The process of getting rid of Musharraf has commenced and one would hope reach its logical conclusion. The verdict the people of this country gave on February 18 this year will finally be honoured.
However questions remain: would Musharraf's departure from a largely ceremonial position for the last five months make any difference in the policies of the newly elected government? Would his departure alleviate the suffering of the poor in terms of inflationary pressures as well as load shedding? Would his departure, by reducing uncertainty, promote economic activity in the country? These are questions that beg to be answered.
There is no doubt that the political uncertainty generated by President Musharraf in the post February 18 election period has been felt at the level of the stock market as well as in terms of foreign investment. Unfortunately our stock markets, pretty much like our democracy, are not fully developed and are characterised by a few big players who are able and willing to manipulate the markets at the whim of politicians.
As far as foreign investment is concerned Musharraf's initial silence, replaced by a damning indictment of the government's five months performance, and his subsequent recalcitrance in refusing to step down without a fight may certainly have negatively impacted on foreign investment; however the law and order situation can also not be underestimated as a major factor.
It is also fairly evident that the State Bank of Pakistan's tirade against the present government's heavier reliance on internal borrowing in comparison to the past government, a charge that can be refuted by statistics, also fuelled allegations of partisanship against the State Bank Governor.
Many members of the ruling coalition believe, rightly or wrongly, that her reservations about the government's reliance on internal borrowing was motivated by President Musharraf - during whose one man rule she was appointed - and it did upset the markets and fuelled jitters amongst the common people that the government's major policy thrust to control inflation through reducing the deficit was merely rhetoric.
However with or without Musharraf the common man is unlikely to find immediate relief other than to have the satisfaction that his verdict has finally been accepted by the dictator. In contrast the Pakistani rich, knowing the value of holding wealth in more than one country, have adequate resources in global financial centres to render any further weakening of the macroeconomic fundamentals irrelevant. This is amply reflected by our politicians in general and the party leadership in particular. In addition the industrialists and rich landlords can and do band together to resist the imposition of new taxes or, indeed, upgrading of existing taxes. It is the common man who is unorganised and therefore unable to resist any attempt to raise the burden on him.
The middle income earners, in the private or the public sector, have paid a higher relative cost for government mismanagement than the rich as most of their assets are within the country.
They are mostly linked to organisations and institutions where their income can be easily taxed according to the stipulated taxation criteria by the state, unlike the rich who have manipulated their books to avoid paying taxes due to them, with few exceptions; however, the middle income earners can and do exert pressure on the organisation for which they work to get some relief through collective bargaining. Bureaucrats, not those with political affiliations whose wealth in some cases has rivalled that of our politicians, also exert pressure on their employer, the government, and have successfully linked their salaries to the cost of living index.
That leaves the common man on the street - the man who has neither the organisational nor the institutional backing nor any savings to be able to deal with any major issues related to weak economic fundamentals. Over time it has also been made evident to the common man that it is he/she who actually fills up the coffers of the treasury through general sales tax, a regressive tax, whose incidence on the poor is greater than on the rich. It is unlikely that Musharraf's departure will change the reliance on general sales tax.
This, so argues many a man on our streets trudging through the stagnant rain water filled streets and houses in the humid heat of August, is also true in terms of access to utilities; and slashing of supply of utilities affects the poor areas much more than the rich. Few can challenge these assertions: the government continues to raise the levy on sales tax and the budget for fiscal year 2008-09 was no different in this regard, and, at the same time, load shedding appears to affect the poor areas a lot more than the rich. And when the poor come out in protests against load shedding in excess of half a day the police are there to beat them back to their boiling hovels.
The question is what is the solution? Our newly elected government seems to not focus on the regressive taxes that are its major source of revenue increase for 2008-09; but has repeatedly committed to meet the energy shortfall as soon as next year. The strategy is simple: bring back Benazir Bhutto's policy with respect to Independent Power Producers and exploit the Lakhra coal fields as a source of energy.
We have been repeatedly told by Asif Zardari as well as his cohorts that it was the government of Benazir Bhutto that had dealt with the issue of energy last. During her rule in 1994 she was credited with creating PPIB which was to act as a one-window organisation to facilitate the implementation of IPPs under a power policy, issue bidding documents and letters of award to successful bidders, negotiate, execute and monitor performance of IPPs, WAPDA, KESC, fuel suppliers. It is to the credit of the Bhutto government that 15 private sector power projects with a cumulative capacity of 5575 MW were credited to PPIB.
Her political nemesis, Nawaz Sharif, disagreed. In 1998 he reportedly stated, "We have detected corrupt practices in allowing high tariff rate to independent power producers (IPPs) by the government of Benazir Bhutto." Higher unit rates were allowed which were considered to hurt the poor man's kitchen budget. And there one has the gist of the charges made against Benazir Bhutto and her spouse Asif Zardari. However these charges have become meaningless at this point in our history: expensive electricity is preferable to no electricity and this has resurrected the PPP energy policy that was much maligned by Nawaz Sharif at one time.
So the question is what should the people expect from the energy policy of Asif Zardari? The rich have their own generators and are not that affected by load shedding. The influential rich have it the best because WAPDA is quite unable to cut off supply to those sitting in our national and provincial assembly seats, especially those who form part of the current dispensation. And then we come back to the middle income earners and the poor who have to somehow get by this summer.
The Zardari policy is simple: import as much as is possible - a policy that is relevant for the medium to the long term as laying the pipeline from Central Asia or Iran will take time, if that is all major concerns with reference to the geopolitics of the region are resolved amicably. The PPP led government has focused on Lakhra and Thar coal deposits and work is underway to convert coal deposits into electricity. That leaves the IPP policy intact: lure the foreign investors by giving them profitable options. And that unfortunately means a price rise which will take more out of a poor man's income than a middle or rich income earner.
But where does Musharraf come into all this? The answer is nowhere. This is not to deny Musharraf's contribution to the abysmal state of the economy or indeed deny his government's responsibility for undermining economic activity due to its totalitarian credentials (one merely has to look at Indian industry and ours for a major reason for the wide differential between the two); but to merely state that his departure will not bring about changes in the economic arena. While political uncertainty would certainly be lifted yet the government would have to deal with the law and order situation as well as spread the perception that the NRO beneficiaries have brought the money home for that will truly attract foreign investment as well as fuel economic activity in the country.