emerging markets in this growing interconnectedness. As already indicated shocks can get quickly transmitted and ha&e to be absorbed by the countries that ha&e only weak institutions to deal with them. =apital can mo&e in and out( production systems can be disrupted( terms of trade can change quickly( &arious types of regulatory systems can affect the flow of trade. In the past Pakistan has had to deal with all such &icissitudes. Piolence in /arachi and security problems ha&e discouraged foreign in&estorsand caused them to pull out millions of dollars from the /arachi stock market. A sharp increase in the prices of agricultural commodities and oil in )%%#"%; drained billions of dollars from Pakistan[s foreign e-change reser&es. 'uspicions about the quality of shrimps e-ported from /arachi( led to a sharp decline in their e-port to +estern 6urope. =oncerns about the use of child labour in the shops manufacturing sports goods resulted in a serious loss of markets for this important item of e-port. These are some of the problems created for &ulnerable countries such as Pakistan. They are in addition to those brought by such natural disasters as floods and earthquakes. Planners and economic policymakers in Pakistan( howe&er( ha&e gi&en little attention to protecting the country from these unforeseen shocks. As ?asim Taleb puts it in his bestselling book( the appearance of [black swans[ in human history ha&e resulted in greater change than by those e&ents whose occurrence could be predicted with some certainty. >lack swan moments can cause ha&oc or produce opportunities. +hile their occurrence can be foretold which is why they are [black swans[ any sensible economic management must factor them into its calculations.

The uncer&aini&y &ha& e=is&s

By Shahid Javed Burki .u1"ished7 >ece(1er 19, 2011 +ith the amount of uncertainty that currently e-ists( Pakistans economic future is hard to predict. The economy could go in one of two ways. It could enter a period of e&en deeper crisis( especially when the country is faced with a serious balance of payments situation e-acerbated by Islamabads decision to terminate the programme negotiated with the I,5 in late )%%;. 4r it could reco&er and begin to climb on to a tra2ectory similar to the one India N and to a lesser e-tent >angladesh N is already on at this time. The path Pakistan will take depends on what policies are put in place by the people who gain power following the ne-t general elections that must be held sometime in the ne-t 1! months. >ut why wait until then3 +hy shouldnt those in power now adopt the needed growth"promoting policies3 The country will probably ha&e to wait for the elections to clarify who will yield power in Islamabad and the pro&inces following the polls. It is passing through a &ery difficult period N the kind of period that in the past brought the military to power. There now appears to be consensus in the country that repeated inter&entions by the people in uniform is not the way

to mo&e forward and that the solutions to the many problems Pakistan now faces must be found within a broadly representati&e democratic framework. It is worth the wait for such a system to grow roots. That de&eloping a democratic culture would take time was to be e-pected( since real democracies take effort and patience before they take root. 6&en if the wait means a loss of fi&e to 1% percentage points of growth o&er a few years( this foregone increase in income is worth the price to pay. This is the lesson that we learn by looking at the history of political de&elopment around the world. 4ne of these lessons is that policy reforms in democratic systems dont mo&e in a straight line. All reforms mean that there will be some losers but many gainers. If the losers ha&e a great amount of political clout( they will manage to block the needed change. It is only when the potential gainers ha&e learnt to mobilise and put pressure on policymakers that the needed reforms can go forward. It is now well recognised that politics and economics react in many different ways. 'ome of these are ob&iousE some of them more subtle. >ut one thing is clear. In democratic societies( change does not come easily. That notwithstanding( it is better to ha&e change within a democratic framework than in those where the decision" making power is in the hands of a few people. There are interesting e-amples of this non" linear aspect to the process of economic reforms from both India and Pakistan. >eginning first with the Indian case. In an inter&iew gi&en on 8ecember 1$( ,anmohan 'ingh( the Indian prime minister( said that his nations economy will return to a long"term growth rate of nine per cent a year( as inflation slows and the go&ernment e-tends a record of market"opening policies. 5or the moment( interrupted reforms ha&e stalled the rate of growth. >ut growth is not the only setback to the Indian economy. Inflation has increased significantly( in part because of the fall in the &alue of the Indian rupee. Indias currency has tumbled 1# per cent this year( the worst performance among 1% ma2or Asian currencies. The prime minister promised to get India back on the high growth track. F+e will stay the course. +e will make India an eminently bankable and creditworthy economyG( he told the press. Howe&er( gross domestic product will increase to #.! per cent in the financial year ending ,arch B1( )%1). This is two"and"a half percentage points lower than what India has been aiming at for the last se&eral years. High on the Indian agenda is the reform of retail trade( which is an important part of the Indian ser&ice sector but one that has been marred by e-tremely low producti&ity. 4ne way of impro&ing that is to permit large retail groups from the +est to set"up shop in India. >ut the entry of companies such as .nited 'tates +al",art( >ritains Tesco and 5rances =arrefour was blocked by the small operators in the country. There are millions of small shops in India that intermediate between the small producers and small consumers. 'hop owners ha&e numbers and political power on their side. They were able to successfully work against the latest mo&e by the go&ernment to allow these companies to set"up their businesses in India. To Prime ,inister 'inghs great embarrassment( the go&ernment fearing a political backlash had to take back its decision. In the inter&iew quoted abo&e( the prime minister said that he e-pects to succeed in his push to open Indias retail market to foreign companies after regional elections conclude by the end of ,arch )%1). The most important of these will be in the state of .ttar Pradesh that has a population of )%% million and where 1ahul 7andhi( the heir to the ?ehru"7andhi dynasty( is attempting to establish his credentials for becoming the countrys new leader. It is interesting that Pakistan was able to open its retail sector to foreign competition a couple of years ago. Three large western companies ha&e come to the country. These

include 5rances =arrefour( the ?etherlands ,etro and 7ermanys ,acro. Their entry has already had a profound impact on the producti&ity of the retail sector. Howe&er( Pakistan has done less well in the area of domestic resource mobilisation. Here( politics ha&e inter&ened negati&ely. Pakistan had to walk out of the I,5 programme( since in the 2udgment of the policymakers it was not feasible to introduce ta- reforms desired by it. Politicians in power seem to ha&e concluded that the cost of undertaking these reforms outweighs the benefits. This leads to an ob&ious conclusion. 1ather than changing the political system as Pakistan did so many times in its difficult history( people acti&e in the political field must educate their constituentsD to get them to see that those who fear that they will lose in the short"term( need not lose o&er the long"run. Immediate loss may be much smaller than long"term gains. Source7 The 4ncer&ain&y &ha& <=is&s YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#262 Monday, "e#embe 26, 2011

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

$escuing 3- assistance programme

By Shahid Javed Burki Monday, 2# >ec, 2011 +I00 Pakistan be able to go alone if it was shunned by the .nited 'tates3 +hat will be the cost to America of a breakdown in relations with Pakistan3 These questions were asked by a report issued recently by +oodrow +ilson =entre( a +ashington"based think"tank. Titled Aiding +ithout AbettingD ,aking .' =i&ilian Assistance to Pakistan +ork for >oth 'ides. The report was the work of a group of 1# de&elopment e-perts( some of them of Pakistani origin. As the title suggests the report looked at the impact on both Pakistan and the .nited 'tates if the /erry"0ugar>erman :/0>< act signed into law by President >arack 4bama in 4ctober )%%* did not deli&er on its promise. The /0> was de&eloped to satisfy Pakistan[s quest for a relationship with the .nited 'tates that was not sub2ect to +ashington[s political whims. In the work done by me for the report I estimated that the impact of a total shutdown of American economic assistance to Pakistan will be minimal. It will push down the rate of growth by no more than %.1$ per cent a year. Howe&er( a breakdown of relations will ha&e consequences for other financial flows to the country. America[s net aid flows may not amount to a great deal but its influence on other sources of finance could be significant.

Pakistan[s decision to walk out of the I,5 programme will put a serious squee9e on the go&ernment[s financial situation. 0arge repayments to the 5und will begin in early )%1). .nless the country taps other sources( these payments will &ery quickly deplete the foreign e-change reser&es. It is in this en&ironment that American aid to Pakistan should be &iewed. This wasthe conte-t in which +oodrow +ilson group wrote its report. The report[s ); recommendations could be di&ided into four parts. The first deals with the fragility of the situation in Pakistan. The report underscored the point that while Pakistan could fail as a state( it was too large a country and too strategically placed to be allowed to fall apart. In this conte-t the report looked carefully at the country[s current circumstances. [Pakistan already a fragile state( faces a tidal wa&e of internal stresses that could belie the myth that the country always muddles though. This looming [tsunami[ is centred in [settled[ or [main[ Pakistan where most Pakistanis li&e( and not in the tribal belt bordering Afghanistan([ wrote the report[s authors. The crisis the country was facing was fueled by a number of circumstances. These included economic( political( and social di&isions that ha&e been complicated by Islami9ation. There are socioeconomic pressures building from below after decades of dominance and neglect by a narrow elite in the military and ci&ilian establishments that retains a monopoly o&er the best education( agricultural land( urban real estate( and 2obs and access to scarce capital. A legacy of )% years of 9ig9agging policies that ha&e left the country politically and economically underde&eloped and un"reformed( The current situation is precarious. Added to this is a youth wa&e that is about to engulf the urban areas. Half of Pakistan[s 1;% million people are )1 years old or younger. 1ural inmigrants were piling into slums that often lack access to clean water( basic health care and reasonably well paying 2obs. 7i&en a &ery poor domestic resource situation( Pakistan for the timebeing has to rely on e-ternal assistance that would be sustained o&er a period of time and would e&entually allow the country to stand on its own feet. That was what the /0> was meant to achie&e. The /0> act was di&ided into two parts or [titles[. The first title spelt out the democratic( economic and de&elopment assistance( the second dealt with security assistance. There were no programme specific conditions attached to the flow of assistance under the first title but the resources under the second title came with a number of conditions related to Pakistan[s participation in the struggle against Islamic e-tremism. The worsening of relations between the two countries seems to ha&e persuaded a significant number of American legislators to ask the e-ecuti&e branch of the go&ernment to attach stringent conditions to the aid that was promised to the country @ #.! billion o&er a fi&e year period. In other words( there is an effort in =ongress to attach to economic aid the same kind of conditions that were used for security assistance. The report argued against such an approach. The +ilson group recommended that the .nited 'tates [should continue to implement /0> without adding securityor econom ic" related"reformconditions but ad&ocate reforms. RIt should pressS Pakistan to return to an

arrangement with the International ,onetary 5und[. The +oodrow +ilson =enter group also recognised that the Americans were poorly managing their aid programme in Pakistan. Its report had a series of recommendations on impro&ing both the design of the programme as well as its e-ecution. It suggested that +ashington should [continue budgetary support for the>ena9ir Income 'upport Programme[ but do so only [if it is tightened to e-clude political manipulation and mo&e beneficiaries toward e&entual independence. An effort should be made to [partner with local ci&il society organi9ations to impro&e input from aid beneficiaries( local citi9en watchdog groups( and impacted populations throughout the life of a programme. 1ecognising that the current programme was being run by people who stayed in Pakistan for short periods on account of security concerns( did not always of good knowledge of de&elopment issues and looked constantly back at +ashington for guidance( the +ilson =enter recommended that there should also be an effort by the American officials managing the aid programme to [recruit more seasoned technical e-perts( e-tend Pakistan tours( and de&ol&e authority and accountability. The +ilson group[s final set of recommendations concerned the building of capacity to handle the making of public policy as well as implementing aided programmes. It suggested that one of the ob2ecti&es followed should be to [make &ocational training the main .' contribution to education in Pakistan.[ It also recommended the aid programme should [help fill Pakistan[s go&ernment[s most critical e-pertise at the federal and pro&incial le&els but with [payback[ conditions for beneficiaries. The +ilson =entre( in other words( argued for a serious mid"course correction for the /0> programme. The failure of /0> will ha&e consequences for Pakistan[s relations with other countries in the +est. Public opinion in many countries that Pakistan once counted as its friends was rapidly souring. +ithout support from the public( policymakers in countries such as >ritain( =anada( 5rance and 7ermany will not be able to pro&ide significant amounts of assistance to Pakistan. 4ne e-ample of the growing impatience with Pakistan in a country other than the .nited 'tates is indicated by an editorial in ?ational Post( a conser&ati&e =anadian newspaper( that called the authorities in 4ttawa to stop aiding Pakistan. [6&ery dollar that we spend on ci&il pro2ects in Pakistan is another dollar that the country[s security establishment has a&ailable to it for pro&iding material support to the Taliban and the Haqqani network in the Afghanistan"Pakistan borderlands. In replacing Pakistan on its country"of"focus list Rthe =anadian International 8e&elopment AgencyS can pick from plenty of other countries that are not supporting the terrorists who are planting the roadside bombs that kill our troops([ wrote the newspaper. The collapse of the /erry0ugar">erman effort therefore would ha&e serious consequences for Pakistan. It would spread discomfort about Pakistan beyond the .nited 'tates. 1escuing .' assistance programme \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...

The $o""o+in* 4ser Says Thank 5ou &o .reda&or $or This 4se6u" .os&7 a9eegum :Tuesday( 8ecember )#( )%11<
#263 %atu day, "e#embe 31, 2011 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

chievin* a cri&ica" (ass

By Shahid Javed Burki .u1"ished7 >ece(1er 31, 2011 'ocial scientists ha&e begun to note that in the first decade of the )1st century( globalisation and a re&olution in information technology ha&e achie&ed a critical mass. According to one analyst( Fthis has resulted in the democratisation N all at once N of so many things that neither weak states nor weak companies can stand up against popular e-pressionG. +e ha&e seen the democratisation of information( of war fighting( of inno&ation and of e-pectations. The last is particularly important for reshaping political institutions. The year )%11 started with tens of thousands of Arab youth demanding an end to authoritarian rule. It is ending with the young in 1ussia asking for the same. As Aleksei ?a&alny( an imprisoned blogger in 1ussia( wrote recentlyD F+e are not cattle or sla&es. +e ha&e &oices and &otes and the power to uphold them.G The street first rose in the Arab world but its rise ga&e encouragement to the forces of dissent in such different cultures as in >ritain( 5rance( 'pain( 1ussia and the .nited 'tates. A clear lesson has to be learnt by political systems in the making( such as the one in Pakistan. The lesson is that the peoples &oice must be factored in both the design and working of political systems and their capacity to deli&er results for the masses. 7i&en that( is it too optimistic to hope( as I did in last weeks article( that the ne-t elections may ser&e to cleanse the political system in Pakistan3 4n the other hand( is Pakistans political system utterly and comprehensi&ely broken3 4r is the country simply dealing with the birth pangs of a new system that has been through a long and painful period of deli&ery o&er which the military presided off and on for many decades3 =an a political system in such a perilous state manage an economy that is in tatters( fi-ing it in a way to ensure a high rate of 78P growth sustainable o&er time3 These are hard questions to answer. ?either economic theory nor political science is of much help. That said( it would be hard to argue that the progress the country has made in

mo&ing towards a system in which the people ha&e some &oice should be interrupted and replaced once again with strongman rule. 7o&ernments under strong leaders ha&e done well in 6ast Asia and =hina. 'imilar arrangements in Pakistan did not produce the same kind of results. The failure of strongmen in Pakistan was because they had short"term and narrow interests. +ith the possible e-ception of 7eneral Ayub /han( none of the other military leaders came with &isions to set the economy right in a way that benefits flowed to a ma2ority of the population. 'ome could argue that the economy is too sick to be left to the care of political doctors who ha&e displayed little talent in handling it. To be tempted to mo&e in that direction would be to repeat the so many mistakes of history. As I suggested last week( it is worth paying the economic price to de&elop a system of go&ernance that would last for good and which would pro&ide for all citi9ens in an equitable and caring way. Todays system is far from doing that and what is being promised by those present on the political stage at this moment does not get us there. According to the American political scientist and 'enior 5ellow at the =enter on 8emocracy( 8e&elopment and the 1ule of 0aw at 'tanford .ni&ersity( 5rancis 5ukuyama( Fthe passion of protesters and democracy ad&ocates around the world( from 'outh Africa to 1omania to .kraine( might be sufficient to bring about Mregime change from authoritarian to democratic go&ernment( but the latter might not succeed without a long( costly( laborious( difficult process of institution buildingG. This was written before the Arab 'pring added more e-amples to those the author had used for how the pressure of the street could start the process of political change. >ut( continues 5ukuyamaD FHuman institutions are sub2ect to deliberate design and choice( unlike genes( they are transmitted across time culturally rather than geneticallyE and they are in&ested with intrinsic &alue through a &ariety of psychological and social mechanisms( which makes them hard to change. The inherent conser&atism of human institutions then e-plains why political de&elopment is frequently re&ersed by political decay( since there is often a substantial lag between changes in the e-ternal en&ironment that should trigger institutional change( and the actual willingness of the societies to make those changes.G 4n their way to political de&elopment( history tells us that societies ha&e followed cycles of de&elopment and decay. Those who seek to guard against decay must ensure that political systems ha&e se&eral institutional layers which would protect against slippages occurring. If this reading of the process of political de&elopment is correct( there is real danger of political decay in Pakistan. 8escent into it should be pre&ented and this will require hard work and understanding. Pakistan will ha&e to ha&e patience before a set of institutions will get settled and will begin to work together and reinforce one another to pro&ide for the common good. 0ooking back at the political mess Pakistan finds itself in today( one cannot but wonder about what the countrys leaders were thinking when they embarked on a series of outdated approaches. The approaches they tried might ha&e worked N in Pakistans case they did succeed to some degree N but they had no chance of lasting success being perpetuated way into the future. Among the more serious mistakes were those that in&ested more confidence in the style of political management that put premium on leading from the top. In addition there was confidence that America could protect the leadership groups while they attempted to manipulate the populace from great heights. That way of political management could not ha&e worked and is not working. A profound change is needed in which we manage political de&elopment in the country. Source7 chievin* a ,ri&ica" Mass

YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#264 Monday, Janua y 09, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

."uck &he "o+ han*in* 6rui&

By Shahid Javed Burki .u1"ished7 January 9, 2012 There is not much hope that the people who currently hold the reins of power in Islamabad ha&e the political will or the competence to arrest the current economic decline. It appears that the citi9enry will ha&e to wait for a regime change before serious action gets to be taken. It is important that this change comes through democratic means. Any other way would seriously set the country back. +hen the change does come( what should the people in power to do to re&i&e the economy and set it on the tra2ectory of sustainable growth at a reasonably high le&el3 There are many lessons policymakers can learn from the e-periences in other parts of the world. +hen I looked after 0atin America and the =aribbean region for the +orld >ank( I saw many economies pick themsel&es up from almost free fall( steady their situation and then begin to grow and impro&e the well"being of the citi9enry. >oth( Argentina and >ra9il were able to accomplish that feat. 4ne thing that impressed me about the 0atin American economies in e-treme distress was that once the right set of policies were adopted( the bounce"back in the rate of economic e-pansion happened quickly. The reco&ery was fairly sharp and enduring. This is what is meant by plucking the low hanging fruit. +hat are the few things that need to be done immediately N say in the first one hundred days N after the change in regime occurs3 I would suggest four areas of economic reform. 4ne consequence these suggested policies will ha&e is to increase in&estor confidence in the future of the economy. That alone will bring new in&estments into the economy by the pri&ate sector. The first is to indicate that there will be no tolerance for corruption in high places. =orruption takes many forms and affects people differently. It will take a while and serious institutional inno&ation to bring it under control at the lower"le&el. 'ignificant amount of corruption is built into the administrati&e systems. The >ritish designed the systems of land

records and maintenance of law and order at the local :thana< le&el so that the people paid for the ser&ices of the patwari and the thanedar rather than ha&e the state assume the entire budgetary burden of adequately paying these functionaries. 8ealing with corruption at these le&els will take time. There will need to be ma2or systemic changes before this can be brought under control. >ut higher le&el misdemeanour can be dealt with through the setting of good e-amples by the policymakers who occupy senior le&els and by putting in place a system of accountability that is independent of e-ecuti&e control. The pre&ious attempts in Pakistan to create such a system became the &ictims of political e-ploitation. 4nce the signal goes out that there will be no tolerance for bad beha&iour( it will ha&e a salutary effect on the way policymakers will deal with the people. The second area for attention by the new regime should be the impro&ement in the in&estment climate for the pri&ate sector. As economists ha&e known for a long time( confidence in the future is an e-tremely important determinant of pri&ate in&estment and( hence( of economic growth. The pri&ate sector will also be encouraged if the regulatory system is o&erhauled. The new go&ernment would do well to re&iew all the regulations in place and streamline them with a &iew to ridding the system of those that ser&e no economic or social purpose. They ha&e remained in place since they pro&ide handsome rents to those responsible for implementing them. 'ome of the laws on the books ha&e long ser&ed their purpose but ha&e been retained since some &ested interests ha&e turned their pro&isions into rent seeking acti&ities. The third area that should recei&e the attention of the new set of policymakers is the si9e and funding of the public sector de&elopment programme. The Planning =ommission has carried out a thorough re&iew of the programme as it stands today and found that there are thousands of pro2ects on its books with trillions of rupees of throw"forward. This is the amount that was allocated but not actually pro&ided and( therefore( remains undisbursed. 'e&eral pro2ects are under implementation( pro&iding funds for their managers( staffs( residences and offices. =leaning up this programme will not only sa&e the go&ernment considerable amount of resources( it will also help to rationalise public sector spending. The fourth area requiring immediate attention is the energy sector. Pakistans energy problem now encompasses both electricity and natural gas. It is badly hurting the people and the people ha&e begun to react. There was recently tire"burning on the Islamabad Highway as people e-pressed their anger at the shortage of gas in their cooking sto&es. 7as and electricity shortages are also hurting the economy. 'ol&ing the energy crisis will take time and also require a great deal of in&estment. The state does not ha&e the resources to meet the growing needs. The pri&ate sector has to be brought in. 4ne approach would be to allow the pro&inces to in&ite the pri&ate sector to in&est in hydro power. If anecdotal e&idence is any guide( &arious pro&inces in the country ha&e hundreds of sites on canals( streams and ri&ers that can be tapped to produce electricity. 0icenses to in&est should be gi&en not on the basis of the price the state is prepared to pay for buying the power produced. This was done when the first wa&e of IPP :independent power producers< in&ested in de&eloping the energy sector. Instead( licenses should be handed out on the basis of auctions( with those indicating the lowest price they want for the power they produce( getting the go"ahead. This should be the limit of the states in&ol&ement. +ith these policies and initiati&es in place( the Pakistani economy could bounce back from

its current slump. They will also set the stage for undertaking deeper structural reforms without which the country cannot climb on a high growth tra2ectory. The four reform areas discussed abo&e could add as much as a percentage and a half points to the rate of growth e&ery year. This means that by the calendar year )%1!( two years after a set of new rulers takes office( Pakistans growth rate could double( increasing from three to si- per cent a year. Source7 ."uck &he ?o+ 'an*in* $rui& YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#265 Tuesday, Janua y 17, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.akis&an and &he ne+ 2rea& 2a(e

By Shahid Javed Burki .u1"ished7 January 17, 2012 The latest American defence strategy re&ealed by President >arack 4bama( on Aanuary !( could result in the 'outh Asian subcontinent becoming the stage on which the large powers will play the new 7reat 7ame. India and Pakistan are likely to find themsel&es on the opposite side of the new great power di&ide. It would not be healthy for 'outh Asia if the .nited 'tates growing concern about =hinas increasing influence results in promoting ri&alry between =hina and India. A healthy competition between the two Asian giants will ser&e the two well. +hat would not help is +ashingtons use of India to balance =hinas rise and thus ha&e ?ew 8elhi ser&e its strategic interests. The deteriorating relations between the .' and Pakistan( as result of a series of e&ents in )%11( ha&e presented the policymakers in +ashington with a choice. They can work to resol&e the differences and remain engaged with the country that remains critical to its long"term N not 2ust short"term N strategic interests or( they can simply walk out of the country as was done in 1*;* when Pakistans usefulness to the .' was diminished after the 'o&iet .nion was pushed out of Afghanistan. There is considerable temptation to adopt the latter approach. That is certainly the case in the .' =ongress( which has already declared its intention to reduce the amount of military assistance and economic aid promised to Pakistan.

The new .' defence strategy( by focusing so much attention on =hina( is bound to further complicate the situation and add another element in the American"Pakistani equation. +ith hea&y dependence on e-ternal flows to retain some dynamism in the economy and with the Americans threatening to reduce their assistance( Islamabad has already reacted by attempting to draw e&en closer to >ei2ing. This effort was only partially successfulE >ei2ing( with its eye on +ashington( was not inclined to walk into Pakistan to fully compensate for the threatened American withdrawal. >ut >ei2ing may rethink its cautious approach. If the defence strategy sends the message to >ei2ing that =hina"containment had become the main interest for the .' in world affairs( the =hinese may seek to list Islamabad as its partner to counter the American mo&es. And if the .' responds by getting e&en closer to India what will result is a four"power M7reat 7ame with America and India seeking to contain =hina and =hina and Pakistan working together to limit +ashingtons influence in their geographic space. This will be an unhappy de&elopment for 'outh Asia. +hat is needed instead is a deep American in&ol&ement in helping Pakistan to de&elop its political system and its economy to guide the ongoing re&olution in the ,iddle 6ast and se&eral other ,uslim countries into the right channels. 8rawing a connection between the Arab 'pring and Pakistans de&elopment as a way of helping the +ests strategic interests may( at first sight( seem a bit of a stretch. >ut such a link becomes apparent when the dynamic unleashed by the e&ents in the ,iddle 6ast is put in a historical perspecti&e. +hat is at issue now is the direction the Arab 'pring is likely to take. The first series of elections in the Arab world N in ,orocco( Tunisia and 6gypt N following the street"inspired re&olutions ha&e brought parties with strong Islamic roots into prominence. In 6gypt( it is already clear that the party affiliated with the ,uslim >rotherhood will ha&e the largest presence in the newly elected assembly. It has won close to one"half of the seats( while another quarter has gone to the 'alafists. The re&olution was brought about by disaffected youth but its consequences will not bring them into political power. F'o why are so many Arabs &oting for parties that seem regressi&e to +esterners3G asks Aohn , 4wen( a professor of politics at the .ni&ersity of Pirginia and the author of an important book on the clash of ideas and politics. His answerD F0iberalism in the 1*"century 6urope and Islamism in the Arab world today( are like channels dug by one generation of acti&ists and kept open( sometimes quietly( by future ones. +hen the storms of re&olution arri&e( whether in 6urope or in the ,iddle 6ast( the waters will find those channels. Islamism is winning out because it is the deepest and widest channel into which todays Arab discontent can flowG. >ut todays re&olutions are different from those that came earlierE they are taking place in full global &iew where those participating in them are in constant communication with those watching them. It is unlikely that the liberal forces that relie&ed the countries of absolutist leadership will easily gi&e way to the dominance of political forces that may take the affected countries towards another form of control. This happened in Iran in the late 1*#%s. To ensure that Islamists( e&en if they win elections( will not dispense with liberal democratic forms( the liberal forces are looking for models in which religious parties are embedded within democratic systems. Pakistan could become such a model if its fledgling democratic system succeeds. Pakistan( at this time( is deeply in&ol&ed in containing the rise of Islamic e-tremism. 4ne way to deal with it is to combine the use of force with accommodation. Those not prepared to work within the established legal framework must be dealt with firmly while those inclined to use the norms of democracy to ad&ance their agendas must be gi&en accommodation. Pakistans difficult political e&olution is being watched by many in the ,iddle 6ast. If it succeeds( it will be seen as an e-ample to be replicated. Howe&er( the .nited 'tates by

withdrawing its support at such a critical time and forcing the new 7reat 7ame on 'outh Asia( will unleash another dynamic that could seriously set back the Pakistani e-periment. A strong anti"American sentiment would undoubtedly help the Islamic groups and inhibit the more liberal forces. In other words( +ashington must look at Pakistan through the lens of the Arab 'pring rather than as a player on the other side of the game to contain =hina. Source7 .akis&an and /e+ 2rea& 2a(e YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o a9eegum :Tuesday( Aanuary 1#( )%1)<
#266 Monday, Janua y 23, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

.oor *overnance and ci&i@en9s disco(6or&

By Shahid Javed Burki .u1"ished7 January 23, 2012 +hen Mgo&ernance entered the language of economics( it was a camouflage term used by the +orld >ank. The latter substituted it for the term Mcorruption. >y bringing in the term go&ernance in its discourse( the >ank wished to impress the countries it was working with that corruption was taking a hea&y toll on their economies( in particular on the poorer segments of the population. >ut at that time( corruption was too impolite a word to use in a dialogue with the countries who borrowed from the >ank. 4nce serious analytical work got to be done by the +ashington"based institution( it was realised that the word go&ernance went much beyond corruption. It also implied( the distance between the go&ernment and the people it was meant to ser&e. It included the responsibility for pro&iding public ser&ices to the citi9enry and their quality. It included holding public ser&ants accountable for their work. 1esponsibility( deli&erability and accountability( therefore( are three important attributes of good go&ernance. 'ince poor go&ernance has a negati&e impact on economic performance( this is one reason why the rate of economic growth has stalled in Pakistan. It has contributed to Pakistan not

achie&ing the rates of 78P growth attained by other large 'outh Asian economies. In addition to poor go&ernance( a number of structural problems pre&ented the country from reaching its potential. These included a high rate of population growthE low rates of domestic sa&ings and consequently( inadequate in&estment( not only in human capital but also in infrastructure( industry and agricultureE weak industrial and e-port structures( dominated by products based on cottonE an ambi&alent attitude towards the pri&ate sector and the absence of liberal economic framework until the early 1**%sE high le&els of defence spendingE poor resource mobilisation by the go&ernmentE underde&eloped institutions of go&ernanceE and highly centralised decision"making. Among these contributors to economic growth( poor go&ernance is one of the more important ones. 'ince )%%;( the country has been limping through a period of political transition. The rule by the army( that had by then go&erned for BB years out of the 1 years of independence( ga&e way to that by the elected representati&es of the people. There was e-citement in the airE there was e-pectation that through their representati&es( the countrys citi9ens will sit at the table where important public policy decisions were being taken. There was optimism that the pace( at which political transition then underway( would proceed smoothly and would usher in a go&ernment that would be more responsi&e to the needs of the citi9enry. Howe&er( within a couple of months of its induction into office( the coalition go&ernment that had assumed office in Islamabad collapsed and the country entered a period of political uncertainty that has lasted to this date. Political uncertainty contributes to economic stressE people willing to in&est in the economy are unlikely to in&est their capital when risks are high. Political turmoil and poor go&ernance were to take a hea&y economic toll. Pakistan has gi&en scant attention to the need to pro&ide good go&ernance not only in recent times but throughout its history. Howe&er( the country has reached the point where the issue of go&ernance can no longer be ignored by the ruling establishment. The need for good go&ernance acquired special significance as the streets in ,iddle 6ast e-ploded and brought about regime change in four countries that had been go&erned for decades by the same heads of state and relying on the support of the same sets of people. A number of other countries in the region ha&e also come under pressure. The street and the public square in the ,iddle 6ast ha&e sent out two clear messages to those who go&ern. 5irstD the people sub2ected to decades of rule in which they had no role to play and in which their welfare was simply ignored ha&e arri&ed at the limits of their patience. The other message was that in the modern means of communication( the citi9enry ha&e found the tools to get organised( agitate and put pressure on the ruling establishment to mend its ways. These two messages ha&e rele&ance for Pakistan as well. The quality of go&ernance in Pakistan is as poor as that in the ,iddle 6astern countries( contributing to a ma2or economic downturn. Poor economic performance( howe&er( has not pre&ented the well"to"do from becoming rich( lea&ing the rest of the citi9enry way behind. Political scientists from the days of 'amuel P. Huntington ha&e been emphasising that relati&e depri&ation N their term N can be a powerful sentiment for forcing political change. It has been deployed in Pakistans torrid history for bringing about regime change. The go&ernments headed by President Ayub /han and Prime ,inister Julfikar Ali >hutto fell largely because the people were unhappy with what they had recei&ed from the ruling establishment. +hen the youth get agitated of what lies in their future( they are likely to raise their &oice and if the &oice was is heard( they are likely to take to the streets and assemble in public squares. This is precisely what happened in Tunisia and 6gypt. These countries were not

spared the pressure of the street e&en though their economies were growing at a brisk pace. In fact( as Political scientist( 'amuel Huntington wrote a number of years ago( the feeling of relati&e depri&ation becomes acute when the economy is growing rapidly but most of the incremental income is captured by narrow economic and political elites. Absence of good go&ernance( therefore( could N and often does N result in political instability. An open political system and &ibrant media ser&e as safety &al&es but when the pressure being built up cannot be released( there can be trouble for the establishment. It would appear that the mo&ement launched by Imran /han and his Tehreek"e"Insaf has got traction because of the growing discontent among the citi9enry( in particular among the countrys youth. It is worth noting that corruption and its eradication were the main themes in the speeches gi&en by /han at the largely attended rallies in 0ahore and /arachi. Source7 .oor 2overnance and ,i&i@en-s >isco(6or& YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 2 4sers Say Thank 5ou &o rain007 $or This 4se6u" .os&7

a9eegum :'unday( 5ebruary %!( )%1)<( ?aqash 5atima :,onday( Aanuary )B( )%1)<
#267 Monday, Janua y 30, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

2overnance and ci&i@en9s disco(6or&

By Shahid Javed Burki .u1"ished7 January 29, 2012 Political uncertainty need not ha&e produced poor go&ernance. In Pakistan( howe&er( the two came together. Poor go&ernance has many meanings. It means the indifference of those in power towards deli&ering the ser&ices people needE to ensure security for the li&es and properties of the citi9enryE to respect the rights of all minorities( ethnic as well as religiousE to hold themsel&es accountable for their actionsE to pro&ide stability and continuity of policiesE and to create an en&ironment which leads people to de&elop confidence in their future. Those who ha&e go&erned Pakistan since )%%; ha&e failed on most N if not all N of these counts. There are many indicators of the decline in the quality

of go&ernance. To take one( corruptionD according to the )%11 report issued by the >erlin" based Transparency International( Pakistan ranks poorly on that score. It is close to the bottom in the organisations ranking of countries around the globe. There are se&eral measures a well"intentioned go&ernment could ha&e adopted to impro&e the quality of go&ernance. 4f these( four are of particular importanceD to establish a system of accountability for all public officials in which the citi9enry has confidence( to strengthen the legal and 2udicial systems( to gi&e autonomy to the 2udiciary and to bring the go&ernment closer to the people. There was some mo&ement on two of these four. 4ne of these N autonomy of the 2udiciary N was forced upon the political system by the ci&il society. The second N grant of greater authority to the go&ernments at the subnational le&els is still work in progress. 'ome attempts were made to set up institutions of accountability( most recently( by the administration headed by e-"president Per&e9 ,usharraf. He reorganised the apparatus inherited from the democratic go&ernments that ruled in the 1**%s and appointed a highly respected army general N 0ieutenant 7eneral ,uhammad Am2ad( in whom he saw all the needed qualities N as its head. The ?ational Accountability >ureau :?A>< was meant to Fput the fear of 7od into the rich and powerful who had been looting the stateG( ,usharraf wrote later in his autobiography. FA special ?A> ordinance was issued to gi&e power and full autonomy to the organisationG( he continued. The ?A> worked diligently and hard at the beginning of the ,usharraf era. >ut as had happened so many times before it( too( became politicised. In an attempt to stay in power( while realising that he could not stop the country from mo&ing towards democracy( president ,usharraf struck a deal with >ena9ir >hutto and her party( the PPP. As a part of the deal( he issued the ?ational 1econciliation 4rdinance :?14< on 4ctober !( )%%#. According to Transparency International Fin many ways( this was a set"back for anti"corruption mo&es in Pakistan( as all proceedings under in&estigation or pending in any court that had been initiated( or in&ol&ed the ?ational Accountability >ureau ?A> prior to 4ctober 1)( 1*** were withdrawn and terminated with immediate effect. ?14 also granted further protection to parliamentarians as no sitting member of the parliament or pro&incial assembly can could be arrested without taking into consideration the recommendations of the of the 'pecial Parliamentary =ommittee on 6thics or the 'pecial =ommittee of the Pro&incial Assembly on 6thics.G The ?14 became an issue of contention between an asserti&e 2udiciary and the PPP"led go&ernment. The issue remains unresol&ed. Pakistan N in particular its policymakers N ha&e not fully grasped the importance of a well"functioning legal system for pro&iding good go&ernance. ?o significant attempts ha&e been made since the founding of the country to reform the legal system so that it adequately addresses the &aried needs of the citi9enry. 8ispute settlement and holding accountable those who break the law are two of the more important attributes of a good legal structure. >oth attributes not only help the poorer segments of the society. 5ailure of one or of both hurt the political system and it obstructs the smooth economic de&elopment. The legal systems inability to deli&er timely 2ustice is one reason why an increasing number of people in Pakistan are being attracted towards the Islamic way of pro&iding 2ustice. The problems with the e-isting system ha&e been in&estigated a number of times( most recently by the Asian 8e&elopment >ank :A8><. The well"funded A8> pro2ect to reform the legal system did not go &ery far in addressing the problems that ha&e rendered it dysfunctional. Its failure to fully achie&e the stated ob2ecti&es was the poor by"in by the

&arious go&ernments at the federal as well as the pro&incial le&els. In spite of the pressure e-erted by the >ank( there was little establishment interest in making the legal system responsi&e to the needs of the common man. A legal system is as effecti&e as the 2udiciary that administers it. 0argely( because of the support by the citi9enry through the &arious ci&il society organisations( Pakistans 2udiciary at the senior le&els has begun to pro&ide comfort to the people. The hea&y in&ol&ement of the legal community N the Mblack coats mo&ement N during the waning days of the ,usharraf regime has increased peoples confidence in the 'upreme =ourt and the pro&incial high courts. The courts operating at these le&els ha&e begun to take a deep and increasing interest in the political and bureaucratic systems accountability. The current conflict between the 'upreme =ourt and the PPP"led go&ernment in Islamabad is likely to be resol&ed in fa&our of the 2udiciary( notwithstanding( the resolution passed by the ?ational Assembly on Aanuary 1 ( e-pressing confidence in democracy. An efficient and effecti&e 2udicial system is an important part of the democratic structure( not separate from it. There is hope that the reshaping of the structure of go&ernment following the passage of the 6ighteenth Amendment to the constitution will impro&e the quality of go&ernance by bringing the state closer to the people. >ut there is also an-iety that the de&olution of so much authority to the pro&inces could cause disruption in a number of areas. There is a particular concern that unless the process of de&olution is managed carefully( it could result in the deterioration of public ser&ices to the poorer segments of the population. It is now recognised that bringing the go&ernment closer to the people is essential for impro&ing the quality of ser&ices pro&ided by the public sector. This ob2ecti&e can be achie&ed if the process of de&olution underway( factors in the lessons that history and e-periences ha&e to teach. Source7 2overnance and ,i&i@ens- disco(6or& YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#268 %unday, &eb ua y 0$, 2012

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

da+n 30/01/2012

\ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...

#269 Monday, &eb ua y 13, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.o"i&ica" !ar&ies and econo(ic !o"icy(akin*

By Shahid Javed Burki .u1"ished7 $e1ruary 13, 2012 At this stage in our political de&elopment it is useful to pro&ide a brief o&er&iew of the structure of politics and identify a number of di&ergent interests that are embedded in todays political system. They will ha&e to be reconciled in order to formulate a coherent set of policies aimed at finding appropriate solutions to the many economic problems the country currently faces. At play are half a do9en political interests each of which is represented either by political parties or by peoples mo&ements. I will begin with the political parties and the ideologies they represent. The two ma2or political parties N the Pakistan Peoples Party :PPP< and the Pakistan ,uslim 0eague :?< :P,0"?< are committed to a significant presence of pri&ate enterprise in managing the economy. 5or the PPP( this is a ma2or departure from the days of its founding. In the Mfoundation documents issued in 1* # and 1* ; when the party was de&eloping its approach to economic management( it adopted an economic ideology described as MIslamic socialism. The Islamic part of the slogan was mostly for optical purposesE it had little rele&ance for policymaking once the party gained power. >ut the party was serious about socialism. 4nce in power( the party went ahead and e-propriated a significant part of the pri&ately owned economic assets. The P,0"? on the other hand inherited the pri&ate sector orientation of the original party. .nder ,uhammad Ali Ainnah( the long"ser&ing president of the party and the founding father of the state of Pakistan( there was a strong preference for encouraging pri&ate entrepreneurship. >eing a member of the trading community( pri&ate enterprise and pri&ate initiati&e were in Ainnahs 8?A. In fact( once the >ritish had agreed to create Pakistan( Ainnah encouraged some of the well"established business houses to mo&e from India to Pakistan. Among them was the Habib family. .nder ?awa9 'harif the party has simply re&erted to its original preferences. +hile it is helpful that the two mainstream political parties are no longer far apart in their economic preferences( there is ma2or difference in the way they look at go&ernance. That said( I would argue that the PPP has been less concerned than P,0"? about the appropriateness of using go&ernment finance for personal use or for the benefit of the constituencies that support it. The 0eagues traditions go back to the days of Ainnah and 0iaquat Ali /han. The former was a rich man before he assumed the reins of power in ,uslim politics. He did not add to his wealth when he became Pakistans chief e-ecuti&e and ga&e much of it away when he died. 0iaquat Ali /han( who stepped in his shoes( is said to ha&e died a near"pauper. 'e&eral other leaders of early Pakistan( Iskander ,ir9a and 7eneral Hahya /han among them did not ha&e large assets on which they could li&e after they left office. ,o&ing down from the national to the subnational parties( the economic interests of the ,X,( and A?P( are focused on bettering the economic interests of the communities they represent. The former has been more diligent in pursuing the economic interests of its constituents. The latter( while representing the Pashtun communities of the pro&ince of /hyber"Pakhtunkhwa :/"P<( has been less acti&e. 7i&en their support base( both parties are in fa&our of putting more power in the hands of the pro&inces. The ,X, would like to go a step further since its political and economic interests are not entirely ser&ed by de&ol&ing power to the pro&inces. It would like to see authority de&ol&e to local go&ernment institutions since its power base is concentrated in 'indh pro&inces large cities of the pro&ince of 'indh. +hile the ,X, has been more successful in working for the welfare of its

constituencies( the A?Ps record is much less attracti&e in this conte-t. There are also se&eral regional parties operating in >alochistan. ,ost of these are con&inced that the federal go&ernment has not acted to promote the de&elopment of this large and resource"rich pro&ince. 8ominated by tribal leaders( the sociocultural attributes of this pro&ince are different from those of /"P( the other small pro&ince in the Pakistani federation. 6&en when an attempt was made to pro&ide financial compensation to the pro&ince for the e-ploitation of its ample mineral wealth for national use( much of this amount was e-propriated by the powerful tribal maaliks and &ery little trickled down to the &ery poor. 6&en when the distribution of income is deteriorating in the country as a whole( it is getting e&en worse in this pro&ince. 7i&en >alochistans geopolitical position( with long borders with Afghanistan and Iran( and with Pakistans longest coast line( it is not surprising that there is growing foreign interest in the area. 'ome of the smaller political parties operating in the pro&ince are reported to be recei&ing foreign funding. 5or a country in which Islam( in particular its e-tremist &ersion( has become such a &isible and often destructi&e force( parties functioning in the domain of religion ha&e had little political consequence. Islamic groups in the country can be di&ided into two categories. There are those like the Aamaat"e"Islami and Aamiatul"Islam that ha&e always functioned in the formal political space( accepting the norms of political beha&iour. It was only when they coalesced and came under one banner as they did when they created a coalition called the ,uttahida ,a2lis"e"Amal that they became influential in the policymaking arena. ,ore often than not( they operated from the margins of the political space. Howe&er( political organisations such as the 0ashkar"e"Taiba ha&e a &ery different political agenda N a radical make"up of the Pakistani society and its political and economic aspects. They are willing to resort to the use of &iolence rather than operate within the political system. 1eflecting all these di&ergent political interests in shaping a common approach to formulating economic policy will require cle&er and dedicated leadership. This is not present on the scene at this stage. The ne-t set of elections may bring a new group of people into the political space and put them in policymaking positions to rescue the country out of its difficult economic situation. .ntil then( Pakistan will ha&e to muddle along( costing a great deal in terms of lost growth and increased le&els of po&erty. Source7 .o"i&ica" !ar&ies and <cono(ic .o"icy Makin* YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#270 Tuesday, &eb ua y 21, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.akis&an9s (os& di66icu"& &es&

By Shahid Javed Burki .u1"ished7 $e1ruary 21, 2012 .nderstanding the history of crises in Pakistan can contribute to a better appreciation of the way the Pakistani economy has e&ol&ed since the countrys birth in 1*$#. History also helps to define the space in which those making public policy must operate. 'ome economists call it path dependence. In technical terms( Mpath dependence is something economists ha&e begun to belie&e is an important determinant of the present. This refers to the notion that Moften if something that seems normal or ine&itable today( began with a choice that made sense at a particular time in the past( but sur&i&ed despite the eclipse of the 2ustification for that choice. The current structure of the Pakistani economy was shaped to a considerable e-tent by the past. 'o were its relations with many countries in the region. It helps to understand how that happened in order to deal with the problems to which the past may ha&e contributed. 4ne possible solution to the many problems Pakistan faces today is to impro&e the countrys relations with India( the sister state to the south. +hy focus on relations with India is a question that needs a detailed answer. Pakistan( a crisis prone country( is now faced with its most difficult test. The go&ernment that holds the reins of power in Islamabad is preparing to complete its first term in office. +ill that happen and will the PPP"led coalition in Islamabad call for another set of elections sometime before the end of 'pring of )%1B3 If the country passes that critical mark on the way to its further political e&olution( it would ha&e possibly set itself on a course it has been seeking to tra&el on e&er since it gained independence nearly ! years ago. There are many hurdles o&er which it must 2ump before the country reaches that point. If it does( would that mean the end of the period of crises that began the moment the military passed the baton to an elected set of peoples representati&es3 The period since ,arch )%%; N when the current prime minister from the PPP took office N has seen many crises not 2ust in politics but in a number of other areas as well. ?othing has remained unaffected N not economics( not the society at large( not relations with the world beyond the borders. Pakistans torrid history is speckled with crises. They arri&ed at regular inter&als to claim the attention of the people in power. This preoccupation with finding solutions to crises deflected a series of policymakers from e&ol&ing a long"term &ision for de&eloping the economy and shaping the political system. =rises began the day the >ritish decided to transfer power not to one( but to two successor states. 4ne state N India N was created on the basis of an idea that the state structure could be erected that would ser&e all people( all the time. That idea has mostly worked. >ut the Midea of Pakistan did not work. Pakistan was gi&en statehood in the belief that the ,uslims of >ritish India could not li&e in a political system and in an economy dominated by people from other faiths. They had to ha&e a country of their own which they could mould according to their sets of beliefs. These were different from those on which India would build its own state structure. 0ess than a quarter century after gaining independence( ,uslim Pakistan broke into two

parts. The one in the east used ethnicity to create the state of >angladesh. As the name of the new country implies( it was to be a country for ethnic >engalis. The other part in the west( then called +est Pakistan( retained the name of Pakistan. The new Pakistan was multi"ethnic( spoke se&eral languages but did not know what should be the basis of nationhood. Is it necessary for Pakistan to define the meaning of nationhood3 After all( hundreds of new states ha&e been created since the founding of Pakistan and only a handful of those are based on an Midea. Howe&er( Pakistan ha&ing been established on the basis of a distinct idea( belie&es that it must ha&e a reason for its e-istence as a separate state. 5or more than half a century( it used India as the basis of nationhood. Percei&ed Indian threat was used for decades by &arious groups of Pakistani leaders to create a sense of statehood among a &ery di&erse citi9enry. To some e-tent( the impression that India was set to undo Pakistan was 2ustified by a series of actions taken by the first Indian administration under prime minister Aawaharlal ?ehru. It seemed determined to cripple Pakistan before it could de&elop its own economic legs on which it could stand. This India centric approach may ha&e made sense in the first decade or so after independence since( a number of crises were created by the hostility of the administration headed by ?ehru. >ut it has now lost its rele&ance. The drama of crises in Pakistan di&ides into three acts. The first( as already suggested( figured India. ?ew 8elhi took a number of actions N some real( others more feared than real N that made the leaders of Pakistan e-tremely ner&ous about the intentions of India towards their country. The second figured leaders in Pakistan with strong ideological preferences. 7eneral Ayub /han( the first military president( fa&oured the pri&ate sector to take the lead in de&eloping the economy. Julfikar Ali >hutto was disposed towards a socialist approach( choosing to e-pand the role of the state in economic management. 7eneral Jiaul Haq was inclined to MIslamise the economy without fully appreciating what that implied. The third act in the drama is the one that is playing out at this time. ,ost of the crises the country currently faces are the product of poor go&ernance. In this conte-t( the term Mpoor go&ernance needs to be defined in broad terms. It means more than corruption( of which there is a great deal in the country. It also means neglecting the creation of institutions without which no economy can de&elop. 4ne thing is clear about this on"going( three"act drama. It is only by building the capacity to deal with crises that their recurrence can be pre&ented.

Asia1centric approach to development

By Shahid Javed Burki Monday, 27 $e1, 2012 PA/I'TA?[s policymakers( preoccupied as they ha&e been with handling repeated economic crises( ha&en[t spent much time on thinking strategically about their country[s future. +hen they do get around to doing that( it would be appropriate to look at Pakistan[s future in terms of the country being a part of [rising Asia.[That is important not only for Pakistan but other Asian countries as well.

Howe&er( e&en for those countries that think long and =hina is certainly one of them strategic considerations still focus on old ties. That is a mistake. If the two recent &isits by Qi Ainming( =hina[s president"to"be( can be seen as guide to rising Asia[s aspirations( it can be summed up as followsD to stay connected with the old world. The .nited 'tates( &isited by Qi in mid",arch remains not only the world[s largest economy( it is also its most inno&ati&e. Ireland( the tiny country in 6urope[s northeast( offers an opportunity to enter the continent. Qi &isited it after his tour of America. He brought along 1!% =hinese businessmen with him and in&ited 6nda /enny( the country[s prime minister( to >ei2ing. It appears that the fast rising and changing =hina wants to lea&e one thing unchangedD its connection with America and 6urope. This makes little sense if Asia[s prospects are &iewed from a different perspecti&e. 'ome Aapanese economists some time ago came up with the notion that the flying geese offer a good way to describe how the pre&ailing order among nations changes with time. The pattern flying gees follow is known to all those who watch the sky as birds fly from one distant place to another. The bird in the lead can stay in place the lead for only a short time. +hen it is in that position( it faces the most air pressure( in a way protecting those that are behind. After a while( when it is o&ercome by fatigue( it 2ust slips back( taking the last position while the bird right behind it goes in the lead. This was e&olution[s way of teaching the flying birds how to cope with long"distance tra&el and air pressure. This beha&iour is only a slight fit for what happens to world economies. +e ha&e known for many decades that the country or countries in the lead e&entually lose their position to those that are right behind. This happened to >ritain after it had taken a big lead following the Industrial 1e&olution. 5rance caught up with it. 0ater 7ermany did the catching up with both >ritain and 5rance. 0ater still( the .nited 'tates not only caught up with +estern 6urope but o&ertook it. 6urope did not retreat to the back row but stayed right behind. There was much learning done in the catching up process. ?ow the catching is being done by Asia( in particular the eastern part of the continent. >ut this latest episode of [catching up[ has been messier than those that came before it and is likely to profoundly affect the working of the global economy. The pre&ious catch up periods were the result of technological ad&ances. This is what happened to >ritain because of the Industrial 1e&olution or to the .nited 'tates because of the introduction of standardisation and mass production( first introduced by the automobile industry. =onstant inno&ation became the main reason for the continuous dynamism of the American economy. 4r the catching up happened because of the go&ernment of the day decided to play an aggressi&e role in reshaping the economy. In 5rance as well 7ermany( public policies helped domestic industries to mo&e ahead and catch upwith those in the leading economies. The catching up( in other words( was the consequence of what happened to the economies in the second row. This time around(

howe&er( it is the first row economies that ha&e begun to stumble. This is certainly the case in 6urope and may also happen in the .nited 'tates. 5or most of 6urope rapid decline is the consequence of important structural changes( not all of which ha&e been fully understood by the continent[s policymakers. The most significant of these relates to the demographic structures of most 6uropean societies. They are e-periencing rapid fertility declines that are tuning the population pyramids in these countries upside down.The proportion of old people has increased at the e-pense of those who are &ery young. This has se&eral consequences. Two of these are particularly important. +ith the share of the young in the population declining( it becomes increasingly difficult to run educational and entrepreneurial systems that retain the cutting edge. And the social system constructed o&er the last se&eral decades that pay &ery well to the retirees cannot be sustained with fewer people in the working age and therefore fewer people paying ta-es. The only long"term solution to the 6uropean problem is for the continent to admit more migrants and this is pro&ing to be difficult because of the strong biases against cultural dilution. >ut the 6uropeans ha&e opted for what the economist Paul /rugman describes as [pain without gain[ approach to address their crisis. 'ome 6uropean nations are suffering 7reat 8epressionle&el painD 7reece and Ireland ha&e had double"digit declines in output( 'pain has )B per cent unemployment( >ritain[s slump has now gone on longer than its slump in the 1*B%s. [+orse yet( 6uropean leaders and quite a few influential players in America are still wedded to the economic disaster responsible for this disaster...'pecifically( in the early )%1% austerity economics insistence that go&ernments that should slash spending e&en in the face of unemployment became all the rage in 6uropean capital([ wrote /rugman recently in his ?ew Hork Times column. It appears( therefore( that there will not be an orderly rearrangement of the flying geeseE that the 6uropean stepping back from the front line of the global economic structure is likely to be more painful and chaotic than need be the case. All the pre&ious periods of catch up occurred when the world was not as well connected as is now the case. Any ma2or ad2ustment and any ma2or structural change re&erberates around the globe. Pain in 6urope is being felt in other parts of the world. This is particularly the case in Asia and in Asia more in the continent[s eastern part than in other parts that has built up industrial structures based on the markets in the world[s more de&eloped parts. +est[s economic decline is coming at a rate more rapid than was en&isaged e&en by those who saw the )1st as Asia[s century. Asia should figure not only on the tra&el itineraries of aspiring Asian leaders but in the economic plans and thinking of all policymakers. Asian countries should adopt Asia"centric approach to economic growth and de&elopment. 5or Pakistan( placing Asia in the centre of strategic thinking means forging in&estment and trade links with the countries in the neighbourhood. 4nce that is done( Pakistan will ha&e to reorient its economic and industrial policies so that it takes ad&antage of the fast"paced changes in many parts of Asia( in particular the eastern part of the continent. Also( in de&eloping future ties with 6urope and America attention should be gi&en to de&eloping the industries that ha&e growing demand in these older economies.

Asia"centric approach to de&elopment \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...

#272 Monday, Ma #! 12, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Makin* &he sys&e( inc"usive

By Shahid Javed Burki .u1"ished7 March 12, 2012 Pakistans political e&olution towards a sustainable democratic system has been slow but reasonably steady. 'ince democracy returned in )%%;( two sets of 'enate elections ha&e been held. The second one resulted in shifting the control of the upper house to the coalition that currently go&erns at the center. This transfer of power occurred normally without causing a political earthquake. .nless something that is entirely une-pected happens in the ne-t few months( the ne-t general election will be held before the end of this year or early ne-t year. +ith those elections an elected administration would ha&e completed its full term in office. This would a milestone in the countrys political de&elopment N the first time in ! years that an elected go&ernment was allowed to complete its tenure. This would be a giant step towards the realisation of a goal that seemed out of reach for se&eral generations that ha&e come and gone since Pakistan became an independent state. These de&elopments lead to an important questionD If Pakistan does settle down politically what would be the impact on the de&elopment of the economy3 An important recent book by Aames 1obinson and 8aron Acemoglu( two economists from Har&ard .ni&ersity and the ,assachusetts Institute of Technology respecti&ely( suggests a close link between political and economic de&elopment. To argue that politics is an important determinant of economic change is relati&ely rare for economists. That is not so for political scientists who ha&e been postulating such a link for decades. 'amuel P. Huntington of the Mclash of ci&ili9ations fame( pointed out in a work published more than $% years ago that the association between political and economic change runs in both directions. His important finding based on a number of case studies that included Pakistan( was that rapid economic growth can be politically destabilising in the absence of institutions that can absorb the shocks and tensions that ine&itably follow. Piewing change from the perspecti&e of economics( 1obinson and Acemoglu reach a number

of important conclusions. Two of these are important for understanding what is happening in Pakistan at this critical 2uncture in its history. Political progress is not ine&itable( they maintain. The outcome is Fne&er certain and e&en if in hindsight we see many historical e&ents as ine&itable( the path of history is contingentG. The same point is made by 5rancis 5ukuyama in his recent book on the origins of political order. According to him history is littered with e-amples of political de&elopment being followed by political decay. The lesson for Pakistan is ob&iousD people as well as institutions interested in seeing the political system e&ol&e in the right direction need to remain &igilant lest slippage occurs. This has happened many times in Pakistans torrid political history. 5our times the militarys inter&ention was accepted by the people N sometimes with considerable enthusiasm N since there were no &iable alternati&es a&ailable to address the problems the country faced at that time. Also( the military did not face any challenge to its mo&e into the political arena. This is no longer the case. ?ow the citi9ens are confident that the country can be better managed by their representati&es. If the representati&es disappoint they can be remo&ed through the electoral process. The citi9ens ha&e also learnt to ha&e their &oices heard. This happened during the Mblack coats mo&ements that helped to restore to their positions the 2udges fired by President Per&e9 ,usharraf( an autocrat. ?ow( with the powerful precedence of the Arab 'pring( the citi9ens feel e&en more equipped to raise their &oices and be heard. The second conclusion is e&en more powerful from Pakistans perspecti&e. 1obinson and Acemoglu argue that Fcountries differ in their economic success because of their different institutions( the rules influencing how the economy works( and the incenti&es that moti&ate peopleG. In that conte-t the book differentiates between two different types of political institutions( each producing its own economic dynamics. There are Me-tracti&e political institutions( which ser&e the interests of the few at the e-pense of the many. This is where most of Pakistans political parties are today. They cater to the interests of the few at the e-pense of the masses. This is the reason why the country is following economic policies that pro&ide rich rewards to narrow interests N the political elite. 4ne sign of healthy political de&elopment will be to ha&e these e-tracti&e institutions become Minclusi&e. The defining characteristics of inclusi&e institutions in both the economic and political fields are the combination of centralisation( the rule of law( and pluralism. Power resting with a strong political entity at the center of the system would ensure that pri&ate interests can be checked. At the same time( the power of the central authority must be constrained by law and by instruments that ensure accountability. These two types of institutional structures influence one another. 6-tracti&e political institutions produce e-tracti&e economic institutions. The influence can mo&e in the other direction as well. The same holds for inclusi&e institutions. Inclusi&e institutions in politics will create inclusi&e economic institutions. It is right to suggest that at this point in time( Pakistans political and economic de&elopment is stuck at the e-tracti&e stage. 4ne way of mo&ing from the e-tracti&e to the inclusi&e stage is to dispense with the control of families o&er political parties. 8ynastic politics pro&ides party go&ernance at the national as well as the regional le&els. 8emocracy must be practiced not only for pro&iding good go&ernance( it must also be adopted by the parties that dominate the political landscape. Source7 Makin* &he Sys&e( 8nc"usive YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga

#273 Monday, Ma #! 12, 2012

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

-elf1perpetuating4 extractive system

By Shahid Javed Burki Monday, 12 March, 2012 TH616 is now a nearconsensus among the economists who work in the area of de&elopment that political and economic progress interact with one another. There cannot be mo&ement in one without there being mo&ement in the other. The most recent entry in this type of analysis is a book by two American economists( Aames 1obinson and 8aron Acemoglu. Their book( [+hy ?ations 5ailD The 4rigins of Power( Prosperity and Po&erty[ asks the following important questionD +hy are some societies democratic( prosperous and stable while others are autocratic( poor and unstable3 They ha&e a simple answer. Those that ha&e been left behind usually ha&e performed poorly in making political progress. How should this finding be applied to the case of Pakistan3 It is the case that Pakistan of recent years has mo&ed in one right and one wrong direction. It has made some progress towards creating representati&e form of go&ernance but has failed in mo&ing forward its economy. ?ot only is the economy stagnating with the country growing at a rate one"half that of >angladesh and one"third that of India. It has also seen a palpable increase in the incidence of po&erty and as sharp deterioration inTH616 is now a nearconsensus among the economists who work in the area of de&elopment that political and economic progress interact with one another. There cannot be mo&ement in one without there being mo&ement in the other. The most recent entry in this type of analysis is a book by two American economists( Aames 1obinson and 8aron Acemoglu. Their book( [+hy ?ations 5ailD The 4rigins of Power( Prosperity and Po&erty[ asks the following important questionD +hy are some societies democratic( prosperous and stable while others are autocratic( poor and unstable3 They ha&e a simple answer. Those that ha&e been left behind usually ha&e performed poorly in making political progress. How should this finding be applied to the case of Pakistan3 It is the case that Pakistan of recent years has mo&ed in one right and one wrong direction. It has made some progress towards creating representati&e form of go&ernance but has failed in mo&ing forward its economy. ?ot only is the economy stagnating with the country growing at a rate one"half that of >angladesh and one"third that of India. It has also seen a palpable increase in the incidence of po&erty and as sharp deterioration inthe distribution of income and assets. In that conte-t the country is mo&ing against the trend in other de&eloping nations. A report

recently published by the +orld >ank reaches the surprising conclusion [that for the first time the proportion of people li&ing in e-treme po&erty on less than @1.)! a day fell in e&ery de&eloping region from )%%! to )%%;. And the biggest recession since the 7reat 8epression seems not to ha&e thrown that trend off course( preliminary data from )%1% indicate. The progress is so drastic that the world has met the .nited ?ation[s ,illennium 8e&elopment 7oals to cut po&erty in half fi&e years before the )%1! deadline.[ The world therefore has much to celebrate but Pakistan cannot 2oin the celebration. It has bucked the trend. +hy3 The answer comes from the 1obinson"Acemoglu book. They argue that only those political systems work to produce growth with po&erty alle&iation and impro&ement in the distribution of income that are [inclusi&e[. Pakistan has de&eloped what they describe as e-tracti&e systems. They pro&ide for the few not for the many. In what way would an inclusi&e system work for Pakistani economy3 It should aim to achie&e at least the following three policy changes. ?ot only should there be a significant change in the go&ernment[s economic priorities(. some of the content of the policies need to be adopted should also change. ,ore imagination and politicalthe distribution of income and assets. In that conte-t the country is mo&ing against the trend in other de&eloping nations. A report recently published by the +orld >ank reaches the surprising conclusion [that for the first time the proportion of people li&ing in e-treme po&erty on less than @1.)! a day fell in e&ery de&eloping region from )%%! to )%%;. And the biggest recession since the 7reat 8epression seems not to ha&e thrown that trend off course( preliminary data from )%1% indicate. The progress is so drastic that the world has met the .nited ?ation[s ,illennium 8e&elopment 7oals to cut po&erty in half fi&e years before the )%1! deadline.[ The world therefore has much to celebrate but Pakistan cannot 2oin the celebration. It has bucked the trend. +hy3 The answer comes from the 1obinson"Acemoglu book. They argue that only those political systems work to produce growth with po&erty alle&iation and impro&ement in the distribution of income that are [inclusi&e[. Pakistan has de&eloped what they describe as e-tracti&e systems. They pro&ide for the few not for the many. In what way would an inclusi&e system work for Pakistani economy3 It should aim to achie&e at least the following three policy changes. ?ot only should there be a significant change in the go&ernment[s economic priorities(. some of the content of the policies need to be adopted should also change. ,ore imagination and politicalwill are needed than ha&e been on display in recent years.

The first priority should be to impro&e the quality of go&ernance by creating a system of accountability. A number of attempts ha&e been made by se&eral administrations in the past but did not ser&e the ob2ecti&e of holding elected officials and bureaucrats accountable to the citi9enry. In fact( most of those attempts resulted in politicising the accountability structure. In recent years the go&ernments headed by Prime ,inisters ?awa9 'harif and >ena9ir >hutto and President Per&e9 ,usharraf used the accountability apparatus that had been set up to settle political scores or to achie&e political goals. A new effort is needed. This should ensure full autonomy to an accountability system and thus pre&ent interference by the e-ecuti&e branch of the go&ernment. 4ne way of achie&ing this ob2ecti&e would be to appoint( say( a fi&e"member accountability board :A>< to o&ersee the working of all branches of go&ernment"the e-ecuti&e( the legislature and the 2udiciary. A> should be appointed by the national legislature on the recommendations made by the e-ecuti&e branch. The chairman of the board as well as its members should ser&e terms longer than that of the legislature( perhaps eight years. Two members should be appointed e&ery two years. The board should o&ersee the working of the in&estigati&e agency and the A> courts. It should prepare and present to the national assemblywill are needed than ha&e been on display in recent years. The first priority should be to impro&e the quality of go&ernance by creating a system of accountability. A number of attempts ha&e been made by se&eral administrations in the past but did not ser&e the ob2ecti&e of holding elected officials and bureaucrats accountable to the citi9enry. In fact( most of those attempts resulted in politicising the accountability structure. In recent years the go&ernments headed by Prime ,inisters ?awa9 'harif and >ena9ir >hutto and President Per&e9 ,usharraf used the accountability apparatus that had been set up to settle political scores or to achie&e political goals. A new effort is needed. This should ensure full autonomy to an accountability system and thus pre&ent interference by the e-ecuti&e branch of the go&ernment. 4ne way of achie&ing this ob2ecti&e would be to appoint( say( a fi&e"member accountability board :A>< to o&ersee the working of all branches of go&ernment"the e-ecuti&e( the legislature and the 2udiciary. A> should be appointed by the national legislature on the recommendations made by the e-ecuti&e branch. The chairman of the board as well as its members should ser&e terms longer than that of the legislature( perhaps eight years. Two members should be appointed e&ery two years. The board should o&ersee the working of the in&estigati&e agency and the A> courts. It should prepare and present to the national assemblye&ery year a report on the state of go&ernance in the country. The second area needing attention is the mobilisation of domestic resources for running the affairs of the go&ernment and for making public sector in&estments. +ithout adequate public re&enues( high rates of economic growth will not be possible. 1esource constraint is not a n new problem. It is also the one that &arious go&ernments at &arious times in the country[s history ha&e worked upon but without much success. The ta-"to"78P ratio has now declined to ;.! per cent( the lowest of any large de&eloping

country economy. A number of pre&ious reform efforts were made with the help of outside de&elopment and finance institutions particularly the +orld >ank and the I,6. The former ad&ised the go&ernments in office to de&elop and modernise the ta- collection system including the working of the ta- collection agency now called the 5ederal >oard of 1e&enue. The latter made increasing the collection of go&ernment re&enues as one of the conditions for pro&iding much needed assistance. The last I,5 effort was made in )%%;"11 but was abandoned after Islamabad indicated to the agency that the reforms it was pushing were politically not feasible. In fact( it was the absence of political will that resulted in the collapse of the 5und programme. Howe&er( it remains critical to impro&e the go&ernment resource situation.e&ery year a report on the state of go&ernance in the country. The second area needing attention is the mobilisation of domestic resources for running the affairs of the go&ernment and for making public sector in&estments. +ithout adequate public re&enues( high rates of economic growth will not be possible. 1esource constraint is not a n new problem. It is also the one that &arious go&ernments at &arious times in the country[s history ha&e worked upon but without much success. The ta-"to"78P ratio has now declined to ;.! per cent( the lowest of any large de&eloping country economy. A number of pre&ious reform efforts were made with the help of outside de&elopment and finance institutions particularly the +orld >ank and the I,6. The former ad&ised the go&ernments in office to de&elop and modernise the ta- collection system including the working of the ta- collection agency now called the 5ederal >oard of 1e&enue. The latter made increasing the collection of go&ernment re&enues as one of the conditions for pro&iding much needed assistance. The last I,5 effort was made in )%%;"11 but was abandoned after Islamabad indicated to the agency that the reforms it was pushing were politically not feasible. In fact( it was the absence of political will that resulted in the collapse of the 5und programme. Howe&er( it remains critical to impro&e the go&ernment resource situation.A programme aimed at this ob2ecti&e could ha&e the following four elementsD :a< reforming the ta- collection system( possibly by contracting it out to a consortium of pri&ate management firms based on carefully worked out targets following a time"lineE :b< e-panding the ta- base by bringing in the e-cluded sectors into the ta- net( :c< eliminating e-emptions( :d< prescribing targets for pro&incial ta- mobilisation. Possible targets could be increasing the ratio by 1.! percentage points a year at the federal le&elA programme aimed at this ob2ecti&e could ha&e the following four elementsD :a< reforming the ta- collection system( possibly by contracting it out to a consortium of pri&ate management firms based on carefully worked out targets following a time"lineE :b< e-panding the ta- base by bringing in the e-cluded sectors into the ta- net( :c< eliminating e-emptions( :d< prescribing targets for pro&incial ta- mobilisation. Possible targets could be increasing the ratio by 1.! percentage points a year at the federal le&eland %.! percentage points for the pro&inces.

It has not been recognised by policymakers that by not raising enough resources for the proper functioning of the go&ernment( the country loses the space within which it can operate without foreign interference. =ontinuing reliance on foreign flows results in some loss of so&ereignty. That this would ine&itably be the result is now fully apparent as Pakistan relations with the .nited 'tates continue to deteriorate. +ashington is now Pakistan[s largest donor andand %.! percentage points for the pro&inces. It has not been recognised by policymakers that by not raising enough resources for the proper functioning of the go&ernment( the country loses the space within which it can operate without foreign interference. =ontinuing reliance on foreign flows results in some loss of so&ereignty. That this would ine&itably be the result is now fully apparent as Pakistan relations with the .nited 'tates continue to deteriorate. +ashington is now Pakistan[s largest donor andit wants in return what the country cannot politically deli&er. These .' demands could ha&e been met when the administration was in the hands of the military. A go&ernment that draws its power from the people is naturally constrained by their wishes. The third area needing attention is that of the de&elopment of the country[s abundant human resource. This has been neglected in the past and continues to be gi&en low priority by a socially e-clusi&e political system. Pakistan[s educational and health systems now ha&e the in&ol&ement of considerable pri&ate initiati&e. Pri&ately owned and managed schools( colleges( uni&ersities( clinics and hospitals ser&e the well"to"do well. The rest of the population is left to the poorly performing public sector institutions. Pakistan has one of the youngest populations in the world. The median age is only )1 years which means that some *% million people are less than that age. If the country trains and educates them( enormous economic and social benefits could flow. If not( the youth will become a burden hard to carry. 5or mo&ing the country towards inclusi&e social systems rather than continue to function as e-tracti&e economic and political systems( the citi9ens must put pressure on those who go&ern to adopt the types of policies described abo&e. 6-tracti&e systems become self" perpetuating. 4nly the people can mo&e them in the right direction.it wants in return what the country cannot politically deli&er. These .' demands could ha&e been met when the administration was in the hands of the military. A go&ernment that draws its power from the people is naturally constrained by their wishes. The third area needing attention is that of the de&elopment of the country[s abundant human resource. This has been neglected in the past and continues to be gi&en low priority by a socially e-clusi&e political system. Pakistan[s educational and health systems now ha&e the in&ol&ement of considerable pri&ate initiati&e. Pri&ately owned and managed schools( colleges( uni&ersities( clinics and hospitals ser&e the well"to"do well. The rest of the population is left to the poorly performing public sector institutions. Pakistan has one of the youngest populations in the world. The median age is only )1 years which means that some *% million people are less than that age. If the country trains and educates them( enormous economic and social benefits could flow. If not( the youth will become a burden hard to carry.

5or mo&ing the country towards inclusi&e social systems rather than continue to function as e-tracti&e economic and political systems( the citi9ens must put pressure on those who go&ern to adopt the types of policies described abo&e. 6-tracti&e systems become self" perpetuating. 4nly the people can mo&e them in the right direction. 'elf"perpetuating( e-tracti&e system \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...
#274 Monday, Ma #! 19, 2012

Predator

'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

%a"ing decentralisation wor"

By Shahid Javed Burki Monday, 19 March, 2012 H4+ does Pakistan[s e&ol&ing federal system compare with those that ha&e been around for a long time3 +hile the system is in transition( will it deli&er what the citi9ens wantD good go&ernance and economic growth that spread benefits broadly3 These are important questions and some answers can be pro&ided by looking at the e-periences of other federal systems around the globe. The answers I will pro&ide will not be comforting. =ompared to other federalist structures( four differences stand out. Pakistan is attempting to quickly achie&e what took considerable period of time to de&elop in more successful systems. The aim of de&eloping federal systems is to bring go&ernment closer to the people. In Pakistan the process appears to ha&e stopped at the pro&incial le&el. 8ecentralisation has not reached the local le&el where it is needed the most. It has not pro&ided the fiscal space to the subnational go&ernments so that they can raise their own resources and be responsible to the citi9ens as to how they are used. And( not much attention was gi&en to creating a fully representati&e system for watching o&er how decentralisation proceeds. The most important difference between the e&ol&ing federal structure in Pakistan and those inH4+ does Pakistan[s e&ol&ing federal system compare with those that ha&e been around for a long time3 +hile the system is in transition( will it deli&er what the citi9ens wantD good go&ernance and economic growth that spread benefits broadly3 These are important questions and some answers can be pro&ided by looking at the e-periences of other federal systems around the globe. The answers I will pro&ide will not be comforting.

=ompared to other federalist structures( four differences stand out. Pakistan is attempting to quickly achie&e what took considerable period of time to de&elop in more successful systems. The aim of de&eloping federal systems is to bring go&ernment closer to the people. In Pakistan the process appears to ha&e stopped at the pro&incial le&el. 8ecentralisation has not reached the local le&el where it is needed the most. It has not pro&ided the fiscal space to the subnational go&ernments so that they can raise their own resources and be responsible to the citi9ens as to how they are used. And( not much attention was gi&en to creating a fully representati&e system for watching o&er how decentralisation proceeds. The most important difference between the e&ol&ing federal structure in Pakistan and those ina number of other democracies is that in the case of the former it was done quickly and by way of a change in the basic law of the land. ,ost of the successful federal structures e&ol&ed gradually from the basic law or the constitution adopted by the federating system. 4nce the constitution was in place it guided the process of go&ernance and the e&olution of the federal system. And that was not done with the in&ol&ement of the local communities. This is certainly the case with the large federal systems spread around the globe. This is not happening in Pakistan. Take the American and Indian systems as two e-amples. In the case of the .nited 'tates( there was a deep and in&ol&ed debate among the founding fathers on the &irtues of a federal system and the rights of the federating units within the system. The founding fathers( while keen to create a &iable central authority( were equally an-ious to protect the rights of the states they represented. A compromise was reached which allowed the states considerable autonomy while entrusting the federal authority a number of essential and &ital functions. The Indian system was born with a strong centre. In fact( the central go&ernment was called the union go&ernment rather than the federal go&ernment. The two systems e&ol&ed in &ery different directions. In the American system( largely because of the role played by the 'upreme =ourt( the federal go&ernment acquired more power than was originally en&isaged. Thea number of other democracies is that in the case of the former it was done quickly and by way of a change in the basic law of the land. ,ost of the successful federal structures e&ol&ed gradually from the basic law or the constitution adopted by the federating system. 4nce the constitution was in place it guided the process of go&ernance and the e&olution of the federal system. And that was not done with the in&ol&ement of the local communities. This is certainly the case with the large federal systems spread around the globe. This is not happening in Pakistan. Take the American and Indian systems as two e-amples. In the case of the .nited 'tates( there was a deep and in&ol&ed debate among the founding fathers on the &irtues of a federal system and the rights of the federating units within the system. The founding

fathers( while keen to create a &iable central authority( were equally an-ious to protect the rights of the states they represented. A compromise was reached which allowed the states considerable autonomy while entrusting the federal authority a number of essential and &ital functions. The Indian system was born with a strong centre. In fact( the central go&ernment was called the union go&ernment rather than the federal go&ernment. The two systems e&ol&ed in &ery different directions. In the American system( largely because of the role played by the 'upreme =ourt( the federal go&ernment acquired more power than was originally en&isaged. Thecourt used the [commerce clause[ in the constitution that called for free flow of goods and people across state boundaries and interpreted it broadly to increase the powers of the central authority. In India( the states grew stronger at the e-pense of the union. This happened because of the rise in power of the regional political parties. The regional parties are now politically more powerful than the two national organisations. That is still not the case in Pakistan. The =onstitution of 1*#B in Pakistan was designed to create a federal system with the pro&inces allowed to e-ercise authority in a number of areas. This was considered to be a necessary condition for preser&ing what was left of Pakistan after the country[s eastern wing broke away and became the independent state of >angladesh. Howe&er( the full e-tent of autonomy was not granted immediately. The process was to be completed following the de&elopment of competence and capacity in the federating units. That( of course( did not happen. In other words( the Pakistani system did not e&ol&e from practiceE it was the outcome of a ma2or change in the basic law the eighteenth amendment to the constitution. The pace adopted to bring about a ma2or structural change was the result of the mistrust that e-isted between those who wield power in Islamabad and those who go&ern in the pro&inces. 'ince the system did not e&ol&e( it does not balance thecourt used the [commerce clause[ in the constitution that called for free flow of goods and people across state boundaries and interpreted it broadly to increase the powers of the central authority. In India( the states grew stronger at the e-pense of the union. This happened because of the rise in power of the regional political parties. The regional parties are now politically more powerful than the two national organisations. That is still not the case in Pakistan. The =onstitution of 1*#B in Pakistan was designed to create a federal system with the pro&inces allowed to e-ercise authority in a number of areas. This was considered to be a necessary condition for preser&ing what was left of Pakistan after the country[s eastern wing broke away and became the independent state of >angladesh. Howe&er( the full e-tent of autonomy was not granted immediately. The process was to be completed following the de&elopment of competence and capacity in the federating units. That( of course( did not happen. In other words( the Pakistani system did not e&ol&e from practiceE it was the outcome of a ma2or change in the basic law the eighteenth amendment to the constitution. The pace

adopted to bring about a ma2or structural change was the result of the mistrust that e-isted between those who wield power in Islamabad and those who go&ern in the pro&inces. 'ince the system did not e&ol&e( it does not balance therights granted to the federating pro&inces and their capacity to handle new authority. This mismatch is posing a number of serious problems. There is the problem associated with the a&ailability of finance to pay for new functions. It has been estimated that it will cost the pro&inces at least 1s)%% crores to adequately carry out the new responsibilities assigned under the 1;th Amendment. The additional resources that ha&e been maderights granted to the federating pro&inces and their capacity to handle new authority. This mismatch is posing a number of serious problems. There is the problem associated with the a&ailability of finance to pay for new functions. It has been estimated that it will cost the pro&inces at least 1s)%% crores to adequately carry out the new responsibilities assigned under the 1;th Amendment. The additional resources that ha&e been madea&ailable by the formula adopted by the 'e&enth ?ational 5inance =ommission Award amount to only 1sB! crores( or about a si-th of the needed amount. This gap should be met by the pro&inces raising their own resources. They will need both authority and competence to achie&e this ob2ecti&e. At about %.! per cent of 78P( pro&incial own resource is &ery low. There are se&eral reasons for this and they need to be addressed by creating appropriate in"centi&es for the local authorities. At this time( pro&incial ta-ing capacity is lowE pro&inces ha&e a limited administrati&e capacity to manage their financesE the ta- base has been reduced as a result of se&eral e-emptions and preferential treatmentE and political considerations pre&ent pressure on property owners and other potential ta-payers to pay their dues to the go&ernment. 8ecentralisation needs to go beyond the pro&incial le&el. Take the American system as an e-ample. It comprises some *%(%%% go&ernments or 1(;%% go&ernments per state. The go&ernment( in other words( reaches down to the people. And( with emphasis on electing rather than appointing officials responsible for pro&iding ser&ices to the people( they are also accountable to them. Americans choose more than half a million elected officials and in many places they also get to &ote directly on legislation through initiati&es and referenda. This structure pro&ides unparalleled openings for citi9enship participation. Another important problem with the way the process of decentralisation is being carried out in Pakistan is to gi&e to the e-ecuti&e branch the responsibility for resol&ing disputes between the go&ernments at different le&els and for guiding further e&olution of the system. In mo&ing forward there has to be much greater in&ol&ement of local communities and that can only happen if they are able to ha&e their &oice heard. As one commentator( writing onthe American e-perience( puts it( [creating constitutional rights without foundation frays the community fabric and( with it( the &ery notion that the ma2ority can enact into law some e-pression of shared &alues that make ours a society whose whole is better than the sum of its parts. In pushing a constitutional &ision of location in larger social settings( liberals risk weakening the communal &alues and institutions that best afford our most disad&antaged the chance of good life[. There are two main conclusions to be drawn from this discussion.

'ince the new federal structure was adopted in great hurry( there are a number of problems with its design. 'ome of these will create enormous financial problems and constrain the ability of the central authority to manage the economy. The other problem with the entire process of de&olution is its topdown approach. 0ocal communities were left out while the new system was being designed. There was the assumption that since the designing was being done by the people[s elected representati&es( the people[s rights will be protected and their aspirations fully realised. >ut in e-ercising authority policymakers are influenced by where they sit and not always by whom they represent. 8e&olution was a centrally managed e-ercise and which means that local interests were not fully reflected. It is important to correct the course on which we are proceeding.the American e-perience( puts it( [creating constitutional rights without foundation frays the community fabric and( with it( the &ery notion that the ma2ority can enact into law some e-pression of shared &alues that make ours a society whose whole is better than the sum of its parts. In pushing a constitutional &ision of location in larger social settings( liberals risk weakening the communal &alues and institutions that best afford our most disad&antaged the chance of good life[. There are two main conclusions to be drawn from this discussion. 'ince the new federal structure was adopted in great hurry( there are a number of problems with its design. 'ome of these will create enormous financial problems and constrain the ability of the central authority to manage the economy. The other problem with the entire process of de&olution is its topdown approach. 0ocal communities were left out while the new system was being designed. There was the assumption that since the designing was being done by the people[s elected representati&es( the people[s rights will be protected and their aspirations fully realised. >ut in e-ercising authority policymakers are influenced by where they sit and not always by whom they represent. 8e&olution was a centrally managed e-ercise and which means that local interests were not fully reflected. It is important to correct the course on which we are proceeding. ,aking decentralisation work \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...
#275 Monday, Ma #! 26, 2012

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

#xperimenting with growth models

By Shahid Javed Burki Monday, 2# March, 2012 PA/I'TA?[' poorly performing economy calls for a well thought out growth strategy. The Planning =ommission has drafted one but it is unlikely that it will get to be implemented. It calls for a ma2or change in the way the economy needs to be managed and de&eloped. Its aim is to realise a reasonably high and sustainable rate of growth by concentrating not on in&estment but on increasing the efficiency of the economy. The proposedstrategyneeds the full backing of the political establishment which will be difficult to secure as the go&erning political coalition gets ready for the ne-t general election. +hat a quick reading of history tells us is that Pakistan has been sub2ected to so many policy changes in the past that those who would ha&e liked to in&est in the economy are holding back. In&estors don[t appreciate uncertainty. 5rom the perspecti&e of economic management( Pakistan[s history di&ides fairly neatly into se&eral periods. The first began almost ! years ago when the country gained independence and lasted for a do9en years. Those who go&erned in the period from 1*$# to 1*!; were preoccupied with two problems. The first was the way the Indian administration under the leadership of Aawaharlal ?ehru looked at Pakistan as the latter triedstand on its own economic legs. It appeared to those responsible for managing the Pakistani economy that India was determined to cripple it( perhaps in the hope that ,uhammad Ali Ainnah( Pakistan[s founding father( would apply for readmission into the Indian union. The second problem the first Pakistani administration needed to deal with was the settlement of eight million refugees who arri&ed from India. Thus preoccupied( the new administration had no time to deal with the question of economic growth. That was left to be dealt with at a later date. 'erious economic planning began under 7eneral Ayub /han( the first military president. He placed the Planning =ommission in his own office and appointed himself as the chairman. 'aeed Hasan( a senior ci&il ser&ant( was appointed the =ommission[s deputy chairman. The president also asked the .nited 'tates for technical assistance for preparing the 'econd 5i&e Hear Plan. This came in the form of nearly a do9en economists from Har&ard .ni&ersity who were deployed as ad&isors in the Planning =ommission and in the then two pro&incial planning and de&elopment departments. A plan was produced in 1* % to co&er the 1* %" ! fi&e year period. It had three important featuresD emphasis on growth( reliance on the pri&ate sector with

only light guidance pro&ided by the go&ernment( and significant augmentation of domestic sa&ings by official de&elopment assistance :48A<. The .nited 'tates and theInternational 8e&elopment Associations :I8A<( a new affiliate of the +orld >ank( were the main sources of 48A. The second plan was remarkably successful in accelerating the pace of economic growth. It more than doubled the increase in per capita income which reached an unprecedented le&el of three per cent a year. The third plan :1* !#%< followed the same model and would ha&e produced the same result had it not been interrupted by two de&elopments. The first was the 1# days war with India in 'eptember 1* ! 2ust as the third plan period was beginning. The second was Ayub /han[s illness which weakened him physically and affected his resol&e to bring about the country[s rapid de&elopment. He was forced out office in 1* * by 7eneral Hahya /han( the commander"in"chief of the armed forces. The new president was himself thrown out of office after he had caused 6ast Pakistan to separate and become the independent state of >angladesh. This change of administration happened in a coup in 8ecember 1*#1 staged by a group of young military officers. They brought Julfikar Ali >hutto( a ci&ilian( to go&ern first as president and chief martial law administrator and later as prime minister. >hutto had a deep interest in economic matters but his approach was quite the opposite to the one that had produced the 1* %s miracle. His model of economic management and change also had three elementsD a ma2orrole for the state( state"led industrialisation( and tapping the rapidly increasing wealth of the ,iddle 6ast for e-ternal finance. He achie&ed the first ob2ecti&e by nationalising the pri&ately owned large industries( banks and insurance companies. To achie&e the second( he established a number of state"owned corporations. 5or the third he encouraged the migration of millions of construction workers to help the oil"rich countries build infrastructure. These policies 2olted the economy from which it took a long time to reco&er. It was surprising that >hutto an a&owed socialist did not ha&e any place in his scheme of go&ernance for disciplined planning. The public sector pro2ects implemented during the period were not sub2ected to the kind of analysis used during the period of Ayub /han. ,any reflected the whims and interests of the ruler and the ruling establishment. The ne-t economic period began in 1*## when >hutto was remo&ed from office and lasted for 11 years until the death of 7eneral Jiaul Haq( the country[s third military ruler. The new administration attempted to put the economy back on the track on which it was mo&ing before the >hutto interregnum. Powerful bureaucrats and a clutch of economists were back in power. ,ahbubul Haq( the principal author of the 'econd and Third Plans( was brought back from the +orld >ank and placed in change first of the Planning =ommission and then of the ministry of finance. 7rowth returned to the econo"my but not because a well thought out strategy was put in place. It was largely the consequences of the large flow of e-ternal assistance pro&ided by the .nited 'tates in return for the effort Islamabad made to e-pel the armed forces of the 'o&iet .nion from neighbouring Afghanistan. ,ost of the structural changes made during the >hutto period remained. Pakistan had to wait for the death of President Jia before the pri&ate sector once again be"gan to play the

leading role in managing the economy. Het another distinct period in the country[s economic history saw the re&ersal of some of >hutto[s policies. The financial sector was placed in pri&ate hands and [+ashington =onsensus[ set of policles were adopted. These included the opening of the economy to the world outside. Howe&er( this fundamental change in the approach did not bring growth back to the economy.>y that time a number of fault lines had opened up under the economic structure for the country and these were not remo&ed since no administration stayed long enough to affect change. The country was politically unsettled. 'e&en administrations four elected and three appointed as caretakers go&erned during the ele&en year period between Jia[s death and the fourth military inter&ention in 4ctober 1***. .nder President Per&e9 ,usharraf the tried and tested model of economic management was put in place again. The three features of the ,usharraf[s model were the pro&ision of space in which the pri&ate sector could operate without much constrain by the state( centralisation of economic policy making with little pro&incial autonomy( and dependence on e-ternal finance to augment paltry domestic sa&ings. As was to be e-pected( the economy rebounded largely because of the acti&ation of the capacity that had been created during the earlier periods. +ith the return of democracy in )%%;( nine years after ,usharraf[s rule( the political establishment was too preoccupied with managing the transition to ci&ilian rule to pay much attention to economic management. This is where the situation stands today while the economy continues to slip without much guidance pro&ided by the policymakers. +ill the administration that takes office following the ne-t general elections adopt a &iable growth strategy3 4nly time will tell. 6-perimenting with growth models \ ePaper \ 8A+?.=4, YYYYYYYYYYYYYYYYYY ?o signature...
#276 Monday, A' (l 02, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

The (idd"e c"ass de1a&e

The (idd"e c"ass de1a&e

By Shahid Javed Burki .u1"ished7 !ri" 2, 2012

There is a debate both inside and outside Pakistan about the si9e of the middle class in the country. I had suggested in an article written some time ago for 8awn that the si9e of the middle class was about $% million. At that time the countrys population was about 1#% million. If my estimate was correct( the Pakistani middle class accounted for a bit less than )$ per cent of the population. This did not seem to be an unreasonable estimate for a country at Pakistans stage of de&elopment. I had used a simple back"of"the"en&elope type of calculation to reach my estimate( which used the +orld >anks income distribution numbers for Pakistan that pro&ided the shares of income for the upper and lower deciles of population and for the quintiles in between. >ased on considerably more robust pieces of analyses carried out by se&eral Indian scholars( it was determined that the Indian middle class accounted for some $% per cent of that countrys population. This meant that some !%% million people in India could be said to belong to this economic and social class. +hile the Indian estimate generated considerable e-citement among western businesses( my estimate for Pakistan pro&oked some contro&ersy. At a conference held in >elagio( Italy( some participants from the .' doubted my numbers( suggesting that it was a &ery high estimate. +hy this questioning when a much larger one for India was readily accepted3 The answer is simple. There is a group of scholars in the .' who belie&e that the endgame has been reached for Pakistan as we :and they< know the country today. They belie&e that Pakistan is now ripe for takeo&er by Islamic radicals. 4nce they ha&e succeeded in o&erthrowing the current political and social order( they will go on to establish a regime not too different from the one that has been go&erning for the last se&eral decades. 'uch a regime( like the one in Tehran( will be hostile towards the +est( in particular towards the .'. It will also be much more dangerous being in possession of a large nuclear arsenal N now belie&ed to be the fourth largest in the world N a radical Islamic Pakistan would pose a serious threat to the .'( and by implication( to the state of Israel. The +est should( therefore( be prepared to take action to pre&ent such an unpleasant outcome. It was( howe&er( not specified e-actly what action should be taken. The middle class estimate( such as the one I had offered( countered this line of thinking. It was recognised that the middle classes normally are more inclined towards modernity than other classes. In this conte-t it is worth quoting from 5rancis 5ukuyamas recent article in 5oreign Affairs. He writesD FIt is most broadly accepted in countries that ha&e reached a le&el of material prosperity sufficient to allow a ma2ority of their citi9ens to think of themsel&es as middle"class( which is why there tends to be a correlation between high le&els of de&elopment and stable democracyG. He accepts the fact that there can be de&iations from this path( as has been the case in Iran and 'audi Arabia( but that is e-plained by their enormous oil wealth which they can use to obtain the loyalty of the middle class. The Arab 'pring has shown N he maintains N that the middle class can be mobilised against any kind of dictatorship including the theocratic ones to which the followers of radical Islam aspire. +hat stands in the way of the nightmare seen in Pakistan by some American scholars is the middle class. If it is large enough( their fear is unfounded and no action is needed. The academics ad&ocating that the +est should be prepared( dont like this conclusion to be reached since it is likely to breed complacency amongst policymakers. ,ore serious work has been done on the si9e of the middle class in Pakistan since I wrote my article. In a recent contribution by the economist 'akib 'herani to 8awn titled F=onsumption conundrumG :,arch )B<( he presents a much higher estimate than I had pro&ided( both in terms of the si9e of the middle class in Pakistan and its proportion in the

total population. FI updated the figure arri&ed at earlier( making one crucial ad2ustmentD for the estimated si9e of Pakistans undocumented :or Mblack economy<. The ad2usted figure for the middle class is a staggering #% million people( or $% per cent of the populationG( he writes. This brings the Pakistani situation closer to the one that is generally accepted for India. A large Pakistani middle class will keep Pakistan mo&ing on a relati&ely liberal path in terms of its economic and political de&elopment. This class is also influenced by the members of the large Pakistani and ,uslim diasporas( particularly in the .'. The Pakistani middle class is well"represented in the &arious diasporas dispersed across the globe. ?otwithstanding the 6uropean and American fears about the penetration of radical Islam into these communities( large segments of these populations ha&e picked up the liberal economic( political and social &alues of their host populations. This makes the diasporas more modern and secular than the nati&e populations from which they are drawn. +ith the de&elopment of communication technologies in recent years( the ,uslim communities in the +est are not only in touch with their homelands( they are also influencing the populations from which they come from. +e know from the se&eral case studies that ha&e been carried out to understand the dynamics of the Arab 'pring( that the diasporas had a deep influence on the e&ents leading up to the uprisings in the streets and the public squares. Prominent members of the diasporas are now prominently engaged in the political restructuring of countries such as 6gypt( 0ibya( and Tunisia. In Pakistan( Imran /hans rise has the support and financial backing of the Pakistani diasporas in >ritain( the ,iddle 6ast and ?orth America. I think it is safe to assume that Pakistans de&elopment will be deeply influenced by its middle class( which is not likely to adopt the radicalism on offer by &arious groups such as al Xaeda and the Taliban. YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#277 Monday, A' (l 02, 2012

Predator
'enior ,ember

Aoin 8ateD Aug )%%# 0ocationD /arachi PostsD )(!*1 ThanksD ;%# Thanked 1(#B* Times in ;B# Posts

5on1traditional trade opportunities in India

By Shahid Javed Burki Monday, 02 !ri", 2012 A0TH4.7H the pace has been slow( Pakistan and India are making progress in mo&ing towards normal trade relations. This was recognised by the comments made by 8r ,anmohan 'ingh( the Indian prime minister( after his meeting in 'eoul( /orea with his Pakistani counterpart.

He was appreciati&e of the fact that Pakistan had mo&ed from using a positi&e list to regulate trade with its neighbour to a negati&e list. As trade economists ha&e long argued( positi&e lists are more restricti&e compared to the negati&e ones. They also create rent" seeking opportunities for the officials who manage trade. Howe&er( gi&en the huge burden of history the two countries carry( it will take both time and effort before trade relations become close to normal( and goods( commodities( ser&ices and people begin to flow relati&ely freely across the border. In this conte-t( it would be useful to indicate some of the opportunities that e-ist on both sides of the border for the gains that could be made by producers( traders and consumers. Pri&ate industrial and commercial groups in both countries are preparing for more open trade. 4ne e-ample of the way industry and trade will be affected comesfrom some industrial groups in India. It was reported in both the Indian and Pakistani press that Indian oil companies including the Hindustan Petroleum =orporation :HP=0<( the Indian 4il =orporation :I4=0< and 7AI0 India are preparing to supply petroleum products and liquefied natural gas to Pakistan. There are enormous opportunities in Pakistan for products such as these produced in India. Pakistan[s refining capacity meets only half of its total domestic requirement while India now e-ports almost one"fourth of the 1;! million tons it refines. A ,umbaibased oil analyst was quoted as follows by the Times of IndiaD [Pakistan[s mo&e to ease trade with India could translate into a big opportunity for HP=0 as it will be best positioned to use its >hatinda refinery as a critical gateway.[ This will require the building of a !% km pipeline connecting the refinery being erected in the Indian Pun2ab with 0ahore in Pakistan. [+e plan to tap capital markets as soon as our >hatinda refinery nears completion to lay the pipeline[ said a member of the HP=0 board. Also( India[s largest oil refiner( the Indian 4il =orporation( is e-amining the possibility of connecting its Panipat and ,utthura facilities with the contemplated >hatinda"0ahore pipeline. 0iquefied natural gas is another product of interest for the Indianindustry since Pakistan does not ha&e domestic capacity for producing 0?7. The Indians estimate that by )%1 Pakistan could e-perience shortfalls of three billion cubic feet per day. A Pakistan delegation led by petroleum and natural resources secretary &isited ?ew 8elhi in late ,arch to hold discussion for facilitating trade in petroleum products and petrochemicals between the two nations. It is worth noting that entrepreneurs in India are looking at the possibility offered by the Pakistani market by not confining their attention to products. There is also talk of e-porting ser&ices to Pakistan. 8uring the ,usharraf period there was a &isit from senior Tata officials who wanted to create a presence for their IT wing in Pakistan. Tata is India[s largest information technology and consulting company. It has e-panded rapidly along with se&eral other firms based in India. They ha&e now begun to e-perience worker shortages in some skills that Pakistan has de&eloped but are not fully employed in its own IT industry. The Indians were hoping to set up shop in Pakistan. After showing some interest in the Tata initiati&e( the ,usharraf administration backed away( fearing political backlash in the

country. >ut smaller companies that would not ha&e a large footprint that would in&ite political noticeha&e &entured into Pakistan. I know of an Indian"owned company based in 'ingapore that has Pakistani programmers working in two offices( one in 0ahore and the other in Islamabad. The company[s=64 told me that the entire programming work for his enterprise is done in the Pakistani offices since he is able to find the skills he needs at a much lower price than he would pay in his nati&e India.5ilm industry is another area where the entrepreneurs in the two countries could work together. A Pakistani newspaper recently reported on a &isit to 0ahore by ,ahesh >hatt( an Indian film mak"er. He was part of an 11 member delegation from India that came to 0ahore to celebrate >hagat 'ingh[s death anni&ersary. [In )%%B( I recei&ed a lot of flak in India for saying that the centreof music in the sub" continent was /arachi. 6&en today that statement rings true([ he told an audience at the Pun2abi =omple- in 7addafi 'tadium. [Although Pakistan is going through a dark period( it can still take 'outh Asian culture forward. He also re&ealed that he was working on a pro2ect with the late 'almaan Taseer for the 2oint production of a film. The pro2ect is on hold following Taseer[s death but >hatt is confident that he will be able to mo&e forward. [I want to create a film in which #% per cent of the technical team is from Pakistan( only then the film will be profitable for the Pakistani film industry([ he told his audience. +hile India is industrially more de&eloped and its manufactured products will ha&e more prospects in the Pakistani markets( Pakistan should be able to do well in agriculture( agricultural processing( &arious industrial supply chains( and in some ser&ices. There is nothing wrong or belittling about using Pakistan[s potentially rich agriculture sector as leading the way to India. After all( 8enmark and the ?etherland( two of the richest countries in 6urope( are large e-porters of agricultural products to other states in the continent. To take one e-ampleD =ulti&ation and marketing of flowers in the areas around 0ahore are now big businesses. These could be de&eloped further once the large and rapidlygrowing Indian markets open up for Pakistan. +hen I was working for the +orld >ank on 0atin America I saw countries such as =olombia and 6cuador reap rich rewards by e-porting flowers to the .nited 'tates. These two countries are not close to America as 0ahore is to such large centers of consumption as 8elhi in India. Pakistan[s well de&eloped and rapidly de&eloping fashion industry is another non"traditional area of opportunity for the country. There are se&eral aspects of this industry that are attracti&e. It uses locally produced cotton cloth as the main input. It pro&ides employment to a growing number of women. It is managed mostly by women entrepreneurs. It is promoting the de&elopment of e-pertise in some of the educational institutions in the country. Periodically women from this industry go o&erseas to sell their produce to the e-patriate community in >ritain and the .nited 'tates. 5or them India offers an e&en better and larger market.

The important point about the opportunities that will open up as a result of the easing of trade restrictions in the sub"continent is that all of them cannot be anticipated at this point. An alert entrepreneurial class will be able to de&elop new ideas about products and ser&ices as trade begins to flow in an unrestricted way between Pakistan and India. httpDOOepaper.dawn.comO_epaperO8etai...$Y)%1)Y %!Y%%$ YYYYYYYYYYYYYYYYYY ?o signature...
#278 & (day, A' (l 13, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

8s"a(a1ad9s 8ndi66erence To+ards 2"o1a" 8ssues

By Shahid Javed Burki .u1"ished7 !ri" 9, 2012 It should be a matter of great concern in Pakistan that the countrys leadership remains totally obli&ious to the fact that the global economic and political order is being slowly reshaped. Islamabad is too concerned with the domestic economic and political situation to ha&e the time( or the inclination( to raise its sights beyond its borders. If that sight is raised( one would see the rapidly deteriorating situation in Afghanistan and how the .' is &iewing Islamabad. It is possibly because the policymakers in the Pakistani capital are so preoccupied with these kinds of concerns that they ha&e ignored the de&elopments that will affect the country in the not"too"distant future. Pakistans policymakers should be concerned that their country has been totally e-cluded from the deliberations that are currently going on to construct a new N or to reshape the old N global and economic and political order. I find it quite e-traordinary( and somewhat disturbing( that the Pakistani media( both the print and electronic &ersions( ga&e so little attention to the ?ew 8elhi summit of the >1I=' :>ra9il( 1ussia( India( =hina( 'outh Africa< nations. The meeting was held in ?ew 8elhi on ,arch )* when Prime ,inister Housaf 1a9a 7ilani was meeting with important political leaders( heads of the armed forces( and the chief of the main intelligence agency to fashion a new relationship with the .'. That meeting appropriately recei&ed full media co&erage. >ut the media did not seem too interested in the summit of the fi&e heads of states of the >1I=' nations ne-t door in ?ew 8elhi.

Hosted by the Indian Prime ,inister 8r ,anmohan 'ingh( the >1I=' summit discussed a number of issues that should also be of immediate concern for Islamabad and Pakistans informed citi9enry. That apparently is not the case. 4ne reason why Pakistan is treated with such little respect is that it has made &ery little effort to get in&ol&ed in global economic and political matters. There is a lesson to be learned from the way Turkey has positioned itself on the global stage. It was not a &ery long time ago that Ankara was totally ignored by the international community. ?ow it is represented effecti&ely in a number of different forums. The ?ew 8elhi meeting was the fourth time that the >1I=' leaders ha&e met. The first meeting was held in 1ussia in )%%*. This time around they took up a number of matters on which they belie&e a collecti&e decision would ha&e a greater impact than acting alone. 4ne of the issues taken up( on which no definiti&e stance was adopted( was about the restructuring of the institutional structure that supports the old global economic order. They want their countries to ha&e a greater say in the way these institutions are managed and make their policies. >oth the I,5 and the +orld >ank are important for Pakistan. The country leans on the former during difficult times. It relies on the latter all the time for de&elopment assistance. ?ot only has Islamabad not taken much interest in the way these institutions are likely to e&ol&e to maintain their rele&ance in a rapidly changing global economy( the country also has e-tremely weak official representation in these two institutions. The >1I=' nations ha&e e-pressed some interest in creating a de&elopment bank of their own. If established( this new financial institution will draw its capital from the de&eloping world. All the >1I=' nations ha&e large e-ternal account balances. =hina now holds the worlds largest foreign e-change reser&es. If it decides to create a +orld >ank type"of" institution( it will ha&e no problem finding capital for it. The institution might not be able to ri&al the +orld >ank in terms of access to resources but it could certainly acquire the significance that the Asian 8e&elopment >ank en2oys. It should be of interest to Pakistan to keep a watch o&er the working of the process that might e&entually lead to the establishment of a >1I=' bank. How will such an institution be managedE who will ha&e access to its resources and how will that access be determinedE what will be its lending policiesE how will it deal with other de&elopment institutions3 These are some of the questions that will be raised and when the answers are found( they would ser&e the interests of the founding members and other de&eloping nations. Is there some ministry or go&ernment institution in Pakistan that is concerned with such issues3 The answer is( probably not. 8o we( in Pakistan( know that Aames 4?eill( the author of the >1I=' idea has now come up with another suggestion3 He belie&es that the world would do well to watch the progress being made by another group of countries he calls the Fnew ele&enG. This group includes Pakistan along with more dynamic( emerging economies such as Argentina( Indonesia( ,e-ico( 'outh /orea( and Turkey. These countries ha&e either the demographic si9e :for instance Indonesia( ,e-ico and Turkey< or high rates of economic growth :for instance 'outh /orea and Turkey< that will ha&e considerable influence on the working of the global economy. If that idea is picked up( would it also lead to the de&elopment of an institutional de&ice or a forum where these countries can acti&ely pursue their interests3 The main conclusion I want to draw from this discussion is that Pakistans policymakers are so absorbed in dealing with a rapidly deteriorating domestic situation( that they ha&e not turned their attention towards the way the global system is being reshaped. Islamabad may assign a low priority to what is happening to the economic world some distance away from its borders. This will pro&e to be costly neglect. +e must operate in a system in which we

ha&e a &oice and a role in de&eloping it. This is not the case at this time. .nless we change our priorities we will be functioning in an en&ironment that will remain hostile towards us( and in which our position will be increasingly uncomfortable. Source7 8s"a(a1ad-s 8ndi66erence To+ards 2"o1a" 8ssues YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#279 Monday, A' (l 16, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

'o+ na&ions 6ai":

By Shahid Javed Burki .u1"ished7 !ri" 1#, 2012 4ne answer to the question Mhow and why nations fail3 comes from the authors of a powerful new book +hy nations fail( that has become the talk of the de&elopment community. In it the authors N Aames 1obinson( a political scientist teaching at Har&ard .ni&ersity and 8aron Acemoglu( an economist teaching at ,IT N suggest that for a number of poor and struggling countries( the future looks grim. In most de&eloping societies what they call Fe-tracti&e institutionsG dominate the landscape and pre&ent the emergence of Finclusi&e institutionsG without which de&elopment cannot and will not occur. 'hould we apply this idea to todays Pakistan3 Pakistan has been shaped by ideas. 'ome of these were de&eloped by those within the society. 'ome were borrowed from abroad. The two"nation theory e&ol&ed from the thinking of ,uhammad Iqbal and ,uhammad Ali Ainnah. The idea behind it was simple but powerful. These two leaders of the ,uslims in >ritish India were con&inced that their community will not get a fair deal from a political system that was dominated by the Hindus. They argued for the creation of a separate homeland for the ,uslims in which they will they will be able to lead their li&es according to their beliefs. In the area of economics in which Pakistan had initially few thinkers of its own( there was a great deal of borrowing of ideas from the world outside. In the 1*!%s and the 1* %s( economists belie&ed that countries remained poor because they lacked capital. The solution was to augment their meager domestic sa&ings by pro&iding them cheap money. This led to the adoption of plans by the worlds rich nations to transfer %.# per cent of their total

incomes to poor countries as aid e&ery year. The rich also set up institutions such as the International 8e&elopment Association( I8A( as an affiliate of the +orld >ank to pro&ide concessional assistance to poor countries that lacked creditworthiness to tap the financial markets. This approach to de&elopment resulted in creating dependence of the poor on the rich. Pakistans geography made it possible for those who dominated politics to trade it off with foreign flows of capital. In taking that route they made the country a sla&e of those who had the money to gi&e. There were growth spurts in the 1* %s under 7eneral Ayub /han( in the 1*;%s under 7eneral Jiaul Haq and in the early )%%%s under 7eneral Per&e9 ,usharraf. The high rates of growth became possible since easy money became a&ailable from the .nited 'tates in return for supporting the latters strategic interests in the area in which Pakistan occupied an important place. The fact that this always happened under military rule is easy to e-plain. Army rulers could turn Pakistan around without worrying about peoples reaction. This dependence on cheap foreign capital for promoting de&elopment did not always work and ine&itably resulted in academics asking an important questionD 8oes aid matter3 The answer was that most of the time aid"induced de&elopment benefitted the rich and the Fe-tracti&e institutionsG rather than the poor. This was certainly the case in Pakistan. In the 1*;%s and the 1**%s( a consensus de&eloped that countries remained poor because of poor economic policies. This emphasis on policies led to the de&elopment of a framework that came to be called the M+ashington =onsensus. It encouraged the de&eloping world to pull the state back from managing the economy and to open domestic markets to both domestic and foreign players. 4nce( again Pakistan was at the forefront of allowing this idea to shape thinking on de&elopment. It was the ,usharraf go&ernment under the influence of a banker who had worked in a foreign institution all his life that 2umped on the M=onsensus bandwagon with predictable results N a high rate of economic growth( increase in income inequality( domination of a few o&er the institutions of go&ernance. The situation did not change with the change of regime when the military was replaced by an elected ci&ilian administration. .nder the watch of the peoples elected representati&es the economy slumped( the incidence of po&erty increased( consumption by the rich grew but that by the poor declined( foreign aid declined and pressure on foreign reser&es increased. There were negati&e de&elopments on the political and social fronts as well. /arachi e-ploded with ethnic &iolence( the incidence of urban crime increased( while the quality of go&ernance deteriorated. The country appears to be heading for a disaster. +ith these de&elopments( Pakistan is sometimes called the worlds most dangerous placeE sometimes a fragile stateE and sometimes it is seen as a failing state. +hy did this happen as the country was mo&ing towards the establishment of a democratic system of go&ernance3 There was the belief that a democratic system was better at inclusi&e economic de&elopment by which economists mean the pattern of economic growth that pro&ides for the poor and the disad&antaged. +hy was that not happening in Pakistan3 6nter ,essrs 1obinson and Acemoglu to pro&ide an e-planation that is rele&ant not only for Pakistan but for do9ens of similarly placed countries. They argue that there is a strong correlation between politics and economics. =ausality can run in both directions. In open and democratic systems most changes occur following elections but elections dont necessarily produce the institutions that pro&ide for inclusi&e economic de&elopment. In the cultures dominated by narrow elites elections strengthen their position. The result is that instead of producing Finclusi&eG institutions( they de&elop Fe-tracti&eG institutions. The latter type of institutions e-tract from the economy as well as society( for the benefit of the elites. The poor and the less pri&ileged are left out in the cold. This is precisely what has happened in

Pakistan in recent years. The making of policy is dominated by those who are committed to ser&ing their own interests( not caring for the society at large. 'uch an institutional structure can be self"perpetuating and will ultimately lead to social( political and economic chaos. This is how nations fail. +e seem to be mo&ing towards that situation. Source7 'o+ /a&ions $ai": YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#280 Tuesday, A' (l 24, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

)ec"ai(in* "os& *round

)ec"ai(in* "os& *round

By Shahid Javed Burki .u1"ished7 !ri" 24, 2012 It is fair to suggest that e&er since Pakistan began life as an independent state( it has ne&er de&eloped a sound growth strategy to deli&er a high rate of 78P increase that would be sustainable. It followed the simple production function approach put forward be the early thinkers in the field of de&elopment economics. According to it( all that was needed for economic growth was to combine capital with labour. Ha&e enough of both and the result would be a respectable increase in national income. Pakistan had plenty of labour but not enough capital. 5or the latter( it culti&ated friends abroad that were prepared to gi&e it the needed funds as long as their interests in the area around Pakistan were kept in mind. 5irst the .'( then =hina( and still later( 'audi Arabia pro&ided the required finance. =onsequently( the economy did well when large doses of e-ternal finance were a&ailable. It performed poorly when the friends tuned away( not happy with what Islamabad was prepared to do in return for the fa&ours it recei&ed. The economy has hit a rough patch at this time( partly because foreign friends are not satisfied with what they are recei&ing in return. There is( of course( a different approach to de&elopmentD to mobilise domestic resources for needed in&estment. >ut this will need a sense of confidence on the part of those who ha&e the capital to in&est in the economy. 6conomists ha&e long recognised that confidence is by far the most important determinant of economic performance. Those who de&eloped the old growth model had factored it out of their equation. They did not recognise that e&en if capital and labour are present in abundance( they will only begin to work together if the

owners of capital had the confidence that there will be good results produced from their effort. This confidence is absent at this difficult moment in Pakistans history. =ould this be restored and could the lost ground be reclaimed. The answer is yes( but that would need the adoption of public policies which would pro&ide confidence to the people that those in positions of power will be acting for the larger good of the citi9enry( not 2ust for their narrow interests. The right time to re&i&e confidence will be when a new administration takes office following the ne-t general elections to be held( presumably( sometime early ne-t year. At that time( whoe&er becomes the prime minister should announce a set of policies aimed at confidence" building. Those who are reflecting on this matter probably ha&e their own listsE my list has two important items. The first( of course( is impro&ing the quality of go&ernance. 4nly when that happens that people with capital will begin to in&est in the economy rather than sending capital abroad as seems to be happening now. The well"to"do are acquiring foreign assets e&en when the return from them is much lower than would be the case if domestic corruption had not increased their transaction costs. If it takes a significant proportion of the capital being committed to a particular enterprise 2ust to get the go&ernments support( there will be a lowering of the rate of return. There are se&eral ways of reducing corruption. 4ne of these is a system of accountability that is effecti&e and efficient and also one in which people ha&e a high le&el of confidence. Pakistan has tried se&eral systems o&er the last half"century. They did not work for the simple reason that they were not allowed to be autonomous. They were controlled by the e-ecuti&e branch( the &ery branch that was to be the sub2ect of accountability. A go&ernment that is serious about making elected and public officials accountable must create a system that is beyond the reach of the people and the institutions that are being looked at. This should not be an impossible ob2ecti&e to achie&e. The country is working with different approaches to make appointment to offices and functions such as the =hief 6lection =ommission and senior 2udiciary as free of influence as possible. The same should be possible for those who manage the accountability process. The regulatory system is another source of corruption and another area that reduces the confidence of the potential entrepreneurs that their in&estments will pro&ide the needed returns. The current system of regulation was built o&er timeE some of it dates back to the time of the >ritish. The entire structure needs to be carefully re&iewed and the pro&isions that do not ser&e the citi9ens interest should be remo&ed. 4ne good e-ample is the infamous '14 issued by those who manage e-ternal trade to pro&ide relief to a particular industry or enterprise. 7i&ing so much power to one particular part of the bureaucracy almost always in&ites rent"seeking beha&iour. The new prime minister by announcing 2ust these two measures N an accountability system that is free of influence and the re&iew of the regulatory system with the intention of reforming it N will help to restore the confidence of the currently disheartened likely in&estors and get them to participate in making the economy work again. Aust the fact that the go&ernment has an interest in turning the economy around would bring back hope to the community of potential in&estors.

.akis&an7
By Shahid Javed Burki

coun&ry in crisis

.u1"ished7

!ri" 30, 2012

Pakistan is attracting a great deal of academic and analytical interest. That is not surprising. 'ome ha&e called it the most dangerous place on earth. The titles of a number of recent books on Pakistan throw light on the &arious aspects of a state and society in deep trouble. Anatole 0ie&en( in PakistanD a hard country :)%11<( looks at the social and political structures of a country that( e&en si-"and"a"half decades after achie&ing independence( is still engaged in the process of creating one nation out of many different people. The Mhard in the books title has se&eral meanings. To begin with( the country is not easy to understand. It is full of contradictionsD modernisation &ersus e-treme conser&atismE asceticism &ersus lo&e for the good things of lifeE a tradition of philanthropy &ersus little regard for the sufferings of the less ad&antagedE isolationism &ersus a deep desire to work with the world( in particular the +est. The Mhard also refers to the fact that though torn by numerous conflicts that di&ide its people( the country keeps muddling through. It is a hard country to put down. +hat gi&es it resilience is the set of local loyalties that bind the citi9ens to the members of the political establishment that( in turn( meet the peoples basic needs and aspirations. ,aleeha 0odhis Pakistan beyond the crisis state :)%11< is a rare book in the sense that its contributing authors are positi&e about the countrys future. They belie&e that the contemporary security challenges and long"term demographic pressures and energy shortages can be o&ercome if the countrys political establishment can muster the political will to undergo wide"ranging institutional and structural economic reforms. The authors look at what might emerge in the country once the difficulties it faces are o&ercome. At the end of a long tunnel through which the country is now passing( they see it emerging not &ery different from a number of other Asian states that ha&e already produced high rates of sustainable 78P growth. They argue that Pakistan is capable of transitioning itself into a stable modern Islamic state( though bold reforms are necessary. The country can be reeled back from the brink of crisis. According to Ahmed 1ashid( the country is already on the brink. His latest book( Pakistan on the brinkD the future of Pakistan( Afghanistan and the +est :)%1)<( adopts a tone e&en more somber than his earlier ones. His reading of the Pakistani situation is different from that of 0ie&en and those of the contributors to 0odhis &olume. The former sees some resilience in the structure of the Pakistani society( while the latter belie&e that actions by the ruling establishment can not only sa&e the situation from further deterioration( they can also mo&e the country toward a better future. 1ashid( howe&er( is considerably less optimistic. He lays the blame equally on those who ha&e ruled in the past and those who are ruling right now. FThey take no responsibility for pro&iding ser&ices to the public( while indulging in large"scale corruption. They allow an unprecedented economic meltdown to become worse by declining to carry out reforms or listening to international ad&ice.G 'ome of the analytical interest in Pakistan looks at the impact it is likely to ha&e on the world if the crises it faces are not managed. According to Jahid Hussains The scorpions tailD the relentless rise of Islamic militancy and how it threatens America :)%1%<( Pakistan carries a lot of poison stored in its body. Pro&oked( it will sting. Ha&ing deli&ered the poison it carries it may die( as scorpions are said to do once they ha&e attacked( but its sting could pro&e to be fatal for its &ictim. 'tephen =ohens The 5uture of Pakistan :)%11<( :which he has edited< does not belie&e( at least according to the &olumes editor( that the country has much of a future. >ut( in line with Jahid Hussain( the editor of this rather depressing &olume suggests that this highly troubled 'outh Asian nation will go a long way toward determining

what the world looks ten years from now. They ad&ise the world to watch Pakistan closely and prepare for the worst. To this list of recently publishedbooks we should add the +orld >anks +orld 8e&elopment 1eport( )%1% which comes with the subtitle( =onflict( 'ecurity and 8e&elopment . +hile not entirely focused on the situation in Pakistan( It sees the country belonging to the category of what it calls Ffragile statesG. The >anks report has one powerful messageD that there is enough e&idence from around the globe to suggest that the fragility of the states it e-amines need not result in their failure. They can reco&er but will need to be kept on life support for years to come. There is one thing common to all these analyses. They focus on many crises Pakistan currently faces. It is a perfect storm through which the country will ha&e to na&igate. +hether it can go through without capsi9ing will depend on how the Pakistani establishment is able to steer the state towards the safety of a shore. +hat will help those in command is to de&elop a better appreciation of the nature of the many crises they must deal with. They should also ha&e some idea about the way the country dealt with crises in the past. Source7 ,oun&ry in ,risis YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o siddiqui;; :,onday( April B%( )%1)<
#282 Monday, May 07, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

The .unAa1 s&ory

The .unAa1 s&ory

By Shahid Javed Burki .u1"ished7 May 7, 2012 It will take more than one short article to tell what the 0ahore"based Institute of Public Policy :IPP<( >eaconhouse ?ational .ni&ersity( calls the FPun2ab storyG. This is the subtitle of the institutes fifth annual report launched on ,ay )( in 0ahore. As has been the practice

in the past fi&e years since the institutions founding in the fall of )%% ( the annual reports come in two parts. The first deals with the state of the economy at the time of the writing of a particular years report. In each year( since the first report was published in the spring of )%%;( the mood of the authors has become progressi&ely more sombre and their predictions for the future of the economy increasingly dire. This year( they ha&e concluded that the economy may be heading towards another ma2or crisis unless remedial action is taken by those who currently hold the reins of power in Islamabad and the four pro&incial capitals. The other important recent de&elopment in Pakistan is the de&olution of considerably greater e-ecuti&e authority to the pro&inces. This happened as a result of the passage of the 6ighteenth Amendment to the =onstitution in )%1%( which was preceded by the announcement of the 'e&enth Award by the ?ational 5inance =ommission :?5'< in late )%%*. The ?5' has significantly increased the flow of resources from the centre to the pro&inces. The 6ighteenth Amendment has greatly e-panded the scope of pro&incial operations( making it possible for them to do what could not be done under the pre&ious constitutional dispensation. It is for this reason that we in the IPP thought that it would make a good deal of sense to start writing the pro&incial de&elopment stories. In the report for )%1)( we tell the Pun2ab story which will be followed in the coming years by the stories of other pro&inces. It made sense to start with Pun2ab. It is the largest pro&ince in the federation in terms of the share in population as well as in the national product. It is also the most important gateway to India as the trade between the two long"feuding nations is re&i&ed after a lapse of almost si- decades. A trip to the +agah border is a good indication of the interest the citys citi9ens ha&e in the opportunities that will become a&ailable once trade begins to flow without many hindrances. 6&ery late afternoon( thousands of 0ahores citi9ens take the trip to the border with India to watch the elaborately choreographed Mchanging of guards ceremony. That this show will become a part of the history is shown by the massi&e infrastructural de&elopment at a stones throw from the old border. A new gateway has been constructed there to facilitate trade between both countries. As we dro&e to the old border to watch the change of guard ceremony( we saw scores of trucks laden with Pakistani gypsum to be taken across the border to feed Indias growing appetite for cement. +e were told that a con&oy of trucks was also waiting on the Indian side bringing in fresh agricultural produce to Pakistan. The composition of this trade will change enormously as the current restrictions on trade are remo&ed. This will happen as the two countries continue to press for the normalisation of economic and trade relations among them. Pun2ab is the pro&ince that is likely to be affected the most by this de&elopment. This de&elopment along with the process of de&olution of economic authority to the pro&inces is the reason why the IPP decided to focus our attention on pro&incial de&elopment. The Pun2ab story is also important since it pro&ides a menu of options for the policymakers to take full ad&antage of pro&incial dynamics to rescue the Pakistani economy from the current slump and hence( it is the focus of the IPPs )%1) report. +hat the story is( will be the sub2ect for the ne-t few columns in this space. Source7 The .unAa1 S&ory YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga

,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o rain007 $or This 4se6u" .os&7

/amran =haudhary :,onday( ,ay %#( )%1)<

#283 Monday, May 14, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.unAa19s econo(ic i(!or&ance

.unAa19s econo(ic i(!or&ance

By Shahid Javed Burki .u1"ished7 May 14, 2012 ,uch of what happens to the Pakistani economy in the future will be determined by what happens in its pro&inces. Islamabad is too distant from the citi9enry to address their immediate problems and to design a better economic future for them. 4ne reason that Islamabad dominated policymaking in Pakistan was the long rule by the military. The military belie&es in a highly centralised command and control system of management. That may work for facing an e-ternal enemy. >ut it is not the right way to manage a country that has close to )%% million people who are also e-tremely di&erse in their ethnic composition( the languages they use and their state of economic and social de&elopment. They need to ha&e go&ernments that are physically closer to them. That is why pro&incial( economic and social de&elopment must recei&e serious attention. .nder the 6ighteenth Amendment of the =onstitution( pro&inces ha&e been gi&en a much greater say in their de&elopment. How they should make use of the opportunities now being offered in order to impro&e the li&es of their citi9ens will depend not only on the quality of go&ernance that democracy produces for them but also on their demographic and economic situation. In a country as large as Pakistan( the pro&inces ha&e different economic potentials that need to be understood by policymakers. According to recent estimates( Pun2abs population is approaching the 1%% million mark. The current si9e of the population is more than fi&e times what it was in 1*$# when the pro&ince became a part of Pakistan. Pun2ab then had a population of 1; million of which only two million li&ed in urban areas. Its urban population is now 2ust a bit less than !% million( three times the si9e of the pro&inces total population at the time of Pakistans birth.

This demographic transition has had se&eral consequences but the most important consequence for the pro&inces future is the median age of its population( which is )) years. This means that about !% million of the people are at or below that age. >y pro&iding its youth with education and appropriate skills( the pro&ince could ensure a better economic future for itself. Ignoring the de&elopment of this cohort would mean political and social instability. Any program for pro&incial betterment must( therefore( focus on educating the young and pro&iding them with modern skills. 4&er the last ! years( Pun2abs economy has done better than the a&erage for Pakistan. 5or the final quarter of the )%th century( the pro&incial product grew at a rate of %.1 per cent more than the national a&erageE !.1 per cent a year compared to fi&e per cent for Pakistan as a whole. The annual report launched a few weeks ago by the 0ahore"based Institute of Public Policy has an interesting finding about the relati&e rates of economic growth for Pakistan taken as whole and for the pro&ince of Pun2ab. The pro&ince does much better than the country when the economy is mo&ing at a sluggish pace. 5or instance( in the relati&ely sluggish 1**%s( when the national product increased at a rate of $.$ per cent a year( Pun2abs gross income increased at a rate of $.; per cent. It was the re&erse in the more rapid growth period of the 1*;%s. Then( the Pun2ab economy e-panded at a rate %.1 per cent a year less than the national a&erageE si- per cent &ersus .1 per cent. The reason for this beha&iour of the pro&incial economy is the smaller share in manufacturing which is usually the sector that does better when the economy is growing rapidly. Its share in agriculture is larger than the national a&erage. Agriculture has fewer ups and downs in growth rates. There is an important change taking place in the structure of Pun2abs agriculture sector. The share of crops in the pro&incial product has declined in recent years( from !).* per cent in 1***")%%% to $ .; per cent in )%1%"11 due to a significant increase in the share of li&estock in the agricultural economy. The share increased by as much as #.! percentage pointsE from $$.) per cent to !1.# per cent in the same period. 4ne reason for this is that pro&ince is running out of land a&ailable for the production of such land"intensi&e crops as sugar cane and cotton while animals can be managed in fairly constricted space. The structure of the manufacturing sector in the pro&ince is also different from that in the rest of Pakistan. +hile Pun2abs share in large scale manufacturing has declined by more than a percentage point in the last one decade( from $%.B per cent in 1***")%%% to B*.) per cent( the share of small scale manufacturing has increased to #% per cent. It is in this part of the manufacturing sector that Pun2ab has a clear comparati&e ad&antage. The structure of the pro&incial economy and the recent changes within it make it clear that the pro&ince must adopt a growth strategy that will be significantly different from the one that would make sense for other parts of Pakistan. +hat the design of such a policy should be will be taken up in a later article. ?e-t week( howe&er( I will look at the differences among the &arious regions of the pro&ince. These differences must also inform the making of economic public policy. Source7 .unAa1-s <cono(ic 8(!or&ance YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#284

Monday, May 28, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Mi*ra&ion and econo(ic 1ack+ardness in .unAa1

By Shahid Javed Burki .u1"ished7 May 28, 2012 'taying with the Pun2ab story as told by the Institute of Public Policy :IPP< in its )%1) annual report( I will today begin to look at what has kept the pro&inces southern districts persistently poor compared to those in other parts of the pro&ince. There is a high le&el of correlation between the incidence of po&erty and the le&el of district de&elopment. There is nothing surprising about this result. The incidence of po&erty in the southern districts is $B per cent of the population while that for the pro&ince as whole is )# per cent. It is e&en lower in the districts in the pro&inces center and north. Po&erty is much more se&ere in small towns and cities than in the countryside. ,igration it appears has played an important role in this conte-t. 4ne reason for this may be that the rural poor choose to relocate themsel&es in the urban areas in the e-pectation that more 2obs will be a&ailable in the urban economy. 6conomists call this the Mpush factor when poor economic conditions in the place of residence persuades people to mo&e to the areas where there may be better prospects for finding 2obs. 4pposite to this is the Mpull factor when it is known that better paying 2obs are a&ailable in a particular geographic space some distance away from the place of residence. The push factor is independent of the amount of distance tra&elled by those who choose to mo&e out. 'hort distance migration especially in southern Pun2ab is an e-ample of the push factor. 4ne result of this is that po&erty simply gets e-ported from one place to the other. Aust by mo&ing out( the migrants help those who remain behind. Howe&er( they bring down a&erage incomes by mo&ing into the urban areas that dont ha&e many opportunities to offer. This appears to ha&e happened in the case of the southern districts of Pun2ab. 5or some reason( those discouraged by their circumstances in the countryside as are the people in the southern districts of Pun2ab pro&ince( ha&e preferred to relocate in the nearby towns and cities. They seem to a&oid long"distance migration. There are( accordingly( relati&ely few people from these districts in the well"populated Pakistani diasporas in the ,iddle 6ast( >ritain and ?orth America. A good e-ample is out"migration from 7u2rat district situated on the border of central and northern Pun2ab. The people from this district are to be found in many distant places. They constitute the bulk of the Pakistani population now

resident permanently in ?orway. I was once told by the ?orwegian ambassador to Pakistan that one percent of her countrys population was made up of Pakistanis. In 4slo( the countrys capital( Pakistanis accounted for 1% per cent of the population. ,ost of these people were from 7u2rat district. 4utmigration from 7u2rat to 6urope offers some interesting insights not only for understanding why people mo&e but also of the choice of their destinations. 4nce it was appreciated in the district that migration was an important and effecti&e contributor to po&erty alle&iation( people began to look acti&ely for the opportunities that were a&ailable. The 7u2ratis took ad&antage of the path disco&ered by illegal migrants from ?orth Africa to 'pain to 2oin this stream of migration. There is now a fairly large community in >arcelona of the people from this district. /arachis growth( on the other hand( is a good e-ample of the pull factor. ,illions of people who ha&e left their homes in such poor areas as the tribal regions of /hyber"Pakhtunkhawa :/"P< and the barani areas of north Pun2ab and A9ad /ashmir and mo&ed to /arachi. >y doing so( they ha&e generally impro&ed their economic situation. They also help the places from which they come by sending back remittances. These ha&e become important contributors to the incomes of the areas such as ?orth Pun2ab and /"P. Although in its Pun2ab study the IPP did not do work on the impact of remittances on economic and social de&elopment( there is good reason to argue that this must ha&e been positi&e. 5or some reason( which sociologists and anthropologists need to ponder on( is that there are areas that send out more migrants compared to other places. In the case of Pakistan( the people from /"P and northern and central parts of Pun2ab ha&e been more inclined to tra&el long distances in search of 2obs than those who li&e in 'outh Pun2ab( >aluchistan and 'indh. 8emonstration affect may be one reason why people from some areas find long"distance migration to be a reasonable way for addressing their poor economic circumstances. 4nce remittances from those who ha&e gone to distant places begin to arri&e they pro&ide incenti&es for those who are under stress for economic reasons to also contemplate migration. Also( once people from a particular area ha&e formed communities of their own in places such as /arachi( 4slo and >arcelona( it is easier for the newcomers to get settled. Pioneering migrants ha&e much more difficult time in creating opportunities for themsel&es in their adopted homelands. It is much easier for those who follow them. Pakistans economists( in particular those who study the countrys history( ha&e not paid much attention to how migration has contributed to de&elopment. A better appreciation of the links between the mo&ement of people and its impact on economic de&elopment and social change will lead to the making of better public policy. Source7 Mi*ra&ion and <cono(ic Back+ardness in .unAa1 YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o emran ali :,onday( ,ay );( )%1)<
#285 Monday, June 04, 2012

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

.u1"ic !o"icy &o address 1ack+ardness in .unAa1

By Shahid Javed Burki .u1"ished7 June 4, 2012 In this final article on the relati&e de&elopment and backwardness of the administrati&e districts in the pro&ince of Pun2ab( I will take up the issue of public policy. 5ollowing the added responsibilities transferred to the pro&inces by the 6ighteenth Amendment and the promise of the flow of additional resources from the federal to the pro&incial go&ernments as a consequence of the 'e&enth Award of the ?ational 5inance =ommission( the pro&inces now ha&e larger space a&ailable to them to address their problems. 5or 0ahore( regional disparities need to be addressed with considerable seriousness. As discussed in the earlier articles( those that ha&e been left behind economically and socially are mostly in the south( those that are relati&ely better off are mainly from the districts in the pro&inces centre and a couple in the north. 7i&en what we know and what I ha&e discussed before( raises an important issue concerning public policy. +hat can the pro&incial go&ernment do to close the yawning gap between the pro&inces backward areas and those that ha&e done well3 A comparison of the o&erall de&elopment ranking of the districts with the three sets of indicators used for this purpose :income and wealth( social de&elopment( and de&elopment of economic infrastructure< yields a number of interesting results. It should be e-pected that the top districts would do well in terms of income and wealth. That( surprisingly( is not the case. There is more than a fi&e"point difference between district ranking on the de&elopment scale compared with the ranking on the scale of income and wealth for 1# out of the B! districts. In other words( almost one"half of the districts do well e&en when their wealth and income indicators are not &ery high. To take two e-treme e-amplesD 7u2rat ranks 1 th on the de&elopment scale but is BBrd on the scale of income and wealth. This means that there are factors other than wealth and income that ha&e contributed to the districts better performance. 0ong"distance migration that results in large flow of remittances may be one of them. The other e-treme is the district of >hakkar( which is ))nd on the de&elopment scale but si-th on the income and wealth scale. >y and large( the less de&eloped districts in the south do better in terms of income and wealth. This may well be because a&erages used for wealth and income hide the e-tremes in their distribution. Howe&er( since distribution

data are not a&ailable at the district le&el this conclusion will remain in the realm of speculation. The relati&e backwardness of the south is largely because of poor social de&elopment and poorly"de&eloped economic infrastructure. These( as indicated abo&e( are the other two indicators of o&erall de&elopment used by the Institute of Public Policy in its recent work on Pun2ab. It is( therefore( in these two areas that public policy needs to focus on to reduce the de&elopment gap between the more and less de&eloped districts of the pro&ince. In these two broad areas( the pro&incial go&ernment should pay particular attention to four thingsD education( in particular at the tertiary le&elE health careE impro&ement of the irrigation systemE and inter"district transport. I will say a few words about each of these four areas of public policy focus. The need for getting all children educated has long been recognised as an important de&elopment ob2ecti&e. It is one of the ,illennium 8e&elopment 7oals :,87< to which Pakistan has subscribed. Howe&er( while this ,87 is to be met by )%1!( Pakistan remains way behind. This is particularly the case for the countrys backward areas( including the less de&eloped districts of Pun2ab. +hile the realisation of this goal must recei&e the attention of all go&ernments( Pun2ab should gi&e special attention to impro&ing the le&els of skills of the youth in the pro&ince. A public"pri&ate sector partnership should be de&eloped where the go&ernment could pro&ide land grants and supporting infrastructure to pri&ate operators who ha&e demonstrated their ability to pro&ide quality higher education. These seasoned educational entrepreneurs should be encouraged to establish &ocational institutions in the areas where the region could establish new industrial and ser&ice sector enterprises. In the health sector as well( the go&ernment( while focusing on pro&iding primary care( could work with pri&ate parties to build hospitals in all the less de&eloped districts. These medical establishments should be part of an integrated chain with different district centres specialising in different areas of medical e-pertise. This way patients will not need to go to the more de&eloped cities in the pro&ince to get the medical attention they need. There is now a realisation that Pakistan has not gi&en as much attention to maintaining and further de&eloping the rich irrigation infrastructure it inherited from the >ritish period. It is a water"scarce country( which needs to properly husband this precious resource. The Pun2ab go&ernment needs to formulate an action plan aimed at pro&iding the neglected infrastructure the maintenance it needs. 8e&eloping a road network linking the districts is the fourth priority for the go&ernments focus. 'uch a network is needed so that south Pun2ab can mo&e towards de&eloping agro" processing industry. The new retail chains that ha&e arri&ed in the country and set up shop in some of the ma2or cities ha&e indicated that they would be able to increase their processing acti&ity if they can quickly mo&e perishable commodities from the production areas to processing centres. I will conclude this series of articles with the suggestion that the policymakers operating from 0ahore may consider de&eloping a special plan for the de&elopment of the backward districts. The plan should be formulated by in&ol&ing the pri&ate sector and by consulting the citi9ens of the districts. And it should indicate the source of the required funding including the possibility of le&ying a Mbackward areas de&elopment ta- on consumption in the relati&ely better"to"do parts of the pro&ince.

Source7 .u1"ic .o"icy &o ddress Back+ardness in .unAa1 YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#286 Monday, June 11, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Takin* s&ock o6 &he si&ua&ion

By Shahid Javed Burki .u1"ished7 June 11, 2012 As Pakistans current democratically elected go&ernment enters its fifth year in office and as it begins to prepare itself and the country for the ne-t general elections( it is legitimate to take a good look at the situation which pre&ails today. These are troubled times in Pakistan. The economy is slippingE Pakistan is now the sick man of 'outh Asia. If the current trends continue( after ha&ing been o&ertaken by >angladesh N whose 78P growth rate is now twice as high as that of Pakistan N the country may well become the poorest in the subcontinent. The budget presented on ,ay B% co&ering the )%1)"1B financial year did not address the issue of the loss in growth momentum. ?or did it promise the long o&erdue structural reforms needed to restore health to the economy. In the absence of serious structural reforms( the faltering economy is not likely to regain balance. The country has become progressi&ely isolated. It has lost the affection N and most certainly the respect N of what the present go&ernment once called the F5riends of 8emocratic Pakistan :5o8P<G. 5or a while( the 5o8P worked as a quasi"formal association( discussing how to aid a friend in distress. +hile not much new finance flowed into the country from this source( its support resulted in a conditionality"mild but resource"rich program de&ised by the International ,onetary 5und. The main purpose of the I,5 programme was to help Pakistan reco&er from the poor state in which the economy was left by the military go&ernment. >ut Islamabad was not able to meet the gentle conditionality of the program and let it lapse e&en when billions of dollars remained undisbursed. There is now talk of going back to the 5und so that the country remains current with foreign obligations. There is an insurgency on the countrys border with Afghanistan. The go&ernments writ ne&er ran in the tribal areas but now a large military presence is needed to keep the militants operating in the area confined to their geographic space. 4n many occasions( the

militants from the tribal belt ha&e struck de&astating blows in the countrys ma2or cities. They ha&e not spared the large military establishments( including the headquarters of the army in 1awalpindi and a na&al base in /arachi. The si9e of the force stationed in this part of the country to pre&ent the insurgency from slipping into other areas almost matches the si9e deployed in the eastern border with India. Pakistan will face additional security problems as the Americans begin to withdraw their forces from Afghanistan. They are committed to completing the process by the end of )%1$ and it is hard to predict how this will affect Pakistan. The country may not be able to protect itself if the result in Afghanistan is another ci&il war of the type that tore it apart following the departure of the troops from the 'o&iet .nion. There is &iolence in /arachi( Pakistans largest city and the centre of commerce and finance. The city has e-ploded with &iolence twice during the tenure of the current go&ernment. The citys fragile political system is not able to settle the differences among the three ma2or ethnic groups that are roughly balanced in terms of their si9e. There are groups working in >alochistan( the countrys largest pro&ince in terms of geographic si9e( hoping to mo&e their pro&ince towards greater autonomy( if not towards independence. There was an e-pectation that when the democratically elected go&ernment replaced military rule in ,arch )%%;( it would uphold the rule of law. That was the spirit behind the =harter of 8emocracy signed on ,ay 1$( )%% in 0ondon by the leaders of the two main political parties. 4ne of these( the Pakistan ,uslim 0eague"?awa9( 2oined the leaders of the lawyers mo&ement to bring back to the bench some of the independent"minded 2udges who had been remo&ed by 7eneral :retd< Per&e9 ,usharraf( Pakistans fourth military president. >ack in their positions( the re&i&ed 2udiciary did what it was e-pected to do N it acted independently. It held the functionaries of the go&ernment( e&en those in high positions( accountable. >ut its 2udgments and orders were largely ignored. Prime ,inister Housaf 1a9a 7ilani( con&icted of ha&ing committed contempt of the 'upreme =ourt( remains in office. The powerful interior minister lost his seat as a result of the 'upreme =ourts inter&ention. According to the law of the land( a person holding dual nationality cannot be a member of parliament. >ut the minister left his position only for a few hours. He was back in charge of his ministry as an ad&isor to the prime minister. The list of the problems that the country faces goes on. The state of Pakistan( in other words( is highly troubled. +hy was the promise of )%%;( when democracy returned to the country in a stable form( so totally lost3 5or an answer to this question we should turn to the growing literature on state failure. This sub2ect has recei&ed serious attention from a number of scholars as well as de&elopment institutions such as the +orld >ank. In the coming weeks( I will turn to these works to e-plain what has happened and is happening to Pakistan. Source7 Takin* S&ock o6 &he Si&ua&ion YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#287 Monday, June 18, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.akis&an in a 1ind
By Shahid Javed Burki .u1"ished7 June 18, 2012 Pakistan is currently sitting on a demographic bomb which could e-plode if some fundamental economic changes dont take place. >ut economic changes and de&elopment occur within a facilitating social( political and e-ternal en&ironment. 6&en the most conser&ati&e economists wedded to the basic principles of their discipline ha&e begun to recognise that growth is not simply the consequence of capital accumulation and mo&ing the work force from the less to the more producti&e acti&ities. That was the assumption made by Arthur 0ewis( one of the founding fathers of de&elopment economics. His suggested growth equation 2ust had two contributing factors( capital and labour. ?ow( with decades of e-perience behind them( economists ha&e begun to recognise that they must go beyond the boundaries of their discipline to understand how economies succeed and fail. The number of factors contributing to growth continues to increase as more empirical work is underway in intuitions such as the +orld >ank that now has large amounts of economic( social( political and demographic data at hand to understand the relationships between the many different attributes of any society. This applies to both( de&eloped and de&eloping nations. The latter group is now euphemistically called Memerging nations. It is safe to assume in the case of a country such as Pakistan that politics and international relations will profoundly affect the structure of the economy and the rate of its e-pansion. >oth in turn will ha&e enormous social consequences. 4ne of the disturbing things about the way the countrys economy has been managed has to do with the lack of attention gi&en to statistics and the a&ailability of information. The si9e and rate of increase in the countrys population are two important pieces of information that are critical for undertaking economic planning. There is other population related information that is needed. 5or instanceD what is the gender di&ision of the population( what is the rate of increase in the number of people li&ing in large cities and towns( what is the rate at which people are lea&ing the countryside and mo&ing to the urban areas( what is the si9e of the work force( how many women are now working and how many of them are working outside their homes3 It is from population censuses that such information is obtained but Pakistan( mostly for political reasons( finds it hard to systemically count the people and collect information about their social and economic circumstances. A household sur&ey was conducted which was to be followed by a population census. The latter has not taken place. In the absence of this information we ha&e to proceed on the basis of guess work. In mid")%1)( the population of Pakistan stands at some 1*% million. The median age is )1 years( one of the lowest of all ma2or population groups in the world. This means that some *! million people are below that age. The current rate of increase in population is adding close to four million people a year. 7i&en the fact that the rate of population increase in the past was a little higher( the work force is increasing at rate of three per cent a year. This rate could be e&en higher if more women begin to look for work outside their homes. 'ome of the analysts who ha&e worked in this area of economics belie&e that employment elasticity in Pakistan is a bit more than %.!( which means that for e&ery percentage point

increase in 78P( employment grows by half a percentage point. >ased on this estimate( the 78P must increase by si- per cent a year for the pool of the unemployed not to increase in si9e. The rate has to be higher than this in order to shrink the si9e of the pool of the unemployed. +ith the rate of 78P not likely to be much more than ).!"B per cent a year for the ne-t few years( Pakistan can count on social turbulence. +hat form it will take is hard to predict. The democratic system under de&elopment gi&es an outlet to those not being helped by the economy. The >ena9ir Income 'upport 5und which is belie&ed to be reasonably well" managed and is said to be free of the types of leakages that are common for such programmes also helps in keeping the frustrations of the &ery poor for being articulated in &iolent ways. Pakistan will probably not see the kind of Arab 'pring that shook the ,iddle 6ast. +hat could happen though is that the unemployed youth may get attracted to e-tremist causes which pick up their recruits from among those who dont see much of a future for themsel&es. 5or social peace( therefore( it is important that the Pakistani state works hard to increase the rate of economic e-pansion. >ut here politics and international relations are pro&ing to be hindering forces. 5or the rate of growth to increase( Pakistan must in&est a larger proportion of its income( particularly in the areas in which the state must be in&ol&ed. This means the ability to raise more resources by impro&ing ta- collection and bringing more people and sectors into the ta- base. This has been hard to do. There are important political constituencies that wont allow these changes to take place. In order to meet the resource gap( Pakistan could turn to the outside world but this has turned increasingly hostile. The country is( therefore( in a bind. 7etting out of it will require political will( which those who hold the reins of power seem to lack. Source7 .akis&an in Bind YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 2 4sers Say Thank 5ou &o rain007 $or This 4se6u" .os&7

Austere :,onday( Aune 1;( )%1)<( 'H68A 'A>AHAT :Tuesday( Aune 1*( )%1)<
#288 Monday, July 02, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Buie& revo"u&ion 1y +o(en in .akis&an

Buie& revo"u&ion 1y +o(en in .akis&an

By Shahid Javed Burki .u1"ished7 Ju"y 2, 2012 The term Ma quiet re&olution sounds like an o-ymoron( since re&olutions normally produce a lot of noise. >ut when something entirely une-pected happens that( too( can be called a re&olutionary e&ent e&en if it is not noisy. That is precisely what women in Pakistan are e-periencing. A significant number of them are lea&ing their homes and entering the workforce. The numbers in&ol&ed are large enough to make a difference not only to the womens o&erall welfare( but it will profoundly affect the way Pakistani society will function( the way its economy will run and the manner in which its political order will e&ol&e. This change is coming about as a result of de&elopment in three ma2or areasD education( employment and entrepreneurship. 0et us begin with education. There is a widespread belief that women are faring poorly in recei&ing education. That impression is correct to some e-tent. The o&erall rate of literacy for women is lowE much less than that for men which is also not &ery high. Although the 7o&ernment of Pakistan is a signatory to the ,illennium 8e&elopment 7oals :,87<( the country is far from achie&ing them. Attaining uni&ersal literacy for both boys and girls by the year )%1! was one of the ,87s. +ith literacy rates standing at #% per cent for boys and only $! per cent for girls in )%1%( Pakistan will miss these goals by a &ast margin. Howe&er( when speaking of a re&olution( the reference is to the growth rate in womens enrolments in institutions of higher learning. Here( the recent trends are e-traordinary N in fact re&olutionary. It is interesting and pu99ling that some of the numbers used here to make this point ha&e not appeared in the countrys discourse about economic and social issues. 4&er the last 1# years( from 1**B to )%1%( the number of girls enrolled in primary education has increased from B.# million to ;.B million. This implies a growth rate of .# per cent a year( about two and half times the rate of increase in the number of girls entering the primary school"going cohort. Howe&er( e&en with this impressi&e rate of increase( it is worrying that girls still account for less than one half N the proportion was $$.B per cent in )%1% N of the total number of children in school. It is in higher education that girls ha&e made a most spectacular ad&ance. The numbers of girls attending what are described as Mprofessional colleges has increased in the same 1#" year period( at a rate of eight per cent per annum. In 1**B( there were only 1%%($%% girls attending these institutions. Their number increased to more than ) 1(%%% in )%1%. There are now more girls in these institutions than boys. Their proportion in the total population of these colleges has increased from B per cent to !# per cent in this period. It is attendance in the uni&ersities( though where the real re&olution has occurred. There were less than 1!(%%% girls in these institutions in 1**BE their number increased to $B (%%% in )%1%. The proportion of girls is approaching the !% per cent mark with the rate of growth in their numbers an impressi&e ); per cent a year. +hile a &ery large number of girls drop out between the primary stage and the stage of professional and uni&ersity education( the numbers completing higher education is now much greater. Three quarter of a million girls are now lea&ing the institutions of higher learning e&ery year. In education( it is the numbers that make a re&olution. 7i&en the rate of increase in the

number of girls attending these institutions( it is not an e-aggeration to suggest that by )%1! a million girls will be ready e&ery year to enter the modern sectors of the economy. That has already begun to happen and here the statistics on participation in the workforce dont tell the complete story. 4fficial statistics still indicate &ery low le&els of womens participation in the workforce. According to the official data( only 1 per cent of women were working compared to !% per cent of men. The rate of womens participation in the workforce is higher in the countryside than in urban areas N 1* per cent as against eight per cent. >ut these statistics dont paint the real picture. A lot of the work that women do( either in the households or in the work place( does not get recorded. This is not only the case for de&eloping countries. The same happens in more de&eloped economies that keep a better record of what people do for li&ing. In Pakistan( for instance( women are &ery acti&ely engaged in the li&estock sector but that goes mostly unnoticed in official accounting. There are a number of sectors in modern areas of the economy where women now make up a significant part of the workforce. These include the traditional areas where educated women ha&e been acti&e for decades. These include teaching and medicine. Howe&er( more recently( as the number of women with high le&els of skills increased( they ha&e become players in sectors such as banking( communications( law and politics. +omen also now makeup a significant proportion of the workforce in companies engaged in IT work. 'ome IT e-perts ha&e estimated that in their sector( there are tens of thousands of women working in what they call Mcottage businesses. These are women with good computer skills( who are working from their homes undertaking small contractual work for members of their families or their friends who are li&ing and working abroad. 'ome estimates suggest that more than a billion dollars worth of work gets done in these informal establishments. These are( by large( one"person shops that recei&e payments through informal transactions. Howe&er( it is the entry of women in the entrepreneurial field where the real re&olution is occurring. I will take up that sub2ect in this space ne-t week. Source7 Cuie& )evo"u&ion 1y Wo(en in .akis&an YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o ,alik ?adeem % :Tuesday( Auly %B( )%1)<
#289 )ednesday, July 11, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

,han*in* &he "andsca!e

,han*in* &he "andsca!e

By Shahid Javed Burki .u1"ished7 Ju"y 9, 2012 It is in education that the Pakistani women ha&e made the most spectacular ad&ance in the country. The change noted abo&e has come about for the reasons that are not unique to Pakistan. It is happening in other parts of 'outh Asia as well. The state was failing to get the public sector to deli&er the quality of education demanded by parents belonging to the middle class. As the demand for spaces within the educational system increased( the state came under growing pressures. ,ore financial and human resources were required to take in all the students knocking at the doors of the system. ,ost 'outh Asian states did not ha&e the funds in the amounts needed( qualified teachers in the numbers desired and te-tbooks of the quality parents demanded should be used to teach their children. 4ne conclusion that was drawn was that the a&ailability of finance in the needed amount would reform public education. This turned out to be the wrong assumption to make. That additional finance alone wont sol&e the problem was &i&idly illustrated by the embarrassment caused to the +orld >ank by the spectacular failure of its large social action programme( or 'AP( in Pakistan. This multi"donor( multibillion dollar program was aimed at gi&ing a ma2or lift to the educational sector in the country by increasing the rate of enrollment for both boys and girls( by building new schools in the rural areas so that children didnt ha&e to walk long distances to attend classes( to pro&ide better trained teachers( and to impro&e the quality of instruction by using better te-tbooks. The programs intentions were good but the reason for its almost total failure was its implementation. In the initial stages( the programme concentrated on the pro&ince of Pun2ab. The education department in 0ahore( the pro&incial capital( had a poor reputation. It was under the influence of the political forces that put pressure on its officials to employ their friends and relati&es or to mo&e those who were already working in the system to more desirable places. To use a 2argon of the time( the pro&incial education department was focusing on Fpostings and transfersG of teachers as its principal function. An enormous growth in the a&ailability of funds in the system because of the resources pro&ided by the 'AP led to a sharp rise in the le&el of departmental corruption which was already high. The program because of these design failures was e&entually abandoned by the >ank and other members of the donor community. Howe&er( failed efforts such as these created an opportunity for women with good education( with access to family funds( and with children of their own to step in and establish institutions which they would manage themsel&es. Their own children and the children of their friends and relati&es were their first batch of students. ,ona /asuri from a well established political and business family was one of the pioneers in this area in Pakistan and her performance is an e-cellent e-ample of the marriage of entrepreneurship to the a&ailability of opportunity. 'ome of the more impressi&e school systems in Pakistan started modestly with the founding"mother creating a facility o&er which she could watch as her own children were being taught. 'ome of these &entures were begun in the homes of the budding education"

entrepreneurs. These modest institutions grew from the pre"school and kindergarten stage to the primary stage and to the high school stage. In one case N in the case of the school started by ,rs /asuri N its de&elopment took it to the uni&ersity stage. The >eaconhouse school system is said to be one of the worlds largestD ha&ing recei&ed an infusion of a significant amount of foreign capital pro&ided by a pri&ate equity fund it has gone beyond Pakistans borders and established N in some cases acquired N school systems in Africa( the 5ar 6ast and >ritain. The owners of this for"profit educational system ha&e ploughed back some of their accumulated earnings by gi&ing a large donation for the establishment of a liberal arts uni&ersity called >eaconhouse ?ational .ni&ersity. >?.( specialising in liberal arts( has concentrated on the sub2ects that attracted women and for which there were growing markets. It is pro&iding instruction in communications( IT( &isual arts( architecture and economics. This one e-ample pro&ides a good illustration of how womens ad&anced education and acquisition of modern skills ha&e begun to change the social and political landscape. +ell qualified women with right kinds of skills ha&e decided not to stay at home and build and care for their families. They are increasingly becoming professionals and occupying high le&el positions. 'ome economists maintain that supply creates its own demand and that has indeed happened in the case of Pakistan with some significant changes in public policy. 5or se&eral decades after independence( Pakistan did not admit women into what were called the Fsuperior ser&icesG. These included the =i&il 'er&ice of Pakistan and the Pakistan 5oreign 'er&ice. That ban on the recruitment of women was lifted a couple of decades ago and now women ha&e ad&anced to the senior most echelons in both ser&ices. According to a paper written recently by a female diplomat( there are now more than a do9en women ser&ing as ambassadors around the globe. It is( therefore( fair to conclude that e&en in a country which is presently in a se&ere depressed condition( womens educational and work performance may offer one hope for a better future. >y relegating women for so long to the back benches( Pakistan was operating its economy with one hand tied to back. That hand has now been loosened and may contribute to the countrys re&i&al. Source7 ,han*in* &he ?andsca!e YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o ra2a na2am :+ednesday( Auly 11( )%1)<
#290 Tuesday, July 17, 2012

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Wha& "ies in our 6u&ure:

By Shahid Javed Burki .u1"ished7 Ju"y 17, 2012 Pakistans future has ne&er seemed more uncertain than it appears today. The country faces difficulties on many fronts. The economy is weakeningE it appears highly unlikely that the go&erning coalition in Islamabad will be able to take the steps to bring growth back to the le&el needed to absorb two million additional workers that 2oin the work force e&ery year. The I,5 has recently estimated that the economy needs to e-pand by se&en per cent a year to keep unemployment from increasing. It e-pects that rate of growth at B.$ per cent in )%1)"1B. The countrys e-ternal situation is weakening as it gets ready to ser&ice the large amount of accumulated debt( in particular( the amount owed to the I,5. The recent agreement with the .' on reopening the ?ato supply route to Afghanistan will bring some financial rewards. The 4bama Administration will send =ongress a request to appropriate @1.) billion for Pakistan. This money is owed to Islamabad for the ser&ices that ha&e already been pro&ided. Pakistan estimates the owed money at more the @B billion. There is( howe&er( no mention of the flow of funds from the /erry"0ugar">ermen bill( which was supposed to put Pakistan".' relations on a firmer ground. 6&en if =ongress acts with dispatch N not certain that it will( gi&en Pakistans &ery low reputation in that body N it might ease the financial situation for a while. >ut the basic arithmetic will not change. Pakistan spends more than it collects in ta-esE it buys more imports that it is able to earn from e-ports. In fact( e-ports are doing poorly and the trade deficit has widened. +hile 1a2a Per&ai9 Ashraf( the new prime minister( has made sol&ing the deepening energy crisis his first priority( prospects dont look promising. 6lectricity shortage has resulted in loadshedding of more than half of the day in many areas( particularly in Pun2ab. There are also shortages of natural gas. The people are becoming resti&e and many ha&e taken to demonstrating in the streets. The 'tate >ank of Pakistan has begun to lose reser&es and the rupee is under pressure as its &alue has declined by more than fi&e per cent in )%1). There are no signs of any easing of tension between the go&ernment led by President Asif Ali Jardari and the senior members of the 2udiciary. The 'upreme =ourt has been relentless in pursuing cases of alleged corruption by members of the administration( including the president. It forced Housaf 1a9a 7ilani out of premiership and has begun to mo&e against his successor.

FThe point is that the prospect of disaster( no matter how ob&ious( is no guarantee that nations will do what it takes to a&oid that disaster(G wrote Paul /rugman( the ?obel 0aureate( in a recent column in The ?ew Hork Times. His reference was not to Pakistan but to 6urope( where a dithering leadership was letting the continent slip towards an economic abyss. >ut the possibility of disasters on se&eral fronts does not seem to ha&e focused the minds of the policymakers in Pakistan( either. There is a consensus both inside and outside Pakistan that most systems in the country are now dysfunctional. The most worrying de&elopment of recent years is the emergence of e-tremism( a mo&ement 2oined in by those who are working towards a radical change in the system of go&ernance. 5or them( liberal democracy the rest of the world has decided is the best way to go&ern is an anathema. These groups and people ha&e to be reintegrated into society. Their anti"state acti&ities ha&e cost the economy dearly and ruined the countrys reputation in the international community. It would take a multi"pronged approach to bring Pakistan out of the deep crisis it faces at this time on many fronts. In the area of economics( public policy will ha&e to address the issue of poor go&ernance. It will need to deal with the failure of the state to raise sufficient resources for deli&ering public goods to an increasingly frustrated and disgruntled citi9enry. It must o&ercome serious shortages of goods and ser&ices critical for industrial output as well as household consumption. There is work to be done to reduce interpersonal and inter" regional income inequalities. Physical infrastructure needs to be impro&ed and what has already been built needs to be maintained. It has not fully dawned on the policymakers that global warming is likely to pro&e disastrous for Pakistan( making the already stressed water situation e&en more problematic. The list of Mdos is a long one. 6-periences from other parts of the world show that appropriate sets of economic policies and good quality leadership can quickly turn the situation around. This happened in 0atin America in the 1**%s. It is happening now in some parts of Africa. >ut these changes always occur when those who lead are committed to impro&ing general welfare and not their own economic situation and that of their families and close associates. It requires political will to take difficult decisions when they are not fa&oured by some powerful segments of society. ,ost of these conditions dont e-ist in Pakistan. >ut they may appear as a consequence of the cleaning of the political house that may result from the ne-t general election. 4ne can only hope that this wait will not be a long one.

.akis&an in &he ro"e o6

By Shahid Javed Burki .u1"ished7 Ju"y 23, 2012

sian *"ue

In terms of pro&iding for the economic well"being of its citi9ens( Pakistan( today( is the poorest performing economy in south Asia. It is not doing well when its performance is measured in terms of a &ariety of economic and social indicators. It has had a declining rate of growth for almost !% years. The trend started in 1* !( when Pakistan fought a brief war with India o&er the issue of /ashmir. >ut punctuating this declining growth trend were a few spurts( each lasting for about three to four years. All of these occurred during military rule and all were associated with large foreign capital flows. The military leaders were able to access foreign aid since it was consequent upon subscribing to Americas strategic interests in the area around Pakistan. The military rulers had more degrees of freedom to work with foreign go&ernments. They did not feel they needed to be

constrained by public opinion. As can be gauged from Pakistans difficulties with the .' in )%11"1)( a democratic go&ernment has to take peoples &iews into account while fashioning foreign policy. As a recent sur&ey by the Pew 1esearch =entre re&ealed( a &ery large proportion of people in Pakistan &iew the .' unfa&ourably compared with other countries in Asia. Pakistans current economic downturn has been e-tremely se&ere( lasting longer than any other in its history. It has lasted for fi&e years and is likely to persist for a while. 4ne way of dealing with this situation is to completely reorient the countrys approach to economic de&elopment. It needs to focus more on de&eloping strong links with the Asian nations in its neighbourhood rather than continue to seek a close relationship with the .'. 5or some time now( Pakistan has been attempting to negotiate a free trade arrangement( 5TA( with the .'. That is an impractical approach since +ashington has signed 5TAs with mostly small nations such as Panama. These countries could be gi&en tariff"free access since they did not pose much threat to Americas domestic industry. 5or a large country such as Pakistan with one large sector N te-tiles N the path to an 5TA will be slow and will not be particularly rewarding. Instead( this may be a good moment to think about going Asian. 7i&en Pakistans current chaotic situation in both politics and economics( it would be rather presumptuous to suggest that the country could act as the glue for binding different parts of Asia( a large continent( which is now on the mo&e. 'e&eral analysts ha&e suggested that the )1st century will be the Asian centuryE that the e-traordinary combination of demography( the role of the state and recent economic history will take Asia forward. The 1*th century was the century of 6urope and the )%th that of America. This was now the turn of Asia. According to this line of thinking( Asia could( in the not too distant future( o&ertake both 6urope and America in terms of the respecti&e si9es of the economies of these three continents. There is enough dynamism in Asia for se&eral scholars to be comfortable with the thought that such a repositioning of the continental economies is ine&itable. Howe&er( the pace of change could be quicker and the result more definite if the &arious Asian countries( large and small( could work together and enable the continent to become a well"connected economic entity with strong inter"country links. 'uch an outcome could become possible if there was the political will to act on the part of Asias large countries. In this conte-t( Pakistans role could be critical e&en when its own economy is &ery weak at this time. 'ome analysts ha&e suggested that rather than one Asia there were( in fact( two Asias( one dominated by =hina( the other by India. The question was whether the two Asias would con&erge into a loosely"bound economic entity( or di&erge N each part going its own separate way N de&eloping separate economic and political systems and pursuing different goals. There were 2ust too many systemic differences between these two parts of Asia for them to meld together. The state systems in the two anchor economies( =hina and India( were so different that working together within a common policy framework would not be a practical proposition. =hina was a highly centralised state. In Indias e&ol&ing political system( federating states possessed considerable autonomy( a trend that was weakening the centre. Political systems were also different. =hina was able to orchestrate regime change in a fairly orderly mannerE a process in which it was engaged in now for more than a year and will reach a well"choreographed finale in the spring of )%1B. Howe&er( the transfer of power in India occurred through elections and the formation of go&erning coalitions was not always a smooth process. The two countries were headed in quite different directions. 8i&ergence was the more likely outcome. Howe&er( it is( perhaps( e&en better to think in terms of not one or two Asias but about four rather different parts. This further di&ision of a geographic entity that many would like to see

merge into one cohesi&e economic system certainly complicates the thinking about the future. >ut looking at Asia from this perspecti&e is more practical and makes it easier to handle the making of public policy. It also makes Pakistan a central player. I will pick up this sub2ect ne-t week. Source7 .akis&an in &he ro"e o6 sian 2"ue YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#292 Monday, August 06, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

S&e!s &o+ards *rea&er Sou&h coo!era&ion

By Shahid Javed Burki .u1"ished7 u*us& #, 2012

sian

5our steps need to be taken towards turning 'outh Asia into a well"integrated economic entity. The first would be to bring Pakistan back into 'outh Asia in the economic sense. If one recalls( the area that is now Pakistan was once an integral part of what was once >ritish India. >ack then( Pakistan e-ported three"fourths of its food and commodity surpluses to India( getting in return about the same proportion of imports from the former. And then politics inter&ened and with it came suspicion( particularly on the Pakistani side of the border. 5ollowing the trade embargo imposed by India in 1*$*( trade between the two countries dried up. Pakistan turned its back towards India and started looking towards the +est. The distant .nited 'tates became its largest trading partner( defying what trade economists call the Mgra&ity model of trade. India( in turn( adopted what some analysts call the Mlook east policy. The first step( therefore( would be to bring Pakistan back to 'outh Asia and breathe new life into the 'outh Asian 5ree Trade Area. The process has begun but there should be full commitment from both sides to maintain the momentum. There are groups on both sides of the India"Pakistan di&ide that ha&e an interest in derailing the process. They must not be allowed to succeed.

The second step should be to open Pakistani space for use by India to trade with Afghanistan and beyond. 4nce again( there is mo&ement hereE a transit agreement is in the works for Afghanistan to trade with India using Pakistani territory. It is the flow of goods in the other direction that Pakistan is hesitant to permit. It is this inhibition that needs to be o&ercome. The third step would be to link the &arious Asian countries through a network of oil and gas pipelines and with an electricity grid so that energy begins to flow from the energy surplus to the energy deficit countries. 'ome work has been done in this conte-t. A gas pipeline is being constructed on the Iranian side of the border to e&entually be linked with Pakistan. The =hinese ha&e long been interested in connecting their western pro&inces with the gas" rich countries in the ,iddle 6ast with a pipeline that will cross the length of the Pakistani territory. The pri&ate sector in India is planning to lay an oil pipeline from a new refinery located in >hatinda in the Indian state of Pun2ab to the Pakistani pro&ince of Pun2ab. This will pro&ide gasoline and other refined products to Pakistan. It would take a great deal of in&estment to de&elop these routes of international commerce. 5inding resources for building this type of connecti&ity is( therefore( the fourth step. Pakistan does not ha&e the means to do this but it can be done with the help of pri&ate finance and pri&ate technology. A programme focused on creating a regional network to facilitate trade could be launched. And it should ha&e much greater in&ol&ement of the pri&ate enterprise. This is where an Asian centre of finance such as 'ingapore may enter the picture. It has the banking sector and other instruments of finance to establish a financial consortia to implement such a pro2ect. It also has a large and e-perienced construction industry to 2oin such an effort. A city"state such as 'ingapore may well become the headquarter of a large consortium to handle these infrastructure pro2ects. Insofar as the financing of such an in&estment programme is concerned( there are se&eral possibilities. The traditional sources would be the two multilateral de&elopment banks( the +orld >ank and the Asian 8e&elopment >ank. To this( two more could be added. The >1I=' countries are now working on the possibility of setting up a de&elopment bank of their own( which would be capitalised by them from their large e-ternal reser&es. 0arge inter"country infrastructure construction pro2ects would be a good starting point for the proposed >1I=' bank. In sum( it is possible to create a &ibrant economic entity in 'outh Asia. +hat is needed is political will and imagination on the part of &arious countries that would be in&ol&ed. Source7 S&e!s &o+ards *rea&er Sou&h sian ,oDo!era&ion YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#293 Monday, August 13, 2012

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

,risis in !o"icy(akin*
By Shahid Javed Burki .u1"ished7 u*us& 13, 2012 The situation in Pakistan is now precarious. There is a consensus both inside and outside the country that most systems( economic as well as political( are dysfunctional. >ut as economists now emphasise( an economy not supported by an appropriate institutional framework cannot e-pect to ha&e a reasonable rate of economic growth( cannot pro&ide adequate ser&ices to the citi9enry( cannot alle&iate po&erty and cannot reduce income inequalities. There are many things wrong with official thinking about the state of the Pakistani economy. 'ome useful material was produced at the Planning =ommission. +hat the Planning =ommission called the 5ramework for 6conomic 7rowth( or 567( has some inno&ati&e material. It is right to focus on what it labels the Fsoft sideG of the de&elopment equation. The =ommission has claimed that for Pakistan to increase the rate of economic growth( it needs to in&est in the softer aspects of de&elopment and not continue to commit large sums of public money on brick and mortar de&elopment schemes that ha&e( in the past( dominated the Public 'ector 8e&elopment Plan. The Fsoft sideG ad&ocated by the Planning =ommission includes institution building( human resource de&elopment( increasing the capacity of the pri&ate sector to inno&ate( reducing the regulatory burden carried by pri&ate enterprise and changing and modernising urban regulation so that cities become the most dynamic part of the economy. The =ommission is also concerned about the declining efficiency and effecti&eness of the &arious ci&il ser&ices. It has called for a fundamental restructuring and reform of the ci&il administration. All these are worthwhile goals and they needed to be included in an approach aimed at the long term. Howe&er( they dont constitute a strategy that could pull Pakistan out of the deep economic hole it has dug for itself. The 567 is an approach that will deli&er rewards o&er the long term. It will do &ery little to sol&e Pakistans current economic problems. 5ollowing are some of the many problems crying out for policymaking attention( listed in no particular orderD Pakistans longest lasting recession with no end in sightE continuing &iolence( some of it directed at the stateE increasing isolation from the worldE continued dependence on e-ternal capital flows for financing low le&els of public"sector in&estmentsE the loss of confidence on the part of the in&estment community( both inside and outside the country( in Pakistans economic futureE

low rates of domestic sa&ings and low ta-"to"78P ratioE &ery little public"sector in&estment in impro&ing the quality of the large human resourceE declining share in international tradeE poor relations between the federal go&ernment and pro&incial administrationsE and increasing incidence of public sector corruption. Pakistan is now regarded as a fragile state by de&elopment institutions such as the +orld >ank. In one of its recent +orld 8e&elopment 1eports( the >ank also picked up some of the soft factors in the growth function. These( it suggested( are essential ingredients of long" term sustainable de&elopment. >ut it emphasised N correctly I belie&e N that it will take a generation or two( before fragile economies such as Pakistan can begin to use these factors effecti&ely in the de&elopment equation. In the meantime( they need to pull their economies out of the low growth traps into which they ha&e fallen. To get to the long term( they need to focus on the short term. +hat should be the de&elopment agenda for the policymakers at this delicate moment in the countrys economic history3 There are at least fi&e areas that need the policymakers urgent attentionD re&i&al of growthE increasing domestic resource mobilisationE reconnecting the country with the worldE reducing income disparitiesE and in&esting in the de&elopment of the large human resource. 6ach of these areas requires a series of go&ernment actions. There are no indications that any of these are planned. +hat needs to be done in one area will impact on the remaining four. In other words( a comprehensi&e approach that dealt with the short"term is the need of this precarious hour. 0ong"term thinking could wait while the short term was being fi-ed. Source7 ,risis in .o"icy(akin* YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#294 T!u sday, August 23, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.o"i&ica" !ar&ies and econo(ic deve"o!(en&

By Shahid Javed Burki .u1"ished7 u*us& 20, 2012 The growing literature on how politics interacts with economics places particular emphasis

on the de&elopment of political parties within political systems. The parties ser&e se&eral economic functions. They bring together those in society who share ideologies( &alues and &iews about the direction that should be taken by the state that go&erns the society. +ell" organised parties can influence the making of public policy. A good e-ample of this in the conte-t of Pakistan is the rise of the All"India ,uslim 0eague :AI,0<( founded in 1*% in 8haka. There was some an-iety on the part of the ,uslims in >ritish India that a Hindu" dominated independent country that would be the consequence of the >ritish departure would be less than fair to them. The AI,0( therefore( was moti&ated by economic interests of the community it represented. 4&er time( it focused on only one demandD the creation of an independent state for the ,uslims of >ritish India. 4nce that demand was met( the rechristened AI,0 as the Pakistan ,uslim 0eague :P,0< lost its raison d`tre and morphed into a number of different organisations. Pakistans political landscape was transformed in 1* ; when Julfikar Ali >hutto founded the Pakistan Peoples Party :PPP< as a national organisation with a socialist agenda. It won the most seats in the ?ational Assembly allocated to +est Pakistan in the elections held in 8ecember 1*#%. A year later( it formed the first PPP"dominated go&ernment in the part of the country that was left after the separation of 6ast Pakistan. >ut the success of the separatist mo&ement in what was once Pakistans eastern wing encouraged the establishment of political organisations promoting narrow regional interests. 5or a number of years( Pakistans political landscape was dominated by national parties N the P,0( the PPP and the Aamaat"e"Islami. Howe&er( the rise of regional parties complicated the making of economic policies especially when regional interests could not be reconciled with national priorities. The P,0s political monopoly was broken when in the election of 1*!$ in 6ast >engal( the ,uslim 0eague was trounced by a coalition of parties that had assembled under the banner of the .nited 5ront. The name gi&en to the coalition was suggesti&e of its ,ar-ist orientation and combined religion with a socialist orientation. The group included 5a9lul Haq who had 2oined hands with ,ohammad Ali Ainnah and campaigned for the establishment of Pakistan. The success of regionalism as reflected in the lopsided &ictory of the .nited 5ront when it won B%% seats &ersus the 1% secured by the P,0 became the inspiration for the de&elopment of a number of narrowly focused regional parties. The most successful of these efforts was the ,uttahida Xaumi ,o&ement :,X,< as well as the Awami ?ational Party :A?P<. The names of these parties signified national aspirations rather than purely regional interests and were to ha&e profound impact on the formulation of national economic strategies. 4ne e-ample of this was the position taken by the ,X, with reference to the design of fiscal policy. The ,X, represented the 'indh urban middle class( which was reluctant to see its ta- burden increase while the landed community was mostly spared. In 1*#B( when >hutto was engaged in drafting the =onstitution( he won support of the powerful landed interests by e-cluding agricultural incomes from the ta- base. This pro&ision had serious economic consequences. 5or most of the time( &alue added in agriculture increased impressi&ely but this growth could not be captured in ta- re&enues. The attempt by the I,5 to increase the ta-"to"78P ratio as a part of the programme it negotiated with Islamabad in )%%; did not succeed. The 5unds proposal to le&y a ta- on consumption was resisted by the ,X,. Its opposition resulted in the collapse of the I,5 programme in )%11. +e may be witnessing another shake"up in the institutional structure of politics in Pakistan. The rise of Imran /hans Pakistan Tehreek"e"Insaf :PTI< may bring another national force in play that will focus on the country rather than on narrow regional interests. The coming

electoral competition between three or four national groupings N the PPP( the two ,uslim 0eagues and the PTI N will ha&e significant economic consequences. If they score big &ictories in both the central and pro&incial elections( they may be able to swamp the regional parties. That will make the formulation of economic strategies that keep national interests in their sight become somewhat easier and practical. Source7 .o"i&ica" .ar&ies and <cono(ic >eve"o!(en& YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#295 Tuesday, August 28, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

.o"i&ics and econo(ics7 a &heore&ica" !ers!ec&ive

By Shahid Javed Burki .u1"ished7 u*us& 28, 2012 That economic de&elopment affects politics and &ice &ersa are two beliefs that ha&e been at the centre of academic discourse for a long time. The way politics and economics interact with each other was in&estigated with some thoroughness by a number of scholars in the 1* %s. Among them was an economist( 7unar ,ydral( who won the ?obel Pri9e in 6conomics for his efforts( a political scientist( 'amuel P Huntington( who had a profound impact on +estern thinking about Islam and a political"economist( Albert 4 Hirschman( who laboured hard to bring political science into economics and business management. ,ore recently( one sociologist( one political scientist and one economist ha&e 2oined the ranks of these three scholars in analysing the process of economic and political change. The sociologist( 5rancis 5ukuyama( is currently engaged in studying the de&elopment and decay of what he calls the Fpolitical orderG. The other work to which I will make reference is by 8aron Acemoglu( an economist at ,IT( and Aames 1obinson a political scientist at Har&ard .ni&ersity( called +hy ?ations 5ail. 'e&eral ideas from the works of these analysts ha&e rele&ance for understanding Pakistans economic and political de&elopment. Among the questions areD why has political and economic power remained concentrated in the hands of a handful of groups in Pakistani

society3 And why has the society resisted change that would take it towards modernisation3 ,yrdal famously coined the word Fthe soft Asian stateG to e-plain why in many post"colonial countries in Asia the state did not act as if it had the power and authority to o&ercome the interests of se&eral strong &ested groups. To allow so much power to be accumulated in so few hands was done by colonial rulers for the purpose of ha&ing well"entrenched groups in Indian society de&elop strong loyalty towards the >ritish 1a2. 'haken by the 7reat ,utiny of 1;!#( the colonial masters of India chose the ,uslims of the northern pro&inces to shoulder some of their security burdens. They did this by bringing Pun2abis and Pathans into the >ritish Indian Army in large numbers( by allowing some members of the carefully identified communities of northern India become important players in the elaborate bureaucratic structure that was established and by de&eloping a system of rewards to recognise those who showed great loyalty towards the >ritish rule. In return( the rulers put on the books a large number of laws that protected ,uslim landowners from losing their land to Hindu moneylenders. They also restricted the role of middlemen in agriculture to those the state fa&oured. >y di&iding Indian society into martial and non"martial races( the >ritish allowed only a few communities to find employment in the armed forces. ,ost of these groups were not particularly keen on the idea of a separate homeland for the ,uslims of India. 4nce the idea of Pakistan became a reality( these groups de&oted their immense energy and resources to protect their economic and political interests. They had little interest in de&eloping the Pakistani state based on a rule of law. They kept the state FsoftG so that it remained under their control. They( in other words( became members of what Acemoglu and 1obinson call an Fe-tracti&e systemG. This is a system that has its own rules( &ery different from those that must go&ern a modern political entity. The main goal of the e-tracti&e systems is to e-tract as much political power and material wealth from the rest of the society as possible. In the Acemoglu"1obinson formulation on the other side of the politico"economic spectrum are the Finclusi&e systemsG( which allow political and economic power to be &ery broadly shared. The e-tracti&e systems work on the basis of informal rules while the inclusi&e systems follow formal rules such as those embedded in the constitutions that modern societies write for themsel&es to regulate indi&idual and community beha&iour. =an societies transit from the e-clusi&e to the inclusi&e state3 =an this be done by an independent 2udiciary3 =an elections be the way to bring about this change3 I will answer these questions ne-t week. Source7 .o"i&ics and <cono(ics YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o Pet8octor :Tuesday( August );( )%1)<
#296 Monday, %e'tembe 03, 2012

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Movin* ou& o6 &he s"u(!

Movin* ou& o6 &he s"u(!

By Shahid Javed Burki Se!&e(1er 3, 2012 I ha&e long held the &iew that the economic circumstances of a country N the problem it faces( its future prospects and the public policy choices leadership groups are likely to make N cannot be understood without de&eloping a good appreciation of the structure of the society and the operating political system. ,ost under"performing economies ha&e a lot of slack in the system. This can lead to better economic performance if the capital that has already been in&ested in the economy is put to more efficient use and if the workers that are engaged in low producti&ity acti&ities are able to mo&e to those that ha&e higher personal as well as societal rates of returns. 4nce the economy begins to reco&er( the pace of growth can be sustained for a long period of time. That was the e-perience of India. 5ollowing the reforms instituted in 1**1( the Indian economy left the path of what the countrys own economists called Fthe Hindu rate of growthG. The country quickly climbed on to a new growth tra2ectory that produced an a&erage rate of increase in national output that was twice the Hindu rate of growth. In the $$"year period from 1*$# to 1**1( the a&erage rate of increase in national income was B.! per cent a year. 'ince then( it has a&eraged #.B percent per annum. 'e&eral 0atin American countries went through the same kind of e-perience( quickly reco&ering from slumps once the right set of policies ware put in place. Pakistan also had periods of growth spurts that took the economic rate of growth close to # percent a year. This happened during the first half of the rule by President Ayub /hanE it happened again in 1*;)";* when the country was go&erned by 7eneral Jiaul HaqE and it happened for the third time in )%%1"%# during the presidency of 7eneral Per&e9 ,usharraf. >ut it is important to understand that these were essentially de&iations from the trend lineE they were not the consequence of structural changes that could sustain high rates of growth o&er the long"run. The Ayub model N in contrast to the one India had followed N ga&e considerable space to pri&ate enterprise. The go&ernments role was limited to pro&iding encouragement( access to capital and in&estment in creating supporting infrastructure. It was during this period that a multibillion dollar in&estment programme was completed that included the building of two large dams. These works impro&ed the already well"de&eloped irrigation system and significantly increased hydro"power generation.

+hat should be the content of the policies to be adopted in order to mo&e the economy on to a growth path much higher than the one it is on at this time3 At this point( and once again relying on my work e-perience( I would make three obser&ations. The first relates to the restoration of confidence in the countrys future among different segments of the population. 6conomies generally respond to the signals the policymakers gi&e. At this time( the signal is that of indifference to the economy. There is anecdotal e&idence of considerable amount of capital flight from the country because of the growing belief that Pakistan is not a safe place in which to keep money. Howe&er( there will be a positi&e response if a different signal were to go out. 'ome of the capital that has left the country will come back if an impression was created that those who hold the reins of power would not spare any effort to put the economy back on track. ,ore capital would be kept at home rather than taken outside the country. This could increase the rate of domestic in&estment by as much as two percentage points a year( resulting in adding half a percentage point to 78P growth rate. The needed policy framework should be di&ided in two partsE one for the near"term( say the ne-t three years and the other for the medium"term( say the ne-t three to eight years. The programme for the near"term should focus on institutional reform aimed( to begin with( at three areas. The first and by far the most urgent is reform of the fiscal system by le&ying a consumption ta-( incorporating the ta-es on incomes that are outside the reach of the ta-man( and impro&ing the system of collection. How all this could be done has been detailed in a number of studies &arious indi&iduals and de&elopment institutions ha&e carried out for the go&ernment o&er the last se&eral years. The second area would be to reform the system of accountability by gi&ing its leadership autonomy and protection. The third part of the immediate effort should be to reform the ci&il ser&ice system. Again( this is an area of reform into which a great deal of thinking has already gone. These efforts should result in increasing in&estments and adding ).! percentage points to the growth rate bringing it to .! percent by )%1 . 5or the longer term impact( four more areas will need to recei&e attention. They include easing the shortage of energy( both electricity and gasE impro&ing the security situationE increasing trade with IndiaE and incorporating si- Mpositi&es in a grand de&elopment strategy. ,y list of positi&es isD agriculture( an engineering industry made up of thousands of small and medium enterprisesE the demographic di&idendE de&olution of power from the centre to the pro&incesE arri&al of one million well educated and trained women in into the work forceE and the presence of large Pakistan diasporas in three continents. 'uch initiati&es could increase the rate of economic growth to eight per cent by )%)%( adding another 1.! percentage points. Source7 Movin* ;u& o6 &he S"u(! YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o rain007 $or This 4se6u" .os&7

faisal anees :Tuesday( 'eptember 11( )%1)<

#297 Monday, %e'tembe 10, 2012

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

)evivin* &he cru(1"in* s&a&e

By Shahid Javed Burki Se!&e(1er 9, 2012 The Pakistani state is crumblingE it needs to be re&i&ed. It is crumbling since it is failing to pro&ide the citi9ens what they need the most N basic ser&ices. The institutions that make up the state are in disarray and we know from the e-periences of other countries that once institutions become dysfunctional if it takes a long time to get them to work again. +hy is the Pakistani situation so dire3 There are se&eral answers and all of them need to be factored into the policies of those who would like to see Pakistan working again. This is the season to reflect on what is happening to the Pakistani state. This is the right time to think about this problem since both the people and those who wish to lead them are preparing for another set of elections. An opportunity will be gi&en to the people to choose their rulers at both the federal and the pro&incial le&els. 5or se&eral years now( economists ha&e been saying that it takes more than capital and labour to produce growth. Institutions are one of those things that need to be brought into the de&elopment equation. +hen economists talk about institutions( they dont necessarily mean organisations with well"defined structures and business plans. They mean rules( both formal and informal that people follow in order to deal with one another. They also mean enforcement mechanisms( when established rules are defied. A legal system that has well" written laws and courts( and a system of regulations that are o&erseen by their own organisational structures( it ensures compliance. =ulture and societal norms ensure compliance of informal rules. 4ne e-ample of the latter is what anthropologists call F&artan bhan2iG N the system that enforces gi&ing( in order to celebrate or obser&e lifes many passages. 5or instance( people are e-pected to gi&e on weddings keeping in mind what they ha&e recei&ed themsel&es. The problem arises when informal rules begin to o&erwhelm those that are formalE when culture begins to mean more than formal laws and regulations. This is one of the more serious problems Pakistan faces today. It is slipping back from formality to informality. Political scientists ha&e begun to emphasise that political de&elopment is not a linear( unidirectional process. 8e&elopment happens when formal rules become more important for transactions than those that are informal. In that case( political decay rather than political de&elopment takes place. If the preceding sounds too negati&e( let me bring into this discussion something that is

positi&e. There is no doubt that in spite of the political roller coaster we ha&e been riding since independence was gained ! years ago( there is now some forward mo&ement. That the military( by repeatedly inter&ening in the political process( set back political de&elopment seems to ha&e withdrawn to the barracks. It is not being asked to come back and sa&e the country and pro&ide the citi9ens what they want from the state. There is now consensus in the country that the only solution to the many problems that must be dealt with is through the political process. There is also consensus that the state must function at se&eral different le&els N the federal( the pro&incial and the local. The 6ighteenth Amendment to the =onstitution has pro&ided the framework that brings the state one step closer to the people. Powerful political leaders in the past and the military with a strong preference for centralised command and control had established styles of go&ernance that made the state &ery distant from the people. Howe&er( the full impact of the amendment has as yet to be felt but it will generally be positi&e. Howe&er( the de&olution must not stop at the pro&incial le&el. It must continue down to the local le&els. ,any ser&ices can only be pro&ided effecti&ely and efficiently when those who are recei&ing them can literally see who are supplying them. This is one reason why institutional economists ha&e begun to emphasise what they call Mlocalisation in the process of go&ernance. The third positi&e is the increasing power that is being claimed by institutions that can pro&ide( what in the American system are called( Mchecks and balances. These institutions ha&e to keep in check and in balance the enormous amount of power all political systems gi&e to the go&ernments e-ecuti&e branch. This usually comes from a combination of the legislati&e and 2udicial branches. In Pakistan( howe&er( the legislature remains weak( in part( because political parties remain seriously underde&eloped. 0egislati&e weakness has brought the 2udiciary forward filling the gap that e-its for all to see. >ut there is another check on all branches of go&ernment that has assumed an increasing role. This is the power of the ci&il society( often e-pressed by the use of the Mstreet. If there is a lesson to be drawn from the Arab 'pring( it is thisD the citi9enry will push back after a certain point has been reached. There is a reason why all the depri&ation that Pakistans citi9ens ha&e e-perienced for the last se&eral months has not caused an e-plosion in the street. The reason is that people ha&e de&eloped some confidence in the political process. The main conclusion that I ha&e to offer is that while the state is becoming increasingly dysfunctional( political e&olution since )%%; offers some hope. People must demand solutions for rebuilding the crumbling state from the political parties that will compete in the coming elections. Source7 )evivin* &he ,ru(1"in* S&a&e YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o rain007 $or This 4se6u" .os&7

faisal anees :Tuesday( 'eptember 11( )%1)<

#298 Monday, %e'tembe 17, 2012

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Eno+ &hy nei*h1our

By Shahid Javed Burki Se!&e(1er 17, 2012 The recent &isit by the Indian 5oreign ,inister( ', /rishna( to Islamabad and the indication that Pakistan may finally get a &isit from the Indian Prime ,inister( ,anmohan 'ingh( are clear indications that the process of economic and trade normalisation is proceeding slowly but reasonably smoothly. There are three aspects of this process that need some consideration and will be the sub2ect of the article today( and a couple that will follow thereafter. The first is that most of the ad&ances ha&e been made at the political le&el. The decision to mo&e the process forward was taken at an informal meeting of the Indian prime minister and Pakistani President Asif Ali Jardari( a few months ago. ,ost of the work related to normalisation was done by the ministries of foreign affairs in the two countries. There was relati&ely little in&ol&ement of the technical people and institutions. The second important aspect of this process is that the Indian states and the Pakistani pro&inces that would be affected as normalisation proceeds ha&e not been directly in&ol&ed in the discussions. +hen the bulk of the trade begins to flow o&er land"routes( the pro&inces on the Pakistani side of the border and the states on the Indian side will need to be included in the contemplated changes. Third( a framework will be needed to mo&e the process forward. It is interesting that much of the work that has been done( to"date( was undertaken outside the 'aarc and 'outh Asian 5ree trade Area arrangements. Howe&er( if the process also brings in countries other than India and Pakistan( as it must( a multilateral framework would be required. ?ow that India and Pakistan are inching towards closer economic relations( it would be useful if each country understood well how the policymaking process works across the border. The Indian system has been democratic &irtually from the day the country started out as an independent state. Pakistan( on the other hand( has ridden a political roller coaster( trying and discarding many systems. It is only during the fi&e"year period since the beginning of )%%; that a durable democratic political order has been shaped. >oth countries are now democratic( India more so than Pakistan. >oth are e&ol&ing rapidly but in doing so are mo&ing in different directions. It is important to understand where they are going in order to appreciate the relationship that will de&elop o&er time in the area of economics. As political scientists point out( calling a political system democratic means more than

recognising that those who wield policymaking power do so as the elected representati&es of the people. Holding periodic elections to choose those who will go&ern is only one part of the political process. A political order is also defined by the location of the policymakers. This is what distinguishes a highly centralised system from the one that is federal. At this point in time( both India and Pakistan are federal systems but that is where the similarity ends. Political power is much more disbursed in India than is the case in Pakistan. This difference will deeply impact the de&elopment of economic ties between the two countries as they e&ol&e. The states in India at this time are important economic actors. The economic choices they make are determined more by the local political establishment than by those who go&ern in ?ew 8elhi. This is one reason why there are &ast differences in the economic performance of the states( as well as in the economic systems that ha&e been adopted by them. 7u2arat( for instance( has gi&en the pri&ate sector much greater space within which it can operate. +est >engal( on the other hand( has a much more intrusi&e go&ernment. This reflects the &ery different histories of the two states. 7u2arat has some well" established industrial and business houses that became prominent players( not only in the state( but in all of India. +est >engal was long go&erned by a coalition of 0eft parties led by the =ommunist Party of India :,ar-ist<( which saw the go&ernment as the leading player in the economy. In Pakistan( in spite of the passage of the 6ighteenth Amendment to the =onstitution that allowed the pro&inces much greater authority in economic matters( policymaking has remained highly centralised. ?ot only does Islamabad remain the most important policymaker( most important policies are taken by the presidency. If the 6ighteenth Amendment were to be interpreted literally( it would ha&e created a presidency akin to the one that e-ists across the border in India. The president would ha&e become a figure head( with most of the power in the hands of the prime minister( answerable to parliament. That has not happened. In India( the constitution also sees the prime minister as the most important policymaker. That( howe&er( is not the case at present. ,uch of the power resides in the hands of the leader of the =ongress Party that go&erns as the leader of the ruling coalition in ?ew 8elhi. In both cases( these are departures from the =onstitutions that clearly gi&e go&erning authority to the head of the go&ernment N the prime minister N not the head of the stateE which is the president. +hy that has happened is an important answer to determine in order to understand which way the two systems may be proceeding. I will take up this question ne-t week. Source7 Eno+ &hy /ei*h1our YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o Pet8octor :,onday( 'eptember 1#( )%1)<
#299 Monday, %e'tembe 24, 2012

rain007 $or This 4se6u" .os&7

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

.akis&an9s "essons 6ro( 8ndia

By Shahid Javed Burki Se!&e(1er 24, 2012 0ooking at India will be of enormous help for fashioning Pakistans political order. ?ot to imply that Pakistan should follow what India is doing( but there are some lessons from what happened to Indias political system as it e&ol&ed. As Pakistan stumbled from one political crisis to another( many looked with en&y at what the Indians had achie&ed N they managed to create a political system that worked reasonably well for a country much more di&erse than Pakistan. That happened for basically two reasons. The first was leadership continuity during the countrys formati&e years. 5rom 1*$# to 1* $( India was go&erned essentially by one manD former prime minister Aawaharlal ?ehru. He was not only one of the founding fathers of India but was also a committed democrat. The second reason for Indias more robust political de&elopment was that unlike the Pakistan ,uslim 0eague :P,0<( the =ongress Party in India did not lose its raison d`tre the moment the country won independence. The P,0 was a one"issue party. As the All"India ,uslim 0eague( its predecessor( it had only one missionD the establishment of a separate homeland for the ,uslims of >ritish India. 4nce that was achie&ed( the party failed to redefine itself. It floundered. The =ongress Party had a more ambitious political agendaD to end colonial rule( keep India united and create a political( social and economic system that would impro&e the well" being of the common Indian citi9en. The two ma2or leaders of the pre"independence India had two &ery different ideologies for achie&ing the third ob2ecti&e. ,/ 7andhi wanted to do it by returning India to its traditions in which the citi9ens welfare was based on the work of small communities( essentially &illages or Flittle republicsG. ?ehru( on the other hand( wanted to bring 6uropean socialism into India. The 'o&iet .nion became his model as he began to shape public economic policies. The =ongress continued to dominate the political system for half a century but then( because of the way the party itself was go&erned( a number of regional parties emerged to challenge it. The Indian system de&eloped and( as pointed out by Pratap >ahnu ,ehta in a recent 5oreign Affairs article( FIndian politicians and bureaucrats all shared four basic management principles N &ertical accountability( wide discretion( secrecy and centralisation N all of which made for a go&ernment that was representati&e but not responsi&eG. The two principles that mattered most were the fact that leaders at all le&els

of the system looked up to the person at the &ery top. ,ost of the time( the top person was the prime minister. The second principle was centralisation. The party was go&erned from ?ew 8elhi. 'e&eral similarities e-ist between the way the two mainstream political parties are go&erned in Pakistan and the go&ernance of Indias =ongress party. >oth the PPP and the P,0"? are dominated by a single leader who commands total loyalty and runs a highly centralised organisation. As a result( both ha&e left space for the regional parties to gain power in some parts of the country. Howe&er( in Pakistan( there is still space between national and regional parties that can be occupied by a relati&ely new national organisation. The Pakistan Tehreek"e"Insaf has gained some traction as the citi9ens ha&e lost some confidence in the established parties. To the four principles mentioned by Pratap ,ehta as the bases on which the Indian system was built( a fifth needs to be added( particularly on the economic side. The Indian system( to a large e-tent( is self"correcting. This is because for endurance( it must respond to the pressure by the citi9enry for change. This affects both the economic and political components of the system. >ut the change comes after a lagE it took many years before the go&ernment stepped out of the way of the pri&ate sector. ?ehru had placed the state on the commanding heights of the economy which produced the FHindu rate of growthG for four decades. This e-perience taught the policymakers that e-cessi&e inter&ention by the state( as practised during the ?ehru years( resulted in the economy growing at a rate much lower than its potential. +hat does the Indian e-perience tell us about Pakistans likely political de&elopment and how it might affect our economy3 I will take up this question ne-t week. Source7 .akis&an-s ?essons 6ro( 8ndia YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#300 Monday, *#tobe 01, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Who +i"" o+n &he sys&e(:

By Shahid Javed Burki

;c&o1er 1s&, 2012 There is( at this delicate moment in Pakistans history( a big question that must find an answerD who will own the new political order that is in the process of being shaped and how will that ownership be e-ercised3 In the last few articles( I ha&e been comparing Pakistans political de&elopment with that of India and will respond to this question first in the Indian conte-t. India is a more di&erse country than Pakistan and yet( it has de&eloped a consensus on how it should be go&erned. Its constitution( adopted in 1*!%( is based on two simple but powerful premisesD that the will of the people must pre&ail and the rights of all communities must be fully protected. India can be 2ustly proud of the fact that its head of go&ernment is a 'ikh belonging to a religious community that once rebelled against the state and since then( has been fully accommodated in the political system. +hile it often de&iates from these two rules( what is attracti&e about the Indian system is that it has the ability to return to the old established norms. Today( the Indian system is faced with at least one big challengeD the slow death of national parties. The =ongress has found it difficult to climb out of the dynastic mould. It is widely e-pected that the fourth generation in the ?ehru"7andhi family will take command of the party and the go&ernment when 'onia 7andhi and ,anmohan 'ingh pass from the scene. The >haratiya Aanata Party :>AP< is finding its ideological foundation to be a weak force for building a national base. The progressi&e failure of the national parties has created space for those with strong regional interests. The ine&itable tension between the regional and national parties has made it &ery hard to formulate economic policies that are aimed at national rather than regional ob2ecti&es. Prime ,inister ,anmoham 'inghs latest set of economic reforms has run into predictable regional opposition. +hether ?ew 8elhi will persist with them will determine the future of the Indian political order. ?ow let me turn to the case of Pakistan and the e&olution of its political system. There are a number of contending forces in the country as well. 'ome of these dont hesitate to use &iolence to get their way. Islamists and secularists ha&e their &iews and are &ying for influence( the former by using threats and intimidation to gain support. It was this group that assassinated Pun2ab go&ernor 'almaan Taseer in Aanuary )%11 for e-pressing secularist &iews about the incarceration of a poor =hristian woman on charges of blasphemy. 1egional and separatist forces are fighting the weakened state( seeking to control the people who li&e in their territories and establish a claim on the resources that are yet to be e-ploited in these areas. 'ectarianism is now a force with each faction within the same faith claiming to be in possession of the full truth. 1eligious minorities are being hounded to gain political ground. It is clear that the forces that seek to di&ide rather than unite will use whiche&er opportunity arises to get their way. It was not bad policing that produced mayhem in Pakistan following the airing of a HouTube &ideo that disparaged the prophet of Islam in mid"'eptember. A score of people died so that those who e-cited them could gain additional political ground. 1eligion has become the battleground in Pakistan. In India( the failure of the >AP to use the Hindu identity to define national politics pushed religion to the background. That has not happened in Pakistan. A fully democratic order that respects the rule of law is the only way to bring together different forces and get them to resol&e their differences through the ballot

bo- and from the floors of the national and pro&incial assemblies. 4nce a law is placed on the books( there must not be any de&iation from it( in particular by those who hold the reins of power. The law( for instance( does not permit any indi&idual N certainly not a federal minister N to urge the murder of a person who may ha&e hurt the sensiti&ities of those who follow his faith. This was precisely what was done by the minister in charge of railways when he announced a reward of @1%%(%%% for the murder of the man behind the HouTube &ideo. +ill Pakistan be able to reconcile the deep de&otion to Islam as the faith of the countrys ma2ority with the demands of a political order based on accommodating different &iews not only about religion but on other issues that lie in the domain of public policy3

>e(o*ra!hy and !o"i&ics

By Shahid Javed Burki .u1"ished7 ;c&o1er 8, 2012 If you look far back into Pakistans history( say( to the time when the country was founded( the scope and e-tent of the demographic change that has occurred in the past se&eral decades becomes e&ident. In 1*$#( the year of the countrys birth( what is Pakistan today had a population of B% million. 4f this( only fi&e million people li&ed in urban areas. >y the end of )%1)( the si9e of the population will possibly touch 1*% million. 'i-ty"fi&e years after the country became independent about $% per cent of the population is urban. In 1*$#( /arachi had a population of $%%(%%% people. It is now what demographers call a mega city N contiguous urban clusters with populations of more than 1% million people N with a population of probably 1; million. The city( in other words( accounts for one"quarter of Pakistans urban population of # million. All this change is awe"inspiring. The population is more than si- times larger than its si9e ! years ago. The urban population is 1! times bigger. /arachis population is $! times larger. 0ahore is now the countrys second largest city ha&ing also attained the status of a mega city( with a population 1) times larger than its si9e at the time of Partition. In describing this change( I ha&e used a number of qualifiers N Mpossibly( Mprobably( Mperhaps and Mlikely. These lend some uncertainty about the numbers mentioned and the e-tent of change implied. The reason for making these statements in a tentati&e way is that the country has not carried out a population census for more than 1$ years( e-ceeding the ten"year inter&al after which most nations count the number of people who are their citi9ens. The last time a count was made was in 1**; and that was 1! years after the census of 1*;1. In fact( in the countrys !"year history( it has conducted only fi&e population censuses N in 1*!1( 1* 1( 1*#)( 1*;1 and 1**;. Politics was the main reason for this lack of regularity. 1apid population growth brings about equally rapid economic and social change. This is ine&itably reflected in politics. >ut the Pakistani political structure in spite of the roller coaster it has ridden has one abiding elementD it has been dominated by the groups that prefer the status quo o&er change. Holding censuses on a regular basis would mean incorporating the changes that occurred in the inter"censal periods. This would ha&e altered the political structure in a fundamental way. According to Article !1:!< of the =onstitution( Fthe seats in the ?ational Assembly shall be

allocated to each pro&ince( the 5ederally Administered Tribal Area( and the 5ederal =apital in accordance with the last preceding census officially publishedG. 7i&en the enormous demographic change that has occurred would mean a significant shift in political power from the rural to the urban areas. 'ome simple arithmetic would highlight this point. 7i&en the possible si9e of the population in )%1) and the likely increase of about fi&e per cent a year in the number of people li&ing in towns and cities( urban areas should ha&e a much larger representation in the national and pro&incial assemblies. There will also be a shift in power among the &arious regions in the country. This will be the case in particular for the parts of the country that ha&e been losing a significant number of people through migration. .rbanisation( therefore( is one of the more important demographic changes that are taking place in the country. The urban 2ump o&er the last ! years is two and a half times larger than the increase in o&erall population. The 2ump in /arachis population is three times higher than in the total growth in urban population. The political system( which is still under de&elopment( must reflect these demographic changes. 0et me illustrate this point by taking a closer look at /arachi. The enormous increase in the citys population is the consequence of three wa&es of migration. The first brought more than half a million refugees from India o&er a four"year period between 1*$# and 1*!1( doubling the citys si9e. The second wa&e occurred when the city went through a construction boom to accommodate the federal go&ernment and to pro&ide space for rapid industrialisation. This wa&e brought in people from the countrys northern areas N north Pun2ab and /hyber" Pakhtunkhwa :/"P<. It was because of this mo&ement of people that /arachi acquired its Pakhtun colonies. 4nce these colonies were well established( they attracted new migrants( especially from /"P and the tribal areas N the parts of the country destabilised by the long Afghan wars. This was the third wa&e of migration. These mo&ements of people brought about one important changeD the political mobilisation of the descendants of those in&ol&ed in the first wa&e of migration. The ,uha2ir community has become a potent political force. Howe&er( its attempt to car&e out political space for itself has resulted in much &olatility in the city. Pakistan will ha&e to find a way of accommodating( within the political structure( the enormously significant demographic changes that ha&e already occurred and those that will occur in the future. The countrys rapid urbanisation and relocation of people through migration are the two most important demographic de&elopments that must be factored into the making of a new political order. Source7 >e(o*ra!hy and .o"i&ics YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o rain007 $or This 4se6u" .os&7

A$ambitious :'aturday( ?o&ember 1%( )%1)<

#302 Tuesday, *#tobe 16, 2012

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

>is!ersa" and coherence7 a cha""en*e

By Shahid Javed Burki +ill the coming elections sol&e Pakistans many economic( political and social problems3 The answer to that question will depend on the outlook towards go&ernance on the part of those who are returned to power. The way Pakistan has e&ol&ed politically and economically is to allow the few who go&ern to accumulate in their hands an enormous amount of political authority. It would do well to understand how that has happenedD how the past has shaped the present3 To achie&e durability for the state( those in power will ha&e to learn to share their authority N to disperse it through the use of &arious institutions and instruments to the countrys distant corners. This would mean accepting federalism as embedded in the =onstitution and by de&eloping political organisations that truly represent the countrys many people. At the same time( this dispersal of authority should be done to retain one state working for one nation. In that conte-t( it will be worth e-ploring how Pakistan de&eloped a taste for centralised authority in the first place. Pakistans founding fathers( by creating political space for the ,uslim community of >ritish India( sol&ed one problem but left a number of others unresol&ed. The problem that was sol&ed was the perception that the ,uslims would not a get a fair deal in a united India. The solution was to create a ,uslim homeland and pro&ide those who came to li&e within the boundaries of the new state( the opportunity to control their own destiny. >ut what was left unsaid was how this space( once created( would be used to help the citi9enry. It was also not clear as to who would be in charge of policymaking in this space. This was to become the dilemma of the Pakistani state. It has preoccupied se&eral generations of leaders in the countrys history. Two approaches were tried alternati&ely. The first one was to let policymaking be the responsibility of the peoples representati&es. The second one was to allow the self" appointed to guide the affairs of the state. The first meant the adoption of democratic ruleE the second was the rule by the bureaucracy( first the ci&ilian( then the military. The first had great merit as has come to be recognised by most communities across the globe. The second was found to be attracti&e by large segments of the population during periods of great economic stress. +ith hindsight it can be said that the military left the country in a worse situation from the one it inherited at the time it usurped power. Initially( it did succeed in making the Mtrains run on time. It brought a degree of coherence during

moments of e-treme chaos. >ut each time( it failed in the larger taskD to create one nation with one purpose out of di&erse people. The military tried four times and failed each time. The first inter&ention in 1*!; was 2ustified by those who assumed power by pointing to the failure of the ci&ilian leadership that had go&erned for 11 years without de&eloping a tenable and durable political order. 'ociety then was e&en more di&ided than it is today. There were serious differences between the two main regions N 6ast and +est Pakistan. There was conflict between those who had arri&ed from India as refugees and those who were indigenous to the areas that had become parts of Pakistan. A large number of refugees settled in some of the larger cities and ga&e the urban population a say in politics they ne&er had during the >ritish period. All these differences needed minding( which meant serious delays in defining the political order meant to pro&ide go&ernance in the country. The military leadership concluded that the ci&ilian leadership was not up to the task and inter&ened. .p until the military inter&ention( political leadership was mostly from among those groups that had left their homes in India. The new leaders had little mass support. Had they created a political system as India did after only two"and"a"half years of gaining independence( they would ha&e had to ask for peoples support. That was not there. In that situation of uncertainty( the leadership tried subterfuge to retain power. The result was the gradual surrender of power to those who had learnt go&ernance from being members of the &arious Mimperial ser&ices of >ritish India. The men who rose to the top in &arious Indian ci&il ser&ices had followed a model of decision"making that relied on the centralisation of authority. The >ritish had used the model successfully for almost a 1%% years. A &iceroy appointed by 0ondon sat on top of an administrati&e structure that put faith in the efficiency and goodwill of a few. The &ernacular term for this approach to go&ernance was Mmai"baap :mother"father<D the citi9ens were the states children to be cared for as such. In its formati&e years( Pakistan de&eloped a hybrid model of political management and go&ernance. 5or a little o&er four years( politicians were clearly in charge. Howe&er( after the assassination of 0iaquat Ali /han( the countrys first prime minister( politicians gradually lost power to the bureaucracy. After 0iaquat was killed in 4ctober 1*!1( a new brand of managers emerged. These were bureaucrats"turned"politicians. Their ascent was to lea&e a lasting impression on the Pakistani political landscape for decades. How that happened will be the sub2ect of the article ne-t week. Source7 >is!ersa" and ,oherence YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 2 4sers Say Thank 5ou &o rain007 $or This 4se6u" .os&7

A$ambitious :'aturday( ?o&ember 1%( )%1)<( Asif Housuf9ai :Tuesday( 4ctober 1 ( )%1)<
#303 Monday, *#tobe 22, 2012

Arain%%#
=9ar

Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Takin* !o+er &o &he !eo!"e

By Shahid Javed Burki 0iaquat Ali /hans assassination was to profoundly affect Pakistans political de&elopment. Those who really go&erned after the death of Pakistans first prime minister were Mstrong men( the praetorian guards trained to e-ercise authority o&er those they ruled. 5i&e of these si- were bureaucrats"turned"politicians. The si-th was a politician. +ith 2ust one break in the 1**%s( these men go&erned for a total of $ years out of Pakistans 1 years during which the search for a durable political order was on. It was only in )%%; that a new political order began to take shape but e&en then some of the legacies from the old orders were still in e&idence. 0iaquat Ali /hans death was followed by the ascent to power of two strong men( made possible by the weakness of the political order. The first in line was 7hulam ,ohammad( the countrys third go&ernor general who was followed by Iskander ,ir9a( the fourth go&ernor general and Pakistans first president. 0iaquat left the political scene without resol&ing the differences between the refugees who had come from India and were able to dominate politics and the host populations who had numbers on their side. This conflict between the outsiders and insiders was to define Pakistani politics to this day. The impact on Pakistans political de&elopment of the way 7hulam ,ohammad and Iskander ,ir9a go&erned has largely been forgotten. >oth were bureaucrats with technocratic flair and trusted those who were similarly inclined. Their dependence on the bureaucracy for wielding and e-ercising power ga&e the military the incenti&e to step in. Insofar as bureaucracies go( the military was much more organised than its ci&ilian counterpart. Two of the strong men N Ayub /han and Julfikar Ali >hutto N who followed 7hulam ,ohammad and Iskander ,ir9a( thought it necessary to prescribe a legal framework within which to function. >oth wrote new constitutions. The 1* ) document unabashedly adopted as its basis a strong centre and limited participation for the citi9enry in the working of the go&ernment. The 1*#B =onstitution reflected what the people wanted N a federal system with considerable dispersal of go&erning authority. Howe&er( prime minister >hutto did not allow the federalist pro&isions to come into force in the political order he had authored. The original intent of >huttos =onstitution became possible $; years after its promulgation. This resulted from the adoption of the far"reaching 6ighteenth Amendment to the =onstitution.

+hereas Ayub /han and >hutto wrote new constitutions( the two strong men who followed them( tinkered with the one they inherited. The fact that neither Jiaul Haq nor 7eneral :retd< Per&e9 ,usharraf dared to abrogate the =onstitution of 1*#B was the fear that such a step would unleash a reaction that may not be controlled. That =onstitution( unlike the one adopted in 1*! ( was the consequence of the e-ercise of popular will. Amending it to increase the power of the president was considered a feasible option rather than doing away with it altogether. The adoption of the 6ighteenth Amendment was a re&olutionary step. It introduced two fundamental changes in the way the country should be go&erned. It took power away from the president and placed it back with the prime minister and his cabinet. The latter was responsible to parliament. It also pro&ided the country a real federal structure and coming as it did after the issuance of the 'e&enth ?ational 5inance =ommission award( it mo&ed a considerable e-tent of control o&er public funds to the pro&inces. The first of these two changes has not produced much change in the way the country is go&erned. ,ost of the e-ecuti&e authority resides with the president( who is able to e-ercise it since he is the undisputed leader of the political party that controls the ruling coalition. The second change is being worked out. >oth are important for dispersing power beyond Islamabad and making the pro&inces partners in the process of go&ernance. +ithout such de&olution( the Pakistani state will remain fragile. Source7 Takin* .o+er &o &he .eo!"e YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o rain007 $or This 4se6u" .os&7

A$ambitious :'aturday( ?o&ember 1%( )%1)<

#304 Monday, Novembe 0$, 2012 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

<(1race, no& reAec& &he 4ni&ed S&a&es

<(1race, no& reAec& &he 4ni&ed S&a&es

By Shahid Javed Burki .u1"ished7 /ove(1er 4, 2012 ,ost American news outlets( both print and electronic( carried an item that showed Pakistan to be the only country among a couple of do9en sur&eyed( which would fa&our a win in the presidential election by the 1epublican candidate ,itt 1omney. This has

confirmed the &iew of those Americans who ha&e interest in Pakistan and in the area of which it is a prominent player that relations between Islamabad and +ashington are now totally ruptured. ,uch of this antipathy towards Pakistan has been created by the impression that the country is the most serious obstacle in the way of Americas decent and not"costly withdrawal from Afghanistan. As Panni =appelli( president of the Afghanistan 5oreign Press Association( wrote in a long letter to The ?ew Hork Times on 4ctober B1 that Fthe deterioration of the situation in Afghanistan has been the ine&itable result of Americas continuation of the &ery dynamic that led to the 'eptember 11 attacks N hefty( decades"long military assistance to Pakistan( which it used to incite pro-y militants to crush socio"economic reform at home and commit aggression against its neighbours.G This reading of Pakistans recent economic history is not totally accurate but the point is that this kind of thinking is recei&ing the attention of influential policymaking institutions. =appelli also offers a solution to what he labels as Americas FAfghan"Pakistan woesG. He suggestsD F=ontinued military and diplomatic engagement in 'outh"=entral Asia( with a truer aim of containing Pakistans ability to destabilise its neighbours and affecting a transition to real ci&ilian rule there( is our best option. 'uch a policy would proceed not from triumphalist myopia but from tragic recognition and is the only course that will bring peace and security to Afghanistan( the region and America.G The treatment meted out( a few days ago( to Imran /han by the .' immigration authorities when the former cricket star and now an influential politician was entering the .' from =anada( did not help Pakistan".' relations. This treatment did not create many friends for America in Pakistan. This will further deepen the di&ide. That is unfortunate for the simple reason that post"Afghanistan withdrawal( Pakistan will need the .' more than the .' will need Pakistan. After the Americans ha&e pulled out( their interests in =entral and 'outh Asia will be better ser&ed by maintaining close and friendly relations with Afghanistan and India. The Americans are interested in obtaining access to the fabulous energy and mineral riches of =entral Asia. A Pentagon report estimated Afghanistans mineral wealth at o&er a trillion dollars. The =entral Asian states ha&e known reser&es of gas and oil as well. Americas other geopolitical interest in the area is containing the rising =hina. That is better ser&ed by a close association with India. This logic( therefore( essentially marginalises Pakistan in the eyes of the policymakers in +ashington. >ut Islamabad must find a way of staying on the right side of America. This is for good economic reasons. 5or as long as the country is unable to generate a greater amount of domestic resource for in&estment and for as long as it fails to e-ploit the riches a&ailable from taking what should be its share in e-panding international trade( Pakistan will remain dependent on e-ternal flows of capital. 5oreign sa&ings are needed to close the domestic in&estment"sa&ings gap( as well as the gap between e-port earnings and e-penditure on imports. In the past( America has played &ery important roles in helping the country with these two gaps. It has pro&ided both direct assistance( as well as pressured institutions such as the International ,onetary 5und to come to Pakistans assistance. +ith the palpable cooling of relations( help from America may not be as readily a&ailable as was the case during se&eral balance of payments crises in the past. It is recognised in Pakistan that the country( as it mo&es towards another general election( will face a new balance of payments crisis. There will be only two ways of sol&ing it. Islamabad could se&erely tighten its belt and thus slow down e&en more its tepid rate of growth. 4r hope that a large flow of e-ternal assistance would be forthcoming to tide o&er the coming difficulties. The former approach would ha&e serious political and social consequences. The latter approach would need setting relations with America on a less rocky course. The large and prosperous Pakistani diaspora in the .' could be of help as it was in countering the damage done by the Pressler Amendment( named after 'enator 0arry Pressler from 'outh 8akota. This imposed se&ere sanctions on Pakistan as Islamabad

continued its programme for de&eloping nuclear weapons. At that time( a number of American citi9ens of Pakistani origin were able to put pressure on the .' 'enate to pass another amendment( eased the sanctions and e&entually restored aid to Pakistan. The Indian diaspora( which is three times the si9e as the one from Pakistan( is now well" organised to play an important role for their country. .nfortunately( the Pakistani community in the .' carries a hea&y burden N that of some links with Islamic e-tremism( which ha&e further eroded its latent political power. Those who ha&e some influence o&er the making of public opinion must recognise that promoting a better relationship with the .' is in the countrys interests. The re&erse is not the case. httpDOOtribune.com.pkOstoryO$ % YYYYYYYYYYYYYYYYYY 0eft is 1ight BOe...united"statesO

The $o""o+in* 2 4sers Say Thank 5ou &o ,u&e Badshah $or This 4se6u" .os&7 A$ambitious :'aturday( ?o&ember 1%( )%1)<( anam%$# :,onday( ?o&ember 1)( )%1)<
#305 Monday, Novembe 12, 2012 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

The

6*han 6ac&or in .akis&an9s 6u&ure

By Shahid Javed Burki /ove(1er 12, 2012 ?one of the standard and respected works on Pakistans economy make reference to AfghanistanE for instance( the books by Par&e9 Hasan and Ishrat Husain on Pakistans economic de&elopment between 1*$# and 1**#. The omission seems surprising when we look back at the countrys economy and reflect on its future from the perspecti&e of the closing months of )%1). There is no doubt that Pakistans economic future will be hea&ily influenced by the way Afghanistan settles down after the American pull"out. President >arack 4bamas re"election may e&en hasten the process. 4nce the Americans depart( what will they lea&e behind3 +e can contemplate two e-treme possibilities( each of which will ha&e enormous consequences for Pakistan. 4n one end of the probability spectrum( it can be assumed that the country will settle down after the withdrawal of foreign troops. ,ost of the &iolence is

directed at foreign troops and the Afghans that support them. According to this scenario( &arious segments of the di&erse Afghan society will find a way of working with one another( preferably( within a political framework that will be representati&e and durable. 4nce politically settled( the Afghans will begin to rebuild their war"ra&aged economy( reduce dependence on foreign support and e-ploit the countrys enormous mineral potential. A Pentagon study estimated the potential of mineral deposits at one trillion dollars. It co&ers a number of minerals( including iron( copper( gold and platinum. 'ome of the mineral &eins e-tend into Pakistan( especially in the countrys south. There is considerable foreign interest in getting to these deposits and foreign in&ol&ement will draw Afghanistan e&en closer to Pakistan. If we mo&e to the other side of the probability spectrum( a &ery grim picture could be painted about Afghanistans future. According to this( the ci&il war that followed the pull" out by the 'o&iet .nion will look like a picnic when the .nited 'tates and its allies lea&e. The assumption that a &ery large Afghan force of more than B%%(%%% soldiers will be able to take charge of security will pro&e to be highly optimistic. There are already signs that the force that has been built up by the Americans( working with their 6uropean allies( may not ha&e the cohesi&eness and ha&e it remain loyal to the state. Instead( the moment the American umbrella is remo&ed( we will see this force fracture. +ashingtons promise to pay @1.$ billion a year to sustain a large force will not amount to much after the pull"out is complete. The Americans are faced with a serious fiscal problem( in which all e-penditures are being looked at to reduce the enormous burden of debt the economy carries. Pro&iding such a large amount of support to Afghanistan for a long period of time will be one of the first commitments to fall by the wayside. Hea&ily armed men not certain that they will continue to recei&e their salaries will begin to seek the support of the numerous warlords in &arious parts of the country. If the 'o&iet .nions departure resulted in a ci&il war with half a do9en contenders( there will be many more this time around. The conflict among them will be bloodier than the war that ended with the triumph of the Taliban in 1** . This time( the Taliban will be one of the acti&e participants in the fight from the &ery beginning. The northern and central areas will come under the control of other social and ethnic groups. The Ta2iks and the .9beks will control the northeast and the groups that ha&e the support of Iran will dominate the west. This possible di&ision of Afghanistan into three parts will create an e-tremist state right on the border with Pakistan. That state will continue using its ideological force to destabilise the areas south of the border( which will ha&e serious economic and political consequences for the state and the people of Pakistan. +hich way Afghanistan goes will matter for Pakistan. Those who ha&e chronicled Pakistans economic past may ha&e o&erlooked Afghanistan as a contributing factor. Source7 The 6*han $ac&or in .akis&an-s $u&ure YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga The $o""o+in* 4ser Says Thank 5ou &o anam%$# :,onday( ?o&ember 1)( )%1)<
#306 %unday, Novembe 18, 2012

rain007 $or This 4se6u" .os&7

=ute >adshah
'enior ,ember

Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

Wo(en &o .akis&an9s rescue

Wo(en &o .akis&an9s rescue

By Shahid Javed Burki /ove(1er 19, 2012 4ften( it is not realised by those who study Pakistan that the women in the country may be in a position to come to its rescue. 6&en without any assistance by the state( they will be contributing more than a full percentage point a year to the rate of economic growth in about fi&e years. They ha&e made some e-traordinary progress in the last decade. 5emale literacy has impro&ed( albeit from a low base. +omen are doing particularly well in institutions of higher learning. There are now more female than male students in colleges and uni&ersities. >y )%1!( a million well"educated and trained women will be ready to 2oin the workforce. A number of these will get married and start families. >ut many will also take up 2obs in modern sectors of the economy. 6&en many of those who are not formally in the workforce will be using their time producti&ely( adding to family income by the part" time application of skills they ha&e acquired. Also well"educated mothers are good in bringing up children. +omen now ha&e a significant presence in the national and pro&incial legislatures. This is one area where 7eneral :retd< President Per&e9 ,usharraf should be gi&en full credit. It was as a result of the changes he made in the political order that women were able to increase their number in the legislatures. +omen ha&e entered the legislatures not only by being elected to reser&ed seats but many ha&e won elections from open constituencies. Pakistan is one of the &ery few countries to ha&e a woman as the speaker of the ?ational Assembly. In a con&ersation a couple of months ago( with 8r 5ehmida ,ir9a( she proudly pointed out to me her successful initiati&es. 'he has organised a Mwomens caucus in the ?ational Assembly that includes legislators from all political parties. FThey ha&e been able to work together( unmindful of the fact that they come from different political organisationsG( she said. They ha&e introduced a number of bills aimed at impro&ing womens welfare. +omen are also occupying leadership positions in non"go&ernmental organisations( especially those dealing with social issues. =ombining this work( with what they ha&e begun to do in politics( has made it possible for women to address some of the problems they face in the country. In addition( women ha&e become entrepreneurs in many businesses. +hat is impressi&e about the remarkable progress made by women is that it has resulted mostly from their own initiati&es. +omen are doing well in education( in large part because se&eral female entrepreneurs established educational institutions which could be con&eniently attended by girls with some comfort. 'ome of the largest school systems in the country( such as the >eacon house 'chools( =ity 'chools and 7rammar 'chools are products of womens entrepreneurship and the business and pedagogical models for these schools were concei&ed by them. They pro&ided the initial funding and are also being

managed by women. ?ot only ha&e women worked hard to impro&e the quality of education girls recei&e. It is women who are now also at the forefront of the fight against e-tremists who are dead set against female education. A bra&e teenager( ,alala Housaf9ai from 'wat( has become the symbol of the struggle being waged by women in a country that is increasingly mo&ing towards an e-tremist interpretation of Islam. The defiant campaign launched by almost cost her her life. Ha&ing sur&i&ed the attack( she will be a beacon of hope for the Pakistani women. Pakistan( although headed in that direction( is different in many ways from conser&ati&e Islamic societies. 'audi Arabia is a country many Pakistani citi9ens admire and would like to follow( in terms of its professed moral rectitude. Howe&er( it remains hostile towards women e-ercising their rights. It has failed to accommodate the &ery women in the work place that the state has paid to educate in foreign uni&ersities. There are 1#(%%% 'audi women studying in American colleges and uni&ersities. According to a report( F'aud Arabia has sharply reduced female illiteracy( &irtually eliminating it among women ages 1! to )$.G >ut educated women( e&en those with foreign degrees are unemployed. F.nemployment among 'audi women who want to work is B$ per cent N almost fi&e times as great as the se&en per cent rate for men.G Pakistani women ha&e better opportunities compared to those in such conser&ati&e societies as 'audi Arabia. They are readily able to find 2obs. They ha&e also been able to become successful entrepreneurs. +ell"educated women dont come up against the brick wall that others face in se&eral ,uslim countries of the ,iddle 6ast. Pakistani women are doing well in the work place and in the business world. They ha&e established both formal as well as informal firms( in sectors such as education( communication( fashion and micro finance. The contribution that women ha&e already begun to make to the economy( and are likely to make e&en more significantly( applies mostly to the urban areas. In the abo&e referred con&ersation with 8r 5ehmida ,ir9a( she emphasised that women remain economically and socially distressed in the poorer districts of the country. 'he used >adin( her district in southern 'indh( as an e-ample of how much work women do both inside and outside their homes but in spite of that their economic situation remains poor. +omen are ad&ancing but still ha&e a long way to go. 4nce they achie&e their full potential( they will be able to lend a helping hand to rescue Pakistan from its current economic tra&ails. 'ourceD httpDOOtribune.com.pkOstoryO$ # B;Ow...istans"rescueO YYYYYYYYYYYYYYYYYY 0eft is 1ight
#307 Monday, "e#embe 03, 2012 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

The econo(ic 1ene6i&s o6 (ore +o(en in &he +ork6orce

The econo(ic 1ene6i&s o6 (ore +o(en in &he +ork6orce

>y Shahid Javed Burki 8ecember B( )%1) ,y pre&ious columns on the contribution Pakistani women could make to the de&elopment of the economy in&ited a number of comments. 'ome of these were sceptical of the claims I was making. There was an impression on the part of se&eral commentators that I was attempting to be cheerful about one( possibly manufactured( aspect of what is indeed a dismal situation. Those who belie&e that the economy is going down uncontrollably on a slippery slope are not prepared to look at some of the positi&es on which a better future could be built. 4ne of them is the role women are poised to play. This is one reason why I am re&isiting the sub2ect and pro&iding another way of looking at what women could do for the countrys economy. 4ne place to start this inquiry is to pro&ide a measure of the cost to the economy of the Pakistani womens persistent N and it should be emphasised forced N backwardness. A simple calculation will help to underscore the magnitude of this loss. According to the )%11" 1) Pakistan 6conomic 'ur&ey( Pakistans labour participation rate in mid")%1) was an estimated B).; per cent of the total population. This is e-traordinarily low when compared to other de&eloping countries. 5or a population of 1;1 million( this means the si9e of the workforce is !*.$1 million. 4f this( $1.) million : *.$ per cent< is in the countryside and the remaining 1;.) million is located in the towns and cities. The +orld >ank estimates Pakistans 78P in )%1) at @)%% billion. This implies output per worker at a little o&er @B($%%. As e-plained below( this should be much higher in case women were allowed to participate more fully in the workplace. Pakistan has one of the worlds youngest populations in the world with a median age of about )) years. This means that one"half of the population( or *%.! million( is below that age. A much larger share of this population should be in the workforce. If this were the case( the country would be benefiting from what the economists call the demographic window of opportunity( when the proportion of the working population is much greater than those who are dependent on it. This would be realised if both men and women of working age were able to work. This is not the case in Pakistan. The proportion of men in the workforce is relati&ely highE ;. per cent. That of women is &ery lowE only B1.$ per cent. This means that while B.! million men are in the workforce( the number of working women is only )* million. This does not mean that millions of women are sitting idly in their homes. In fact( most of them are doing a great deal of housework looking after their children( preparing food for the family( and in the countryside( often tending farm animals. +ould getting them out of the house and into the workforce add to the countrys gross output3 The answer is( probably yes( if the marginal return to their work in the marketplace is higher than what would be paid to those who would be called in to pro&ide help in the house. This will be the case certainly among the middle"income households in the urban areas. >y stepping outside their homes( middle"income women will create opportunities for those women lower down on the income scale. This will produce a ripple effect in the economy or in the language of economics a Mmultiplier will get to work. This brings me to one of the Mwhat ifsT 3 questions about the situation in Pakistan. +hat would be the impact on the economy N to its si9e and the rate of growth N if the proportion of women in the workforce reached( not quite the le&el attained by men( but close to it( say !% per cent. This would mean an addition of )! million women to the labour force. This addition to the workforce will ha&e the capacity to add @;! billion to the gross domestic product of @)%% billion N an increase of $).! per cent. +ith this increase in the countrys 78P( income per capita will increase from the current @1(1%% to @1(!#!. In other words( women could make a larger contribution to the economy if they are allowed to be part of the

workforce. >ut for that to happen( the society will ha&e to lift the many burdens that weigh down women and pre&ent them from contributing to the economy. +omen could help in one other way. ,uch of the contribution made by them to the national output is in low"paying and low"rewards 2obs. This is particularly the case in the countryside. ?o firm estimates are a&ailable on gender inequality in terms of per capita income. If we assume that the monetary rewards from the 2obs they perform are only three"fourths of that by men( then by narrowing the gap( there would be a significant addition made to the gross domestic product. The most producti&e way of making women contribute more to the national product is to impro&e the le&el of their literacy and impart them with better skills. This has begun to happen as argued pre&iously in this space. +e should( in other words( look positi&ely at some of the changes that are taking place N changes that could ensure a better economic future for the country. httpDOOtribune.com.pkOstoryO$#$1 $Ot...the"workforceO YYYYYYYYYYYYYYYYYY 0eft is 1ight
#308 Monday, "e#embe 10, 2012 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

.akis&an9s &arred re!u&a&ion

.akis&an9s &arred re!u&a&ion

>y Shahid Javed Burki 8ecember *( )%1) +hile Pakistans dependence on the +est for capital and also on recepti&e markets for its e-ports continue to increase( the +est N in particular the .nited 'tates N is becoming wary of Pakistan. In a democratic system( what people feel about a country with which it has relations matters. In this conte-t( how Pakistan is &iewed by the citi9ens of the .nited 'tates acquires considerable importance. Pakistans stagnant e-ports and the sharp drop in foreign direct in&estment mean that the country needs large doses of official finance to keep the economy afloat. The capital that is needed can come from two sources. It can be pro&ided by +ashington or it can be made a&ailable by the multilateral de&elopment and financial institutions. In the .nited 'tates( =ongress reigns supreme in money matters. The e-ecuti&e may promise but it is =ongress that disposes. .nfortunately for Pakistan( the countrys reputation is not high in that body. As such( the .nited 'tates will not be able to play in Pakistans corner in the +orld >ank or the International ,onetary 5und where +ashington has a great deal of influence. It should( therefore( trouble Islamabad that while the countrys senior officials were in +ashington holding important discussions on economic matters( two influential publications came out with disturbing stories about Pakistan.

The world has begun to take notice of what it sees as another ugly turn in Pakistan. This is not good for Pakistan and its stressed economy( dependent as they are on e-ternal support. Howe&er( the country needs a helping hand from abroad( without which it would sink into a deeper hole. Pakistans policymakers and the people of Pakistan must realise that the country today does not ha&e the respect of the international community. Two detailed stories in recent days N one in The 6conomist and the other in The ?ew Hork Times( brought their readers news about the rise of sectarianism in Pakistan. This has added another dimension to the Pakistani story. The >ritish 2ournals story was about /arachiE that of the American newspaper about Xuetta. 1eading them together pro&ides a &iew that is of immense concern for the international community. It is of concern because innocent people are being killed( sometimes in broad daylight and sometimes with the killers making no attempt to hide their identity. The only reason why so many people are being killed is that they profess a different faith than the one to which the killers subscribe. It concerns those who are watching this deteriorating situation that the security forces ha&e not tried &ery hard to stop the carnage and bring to 2ustice the people who are engaged in it. It is also of concern since the slow disintegration of normal life in two cities( each important in its own way( has begun to showcase what is going wrong in the ,uslim world. /arachi is the ner&e centre of the Pakistani economy but is being torn apart by se&eral conflicts among the &arious components of its fragmented citi9enry. The 'indhis( the ,uha2ir and the Pashtun are fighting for political and economic space. The Islamic radicals( whose numbers ha&e increased significantly because of the influ- of tens of thousands of Pashtun from the resti&e tribal areas( are attempting to force their religious beliefs and cultural norms on the rest of society. This is an unfortunate de&elopment for the citys large and reasonably affluent middle class. /arachi had deser&edly earned the reputation of being Pakistans most open and modern city. That reputation is being tarnished. According to some obser&ers( /arachi is being Talibanised. If this is the case( it will pose a problem for the .nited 'tates since its crowded slums will not be within easy reach of the drones( the weapon of choice for Americas counterterrorism efforts. At the same time( a dysfunctional /arachi will add to Pakistans many economic woes. Xuetta( the other troubled city( is disturbed by a similar set of problems. 0ike /arachi( it is also multi"ethnic. Its many di&erse communities ha&e come together because of economic and political de&elopments of recent years. >alochistan( of which Xuetta is the capital( is rich in mineral resources. 4ne of them( natural gas in 'ui( has been fully e-ploited and now accounts for a significant share of energy consumption. Its successful e-ploitation brought many highly trained and skilled people from other parts of the country( churning up the ethnic mi- of the pro&ince. Americas war in Afghanistan brought in another group to the citys en&irons( the so"called MXuetta shura. +ith its supporters armed to the teeth( they ha&e taken o&er parts of the geographic space in the pro&ince. These are troubling tales. The story Pakistan needs to tell those who are watching the many disturbing de&elopments in the country is that a period of transition is underway. Pakistan is transiting towards a political order in which conflicts will get resol&ed through discourse and legislation and not through &iolence. As such( the country needs the +ests support and not scorn at this delicate time in its history. 'ource " httpDOOtribune.com.pkOstoryO$##B$#Op...ed"reputationO YYYYYYYYYYYYYYYYYY 0eft is 1ight

#309 Tuesday, "e#embe 18, 2012 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

?ivin* in &he Mus"i( +or"d

?ivin* in &he Mus"i( +or"d

PublishedD December 17, 2012 6conomic progress requires political stability and social harmony. This has been the story of much of the ,uslim world and the reason why it has lagged behind other de&eloping nations in terms of economic de&elopment. The Arab 'pring of )%11 changed many assumptions regarding go&ernance in the ,uslim world. In the period that followed( fi&e questions were asked. These relate to the roles of Islam and the military in politics( the location of e-ecuti&e authority( accommodation of minorities within the political and social systems( and the basis of relations with the +est. In the mo&e towards the establishment of such an order( there will be flow of ideas and influences from one country to the other. In this conte-t( Pakistan will ha&e an important role to play. The reason for that is simpleD Pakistan has struggled the hardest and longest in finding answers to the questions being raised in the ,uslim world. >y far( the two most important questions are the roles of Islam and the military in the e&ol&ing political systems. Pakistan and Turkey ha&e found an answer to the first question( while the Arab world is still looking for it as it transits from one type of political order to another. These two non"Arab ,uslim states ha&e come from different directions to find more or less the same solution. In spite of the intense campaign and hard work put in by the political organisations that call themsel&es Islamic( it is clear that the ma2ority of the Pakistani people dont want to li&e in a political system that is strictly Islamic. This is the main reason why those who want to create an Islamic state are operating from outside the political system rather than from within it. They ha&e chosen to use &iolence as their tool. That is not acceptable to the ma2ority. The mainstream political parties are prepared to accept Islams guidance( not its ruling tenets. The system that emerged since )%%; has resol&ed this issue. Turkey has reached the same conclusion but has come to it from the other side. /emal Ataturk( the founder of modern Turkey( created a secular state in which a number of practices associated with the practice of Islam were strictly banned. 'uch draconian dispensation produced instability. The country was able to resol&e the issue of Islam in politics once power was assumed by the Austice and 8e&elopment Party headed by Prime ,inister 1ecep Tayyip 6rdogan. He and his party ha&e declared that while the religion of the &ast ma2ority of the countrys people must be respected( it must not ha&e a role in go&ernance. The Arab world( howe&er( has not found an answer as is shown by the struggle o&er the draft constitution produced by the ,uslim >rotherhood. According to +estern obser&ers( Fto ,ursi and his Islamist backers( the draft charter is the legitimate product of a democratically"elected =onstitution"writing assembly that is dominated by Islamists. To his

opponents( the document represents a kind of tyranny of the new Islamist ma2ority.G The second question N the role of the military N has been answered decisi&ely by Turkey and to some e-tent by Pakistan. It( too( remains unanswered in the Arab world. In both( it has become clear to the men in uniform that the people want them to remain in their barracks and help to pro&ide security to the citi9ens. Any attempt to enter the political space will be resisted by the street. The street has shown its power not only during the Arab 'pring but e&en before that in the 0awyers ,o&ement of )%%# in Pakistan that brought the dismissed 2udges back to the bench. In 6gypt( howe&er( the >rotherhood has been tempted to use the military to strengthen its claim to power. In the contro&ersial decree issued by President ,ohamed ,ursi( the military was gi&en additional powers to deal with the protests that may seriously disturb the peace as the =onstitution was &oted upon in the 8ecember 1! referendum. In the article ne-t week( I will take up some of the other questions that need answers. 'ource " httpDOOtribune.com.pkOstoryO$;%$#*Ol..."muslim"worldO YYYYYYYYYYYYYYYYYY 0eft is 1ight
#310 Monday, "e#embe 24, 2012 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

Where shou"d e=ecu&ive au&hori&y reside:

Where shou"d e=ecu&ive au&hori&y reside:

PublishedD December 23, 2012 In last weeks article in this space( I wrote about two aspects of political transformation in different parts of the ,uslim world. In some of these( the political systems are mo&ing away from authoritarianism and going towards some form of democracy. I suggested that in determining the role of Islam and the military in politics( Turkey and Pakistan ha&e gone further than Arab nations also in&ol&ed in making the transition. Howe&er( in neither of these two non"Arab ,uslim nations has there been a clear indication as to where the e-ecuti&e authority should reside. >oth Pakistan and Turkey are( on paper( parliamentary democracies. Howe&er( the person who controls the go&erning party holds the reins of power. In Turkey( Prime ,inister 1ecep Tayyip 6rdogan has the e-ecuti&e power because that is where the =onstitution places it. Turkeys current basic law was written by the generals when they were in power. Although they ga&e the states e-ecuti&e authority to the prime minister( they kept enough power for themsel&es to keep a close watch on the performance of the ci&ilian leader. The generals did not hesitate to inter&ene if they belie&ed that the peoples elected representati&es were acting against the basic principles of go&ernance laid down by ,ustafa /emal Ataturk. The political predecessor of 6rdogans Austice and 8e&elopment Party was remo&ed from power when the generals felt that the secular

foundations of the Turkish state were being compromised. 6rdogan used the power of the ballot bo- to ultimately bring the military establishment under ci&ilian control. Three electoral &ictories( each with increasing popular support( ga&e him the confidence to mo&e the generals back to their barracks. In his latest term in office( he felt powerful enough to put some generals on trial( e&en to send some of them to prison for plotting to take o&er control from the ci&ilian go&ernment. 6rdogan ha&ing indicated that he will not ser&e another term as prime minister after completing his current tenure is contemplating a mo&e to the presidency. He will do so if he is able to change the =onstitution and create a quasi"presidential system. In Pakistan( a different kind of ambiguity e-ists. The =onstitution of 1*#B was clear in gi&ing full e-ecuti&e authority to the prime minister. This was the reason that Julfikar Ali >hutto( the principal author of the new basic law( stepped down as president and became the first prime minister under the 1*#B dispensation. 6&en while taking that step( he continued to in&ol&e himself in some trappings of the office he had gi&en up. 5or instance( he kept taking the stage along with the president to recei&e the salute from the military in the march past to celebrate the Pakistan 8ay. The Pakistani =onstitution was put through some massi&e distortions by two military leaders who succeeded >hutto. >oth 7enerals Jiaul Haq and :retd< Per&e9 ,usharraf inserted clauses in the =onstitution through amendments that ga&e the ultimate authority to the president on most important state matters. The changes included the infamous Article !;:)b< which ga&e the president the right to dismiss the prime minister and dissol&e the ?ational Assembly. He could do that on a &ariety of grounds. These were not hard to 2ustify in the courts when the dismissals were challenged. 5our dismissals followed this change to the =onstitution( one by 7eneral Jiaul Haq( two by president 7hulam Ishaq /han and one by president 5arooq 0eghari. 6ach of these was upheld by the 'upreme =ourt. The 6ighteenth Amendment( passed during the tenure of the current PPP"led go&ernment( effecti&ely took the =onstitution back to its original 1*#B form( restoring the prime minister as the repository of e-ecuti&e authority. Howe&er( e&en after the adoption of this amendment( e-ecuti&e authority has remained with President Asif Ali Jardari. He e-ercises it not because of the office he holds but because of the chairmanship of the PPP( his political party. That is the basis of his power. The constitutional situation in Pakistan( therefore( has become ambiguous about the positioning of e-ecuti&e authority. Ambiguity is ne&er propitious for orderly political de&elopment. In other words( the de&elopment of political order in the ,uslim world is a work in progress.

.ro6essor 'irsch(an and .akis&an

By Shahid Javed Burki I was a student of Professor Albert 4 Hirschman at Har&ard in the late 1* %s. 5irst at Har&ards /ennedy 'chool and later at the .ni&ersitys 6conomics 8epartment( Professor Hirschman taught me de&elopment economics. He was a pioneer in that area of economics( one of the few economists who de&eloped the discipline but was not awarded the ?obel Pri9e. He was not recognised for the reason that it was difficult to pin down his specialtyD was he an economist or a political scientistE an anthropologist or a sociologistE a historian or a philosopher. Professor Hirschman died a few days ago( in ?ew Aersey( at the age of *#. His last affiliation in the academia was with the Institute of Ad&anced 'tudies in Princeton .ni&ersity that was made famous by Albert 6instein( the scientist who changed physics and the way we know the world today.

+hen I was a student of Professor Hirschmans( he was working on a book that was to ha&e a profound influence on se&eral disciplines. In the se&eral discussions I had with him then( I talked about Pakistan. At that time( the pre&ailing wisdom at Har&ard was that Pakistan under president Ayub /han had found the road to economic success. Hirschman did not buy that conclusion. He belie&ed that an infle-ible political system did not ha&e the capacity to absorb discontent when it surfaced. His book titled 6-it( Poice and 0oyaltyD 1esponses to 8ecline in 5irms( 4rganisations and 'tates appeared in 1*#% and dealt with the sub2ect of alienation and some possible reactions to it. If people are unhappy with the situation they are in( asked Hirschman( how do they normally respond3 This question became e-traordinarily rele&ant with the launch of the Arab 'pring in )%11. It is also tremendously rele&ant for todays Pakistan. Hirschman looked at three possibilities. People could remain loyal to the system that has caused them an-iety and despair. In that case( their hope will be that they can work within the system to reform it and thus impro&e their own situation in it. This happens in most functioning democracies. People use the opportunities inherent in democratic systems to impro&e what they recei&e from politics and economics. The second option is to raise their &oice. That can be done by stepping out of the system and entering into a different kind of discourse. This is essentially what was done by the participants in the Arab 'pring. The Arab street woke up when the realisation became acute that the autocratic structures in se&eral Arab states did not ha&e the space in which the alienated could raise their &oice. They took to the streets and to the public squares and brought about regime change in se&eral countries that had been go&erned for decades by autocrats. The third option N of e-iting the system N is the most radical of the three that Hirschman considered. This has happened in 'yria. 6arlier( it happened in Pakistan when the citi9ens of the eastern wing decided to opt out and create a country of their own. They had tried hard to remain within the Pakistani system as concei&ed by ,ohammad Ali Ainnah but the political structure within +est Pakistan could not countenance the idea of political power mo&ing from Islamabad to 8haka. That would ha&e happened had the results of the 1*#% election been allowed to create the go&ernment that would ha&e been dominated by 6ast Pakistans Awami 0eague. +hat followed is familiar history. There can be no denying the fact that the le&el of peoples alienation with the current economic and political systems in Pakistan has( at this time( reached a le&el ne&er e-perienced before. And yet( the citi9ens ha&e chosen to remain within the de&eloping political order( rather than opt out and try for something new. That the peoples response this time around has been different from those in the Arab world is because of their belief in the political order that is under de&elopment. >ut the process of de&elopment has been messy which was to be e-pected. This brings me to another point that Hirschman de&eloped in his long academic career. He was of the &iew that progress is ne&er linear. It does not happen in a smooth way( either with the economy or with the political system. ,ost systems operate through disequilibria making ad2ustments as they go along. According to Aeremy Adelman( a professor of history at Princeton whose biography about Hirschman will be published ne-t year( the late professor thought Fdisequilibria creates a problem that you ha&e to sol&e N and thats a good thing. 'omehow we only think in terms one thing to happenE e&erything else will coalesce around it and well come out all rightG. >ut change in the world of politics and economics is much more complicated than that. Had he been &iewing the situation of todays Pakistan( he would not ha&e despaired. He would ha&e suggested that in todays turmoil are

to be found the seeds of positi&e change. The tensions that we see today in the structures of countrys economics and politics will get resol&ed in time. The important thing is not to e-it the system( to stay loyal to it but continue to raise your &oice to get the change that would be positi&e for the entire citi9enry. To quote from Adelman again( Hirschman thought that Fe&en the most seemingly immutable( impossible situations could be sol&ed( that you could change things that seemed unchangeable.G There is an important lesson in this for Pakistan. Source7 .ro6essor 'irsch(an and .akis&an YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#312 Monday, Janua y 14, 2013 Aoin 8ateD 4ct )%1% 0ocationD Penus PostsD $(1)# ThanksD )( )# Thanked B(!%% Times in 1(##% Posts

Arain%%#
=9ar

Sindh9s (issed o!!or&uni&ies

By Shahid Javed Burki January 14, 2013 The story of the use of endowments in 'indh is that of missed opportunities. The pro&ince shared Pun2abs two endowments N a rich agricultural base and small( skill"based manufacturing sector. The latter( howe&er( differed from that of Pun2ab. ,uch of the pro&inces small manufacturing base was artisanal( making adornments for buildings and producing colourfully embroidered garments. These could not ha&e become the base for industrialisation. 'indhs two other endowments took the pro&incial economy in a different direction. It had abundant supplies of gas and coal and a seafront with a number of natural harbours. 7as reser&es were e-ploited but unfortunately( not in the most producti&e way. The enormous reser&es of coal remain to be tapped. 6&en with increasing international en&ironmental concerns about the burning of coal for producing power( 'indh has to find a way for de&eloping this rich endowment. =oal remains( and will continue to remain( the ma2or source of energy for such large economies as =hina( India and the .nited 'tates. 'indh and Pakistan also need to mo&e forward and use this resource in a responsible way. +hile the /arachi port has been de&eloped well( it is the citys location on the map of international air routes that has not been e-ploited. This is another case of a missed opportunity. +hen long"distance air tra&el became commercially &iable( /arachi turned into an important stopping point for se&eral airlines operating out of 6urope and the .'. It lost

that ad&antage to cities such as 8ubai and 8oha that were nowhere on the map when /arachi was already an important airport to call on for se&eral +estern companies. ?ow( /arachi is 2ust one of the many links the ,iddle 6astern airports ha&e de&eloped with near and distant destinations. It was the adoption of wrong public policies that lost /arachi this comparati&e ad&antage. >ut this was not the only missed opportunity. I will discuss two more. 4ne of these had to do with the Pakistan International Airlines :PIA< whose ad&ertisements once use to boast that they were Fgreat people to fly withG. In the 1*#%s( the airline earned a reputation for efficiency and good ser&ice. It was engaged by what are now some of the )1st centurys more de&eloped Asian and ,iddle 6astern airlines to get them started. The PIA now has deteriorated to the point that in )%1B( its &ery e-istence as a separate entity is threatened. It now has the highest ratio of employees per plane( the result of ha&ing been used N along with se&eral other state"owned enterprises N as the employer of first resort for the political workers of the parties in power. The Pakistan 'teel ,ills at /arachi is one other public enterprise that has suffered the same fate as PIAs. The Partition of >ritish India and its human consequences produced for /arachi another endowment. The e-change of population between India and Pakistan in the few months around that time brought millions of well"educated ,uslims from the urban areas of >ritish India. 5or more than a decade( these migrants pro&ided the human resource base for the de&elopment of the state in Pakistan. That changed with the decision by president Ayub /han to mo&e the countrys capital to Islamabad. >ut another type of human resource continued to lend support to /arachis sharp de&elopment as the financial and commercial centre of the country. 8uring the presidency of Ayub /han( the /arachi"based banking sector de&eloped rapidly. 'e&eral pri&ate sector commercial banks de&eloped links with the ,iddle 6ast and >ritain. This process would ha&e continued had it not been interrupted by the ill"concei&ed nationalisation of banking and insurance by the administration headed by prime minister Julfikar Ali >hutto. It was during the >hutto period that the ,iddle 6ast went through its first economic boom. Had the banking industry remained with the pri&ate sector( it would ha&e enlarged its ,iddle 6astern operations with /arachi becoming an important regional financial hub for the region. Instead( the financial industry mo&ed in the other direction with the young ,iddle 6astern banking industry de&eloping a base in Pakistan by acquiring some of the assets that were to be pri&atised in the 1**%s at bargain"basement prices. /arachis mi-ed ethnicity offers the greatest challenge for the de&elopment of Pakistans largest city. It can only make the contribution its location and human resource endowment can make to the countrys economic ad&ance if the structure of city politics is de&eloped in a way that it pro&ides the means to settle inter"ethnic disputes. /arachi will remain a troubled and &iolent city for as long as a new and inclusi&e political order does not get de&eloped. It will also remain a magnet for the people that will undoubtedly be displaced by the struggle in the tribal areas following the winding down of the American in&ol&ement in Afghanistan. This new influ- of migrants to the city needs to be anticipated with a &iew to their economic and political absorption. Source7 Sindh-s Missed ;!!or&uni&ies YYYYYYYYYYYYYYYYYY /on /ehta hy k ,ain 7um"naam ho 2aon ga ,ain tu aik >aab hn Tareekh mein 0ikha 2aon ga
#313 Monday, Janua y 21, 2013

=ute >adshah
'enior ,ember

Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

.unAa19s endo+(en&s and econo(ic deve"o!(en&

.unAa19s endo+(en&s and econo(ic deve"o!(en&

>y 'hahid Aa&ed >urki Aanuary % ( )%1B I will begin by first defining what the term Mendowments implies. 8oes it mean the &arious inheritances by the pro&inces from the century"long >ritish rule of the Indian subcontinent3 If that is one of the meanings then Pun2ab N and to a lesser e-tent 'indh N came to Pakistan with richly endowed surface irrigation infrastructures. If endowments mean the minerals that lie under the surface waiting to be e-ploited then 'indh and >alochistan are particularly rich and Pun2ab relati&ely poor. 'hould we stretch the word endowments to include the human resource3 If that is the case then each of the four pro&inces ha&e different kinds of human endowments( each with a different potential. The word endowments should also perhaps include geographic location. If that is the case then each of the four pro&inces ha&e different positional ad&antages. In that case( it is interesting to note that all the four pro&inces ha&e international borders N the Pun2ab and 'indh with India( >alochistan with Iran and Afghanistan( and /hyber"Pakhtunkhawa :/P< with Afghanistan and =hina. Two pro&inces N 'indh and >alochistan N border the sea. The two other N Pun2ab and /P are landlocked. I will discuss below what each of the four pro&inces possess by way of endowments( how these ha&e affected their economic and social de&elopment( how they ha&e influenced their &iew of the world( and how their future could be shaped by their use. Pun2ab inherited a &ast and intricate system of surface irrigation that had turned its &ast &irgin plane into the granary of >ritish India. It was in the potential embedded in the &ast amount of water that flowed though the si- ma2or ri&ers of the Indus system that the colonial administration in India found a solution to a ma2or problem it faced. The northeastern parts of the Indian colony had suffered from se&eral se&ere famines that took the li&es of millions of people. The >ritish had 2ust reco&ered from the mutiny of 1;!# and they did not want another series of e&ents to agitate the citi9ens of their e-panding Indian empire. Ha&ing tried se&eral different approaches( they settled on the one that in&ol&ed huge in&estments aimed at turning the Pun2ab plane into a large food surplus area. +ater brought by well engineered works on the Indus and its tributaries quickly increased the output of food in the newly colonised lands. 'ince these surpluses had to be transported to the food"deficit areas( the >ritish also in&ested large sums of money in building a network of railways and roads. The strategy worked and for se&eral decades northeast India recei&ed large amounts of food from the Pun2ab. The partition of the subcontinent need not ha&e disrupted Pun2abs economic links with Indias food"deficit pro&inces and its industrial belt. >ut that happened largely because of the actions taken by the new go&ernment in India. The Indians( through a series of actions( sought to show Pakistan that it was a mistake for a significant number of ,uslims to lea&e India. The Pakistani reaction was based on the assertion of the rights of a newly formed

state and to con&ince India and its own citi9ens that the pursuit of the demand for a separate state for the ,uslims of >ritish India was the right way to proceed. These were not the right choices to make. The series of actions and reactions led to the se&erance of the Pakistani economy from that of India. ,ost of the fault lay with India that took a number of aggressi&e steps in the area of trade. These led to the detachment of Pun2ab from the Indian economy. Had that not happened( what is now Pakistans Pun2ab would ha&e remained primarily an agricultural economy supplying &arious items of food to the Indian population and industrial and &arious raw materials to the industries in India. An economy based largely on agriculture is not necessarily inferior to the one that draws its strength from manufacturing or from modern ser&ices. 8enmark and the ?etherlands( for instance( are more economically and socially de&eloped than many parts of industrial 6urope. The Pun2abs other endowment was the skill base of its population. The small towns and medium"si9ed cities situated along the famed 7rand Trunk 1oad had well"established small metal working industries at the time of independence. These supplied manufactured products for e&eryday use( as well as parts and components for large industries. The area that has come to be called the M7olden Triangle N it includes the cities of 7u2ranwala( 7u2rat and 'ialkot N could ha&e played a much more important role than it did in de&eloping the Pakistani industry. The small manufacturing concerns located in the triangle could ha&e created supply chains for large industries in 6ast and 'outh Asia. 0ooking at todays Pun2ab from the perspecti&e of its initial endowments suggests that the pro&ince could ha&e made better use of them than it did. 'ometimes it was forced into other directions by the circumstances o&er which its policymakers did not ha&e any control. At other times( it took a different route by choice. The results would ha&e been more satisfying if the pro&inces rich endowments had become part of a well thought"out de&elopment strategy. httpDOOtribune.com.pkOstoryO$;**!1Op...c"de&elopmentO YYYYYYYYYYYYYYYYYY 0eft is 1ight
#314 )ednesday, &eb ua y 06, 2013 Aoin 8ateD Aul )%1% 0ocationD ?aya Pakistan PostsD $! ThanksD * Thanked )*# Times in 1*! Posts

=ute >adshah
'enior ,ember

2overnance +oes in Ba"ochis&an and ED.

2overnance +oes in Ba"ochis&an and ED.

PublishedD Aanuary )%( )%1B If any e&idence was needed to demonstrate that Pakistans two relati&ely backward pro&inces N >alochistan and /hyber"Pakhtunkhwa :/"P< N were in that situation on account of poor go&ernance( it came on Aanuary 1B. 4n that day( President Asif Ali Jardari e-ercising Fthe powers conferred on him by Article )B$ of the =onstitutionG imposed

go&ernors rule in >alochistan. 4nly time will tell whether that action will bring stability and good go&ernance to that pro&ince. 8epri&ed of both for decades( >alochistan and /"P( the formers neighbour( ha&e not been able to e-ploit their enormous mineral endowment for the benefit of their depri&ed citi9enry. +hile some of the mineral wealth( such as the large natural gas deposits found in >alochistans 'ui fields( has already contributed significantly to Pakistans economic growth( se&eral other remain on the books of geologists. A couple of years ago( America estimated the &alue of Afghanistans mineral wealth at more than a trillion dollars. This has rele&ance for Pakistan since mineral seams dont stop at political borders. ,oreo&er( the =hinese ha&e been in&ol&ed in the e-ploitation of e-tensi&e copper deposits in >alochistan. Howe&er( in early Aanuary( the 'upreme =ourt stepped in to &oid a ma2or foreign contract aimed at e-ploiting the >alochistans rich copper and gold deposits. The =ourt said that the contracts were drawn up in total disregard of the =onstitution. This was one other e&idence of poor go&ernance blocking economic de&elopment in this part of Pakistan. Present in /"P is another kind of mineral wealth. In a report( prepared by the Asian 8e&elopment >ank a few years ago( it was suggested that the tribal belt straddling Afghanistan and Pakistan has large deposits of marble and other semi"precious stones. 'ome of these are being e-ploited but not in the most producti&e way. It will( of course( take a great amount of in&estment to reach these resources. An e-tensi&e communication and transport infrastructure will ha&e to be built to access them and to take them to the processing and consumption centres. In most cases( these types of in&estments are made by the state( which then attempts to reco&er some of what it has in&ested by selling leases to the areas where minerals are belie&ed to be present. The Pakistani state( howe&er( is financially weak and may not be able to make the needed in&estment. It may ha&e to rely on e-ternal capital. Howe&er( a &ery difficult security situation may e&en pre&ent such an arrangement from materialising. >y intelligent strategising( the Pakistani state may be able to simultaneously address two problems it faces in these two pro&inces. 4ne reason for the persistence of insurgency in >alochistan is the ability of the pro&inces tribal chiefs to satisfy their material ambitions while creating a deep resentment against the state. The bulk of the royalties paid by Islamabad for bringing gas out of the ground in >alochistan ha&e gone into the pockets of a small group of people who ha&e then used the control they ha&e o&er the tribal people to con&ince them the state has indulged in predatory beha&iour. 4ne way of dealing with this situation is to take out the tribal chiefs from these transactions. Agreements with the companies in&ited to work on the mineral deposits should be concluded in a totally transparent way. The proceeds from the sale of leases or the royalties paid by the firms should be deposited in a 5und for 5uture 7enerations :557<. The 557 should be professionally managed and its proceeds should be used for de&eloping the relati&ely backward human resource in these pro&inces. In sum( the countrys two poorer pro&inces ha&e rich endowments that could relie&e them of their relati&e backwardness. >ut that would need good go&ernance and state in&ol&ement. It will also require a significant impro&ement in security so that foreign capital and e-pertise can be used to fully e-ploit the immense wealth that lies below the surface in the two areas.