Contemporary Problems of Pakistan

J. Henry Korson

• Publisher: Taylor & Francis
• Year: 2019
• Print ISBN: 9780367011864
• eBook ISBN: 9780429723285
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book considers the range of social, political, and economic problems of Pakistan. It analyzes the country's attempts to control explosive population growth and cope with a flood of Afghan refugees as well as to deal with the demands for education, women's rights, and greater democracy.

1
Pakistan’s Economy in the Year 2000: Two Possible Scenarios

Shahid Javed Burki

Introduction

The subject of this chapter demands an unorthodox treatment. Instead of starting with a series of arguments or hypotheses and then using them to work toward a set of conclusions, I will follow a different approach. I will first state the conclusions I wish to arrive at and then suggest the reasons for reaching them.

I want to adopt this approach for a simple reason. In the few days I spent in Pakistan in the summer of 1992 -- days spent in reading the daily newspapers and current issues of weeklies and monthlies; in talking to relatives, friends and former colleagues in the civil service, and in travelling fairly extensively in the country -- I was struck by the extraordinary amount of pessimism with which people seem to view their country's future. Pessimism can be self-fulfilling. This is true for all situations and for all societies. To take one example: lack of consumer confidence in the United States has prolonged an economic recession well beyond its normal duration. Similarly, pessimism about the future of the Pakistani economy has begun to affect economic life in several different ways. The stock market, after reaching dizzying heights, has been in a long downward slide; large scale private investment remains well below its long-term potential; foreign investors, after having flocked to the country in impressive numbers, now seem to be waiting for the clouds of uncertainty to clear. There is a general malaise -- a sense of fatigue -- which I find hard to understand. To lift it Pakistanis should not be looking at the short term; they should, instead, think in long strategic terms. They should also take a good, sober look at the fundamentals of their economy. They should investigate the weaknesses in the economy as well as its many strengths in order to deal with the former by making use of the latter. It is this kind of analysis that has helped me to reach the following four conclusions:

First, if we choose to focus on the positive side of the economic ledger, there is no reason to believe that Pakistan should do less well in the next decade or two compared to its achievement in the past 46 years.

Second, it does not require a great deal of economic expertise to draw up a list of policy measures that need to be adopted in order to keep the country moving forward at a brisk pace.

Third, only politicians, and not bureaucrats, can lead the country forward. On many occasions in its history, Pakistan was tempted to place its life in the seemingly safe hands of the civil and military officials only to find that they were not capable of dealing with the deep structural problems the country faced.

Fourth, and finally, instead of depending on the largesse of its erstwhile friends in the West, Pakistan will have to rely on its own resources for building its economic base and for erecting a durable structure on top of it.

A Brief Retrospective

To reflect on Pakistan's future, we must understand its past. The past for Pakistan's economy began in 1947 when the country started rather hesitantly the difficult task of creating an economy independent from that of India. In retrospect it is surprising that the Indians should have helped Pakistan's fledgling government to cut itself loose from their much larger economy. This they did probably in the belief that some early shocks to the new country would keep it in line with their own economic destiny. The result, unexpectedly for both India and Pakistan, but to the understandable delight of the latter, turned out to be quite different from that apparently intended by the first generation of Indian leaders. Pakistan emerged economically stronger from the trade and water wars fought with India in the late forties. These wars and the dozens of disputes over the division of assets of British India between the two successor states and over the movement of millions of people across the boundary between the two states convinced the Pakistanis that their survival depended on their ability to develop a totally independent economic system.

While the purpose of this essay is not to offer a detailed account of Pakistan's economic history, it is nevertheless helpful to look back at the long distance the country has travelled since it gained independence 46 years ago, and the place from where the original journey began. There is a definite need for such a retrospective if only to underscore that Pakistan's economy has been through some very shaky periods before. One hears a great deal of pessimistic talk these days about Pakistan's economic future. There is a growing feeling that the country may not find the resources it needs to put its economic and political house in order. There is a widespread impression that for the first time in Pakistan's history the country is faced with economic problems it may not be able to surmount. Abandoned by the United States and largely ignored by the western world, Pakistanis seem to feel that they now have to live in a singularly hostile world. Ethnic tensions, particularly in the province of Sindh but not too far below the surface in other parts of the country, seem to suggest to some that the very existence of Pakistan as a state may be threatened once again; that what happened in 1971 when East Pakistan left to become the state of Bangladesh may be repeated for the second time.

While there is considerable substance in these fears, a look at Pakistan's brief history helps to put them in some perspective. It is useful to remember that Pakistan began its existence as an independent country in a situation considerably worse than the one in which it finds itself today. To start with, it is helpful to recall that Pakistan's birth as an independent state was not treated with wild enthusiasm by the world.

The British would have wanted to leave a united India as the most worthy legacy of their two century rule over the subcontinent. The United States administration, reminded perhaps by its own war of independence against the British crown, was impressed by the way Gandhi and the leaders of the Indian National Congress had waged their struggle against British rule. The Americans, given their own experience with secessionist movements, were also not well disposed toward the breakaway tendencies in the post-colonial states of Asia and Africa. They saw the effort to create a separate homeland for the Muslims of British India from the prism of their own Civil War experience. Accordingly, they were not particularly warm toward the idea of carving out Pakistan from the territory of British India. Totally unexpectedly for the leaders of Pakistan, their country's birth was not viewed as a development of great consequence by the world's Muslim states either. Afghanistan was the only country that voted against the entry of Pakistan into the United Nations. Other Muslim countries also showed little enthusiasm for the creation of a country whose very birth was motivated by the desire to create a separate political entity for a large segment of the world's Muslim population. In other words Pakistan's birth took place in an environment which if not totally hostile was at best indifferent toward the new state.

Pakistan’s Economy in 1947 and 1993

Pakistan's economy in 1947 and for several years after its birth was in a very fragile state. At the time of independence, Pakistan was a predominantly agricultural country with the sector of agriculture responsible for nearly two-thirds of its gross domestic product. It did not have an industrial sector of any consequence and there were few signs of the presence of such modern sectors of the economy as banking, insurance, construction and air transport. Lahore was the only city that could be called truly urban; even Karachi and Rawalpindi were small garrison towns with defense as their only industry. The country traded a small part of its products with the outside world. Even internal commerce was quite underdeveloped.

Today, only four and a half decades after its birth, Pakistan has a much more robust economy. By far the most significant change that has occurred is with respect to the prevalence of poverty. Pakistan does not have the kind of poverty which was common at the time of its birth and which is still highly visible in other countries of South Asia. Much of this change occurred in the last two decades, particularly with the migration of millions of people to the Middle East in the seventies and eighties. These migrants sent billions of dollars worth of savings to their dependents who, in turn, used a large proportion of them to improve their living standards.¹ While firm estimates are not available on the incidence of poverty, my guess would be that no more than 15 percent of its current population -- or about 20 million people -- is absolutely poor. A very large number of the remaining poor are concentrated in less accessible regions of Boluchistan and the Frontier Province and in the rural areas of Sindh.

But Pakistan's economic achievements go beyond the elimination of the worst forms of poverty. It is a relatively modern economy with the share of manufacturing in gross domestic product approaching that of agriculture. Agriculture itself has modernized, no longer producing what is required only for subsistence. A number of Pakistan's agricultural products have entered world trade. The country now counts among the top half dozen exporters of rice and cotton and there is now a sizeable export of fruit and fruit products. Unlike a number of poor countries, the structure of Pakistan's industry is diversified and technologically sophisticated. The manufacturing sector has proceeded well beyond the simple task of processing agricultural commodities toward the production of sophisticated transport and electrical equipment and consumer electronics. Nearly a third of the country's population lives in urban areas spread all over the country. Pakistan has two mega cities, Karachi and Lahore, with populations close to ten million in each. Another dozen cities have populations of more than or approaching one million. The service sector is able to handle sophisticated transactions. In spite of a poorly developed educational sector, Pakistan can boast of a well educated work force that numbers several hundred thousand. It has developed skills of world standard in banking, hotel management, airline operations, shipping, and computer software development. It has a large pool of people working abroad, many of them in highly skilled occupations, and several thousand of them with access to capital that they would be willing to invest in the country.

In other words, it is safe to say that in many respects Pakistan is no longer a poor South Asian country; it has many features of a middle income nation. According to one way of estimating national income, Pakistan's per capita income is close to $2,000, twice that of India's.² Conventional ways of national income comparisons put per capita incomes of Pakistan and India very close to each other: according to the latest figures available from The World Bank, 1990 per capita incomes for Pakistan and India were estimated at $380 and $320, respectively.³

Insofar as Pakistan's external economic environment is concerned, it is much more supportive now than it was at the time of the country's birth. It is easy to exaggerate the consequences of Pakistan's current difficulties with the United States and the consequent suspension of aid by that country. There are a number of entries on the positive side of the ledger. Some unforeseen trading opportunities have opened up in Central Asia after the collapse of the Soviet Union; the economic revolution quickly unfolding in China could have a number of positive implications for Pakistan, particularly in terms of trade in the commodities that have yet to enter the world market; the maturing of the economies of East Asia present Pakistan with additional opportunities to obtain direct foreign investment; the presence of a large and growing expatriate Pakistani community in Europe and North America could become an important source of investment capital and managerial talent for the home country.

Finally, it is also possible to become despondent about Pakistan's ethnic problems and the seeming inability of many of its diverse people to live together in peace. Again, the situation now is not much worse than it was immediately after independence when the arrival of millions of refugees into the country was viewed with tremendous hostility by the natives of the areas that became Pakistan. The states of Boluchistan had to be won over to the Pakistani side by the show of considerable force by the central authority; the tribes of the North West Frontier Province remained restive; even Bahawalpur did not seem anxious to be fully absorbed into Pakistan. All this does not mean that there is no reason to be concerned with ethnic strife in many parts of the country and the damage it is doing to the economy. That notwithstanding, it is important to note that differences among Pakistan's many ethnic groups are not of recent origin and that on many previous occasions the authorities have had to resort to the use of great force in order to secure law and order in the troubled areas.

One useful message to come out of this brief review of history is to recognize that the reasons cited by those who chose to be pessimistic about the country's future are not the product of some recent developments. If anything Pakistan today is in a much better position to move along the path of rapid economic growth than it was at the time of its birth. If Pakistan could survive the trauma of its birth and continue to grow at a rate that would have been considered impossible even by those who were optimistic about the new country's economic and political future, then there is no particular reason, other than the common tendency to feel with greater intensity the pain and discomfort of the moment, to be particularly despondent about the future. Given the history of the country, there is not much justification to be totally pessimistic about the future at this time.

Four Happy Developments

I will now return to the reading of Pakistan's economic history for another type of reflection; to identify the reasons for the country's relative economic success in the four and a half decades since independence. From a reading of our history I reach the conclusion that Pakistan's economic leaders contributed to the country's enormous success in overcoming a number of difficulties faced early in the country's life by getting four things right.

First, they made a very effective use of the competent civil service they inherited from the British raj to handle the large number of economic crises that hit the country soon after it gained independence. These included the trade and water wars with India, the arrival of millions of Muslim refugees from India in the short space of a few months following independence, the situation created by a number of serious floods that visited the provinces of Punjab and Sindh in the first few years after independence, the equally serious situation that resulted from the massive crop failure in 1954 which turned Pakistan for the first time in its history into a food deficit area. The civil service managed these crises extremely well but, unfortunately, in the process also took over the responsibility for all economic decision-making. The civil servants were well trained to manage crises but were not well equipped to undertake strategic economic planning. To succeed, the latter required consensus among a number of powerful social groups, which could not be produced by the civil service. Accordingly, a number of difficult structural rigidities in the economy remained unattended to for a long time.

The second happy development for Pakistan's economy was the lack of interest by the first generation of leaders in getting the state involved in a highly intrusive way in the economic life of the country. While the government of Jawaharlal Nehru in India was putting the state on the commanding heights of the economy, the administrations of Mohammed Ali Jinnah and Liaqat Ali Khan were quite content to leave the economy in Pakistan basically in the hands of the private sector.⁴ No serious effort was made to institute medium or long-term planning. The state was required to play a supportive role providing the private sector with the infrastructure it needed, the funds it required to augment its resources for investment, and protection the domestic industry felt it needed in the initial stages from the more mature industries in the industrial world. It is interesting to note that central planning came to Pakistan not as the result of an ideological belief in it on the part of the leadership of the day, but as a consequence of pressure from foreign donors, in particular the United States, that a planning framework was required to ensure the efficient utilization of the foreign resources that were being provided to the country.

The third fortunate development for Pakistan was the consequence, in turn, of the government's willingness to allow the private sector a major role in the economy. Accordingly, small entrepreneurs in the industrial sector and middlesized farmers in the countryside invested heavily in the sectors of industry and agriculture, thereby broadening the bases of both sectors of the economy. This development, often unnoticed by the students of the Pakistani economy, has lent a degree of robustness to the economic structure which is not usually found in most developing countries. The small industrial entrepreneurs saved the sector from devastation when the government of Prime Minister Zulfikar Ali Bhutto nationalized large-scale industries. They were also responsible for Pakistan's second industrial revolution that started in the mid-eighties and is still unfolding. While the first industrial revolution in the fifties introduced industry into the Pakistani economy, the second revolution is changing its structure by introducing a considerable amount of diversification into the system. Likewise the middle farmers brought first the Green Revolution to Pakistan in the late sixties and then the second revolution which started in the mid-eighties and is still under way. The second agricultural revolution has introduced a tremendous amount of dynamism into the sector by diversifying its output and commercializing its operations.

The fourth happy occurrence for the Pakistani economy has been its openness to the outside world. This is the result of several factors, two of which need special mention. The emigration of millions of Pakistanis, first in the fifties and early sixties to Britain, then in the seventies to the Middle E...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Preface
• 1 Pakistan's Economy in the Year 2000: Two Possible Scenarios
• 2 Growth Without Change: The Demography of Pakistan
• 3 The Plural Medical System and Women's Health in Pakistan: What the Health Statistics Do Not Reveal
• 4 Education in Pakistan: Past Dilemmas and Future Prospects
• 5 The Transformation of the Women's Movement in Pakistan
• 6 The Mohajirs in Sindh: A Critical Essay
• 7 The Impact and Legacy of the Afghan Refugees in Pakistan
• 8 The Geopolitics of the Asian Subcontinent: Pakistan's Security Environment
• 9 Another Try at Democracy
• About the Contributors
• List of Acronyms
• Index
• About the Book