Over the last three years Pakistan has changed, but perhaps not in the way we had hoped or expected. The change that has affected us the most has been the massive inflation we have experienced over the last three years. Inflation has driven millions of poor Pakistanis into grinding poverty and has broken the back of the salaried middle classes who have had to reduce their basic consumption in order to make ends meet.
Despite the headlines, day after day, that trumpet the economic achievements of the PTI government, it is now recognized that the economic performance has been dismal with the GDP falling from $ 315 billion in 2018 to $ 292 billion in 2022. Supporters of the PTI government argued that honest government is more important than economic prosperity, and that Imran Khan was a white knight who was cleaning up the rampant corruption that has ravaged our economy.
The nation was shocked when Transparency International recently announced that Pakistan had fallen even further in their Corruption Perception Index during the three years of the PTI government, and was now more corrupt than ever before.
Questions are even being asked about Imran Khan, whose asset declaration of $ 12 million makes him one of Pakistan’s richer leaders (website www.celebritynetworth.com shows him as a retired cricket player with a net worth of $ 50 million). Dawn newspaper (January 4 2022) writes that Prime Minister Imran Khan’s first year in office saw his income tax payment surge from Rs282,449 to Rs9.85 million in 2019.
Since 2019, Pakistan has also fallen further in other international rankings.
— Rankings for Absence of Rule of Law and State Capture have seen Pakistan fall from its 120th position in 2019 to 140th in 2021.
— The World Justice project that ranks countries according to their prevailing level of Rule of Law, placed Pakistan at 130 out of 139 countries, lower than Nepal, Sri Lanka, Bangladesh, and India – only Afghanistan is worse in corruption, fundamental rights, order, security, and regulatory enforcement.
— Reporters Without Borders, which monitors media freedom, shows that Pakistan’s ranking has fallen from 124 in 2020 to 140 in 2022 as media freedom is reduced.
The only rising star in Pakistan is the Pakistan Military, whose ranking has risen, making Pakistan the 9th strongest military in the world. But military strength cannot rise in isolation. Over a thousand years ago, an advisor to a Turkish sultan wrote,
To control the state requires a large army,
To support the troops requires great wealth,
To obtain this wealth, the people must be prosperous,
For the people to be prosperous, the laws must be just,
If any one of these is lacking, the state will collapse.
This is where we are today, but where will tomorrow take us? The people are disillusioned with the performance of the PTI and Imran Khan’s style of governance, but what is the alternative? If the Prime Minister or the ruling party are removed by a no-confidence motion, who or what will replace them? Will the swing vote in the hands of the least significant parties give them an importance disproportionate with their size? Will we see an interim government that overseas an accelerated election that degenerates into a crude auction with leaders bidding with impossible promises to bribe voters with little, if any, understanding of the realities of governance? Will we continue to dream of prosperity based on a foundation of overpopulation, illiteracy, injustice and a collapse of the moral values that build a society? Or have we stopped dreaming altogether, as we instead calculate who will best promote our personal interests?
Few, if any, people worry about how to curb population growth, how to create skills and capability in an illiterate and mentally handicapped population, how to establish the rule of law, how to resuscitate an economy moving towards bankruptcy.
These questions are considered irrelevant or theoretical. Instead, the burning questions of the day are Will Imran get a second term? Will General Bajwa get an extension? Who will become the next Prime Minister? Law and justice have been replaced by mafias. National interest falls by the wayside as it is replaced in the hungry search for self-interest. The future looks bleak.
Many have given up hope for Pakistan’s future, as more and more we hear the refrain, ‘Nothing can be done’. Nothing could be further from the truth. To build a future is not impossible, is not difficult, it can be achieved within a decade if people are ready to make a sincere effort. Pakistan can learn a valuable lesson from Botswana. When Seretse Khama took over from the British, Botswana was the 2nd poorest country in the world with a per capita income of $ 80.
After maintaining a growth rate of 9.2% for the three decades between 1966 and 1996, Botswana reached a per capita income of $ 14,000 by 2008. Seretse Khama, the founding president, combined intelligence with integrity. When diamonds were discovered in Botswana by DeBeers, a year after independence, Seretse built a relationship of trust with the mining giant.
The joint venture was called Debswana and initially Botswana had a 15% share in the company, but over 5 years this was negotiated up to a 50:50 partnership. Where most Third World dictators would have used the opportunity to become billionaires themselves, Seretse made sure that the fruits of renegotiation went solely to Botswana and its people. His handling of the DeBeers relationship was to be the single most important contribution to the prosperity and growth of Botswana.
Pakistan does not have diamonds, but it has two opportunities which could, if handled properly, be no less valuable– these are Reko Diq and CPEC. Reko Diq is a copper deposit which also holds 40 million ounces of gold (which is now being stated as 20 million ounces). The gold alone at $2000 an ounce is worth $80 billion – an amount much greater than the $ 1 billion recently secured from the IMF after so great a struggle. In 1993 the Balochistan Development Authority and the BHP mining company of Australia signed CHEJVA (the Chagai Hills Exploration JVA) to explore for gold and copper. The BHP share was to be 75% and the BDA share 25%. In the October 1993 elections, the PPP formed the government at the center with Benazir as Prime Minister.
The government argued that the BDA had no legal authority to enter into any such joint venture, the rules were amended and a new agreement was entered into, which further favoured BHP which now transferred its rights to TCC, a partnership between Angofagasta, the Chilean copper giant and Barrick Gold, the world’s largest gold mining company. In 2011 TCC applied for a mining licence but was rejected by the Balochistan Chief Minister, Aslam Raisani.
The Supreme Court of Pakistan, under Iftikhar Chaudhry declared the CHEJVA to be illegal, null and void, holding that the deal involved a blatant instance of a government going out of its way to facilitate a private business.
The government then tried its own mining effort under the name of the Balochistan Copper and Gold Project which failed and was abandoned after 5 years. Years of dispute followed which resulted in international litigation and an award of $ 6 billion in damages against Pakistan. Attempts are underway to find a compromise solution to enable Reko Diq to finally start mining after delays of more than 30 years.
Though shareholding of key players is an important issue yet to be resolved, no less important is Akhtar Mengal’s demand for a refinery without which it will be impossible to determine the amount of gold and copper that is extracted. Where Botswana’s diamonds had given them prosperity, Reko Diq has so far only given Pakistan grief as center fights province, successive leaders try to use Reko Diq for their own advantage, and courts battle endlessly.
An opportunity even greater than Reko Diq is the CPEC (China-Pakistan Economic Corridor) the largest foreign investment program in the history of Pakistan. For Pakistan CPEC can be a game changer, but for China it is a lifeline to break out of the barrier of 180 US military bases on China’s east coast and to access the Middle-East and Africa by this alternate route if American hostility escalates. The largest share of the $60 billion first phase went to eliminating Pakistan’s shortage of electricity generation capacity.
In 70 years, Pakistan developed an installed capacity of 17,000 MW, the CPEC added another 11,000 MW in a few years. Now Pakistan had more than enough electricity but did not want to pay for it on the grounds that the price was too high. As 2021 drew to a close, the GOP had defaulted in payments owed to the Chinese power generating companies under their power purchase agreements. The GOP default reached Rupees 240 billion, an amount equal to the handouts under the EHSAAS program.
Pakistan had the money to distribute largesse to woo the poor electorate but not enough to honour the contractual commitments to the Chinese investors. Security of Chinese personnel has also become a key issue as disgruntled Baloch nationalists continue their attacks.
Is there no solution to the rift between the Baloch and the establishment in Islamabad? If Paul Kagame in Rwanda could repair the rift between the Hutus and Tutsis after a massive and tragic genocide, cannot Pakistan solve their much less difficult Baloch problem? As Chinese disappointment grew, Chinese disbursements contracted and the CPEC slowed down.
Whereas the massive Chinese population constitutes both a great market and a large pool of productive labour, the hundreds of millions of poor Pakistanis are not a great market due to their weak buying power.
Their productivity is low due to illiteracy, lack of skills, and bad health. The Chinese control of their population growth reached its height with their one-child policy. Even Iran controlled their population growth effectively showing that a hard core Muslim country is quite capable of controlling population. Pakistan seems unconcerned by its population growth.
The real problem is bad governance, the result of a system where the rulers are more concerned about wealth and power than about building a nation, the low level bureaucrats, police, patwaris, tax and custom officers are ruthless in their extraction of money from desperate applicants, justice is too often out of reach, and values have degenerated to the level of jungle law. The private sector loses enthusiasm as businessmen and entrepreneurs become prey to hunters with authority, and face the danger of extinction like other endangered wildlife the world over.
What will the future bring? New faces certainly, with their new twists on policy. But real structural change is less likely. Future governments will continue to borrow what can never be repaid, rather than reduce unproductive expenditure.
Tax collection will continue trying to fill the ever empty treasury rather than try to entice the private sector to invest and grow. Government expenditure priorities will remain politically motivated rather than nationally beneficial. Tax payers, distrustful of government expenditure choices, will continue to resist taxes.
The brain drain and the flight of capital will continue to grow, disillusioned of future prospects in Pakistan. Crime will offer the only career prospects for those who cannot find jobs. The rupee will continue its fall, both against the dollar and domestically due to relentless inflation. Some say that the solution lies in good leaders, others that only God can save us.
Copyright Business Recorder, 2022
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