Overwhelming evidence suggests that during the Musharraf era India emerged as a responsible democratic and economically vibrant state in marked contrast to Pakistan.
Pakistan now has a democratically elected government after almost nine years of a military dictatorship, desperately seeking financial assistance from bilateral and multilateral sources, assistance required to tide us over the ongoing economic crisis that has little to do with what is happening in the rest of the world and more to do with governance and accountability during the previous regime. The claim that the unprecedented rise in the international oil and food prices account for the current economic imbroglio is valid to some extent, but the situation was exacerbated by the refusal of the former government to pass the oil and food price rise onto the consumers for political reasons.
President Zardari has made much of the democracy dividend during his rather frequent visits abroad since the PPP emerged as the largest party in the February 18 elections, but, so far, to no avail.
The Saudi oil facility is still not formally signed and the World Bank assistance does not appear to be in addition to what was earlier earmarked for Pakistan. The World Bank routinely prepares a Country Assistance Strategy (CAS) for each individual member country desirous of borrowing from it and it includes earmarking funds for three years - a strategy that is updated on an annual basis. For Pakistan the CAS envisaged a total of 6.5 billion dollars for three years, ie 2006-2009. There is no evidence to suggest that more than 2.1 billion dollars are expected from the Bank this year.
According to the World Bank CAS, "this includes between $200 and $850 million annually from IBRD. The current portfolio consists of 22 projects, with total commitments of US $2.3 billion. Pakistan faces an economic crisis due to high international commodity prices and a lack of policy action during the past two years. The government is now starting to implement reforms relating to petroleum and power prices, tightening monetary policy and controlling expenditures, but more needs to be done. Development emphasis remains on social protection, poverty reduction, and infrastructure, particularly in water management, transport, and energy. Over the last few years, Pakistan's human development indicators have generally improved, but largely lag behind other countries in the region. Key challenges facing Pakistan include a poorly targeted social safety net, an infrastructure deficit - particularly in energy, transport, and irrigation, and poor delivery of social services."
While the foregoing does reflect a substantial increase of assistance over the previous CAS period (2002-05), yet it is relevant to point out that this assistance was earmarked during the Musharraf era and has little to do with the democracy dividend. It is also relevant to note that the World Bank clearly highlights overwhelming key challenges facing Pakistan in its CAS, a document that must have been reviewed by the Shaukat Aziz government, and belies his claims that everything was hunky-dory when he left the country, possibly never to return.
Bilateral support to Pakistan will also be hit by the ongoing global financial crisis that has raised the need for capital in the advanced countries to forestall the onslaught of a depression. Thus it is necessary for the Pakistan government to temper its expectations from the Friends of Pakistan meeting to be held next month.
Contrast our situation with India: it is the third largest economy in the world in terms of purchasing power - a fact that accounts for many a Western country bending over backward to accept the Indian position on matters political and economic in their effort to tap the Indian market. Goldman Sachs has predicted that India would be the third largest economy by 2035 after China and the US and will grow to 60 percent of the US economy. And not surprisingly the challenges facing the Indian economy are not on the scale that Pakistan is grappling with. The main challenges for India are a high population growth rate, 2.11 percent according to the 2001 census, poverty with 36 percent of the Indian population below the poverty line, unemployment and a rural-urban divide that is of serious concern to the government.
The Indian economy has been growing at the rate of 8.8 percent in the last few fiscal years (2003-07), comparable to our own growth rates which were propped up by the post-9/11 foreign capital inflows, with the industrial and service sectors being the major contributors to this growth, suggesting that structural transformation is underway in the Indian economy, unlike in Pakistan. The Indian savings rate is extremely high compared to Pakistan, almost 34.8 percent in 2006-07, while their investment rate too is 35.9 percent. In Pakistan the rich seldom bank within the country other than the minimum amount considered necessary to meet their short term capital needs.
Thus in terms of economic performance, Pakistan and India are not at par and this is reflected in the international economic fora that India is now almost routinely invited to while our leadership continues to demand more assistance.
Pakistan and India are also no longer considered at par by the international community. Evidence for this ranges from the momentous US nuclear deal with India, to the abandonment of the Kashmir cause, to the take-over of Siachin by Indian troops, to India sitting on world bodies and even vying for a permanent position in the United Nations Security Council, a desire that has not yet been translated into reality, and India's economic miracle that accounts for the country actually exerting considerable influence over the management of multilaterals.
The most recent incident that has clearly revealed that India has not only not abandoned its hegemonistic designs in the region but has also got the backing of the international community on its side is the water issue and the construction of the Baglihar Dam, which is against the spirit and the intent of the World Bank brokered Indus Water Treaty. President Musharraf's government did take the matter to arbitration, as allowed under the Treaty, but had little, if any, success in this regard. The Neutral Expert over-ruled all objections raised by Pakistan over the construction of the dam with the exception of one: India must reduce the maximum permissible pondage from 37.50 million cubic meters (MCM) to 32.56 MCM. Pakistan, reportedly, had requested 6.22 MCM.
Trade is considered the only way forward with respect to relations with India by the two major political parties of Pakistan. However India continues to resist the India-Pakistan-Iran gas pipeline as it considers the transmission line through Pakistan a security risk. Be that as it may, the newly installed Pakistani government has opened the economy to greater trade with India - an approach that makes economic sense as buying products from India would be cheaper because of lower transport costs as well as allowing us to benefit from lower output costs in India relative to Western countries.
India, in contrast, has refused to amend its stringent import policy to favour Pakistan. Besides, the economic advantage that would accrue to Pakistan would be considerably greater than what would accrue to India. In other words, it is unlikely that India will agree to make its import policy less stringent for Pakistan's sake.
Indian supremacy in the field of economics and as a member of the international community has been established during Musharraf's era. The reason: its established democracy paved the way towards economic development which, in turn, strengthened its hands within the international community. In contrast, frequent forays by the army in our government left a legislature and judiciary at the whim of one man which, in the end, led to a comprehensive decline in our fortunes - militarily, politically, economically and internationally - vis-a-vis India.
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