In the 76th year of Pakistan as a Muslim-majority state, confined since 1971 to the former West Pakistan when its eastern wing seceded to become Bangladesh, all indicators of economic, political and social development indicate negative trends. Scores for India from which it separated in 1947 and Bangladesh which separated from it in 1971 for such indicators are significantly better.

Pakistan’s ruling class, the power elite, the establishment or the deep state — whatever description one chooses to describe it — is notoriously and proverbially corrupt, inept, irresponsible and uncaring. Economically and financially, Pakistan is for all practical purposes a bankrupt state heavily under debt to foreign institutions and states. Its ability to borrow loans has reached a point of saturation. China’s CEPC project in Pakistan which was to be the panacea to overcome chronic electricity deficit, build roads and developmental infrastructure and generate new employment opportunities, is in the doldrums.

Business and trade are in a very bad shape. Industrial growth and development have stagnated. Pakistan remains largely an exporter of raw materials and semi-finished goods. Once the granary of India, exporting wheat from Punjab to other parts of the subcontinent Pakistan now suffers acute shortage of food and vegetable and galloping inflation has caused a price hike of essential commodities pushing more and more people towards poverty. Notwithstanding the mounting difficulties of the people, the Pakistani ruling class remains oblivious to the suffering of the people.

Politically, Pakistan has failed to establish civilian supremacy. Although a constitution from 1973 is in place upholding fundamental rights and other liberal values, several Islamic features and commitments hedge in those rights. Overall, Pakistan’s representative and democratic institutions lack credibility because elections have not been institutionalized and it is the military or rather the Pakistan Army which calls the shots. Its major political parties are either dynastic preserves or dominated by cult leaders. Mass media churns out biased reports and programmes.

The English-language press generally reflects a rational-liberal mode of thinking the much bigger Urdu-language press is prone to sensationalism. For a long time, extremist ideas and movements promoting militant Islam have had a free hand with proclivity towards violence including mob attacks on non-Muslims, atypical sects and free thinkers.

Socially, Pakistan remains the most conservative society in the subcontinent. Vain attempts to Islamize Pakistan have generated intolerant attitudes which are invariably hostile towards women and religious minorities. The annual reports of the Human Rights Commission of Pakistan report heinous crimes committed against women and non-Muslims. The lack of an effective family planning and birth control policy has meant that Pakistan’s population growth rate remains the highest when compared to India and Bangladesh.

Equally, literacy rates lag behind India and Bangladesh and especially those of females. Some 35 million children are out of school and 45 million are estimated to be suffering from chronic malnutrition. Pakistan’s higher educational institutions are woefully inadequate in encouraging independent and critical thinking or in instilling scientific curiosity. The compulsory teaching of Islam in the schools and colleges has meant extra burden on students without such knowledge having any meaningful relevance for their careers and employment opportunities. Moreover, the teaching of Islam does not exempt non-Muslim pupils. Overall, the educational system inculcates prejudices against non-Muslims. Externally, India is especially described as the enemy of Pakistan and Muslims. Pakistan is generally portrayed as the citadel and bastion of Islam. The Pakistan military is celebrated as a garrison state ready to defend its territories, Islam and Muslims from external and internal enemies and fake stories of military victories during wars with India are taught in the educational institutions.

 

Attempts to Islamize Pakistan have generated intolerant attitudes which are invariably hostile towards women and religious minorities.

Most of Pakistan’s current ills are rooted in the ideologization of politics. A state driven by ideology invariably operates at the cost of national interest. It leads to the obfuscation of the objective reality which in turn results in flawed policies. Rational self-interest whether of the individual or a state must be based on a careful examination of the objective reality and the options available to deal with it. It requires flexibility and pragmatism and the rule of law.

Pakistan’s confessional ideology has proved to be dysfunctional
Winning Pakistan in the name of a confessional ideology which dichotomized Hindus and Muslims as two discrete, hostile but homogeneous nations was undoubtedly the masterstroke upon which the founder of Pakistan, Mohammad Ali Jinnah, won the case of Pakistan. However, it was a misleading depiction of Hindus and Muslims. The fact was that both Hindus and Muslims were deeply divided from within. Caste divisions among Hindus were notorious but the Muslims were equally deeply divided because of sectarian and sub-sectarian differences in belief and doctrine. Moreover, both Hindu and Muslim communities were amorphous entities comprising millions of people dispersed all over the Indian subcontinent. Ethnicity, language and other particularistic identities and local associations played a major role in defining their day-to-day lives.

At any rate, Pakistan came into being in a most violent and bloody manner with more than a million Hindus, Muslims and Sikhs killed in heinous communal conflicts and 14-15 million of them crossing the border between India and Pakistan. Yet, millions of Muslims were left behind in India while a much smaller Hindu minority stayed on in Pakistan (since 1971 confined to West Pakistan).

Another of Jinnah’s masterstrokes was to evade describing what sort of state Pakistan would be. In his hundreds of speeches, statements and messages can be found those which describe future Pakistan as a Muslim democracy, others which portray it as an ideal Islamic state inspired and informed by Islamic law and the praxis of state from pristine 7th Century Islam and one solitary state made on 11 August 1947 where he waxed eloquence about Hindus and Muslims being equal citizens of Pakistan.

In his later public speeches, he returned to the organic connection between Islam and Pakistan but insisted such a connection meant both democracy and ideal protection of minorities. However, regarding centre-province relations, Jinnah, who before Pakistan came into being,was a champion of decentralization, became a vehement opponent of what he decried as parochialism and provincialism, emphasizing that Muslims were a nation of faith while regionalism was a tool of the enemies of Pakistan.

Most of Pakistan’s current ills are rooted in the ideologization of politics. A state driven by ideology invariably operates at the cost of national interest. It leads to the obfuscation of the objective reality which in turn results in flawed policies.

In an interview given to the former foreign minister of Pakistan Sahibzada Yaqub Ali Khan and Syed Ahsan, his military and naval who wanted to know why no progress on the constitution was being made and why India was moving fast to frame one for itself Jinnah admitted candidly that he had been making contradictory pledges to different schools of thought among Muslims. Therefore, he had reposed the duty of framing of the constitution of Pakistan to the Pakistan Constituent Assembly.

The first move on the constitution was made on 7 March 1949 when Prime Minister Liaquat Ali Khan moved the Objectives Resolution. It called for Pakistan to be an ideal Muslim democracy upholding the sovereignty of God. He reiterated that Pakistan will be a modern democracy in which fundamental rights will be enjoyed in accordance with the lofty standards of Islam. What such rhetoric meant concretely for constitution and law-making was not spelled out. While the few Hindu members of the Constituent Assembly invoked Jinnah’s 11 August 1947 speech to plead for a secular Pakistan, the Muslim members who spoke in support of the resolution unanimously underscored that Jinnah had ad infinitum described Pakistan as a state for Muslims and where Islam will be the main source for constitution and law making, but assured the Hindus that would not mean a theocracy but a spiritual democracy fair to all.

What followed thereafter were protracted deliberations on the democratic and Islamic character of Pakistan. The constitutions of 1956, 1962 and 1973 contained familiar civil, political, social and cultural rights but hegded them in by Islamic limits! The current constitution of 1973 added more Islamic features. Not only the president but also the prime minister was to be Muslims. In 1974, the Pakistan Parliament unanimously declared Ahmadis as non-Muslims because they did not believe that Prophet Muhammad (PBUH) was the last of the prophets sent by God. Under General Muhammad Zia-ul-Haq, Hudood and blasphemy laws and several misogynist laws and practices were introduced. They brutalized sensibilities and encouraged a mob mentality preying on those suspected of disrespect to pure and true Islam. Some 96 people have thus far been killed by frenzied mobs and among them have been Christians, Hindus, Ahmadis and even free-thinking Muslims of Sunni origin.

The introduction of zakat tax by Zia was rejected by the Shia minority which agitated for exemption from it because they were not willing to pay it to a Sunni state. In the 1990s,a proxy war was fought on Pakistani soil between Shia Iran and Sunni Saudi Arabia through their sectarian affiliates in the form of armed militias. The terrorism which followed claimed hundreds of lives, but the upper hand belonged to the Sunni extremists who not only formed a majority of 85 per cent but were supported by state agencies. The gruesome assassinations of the Governor of Punjab Salman Taseer and of the Federal Minister of Minority Affairs Shahbaz Bhatti in 2011 are cases of terrorist attacks on high profile individuals, but the extremists have not even spared foreigners working in Pakistan. All this is verifiable from the Pakistani press and annual reports of the Human Rights Commission of Pakistan.

In short, Pakistan is a state whose ideology has taken upon itself the responsibility not only to perform the three main functions all states are expected to perform: protect its population from external aggression, punish crime and provide conditions to produce the material goods needed to sustain and reproduce society, but also to ensure that its policies pave the way for the salvation of true believers. It is a pre-modern ideology harking back to a golden past oblivious to the objective reality of diversity of beliefs within Muslims and between Muslims and non-Muslims. Such developments have placed Pakistan high on the list of countries where extensive, systematic violation of human rights of people take place

Using Urdu to eradicate regional identities has provoked separatist reactions
Closely related to Islam as the basis of nation and nationalism is the problem that Urdu is declared the language of Muslims and therefore a core element in the Pakistan ideology. Its roots go back to the polemics between the Indian National Congress which wanted Hindustani to be the national language of a united India with two official scripts, Devanagari and Urdu-Persian and all provinces having the right to use in their province their mother-tongues for government communications and education. This was rejected by the Muslim League; it insisted that Urdu was the mother tongue exclusively of Muslims. This was not true because not only Muslims but also Hindus and Sikhs were literate in Urdu. But Jinnah insisted on communalizing the language issue.

After Pakistan came into being the state was hellbent on establishing a nation which not only shared one faith but also spoke and wrote one language. The fact was that in 1947 Pakistan contained five major indigenous language groups: nBengalis, Punjabis, Sindhis, Pakhtuns and Baloch and several smaller groups such as Brauhi speakers in Balochistan, Saraiki speakers in southern Punjab and lower Sindh and some even smaller groups. The Urdu-speakers who migrated to Pakistan in 1947 from North India and Hyderabad State formed less than 4 percent of total population. That percentage has increased to 7 percent after East Pakistan broke away from Pakistan to become Bangladesh in 1947.

The imposition of Urdu on Bengalis was one major reason why they were disillusioned with Pakistan. Unlike Punjabis and to some extent educated Sindhis, Pakhtuns and even Baloch were conversant in Urdu but not Bengalis. The language issue in Bengal was the beginning of Bengali resentment against the West Pakistani establishment which they accused of exploiting the resources and income of East Pakistan to finance the development of West Pakistan. Cumulative grievances of the Bengalis finally culminated in the breakup of Pakistan in 1971.

In post-1971 Pakistan, the language question continues to produce resentment in Sindh, Khyber-Pakhtunkhwa and Balochistan. There is no doubt that using Urdu as the medium of education has made it the link language between the four provinces of Pakistan, but the suppression of regional languages and cultures alienates the dominated minorities from the Punjabi dominated Pakistan government. It can be pointed out that by using Islam and Urdu as ideological tools in 1955 the four provinces of West Pakistan were amalgamated under the One-Unit scheme into the single province of West Pakistan. Such forced amalgamation was never accepted by the dominated provinces and in 1969 the One-Unit was dissolved and Punjab, Sindh, Khyber-Pakhtunkhwa and Balochistan became separate provinces.

Such a tendency resulted in protests from the provinces and was a major contributing factor to bitter relations between the centre and the provinces. However, protracted negotiations finally forced the hand of the central government, and the 18th Amendment was agreed whereby many of the powers were handed over to the provinces and their share of the national budget and resources increased to 53 per cent to the provinces and the rest to the centre. Even after the agreement, calls are being given to regain the powers by the centre because of external and internal threats to Pakistani unity.

India-centric and Kashmir-fixated foreign policy has ruined Pakistan

The third pillar on which the Pakistan ideology rests is the belief that India has never accepted the creation of Pakistan and is constantly conspiring to undo Pakistan. From 1937 onward, Jinnah began warning that in a united India Islam will be annihilated and Muslims obliterated and therefore the creation of Pakistan was a matter of life-and-death for Muslims. Ironically, he was willing to leave 2 crore Muslims in India to be sacrificed and smashed to liberate 7 crores from the yoke of Hindu rule. In any case, bitter conflicts over the share of the colonial kitty and conflicting claims to territory degenerated into zero-sum games between them at international forums.

In any case, neither Jinnah nor Liaquat Ali Khan put any high premium on democratic procedures. After their deaths, a serious dearth of civilian leadership paved the way for the civil servants to call the shots, and they in turn were superseded by the most powerful institution in Pakistan, the Pakistan Army. In any case, conflicting claims over Kashmir resulted in the first India-Pakistan war of 1947-48 which left the former princely state divided between the two rivals. Having co-opted itself into Western military alliances, Pakistan received advanced military hardware and initiated military actions which resulted in the second war with India in 1965. Again in 1971, Pakistan went to war with India and after both rivals had acquired nuclear weapons in 1998, a mini-war at Kargil took place. The arms race between them has meant scarce national resources being directed towards wasteful projects to purchase and produce advanced weapons. Moreover, after the so-called Afghan jihad, Pakistan became the base from which so-called non-state actors such as the Lashkar-e-Taiba, Jash-e-Muhammad, Harkat-ul-Mujahideen and several other organizations carried out terrorist attacks in the Indian-administered Kashmir as well as major Indian cities.

Pakistan also became the epicenter of extremism and terrorism where Pakistani and foreign warriors were trained to attack targets in the West. All such vainglory misadventures have earned Pakistan the unenviable reputation of a rogue state.

Umma internationalism has only won Pakistan Brownie points
One can mention that championing Islamic/Muslim causes is part of the overall Islamic ideology although when it comes to China and its ill-treatment of the Uighur Muslim minority reported by the United Nations and other international human and minorities organizations Pakistan maintains a complete silence. In fact, atheistic China is Pakistan’s closest friend and benefactor.

Already, we have paid a very heavy price in getting involved in the so-called Afghan jihad and in propping up the Taliban movement in Afghanistan which is again now wreaking havoc in Pakistan.

Conclusion

Unless Pakistan can extricate itself from such an ideology, its democratic credentials will always be questioned. One way to retain Islam as a moral reference for good and responsible governance is to bring all mosques directly under the state and make the clerics state employees who can lead prayers according to their sectarian and sub-sectarian rituals, but they should be strictly forbidden to take part in politics. The Friday sermon should be prepared by the state in which social service, tolerance, cleanliness, birth control and other such subjects should be emphasized.

One way to retain Islam as a moral reference for good and responsible governance is to bring all mosques directly under the state

More importantly, the educational system must be freed from the stranglehold of ideology. There is ample material available showing that instead of encouraging rational, scientific, independent and creative thinking the textbooks disseminate prejudices against non-Muslims especially Hindus and India. Such an educational system fails to equip students with positive attitudes and stands no chance of competing with other societies in the production of knowledge.

Moreover, Pakistan must accept the multi-linguistic and multicultural nature of Pakistani society and new provinces can be created to reflect the diversity of cultures and identities of the Pakistani people. Forced assimilation will never work. On the other hand, if equitable relations with the provinces are established then Urdu will naturally be the language which will integrate them and while regional cultures and identities can flourish as well.

It is imperative that seeking confrontation with India will always require increasing investments in the arms race. Pakistan is already financially and economically ruined. Knowing fully that the Kashmir dispute cannot be resolved through war and invoking UN resolutions on Kashmir is a huge waste of time Pakistan can accept the Line of Control the international border between India and Pakistan but with the proviso that both states would guarantee maximum autonomy to the Kashmiri people including free movement of Kashmiris across the border.

Trade between India and Pakistan can bring great benefit to both countries but especially Pakistan. If India and China trade can increase from 100 billion USD per annum to 139 USD per annum and China and the US can manage to continue trading at a very high level despite the rising tensions between them there is no reason Pakistan and India should not do so. Restoration of trade relations with India could prove to be the stimulus it needs to start growing again.

We need to concentrate our attention on improving the dismal life conditions of the vast majority of Pakistani people instead of hypocritically championing perceived Islamophobic causes and supporting extremist movements in Afghanistan and elsewhere in the world.

In short, Pakistan must learn to function internally and externally in compliance with the prevailing norms of legitimate government, respecting the rule of law internally and internationally as well as its obligations in the external domain.

Ishtiaq Ahmed

The writer is Professor Emeritus of Political Science, Stockholm University; Honorary Senior Fellow, Institute of South Asian Studies, National University of Singapore. He can be reached at: billumian@gmail.com

The post Can Pakistan Ever Become a Normal Country? appeared first on Dissent Today.

Crises are not new for Pakistan. It has faced dozens of economic, political and humanitarian crises since 1947—around one every 2-3 years. Since 2000 alone, it has faced three mega humanitarian crises (2005 earthquake; 2010 and 2022 floods) and a dozen smaller ones; massive internal displacement due to the war on terror; on-going insurgency in Balochistan; endless political crises and 5-6 major economic crises. It is perhaps the most crisis-prone state globally since 2000.

Even by these standards, the current poly-crises encompassing an economic current account crisis; a political crisis since the April 2022 vote of no-confidence and the 2022 floods against the backdrop of the global slowdown due to the Ukraine war easily ranks as one of its worst crises.

If the current situation is bad, future trends show that Pakistan may face even bigger crises in the next 25 years leading to its 100 years as a free state than it has so far in 75 years.

Demographically, our population may hit 325 million by 2050 against 220 million now. Demographics spell doom against the backdrop of misrule if the state fails to invest socially in health and education. Already, we have the second most illiterate kids globally. Ecologically, by 2050, climate change will destroy fertile soil, swamp coastlines, cause water wars and up disasters and migration hugely. As one of its biggest victims globally, we may face more mega emergencies, epidemics, migration and conflict as more people chase fewer goods.

Economically, we suffer from long-run slow GDP and job growth, high twin deficits, huge debt and low innovation and competitiveness. This has led to 23 IMF programs since 1958, high unemployment and economic stagnation. There are little signs these economic trends will change soon. Socially, fake religiosity, false patriotism and extremism are increasing rapidly. The Tehreek-e-Labbaik Pakistan reflects this trend. It is a monster still in evolution well below its full potential that could cause huge harm, more than the Taliban, as it expands its faith agenda, street power and electoral clout in key Punjab and Karachi areas. A state can’t be both an economic and extremism hub. Externally, our growing Barelvi extremism lies close to Hindu and Buddhist ones in the east and Salafist and Shia ones in west. All hate yet feed each other, making this area the most unstable extremism mosaic globally.

Indo-Pak enmity is the main global nuclear risk in future. Instability in Afghanistan poses increased terrorism threats,as does the Baloch insurgency. Politically, we suffer from elite patronage politics that causes misrule and constant interference by the army in politics which undermines political institutions and increases political autocracy. Politics is society’s avenue to adopt apt policies against other threats. But for us, it poses threats itself.

These six trends portend six security and economic paths to doom for Pakistan, some more immediate than others. The gravest security pathway is nuclear war. The Indo-Pak tiff is the big nuclear risk globally. No two nuclear states have fought yet but there is always a first time for new mania. Another grim security pathway is internal extremist war that ruined Somalia and Syria with big areas falling to them.

Taliban too seized ex-Fata and Swat in 2007 and were sixty miles from leafy Islamabad sending panic waves among its elites. Army action during 2008-16 cut the risk but Taliban’s Kabul win has upped it. Another risk is ethnic insurgency and succession, as with Sudan, Yugoslavia and us too in ’71. Our ethnic Achilles heel is Balochistan. Baloch rebels lack capacity to secede soon or even hold much area but have made some no-go areas and can now stage big attacks beyond home.

Economically, one path to doom is the Soviet one which fell after decades of de-growth due to big misrule and army outlays. We have both too. We don’t yet see prolonged de-growth but may in the long-run, as its two causes persist. Another economic path to doom is hyperinflation. Loose monetary and fiscal policy creating wage-price vicious circles cause it. Our usually cheery central bank glumly told us recently those circles are emerging. A last economic pathway is currency collapse as in East Asia in 1998 due to external deficits as the private sector took short-term foreign loans for long-term work that gave no dollar earning. A scare in one state made foreign lenders pull loans regionally to cause currency collapses. We have had external deficits for decades but now take bigger foreign loans for works with no dollar earnings, though mainly less panicky state to state ones. But souring ties with big lenders may mean default.

How far are we from each tipping point and can we change course before the points of no return? Among the six, nuclear war may occur any time, but its risk is low. But the risk of the last two inter-linked economic pathways is high. We may only be a couple of years from the tipping point as new economic risks like wage-price spirals and foreign loans for local works increase. Economic doom doesn’t cause the gory violence of security dooms. Yet it causes silent, covert violence that hurts the poor badly via local disease, crime, and abuse. We are the only large state globally, and perhaps even only one facing all recent security and economic pathways to doom seen globally except warlord politics that doomed Liberia etc.

Why is Pakistan alone so vulnerable to doom compared to other large states in South Asia, such as India, Bangladesh, and Sri Lanka? Politics is the driving force behind all security, economic, social, and external threats. So, what is so different about our politics from other similar regional countries with whom we share geography, history, culture, ecology and economy? Why is that the country from which Pakistan split (India) and the country that split from Pakistan (Bangladesh) are economically and politically much more stable and dynamic than it? A comparison of our politics shows that these three regional states too have similar dynastic political parties and are close to us on the Transparency International Corruption Perception Index, with Bangladesh being much worse than us. Yet those political parties deliver much better than ours on governance. Deeper analysis shows that the contrasting point is on civilian supremacy and democratic continuity. While India and Sri Lanka never had military rule and have had regular elections and peaceful transfer of powers from the beginning, Bangladesh has joined their ranks too in the last 15 years and has in fact started progressing since then.

In contrast, Pakistan had its first and only peaceful transfer of power between two fairly elected political parties only in 2013 and has since then regressed again since the 2018 elections were very controversial, as mentioned even in the European Union’s election monitoring report for 2018. The security establishment has rigged partially or fully thirteen out of our fifteen national-level elections or referenda and has been instrumental in creating or controlling political parties, with the founders of all three major parties (PTI, PML-N and PPP) having been brought into politics by generals. So, clearly the fountainhead of a way forward for Pakistan towards political stability, economic dynamism and social progress has to be civilian supremacy and an end to the political role of the security establishment. Yet, so badly has its political interference over the past 60 years damaged Pakistan’s politics that its after-effects will continue to haunt it for decades even if it were to become apolitical immediately, of which there are yet no signs.

But assuming civilian supremacy, the next questions are about the right governance structure for Pakistan. The multiple hybrid systems short of outright martial law tried by the security establishment during the 1960s, 1980s and 2003-2008 have all failed too. China and Vietnam’s success has evoked much interest in the virtues of one-party rule among some analysts despite its big failures elsewhere. None of our parties have the huge capacities or the national stature to manage a one-party system successfully in Pakistan. Some analysts see electoral system fixes as panaceas: Presidentialism, proportional representation and term and family limits. But there is no global evidence show that any of them work better than our current first past the post parliamentary system or that a simple switch from one system to another can resolve the major underlying political problems that Pakistan faces. In fact, the more successful regional states like India and Bangladesh have achieved their success with a system very similar to ours. However, India’s Congress model, where after Rajiv Gandhi’s death, the Gandhi family restricted itself to running the Congress party while appointing competent non-family Prime Ministers to manage state governance is one that Pakistani family and personality-driven major parties like PML-N, PPP and PTI must emulate as India’s march towards being a global power started under such eras after 1991.

So badly has the security establishment’s political interference over the past 60 years damaged Pakistan’s politics that its after-effects will continue to haunt the country for decades even if it were to become apolitical immediately, of which there are yet no signs.

So rather than getting into futile exercises to change electoral system with unclear benefits, the focus must be on pressurizing the current parliamentary system to deliver the right mix of social, political and economic policies to halt the malaise and make a move towards progress to at least narrow the gap between it and the more successful regional states. The first issue here is the role of the state. We neither need the elitist state like our own, nor the neo-liberal, hands-off Latin American state nor the Myanmar or North Korea’s totalitarian state nor the Iranian theocratic state. We need a state that combines the developmental role played by Asian Tigers states (good macroeconomic management and stability, a competent bureaucracy, symbiotic state-business relations, publicly controlled financing for development, and a dynamic industrial policy to facilitate industrial and exports growth) and the welfare role played by the Scandinavian state. Their broad contours are so well known. Economically, it requires increased taxes and exports to cut our big fiscal and external deficits that often give crises; population management, reforming power and water sectors and increasing social and economic investment and productivity to get sustainable and equitable growth. Politically, it means devolution; police, judicial and bureaucracy reforms; peace with Baloch rebels and ending TTP terrorism. Externally, it means peace with India and good ties with all key allies like the West, Gulf states and China. Socially, it means ending extremism and full rights for women, minorities, and other weak groups.

We must devise an innovative “Poor-led progress (PLP)” model. PLP sees investing in the poor not just as an ethical or anti-conflict concern but actually as the main driver of national progress. Our internal market is small, despite a large population, given the low incomes of the majority. Increasing their incomes expands national market size and profits for producers. This in turn again expands jobs and incomes for the poor and national market size, thus igniting a virtuous cycle of national progress. The poor spend more on local goods than the rich, thus benefiting local producers and external account. So investing in the poor, largely seen as a moral aim, can actually be the main national growth engine under trickle-up economics that puts those at the bottom at the top.

A seven-step approach (COMPASS-credit, organizations, market power, protection, assets, skills and social services) that goes beyond giving only cash hand-outs serves as the compass for PLP. One, we must expand the poor’s ownership of assets. This includes land reforms, key to East Asian progress. Two, we must expand easy credit for the poor. Three, we must expand the access of the poor to appropriate skills and technology. Four, the government must ensure the rule of law to protect them from economic and physical abuse, e.g., evictions, false cases and labor abuse. Five, the state must expand locally devolved quality education, health, family planning, disaster and other social services for the poor. Six, there is a need to support community-based groups which mobilize, link and advocate for the poor. Seven, increasing the bargaining power of the poor in markets is key. Minorities, women, and people in far-flung areas must be prioritized. All this may require the state to invest Rs. trillion-plus yearly on the poor above current funding which it can do easily by increasing agriculture, property, retail, transport and wealth taxes; and cutting state enterprise losses, elite subsidies, defense outlays and tax evasion.

Experts offer very blueprints for each one of these ideas. But the issue is getting the state to adopt them as these steps nix the interests of powerful elites that stymie their adoption. These include politicians linked to sugar, real estate mafias etc., military elites who thwart peace with Baloch groups and India and thwart cuts to their big budget and businesses; bureaucrats, Mullahs etc. Can major change emerge fast enough from this paralyzed labyrinth of elite politics to avert doom? There are two paths forward. The first is a dose of doom jolting our elites finally into action. We have seen this already. The only time in recent decades our state took big action to end a major threat very successfully was in 2015 when thousands of deaths, big terrorism in major cities and loss of large areas finally jolted our elites to end terrorism. But even it has upped recently as elite interests cut full action and fatally led to futile peace talks with TTP again. A mix of hyperinflation, Rupee collapse and default is a serious risk in next couple of years. Would it jolt elites to act? The key worries on this path are the high human costs and unclarity on whether we would be able to end the crisis and if even it would invoke deep reforms. Many states have overcome such crises to do deep reform, but all had strong capacities, like Israel and the Asian Tigers. Among weak ones, Zimbabwe still is badly misruled and prone to a relapse. We face much more complex and multi-axel problems than it, including ethnic and extremism issues, a badly divided polity, and hostile ties with neighbors. Thus, such an economic crisis may morph into a political and security Armageddon for us. Luckily, there is a second, more proactive, path too.

The history of successful states shows that social movements play a critical role in improving the quality of governance and making it more people centered. Thus, it is critical for Pakistani society to organize itself better and form an alliance or coalition for change to force elites to adopt egalitarian policies that help avoid doom. Progressive, grassroots, pro-poor groups are obvious partners for leading the coalition for this pro-poor agenda. But Pakistan’s situation is so precarious, especially economically even in the short-term, that most components of this agenda would appeal to a much broader alliance, which is also necessary given the enormity of the task involved in swaying strong elite interests. Thus, a broader coalition that includes pro-poor advocacy groups, farmer, and labor entities as leaders but also professional bodies of lawyers, doctors, teachers, engineers and others; media groups, business groups, academia and expatriate groups is needed.

This practically means society willing to support such an agenda outside the narrow range of elite interests that currently control state policy or extremist and criminal groups. The starting step could be for progressive grass-roots groups to come together and then gradually expand the coalition by inviting other societal groups into it. But even this doesn’t guarantee success given the low odds of firstly getting such an alliance together and secondly its low odds of succeeding. But the chances of any other path succeeding are even lower. This sadly reflects our poor odds going forward.

Dr Niaz Murtaza

The writer is an Islamabad-based Political Economist with a Ph.D. From the University of
California, Berkeley. He can be reached at murtazaniaz@yahoo.com. X:@NiazMurtaza2.

The post Pakistan Needs To Invest In The Poor As The Main Driver Of National Progress appeared first on Dissent Today.

Pakistan today faces an unprecedented crisis. Never before has it faced such serious challenges – with the country so deeply divided and in a fractured state. In fact, it confronts a polycrisis – several crises that have converged to reinforce each other and create an overall challenge tougher to deal with than any single crisis. A political crisis, with constitutional implications rages, the economic crisis is the worst in the country’s history, while a resurgence of terrorist violence has revived threats to Pakistan’s security.

The complex nature of the country’s overlapping and interconnected challenges and the fact that no single party can tackle these on its own should make political leaders and other stakeholders rise above narrow interests and consider evolving agreement on core issues, even as they continue to compete with each other.

Here are some core issues that need to be addressed immediately.

Economic revival and growth

First and foremost, Pakistan needs economic recovery and a plan to achieve this. While the present focus is on reviving the IMF loan programme, it should be a part, not substitute for a broader homegrown economic strategy. Stabilisation measures are necessary but not sufficient. Pakistan needs a path to growth and investment and a strategy to fix structural problems to end the vicious cycle of high budget/balance of payments deficits and chronic foreign exchange crises that have led to repeated IMF bailouts – a grand total of 23 now.

Unless underlying structural issues are tackled, the country will not be able to escape the trap of slow growth, low savings and investment, high deficits, heavy borrowing, growing indebtedness and soaring inflation. A band-aid approach is unsustainable. Consensus on longer term, structural measures is needed.
The narrow tax base, reflected in a low and almost stagnant tax to GDP ratio, is the source of fiscal problems, which is why serious tax reform needs to be a priority. This should aim at an equitable, simple and nationally enforced regime to give the country a single tax system. Ending exemptions, simplifying the convoluted sales tax structure, and ensuring tax compliance should be part of reform actions. Pakistan also needs to square the circle between over-taxation and under-collection.

The energy crisis is taking a heavy toll on the economy and testing people’s patience. That gives power sector reform urgency. Similarly, agreement is essential on privatising loss-making, state-owned enterprises that bloat budget deficits. A single, liberal business regulatory framework for the country and commitments for policy continuity are crucial to build and sustain investor confidence. The State Bank’s operational autonomy with the market deciding the exchange rate should also be agreed.

Unless there is an economic vision that puts in place a plan to grow and diversify exports, increase productivity, enhance competitiveness, boost savings and investment and integrate the country’s economy into the global economy, Pakistan will not be able to find a sustainable path to economic growth and prosperity.

Consensual democracy. Political stability, on which economic revival depends, requires consensus between all stakeholders, not just on continuance of democracy but its functioning by tolerance, mutual accommodation and consensus. Democracy cannot be limited to the ballot box. It should determine how the country is governed between elections. The federal nature of the polity makes this imperative – as does the regionalisation of politics and electoral outcomes that leaves different provinces in the hands of political parties different from the one leading the federal government. The federal government has to work with and not against opposition-run provinces to build inter-provincial consensus on major issues. While the central government can enact laws and take reform measures, their enforcement requires the consent of all provinces.

The role of the military is another core area that needs agreement. We have a firm popular consensus in place: that elected representatives should be in charge of governance. This indicates the delegitimisation of military intervention in politics and governance in public eyes. But political leaders must also embrace this consensus and not try to drag the army into politics to fight their battles. The military too should respect the principle of civilian supremacy even though on security policy it will continue to have a significant voice. This civil-military rebalancing of power will help to promote political stability.

Education

No issue is more consequential to a secure and prosperous Pakistan than the coverage and quality of education available to our children. Yet the facts remain grim. Pakistan has the world’s second highest number of children out of school, 22.8 million. 12 million are girls. It means 44 % of children aged 5 to 16 years do not go to school. This violates the constitutional obligation set out in Article 25A that enjoins the state to “provide free and compulsory education to all children of the age of five to sixteen years”. Of those who go to school, drop-out rates are high. All this is the result of decades of neglect and chronic under spending on education by successive governments. At 2.6 percent of GDP, this is among the lowest in South Asia.

Political leaders should stop trying to drag the army into politics to fight their battles. The military, too, should respect the principle of civilian supremacy even though on security policy it will continue to have a significant voice.

Given Pakistan’s demographic profile, young people face a jobless and hopeless future unless the scale and quality of education is expanded. This should spur the country’s leaders into treating education as a national emergency. Pakistan needs champions of reform not champions of vacuous rhetoric on education.

Population planning

Pakistan’s population of over 224 million makes it the world’s fifth most populous nation. In 2040, the population is projected to reach 302 million. The annual growth rate of around 2 % is among the highest in the region. This has far-reaching economic and social consequences. Yet this pivotal issue rarely figures in any government’s priorities.

The demographic structure, with youth constituting 64% of the population under 30, means almost 4 million young people join the working age population every year. This in turn requires 1.4 million new jobs to be created annually, according to a UNDP report. The confluence of demographics, economic stagnation and persisting education and gender gaps confronts Pakistan with the specter of social instability, even social breakdown in the decades ahead if consensus is not forged on population control measures.

These fundamental issues among other critical ones, including water scarcity and climate change, will determine Pakistan’s fate and fortunes. They require implementable plans undergird by a solid political and public consensus. Otherwise, Pakistan will continue to lurch from crisis to crisis without the means to get rid of the political and economic mess that it is perpetually trapped in.

Maleeha Lodhi

The writer is an academic and a diplomat. She served as Pakistan’s Ambassador to the US, High Commissioner to the UK and Permanent Representative to the United Nations.

The post Needed: National Consensus On These 4 Core Issues appeared first on Dissent Today.

Pakistan once again finds itself in a very hard economic situation, but the gravity of the present crisis is far more serious than any we have seen so far. High fiscal deficits, coupled with overspending over the last decade, have pushed Pakistan into a situation where lenders are unwilling to bail us out unless we make serious and consistent efforts towards fundamental economic reforms. In this article, I focus on some tax policy issues and how we should address these challenges.

Historically, Pakistan inherited a typical British tax collection structure which relied heavily on indirect taxes, collected at import (custom duties) or production stages (excise duties), and income tax collected without self-assessment. From 1996-2001, Pakistan undertook a series of tax reforms which shifted the system to a more “modern” self-assessment-based system. This change necessitated rapid automation and the Federal Board of Revenue (FBR) has done exceptionally well in terms of computerisation compared to many other developing countries. It did get some immediate dividends and tax to GDP ratio increased from 9.8 per cent in 2013 to 13.0 per cent in 2018 before regressing back again.
Despite adopting best tax practices, our tax to GDP ratio has barely managed to stay above 10 per cent against a suggested 15-17% given our spending and debt servicing commitments. Why does this anomaly exist? If we have a reasonable tax collection agency, then what ails us and where do we fail? The answer lies in understanding both administrative and policy measures that we need to consider.

On the administrative side, the biggest issue is to resolve the trade-off between ease of doing business, administrative cost and controlling evasion. For example, in 2005, FBR deregistered thousands of small VAT (called sales tax in Pakistan) registered firms because they paid a small amount of net taxes but required high administrative costs. Many of these firms were registered during the 2000-2001 FBR survey drive which was meant to document the economy. Ironically, both steps were taken under the same political regime. What it essentially did was to use extensive administrative resources for nearly half a decade only to let everyone go.

Five years later around 2010, once again all the focus came back on broadening of tax base. The most important source of ensuring tax compliance and enforcement in the present system is audit. While audits can unearth substantial evasion, most cases do not translate to any substantial recovery because of various factors. Cases go in litigation where they are time constrained, and fill the first or second appellate stage but in later stages, there is no time limit on judicial authority for deciding the case. Even when the case is decided against a taxpayer, they may still go to courts to stop recovery action. This has created a perception among taxpayers that they can get away with anything even when the case against them is very solid. There is not much tax authorities can do here.

But the real consequence of this increasingly slow judicial process is that recoveries in most domestic taxes have fallen to 5 per cent on average.The damage this does to the deterrence value of FBR and its tax collection initiatives should not be underestimated in a tax system based on self-assessment. Considering the revenue pressure that FBR faces each year, it has to make up for this loss and the response is often the introduction of arbitrary taxes in the forms of minimum, final, turnover, withholding taxes etc. In this scenario, FBR is left with very limited measures to increase taxes such as increasing the tax rates. But these are not good policy measures.
Tax policy is based on four principles: (1) Adequate Revenue (2) Vertical and Horizontal Equity (3) Economic Efficiency (4) Low administrative and compliance costs. Adequate revenue principle means that tax rate and base should be big enough to collect adequate taxes. While Pakistan has high tax rates, its tax base needs expansion. Retailers and small businesses largely remain out of the tax net, often paying a small turnover tax which is hardly verifiable through any third party. Recent POS retail receipts system is a good initiative to bring these retailers into the tax net.

Agriculture sector is another example of an untapped tax base. The policy initiatives to tap the tax base in the informal economy need long term commitment from political stakeholders that they would not compromise the national economy to appease their political base. Pakistan’s present tax structure performs poorly against the equity principle. Horizontal equity demands that people who have the same income pay the same taxes. Vertical equity requires more proportional payment from high earners than low earners. Over reliance on indirect taxes and withholding taxes implies that low-income people who spend most of their income on basic consumption goods end up paying proportionally more than higher income persons.

Similarly, when some people pay their taxes such as salaried persons and similar income people in self-employment or informal sectors do not, then equity is compromised. Over the last decade, Pakistan has established some good social protection programs like BISP or Ehsaas to mitigate poverty and make its tax and transfer system less regressive. But this certainly is not enough because most middle-income households are left out of these programs.
To increase equity in our tax system, we should follow the simple principle of taxing inelastic but non-essential goods at a higher rate. Recent extra levies on cigarettes and luxury goods are a right step in this direction. However, we need to do more to figure out ways to tax income in exempt and informal sectors. In terms of administrative and compliance costs, Pakistan is not very different from other developing countries because it follows a taxation system which is similar to other developing countries. However, the basic issue that critically ails our tax and transfer system is lack of economic efficiency.

Economic efficiency implies progressive taxation of income, very high taxes on economic rents, consumption taxes with a transfer program that makes them less regressive, and a competitive business environment. Clearly, we have a tax system which fails to achieve these basic goals. Most corporate taxes come through alternative minimum taxes based on turnover instead of profits. But we failed to sign OECD’s Pillar 2 global minimum tax, which is a minimum tax on profits of corporations with top up tax below 15% going to the host country, in this case Pakistan. Seemingly, there is no valid reason for not doing it and 140 countries have joined it. An immediate step could be to join these initiatives which now have a stronger chance of being implemented than ever before.

On the personal taxes front, we may begin with national insurance taxes. They can be a good instrument of bringing informal sector employment to the formal sector. They can also assure long term social protection commitment to a bulging young population. Because these taxes are paid by both employers and employees, they may pressure informal employers to pay extra and hence increase the burden on the informal sector. At the same time, they can make formal sector employers contribute more to the welfare of their workers. Because these taxes are tied to individual transfers in the future, they also make the system more progressive.

The most important element of modern tax policy is to make the business environment economically neutral or competitive. It means that taxes should not distort choices of individuals and firms. Tax on real income or profit is economically neutral provided that it is not easy to evade. Unfortunately, tax evasion for firms operating under the profit tax regime is as high as 70%. This necessitates alternative minimum turnover based taxes. It preserves government revenue by taxing those who may be in a loss at the cost of sparing those who made windfall profits.
Audits do not translate into recoveries but even if they did, firms resort to excessive profit shifting strategies which shifts their profits to offshore tax havens. This puts smaller and new firms at a disadvantage –resulting in loss of productivity, innovation, and competition. Similarly, high evasion in indirect taxes allows evaders to lower their prices and drive honest businesses out of the market. Ease of doing business and ease of doing evasion cannot go together. This phenomenon is costing billions of rupees in lost revenues and discourages compliance. Seemingly, it is a vicious circle. So where do we start?

First, we must decide whether we need a territorial jurisdiction system or not. Territorial jurisdiction system in tax administration has its merits but sadly its demerits in Pakistan are now too grave to ignore. If we switch to a non-territorial system, it will take away unnecessary pressure on the revenue target which, ironically, is almost always achieved. We can then focus on more systemic issues and insulate our tax machinery from social pressures and corrupt practices that come with having a jurisdiction based on geographical area. It may also help in reducing the size of tax administration and make it more efficient. In countries like the UK and USA, field offices are small and only for providing basic services to taxpayers while substantial revenue related work is handled on a functional basis.

Second, we should introduce a monetary reward system for the workforce based on the amount recovered. Presently, recovery from defaulters does not translate into any benefit for those who made efforts to recover the amount. A better system to recover taxes from defaulting firms should be made, a system which makes recovery a priority is essential to a self-assessment-based system. Third, we should exercise due diligence and care in new registrations of firms. Many VAT firms turn out to be mere invoice mills and do not do any real business. Without compromising ease of doing business principle, we can allow a provisional registration online and make the permanent registration contingent on physical verifications and meeting certain other criteria.

Fourth, personal income tax return filers do not receive their refunds automatically. If the return is accepted automatically then refund payment should also follow especially when it is small and straight forward verifiable. It would encourage people to file returns. Short term focus on revenue figures results in long delays and complex refund procedures.

Once we have a more focused system in place, then we can go for increasing the tax base. Presently, a 3% further tax is levied on any supplies made to the informal sector by non-retailers over and above the standard sales tax rate of 18%. Even this extra turnover tax has failed to dent the informal sector. Government should go a step further and impose another 3% as withholding tax. It might seem high but why should we not tax the informal sector at a higher rate? We are already imposing higher taxes on non-filers which should also be the case here.

Another right step would be to map all business locations. Businesses, whether they are required to be registered or not under tax laws, should still have a firm registration number linked to a particular verifiable postal address. Operating any business without such registration should be unlawful. This would help in documenting the economy and ensure that we have a record of people who are working in these small businesses. It would be helpful in implementing a national insurance system which can account for the national workforce. Exporters are currently taxed at 1% of their turnover. It should be converted into a minimum tax from final tax so that those exporters who are earning large profits should pay their due share of taxes.

In short, there are some important measures that we can take to streamline our tax system and generate more revenues from the appropriate base. These measures are not exhaustive and are meant to provide a way forward for developing the country in a global competitive environment.

Jawad Shah

The writer is a Research Fellow in Economics at Oxford University Centre for Business Taxation, Said Business School. He is also a civil servant who is affiliated with the Federal Board of Revenue, Pakistan for two decades. His recent research focus is taxation in developing countries. 

The post What Ails Pakistan’s Tax System? appeared first on Dissent Today.

This short piece goes beyond the immediate multiple crises Pakistan faces on which others contributing to this series have offered thoughts and insight. Some may even be brave enough to present ideas and perspectives which are essential for Pakistan to exist at a level where a predominant majority of the population benefits from public and political action. Some will suggest how many of the chronic problems Pakistan faces today could be resolved.

Observers have been commenting on if/whether Pakistan were to default, what strategies would be required to continue functioning. (There are numerous templates and suggestions where one can look to find answers, although Pakistan’s specific economic configuration, size, location and relationship with many countries will always warrant somewhat different solutions.)

Some have also been asking if there is an alternative to the IMF, and issues related to dealing with International Financial Institutions. Another particularly topical theme on which many would give suggestions, relates to the need for ‘political unity’, or ‘consensus’, where the three or four main civilian political leaders would be advised to ‘sit and talk’ and come up with a strategy to ‘save’ Pakistan – with the military a possible arbitrator to such negotiations and talks. (The contradictions in such an endeavour ought to be obvious to anyone who sees which institutions are mentioned here, being the cause of the problems in the first place.) Issues related to macroeconomics, the Constitution, the ubiquitous climate crisis, and educational and legal reforms are also being discussed by analysts.

Reform and rethinking in all these and numerous other areas is essential, and the status quo cannot continue. For Pakistan to even exist with any prospects of hope and progress, it will have to offer very different possibilities. Avoiding mistakes of the past is important. Some areas which need to be on the agenda for discussion, and if possible, implementation, are presented here.

Neoliberalism’s failure

Perhaps neoliberal policies, backed by global capital, the IMF and the World Bank, work in some countries, where some level of economic growth and stabilisation may have taken place, albeit at huge environmental costs and with increase in inequality. This is a big ‘perhaps’. In fact, one can argue that many years after the failure of the worst kinds of capitalist exploitation under the name of neoliberal economics – the electorate – in many countries, has shunted out governments who supported and endorsed such policies. Latin America’s recent ‘Pink Tide’ offers numerous alternatives.
Moreover, the one-policy-fits-all fails, precisely because not all countries are alike. Pakistan is a good example of such failure, with after 22 IMF programmes, every government insists on starting a new one. This is a failure of every Pakistani government, of the IMF especially, and of neoliberal economics’ generalisations which are supposedly applicable to all, or most, countries.

While Pakistan cannot opt out of the globalised world capitalist system, it can adopt and promote numerous policies which focus on local needs and priorities more than those of global capital. Political leaders will need to take numerous hard decisions to make redistribution instead of accumulation the main pillar of economic policy. Key components for such an economic policy would need to include issues related to: taxation of all incomes regardless of source, taxation which is highly progressive and based on direct taxes rather than indirect taxes, doing away with most tax exemptions and benefits which favour only the elite and the private sector corporations, and similar issues.

A thorough review of expenditure and perks available to public sector employees and interests, including the military, is necessary. A wish list would allow for more spending on education, on promoting the right mix of economic incentives and opportunities, etc.

Income and wealth inequality, with extremes visible, has become a clear manifestation of every economic policy followed under the guise of neoliberalism in Pakistan. A recent UNDP Report found that ‘the richest 20 percent of Pakistanis hold 49.6 percent of the national income, compared with the poorest 20 percent, who hold just 7 percent’. At times of economic crises, as Pakistan faces currently and into the future, such inequality manifests itself in the worst form of discrimination. These policies must change. Trickle-down economics does not work. Land reforms – both urban and rural – better, focussed, distributive policies, all need to be implemented to include the poor and marginalised. All economic and social interventions have distributional consequences which affect different sections of society very differently.

Income and wealth inequality, with extremes visible, has become a clear manifestation of every economic policy followed under the guise of neoliberalism in Pakistan.

Whether a government goes to the IMF or doesn’t, the consequences fall differently on different sections of the population, the well-off, the middle class and the poor, very differently. Distributional consequences need to be factored into every decision taken.

Putting women first

In the literature on development economics and from history, numerous facts emerge repeatedly, which suggest some patterns and allow us to draw some clear conclusions and insights. One such finding is the need to put women first, in every public and private policy initiative. Without the participation, and in many cases, without the promotion and incorporation of women in every activity, countries will not progress. Women are central and foundational to the economic, social and cultural constituents of society and all things which exist subsequently. Every single policy in Pakistan must put women first. From literacy and education, to public safety and making transport available, to ensuring economic rights and opportunities, to providing equal inheritance rights, and rights to choose a spouse or the number of children they want. Such demands are a bare minimum for any collective measure required for the development of women, and ultimately for the progress of the country. At the minimum, equity and egalitarianism in every development and social project, needs to be gender-based. Our analysis of all economic and social issues needs to be based on a clear gendered perspective.

Educating women, giving them more jobs, creating a conducive environment which protects and allows them opportunity for education and financial resources will have huge knock-on effects on the economy and on society overall. From demographic consequences, to acquiring more rights and incomes, educating women will transform the social and economic structures of society and make Pakistan a far better place to be.

Neighbourly relations: An end to no-war, no-peace

Few countries progress or develop – however one wants to define either term – without engaging productively with their neighbours. The academic and anecdotal evidence and literature cites numerous economic and cultural evaluations which underlie this premise. Increasingly, countries are participating in and benefitting from regional trading blocs. South Asia remains the only major region, with as many as 1.5 billion people (twenty percent of the world’s population), which has little trade or economic engagement. The reason obviously is the relation between India and Pakistan.

Neither country is going to (physically or ideologically) move out of South Asia, although Pakistan has unsuccessfully tried for decades to do so. Both neighbours will have to come to terms with different religions, ideologies and political constituents and will have to accept each other’s domestic preferences and work around them. India is expected to be the fastest growing economy in 2023 and 2024, and in 2023, 15 percent of global growth will come from India.

Pakistan, at a time of extreme economic crisis, will be the biggest loser – having lost the opportunity to benefit from and participate in India’s economic boom. Pakistan’s leadership will cry hoarse over India’s internal politics, but this will not help Pakistan’s case. It will have to engage with its larger neighbour and accept that it is the junior partner, but a partner no less, and take South Asians forward. Egos and jingoistic sabre-rattling is not going to help Pakistan. There is an urgent need to rethink Pakistan’s India policy as this has far greater consequences than just possible economic benefits. The entire political economy of Pakistan will change if Pakistan and India can actively wage peace and engage in economic, social and cultural exchange.

Negotiating the military/negotiating with the military

Politicians are as much responsible for bringing the military into power in Pakistan, as the military’s own ambition and its greed and hubris. Pakistan continues to be dominated by the military because politicians have made it easier for the military to do so. Every opportunity that civilian politicians have created to enforce their writ on the political settlement, has been lost, as the military has re-established its writ and hegemony over civilian politicians, essentially due to some politicians (usually the opposition at any given time) reaching out to the military to favour it (the opposition) against the incumbent government.

As long as politicians and civilians believe that the military is their benefactor, it will continue to reign supreme. Pakistan’s military governments are a consequence of the failure of civilian politicians to be able to reach some form of understanding and equilibrium amongst themselves as to how to deal with the military, the so-called ‘establishment’. Individual civilians, in particular, have played a role in claiming ‘same-page-ness’ with the military, and have benefitted as well as suffered, by giving individuals in the military too much importance. While it is easier said than done, civilian politicians need to understand that the military is always a non-democratic force and needs to be kept away from politics. Only a consensus by civilian politicians can do this.

Moreover, it is important to realise that the question of the military’s budget as a share of the overall budget, is not of the consequence it once was, and today the dominance of the military in civilian and economic affairs, is much greater than what can merely be measured as a percentage of GDP. Agricultural land of many thousands of acres given by the government, or the many businesses of the military and real estate assets and connections, are far greater in value than its military budget. The absence (or inability) of civilian oversight and control, allows a severely warped playing field to exist, which hinders civilian enterprise – creating further privilege in favour of an institution which remains outside the control of civilians.

The aforementioned UNDP report shows that Pakistan’s military has ‘the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects’. Pakistan’s politicians are responsible for this only as much as Pakistan’s military itself.

Conclusion

Neoliberalism’s failure in Pakistan is not simply a failure of the market or of capitalism, but also of those groups and parties which have constituted government and have held power over the last several decades – the elite in their political manifestations. Every political party as well as the military, is equally implicated in Pakistan’s acute failures and to expect the same groups of institutions or individuals to now do things differently, is irrational.

The existing political settlement has completely failed, and collapsed, and new political and class forces will have to capture political power to offer alternatives. An end to Pakistan’s political, social and economic problems can be achieved through different forms and manifestations of collective action since the existing political forces are unable and unwilling to bring about change even when the old order has unambiguously collapsed. This is a minimum requirement which underpins the possibility of meaningful and substantive change or A Way Forward for Pakistan. Otherwise, we repeat, we fail, we repeat again, and we fail better.

S Akbar Zaidi

The writer is a political economist and currently heads the IBA, Karachi, a public sector University. These views are his own and do not represent those of the institution.

The post Pakistan Needs To Make Redistribution The Main Pillar Of Economic Policy appeared first on Dissent Today.

It is the people, stupid! We must invest in people and empower them, especially women.

Pakistan cannot move forward without a major course correction. Pakistan’s citizens, especially the young and women, must take charge of their destiny. The people must learn and reflect on the reasons behind Pakistan’s failures since its independence. They must force the ruling elites to strike a development bargain that makes economic development the number one national priority and the achievement of a 90 percent literacy rate within 10 years as the most important goal, through the use of technological innovations and knowledge transfer from countries in Asia. This goal will be next to impossible to achieve without removing distortions in the taxation of the real estate sector, restricting the government’s authority to allot state land, and devolving greater responsibility and authority to local governments. People must shun conspiracy theories, dogma and stop waiting for a messiah to emerge. 

Until and unless a movement emerges that represents the people’s aspirations to create an open society, as well as a genuinely democratic state that works for the people and not just for the ruling elites, Pakistan will not be able to evolve as a tenable state, let alone a self-respecting nation that can compete internationally. A country that is not internationally competitive is doomed to fail in our times.

It is necessary to trace the roots of Pakistan’s multiple crises, which go back to the early years after the independence, so as to review the subsequent developments which led to the emergence of Pakistan as an authoritarian security state – a cursed identity which stands at the heart of our current problems. We did not arrive in 2023 as a fractured society and a fragmented nation simply as a result of recent political events, flawed macro-economic policies or the all-consuming global energy crisis. The root cause of the great troubles brewing in our homeland runs much deeper in our history. Hence, it is essential to go back in time, introspect and learn from the failures.

After a discussion of some critical events from 1947 into the 1980s, this article reviews the political and economic decline since the 1990s, as well as the consequences of the policies whose seeds were sown during the early years of independence. What follows is a discussion of the experiences of some other developing countries, Pakistan’s immediate policy challenges, and thoughts about the way forward.

Current Situation

Pakistan, the world’s fifth-largest country by population and a nuclear-armed nation, is currently facing a multitude of political, economic, security, and societal crises. With a median age of 23 and one of the fastest urbanization rates, Pakistan is experiencing a slow-motion implosion that threatens its future stability and growth prospects. 

It may sound cynical but it seems that Pakistan’s top military and civilian leaders, and the wealthy would rather see the country go bankrupt than pay taxes on their real estate. No wonder the International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, had been compelled to say: “Pakistan needs to protect the poor and tax the wealthy while ensuring that subsidies are targeting those who really need them.”

These concerns have fallen on deaf ears. Pakistan’s misconceived energy policies have compounded its debt and fiscal issues, exacerbating the effects of the global energy crisis and climate change-related disasters, as seen in the floods of 2022. To avert a potential catastrophe, Pakistan needs to mobilize significant resources both internally and externally. However, an acute leadership crisis and public apathy provide little reason for optimism. 

To this end, Pakistan is facing anarchy, with state institutions at loggerheads and the democratic process all but dead, increasing uncertainty, according to respected journalist Zahid Hussain. The political turmoil has also caused schisms within the military, with some supporting former prime minister Imran Khan, while top brass has lost patience with his accusations. Pakistan’s governance has turned from rot to a gangrenous mess.

Amid such an untenable situation, how have people managed? Pakistan’s poorest 20% struggle to survive. According to a United Nations Development Program report, the “poorest 20% of Pakistanis fall in the low human development category, with a Human Development Index (HDI) value of just 0.419. This is below Ethiopia’s HDI value and comparable to that of Chad, which ranks 186th of 189 countries in the global HDI ranking.”.

The situation has been exacerbated due to the economic downturn. “People have stopped buying clothes, reduced their food intake and cut down on medical expenses,” says Dr. Ali Cheema, a professor of economics at the Lahore University of Management Sciences, quoting a study of a lower-middle-class neighborhood in Lahore. “But they are still protecting, as best as they can, their children’s education.” 

Large numbers of lower-income and middle-class Pakistanis are still able to make ends meet due to the generosity of their relatives abroad. In 2021, remittances from overseas Pakistanis accounted for 12.6% of the GDP, compared to 6.5% in Bangladesh and just 3% in India. It is not surprising, therefore, that 90% of Pakistan’s economy is driven by consumption and suffers from chronically low savings and investment levels.

Pakistan’s foreign and security policy mistakes have added another layer to the country’s ongoing crises. Trade with India would be beneficial for Pakistan but the issue is a political hot potato. Imran Khan’s attempts to play a leading role in the Muslim world antagonized Saudi Arabia, which was traditionally one of the largest sources of bilateral aid. Pakistan’s former army chief Javed Qamar Bajwa reportedly made secret overtures to the United States to reduce dependence on China, causing tension between the two nations.

On March 13, 2022, I tweeted:

“An economic tsunami will hit Pakistan in the coming months and no government will be able to face it as neither the establishment nor the political parties have the capacity or plan to manage it. I shudder to think of the consequences.”

The worst economic crisis in Pakistan’s history is now a topic of discussion everywhere in the country. Topics such as elite capture and the military’s domination have become part of mainstream debates. Media often turns to economists to seek answers and solutions as if it is just an economic crisis. It is very clearly not the case.

Pakistan’s current economic meltdown is a crisis of competence if judged in light of the recent past. But in the context of history, it represents a colossal failure of the army establishment’s long-term political, economic, and foreign policies.

Historical Context

Present-day Pakistan is an ahistorical society and an intellectual wasteland, as Ayesha Jalal – one of Pakistan’s top historians – described it. Most of today’s widely held views on Pakistani history are greatly distorted and starkly contrast with the realities of the past. Generations have grown up believing false narratives so much so that even many of Pakistan’s best-educated doctors, engineers, teachers, bankers, economists, generals, and politicians demonstrate little understanding of the historical context of Pakistan’s existential crises. 

It stands as pertinent, thus, to evaluate the decisions made in Pakistani history that led us to this position. That our state was birthed as an authoritarian security state, that we continued to persist in confusion about the role of religion in our nation, and that the military has continued to siphon rents for the last seventy five years all stand as parts of our history we must deeply scrutinize.

Pakistan is the only country in the world’s history that broke up after just 24 years of its creation because the majority of the population – around 55% in 1971 – decided to form an independent country. The creation of Bangladesh based on ethnic nationalism signified that religion alone was not enough to keep a country united.

Pakistan’s average GDP growth rate was 6.66% during the five years from 1963 to 1968. The GDP growth rate was 9.79% in the fiscal year 1969-70, the highest ever in the last 75 years. Within the next two and half years, neither the ‘record GDP growth’ nor the military or the famous tilt of President Richard Nixon towards Pakistan could save the country from dismemberment and a complete collapse. Why?

After independence, Pakistan’s rulers ignored or forgot what was among the critical reasons for Muhammad Ali Jinnah’s demand for Pakistan. Jinnah declared in 1938, even before the demand for the partition of India was made, that:

“Muslims have made it clear more than once that besides the question of religion, culture, language, and personal laws, there is another question of life and death for them and that their future destiny and fate are dependent upon their securing definitely their political rights, their due share in the national life, the Government and the administration of the country.”

 Even as all of India attained its independence, its Muslims feared that the majority Hindu populace would dominate the state – and a result of this would be their exclusion from governance and a future paved with suffering. Indeed, Shah Waliullah (1703-81), a Sufi scholar, wrote to the Afghan King, Ahmad Shah Abdali, imploring him to help Indian Muslims. The Sufi wrote:

“The Muslim community is in a pitiable condition. All control of the machinery of the government is in the hands of Hindus because they are the only people who are capable and industrious. Wealth and prosperity are concentrated in their hands, while the share of Muslims is nothing but poverty and misery.”

The Birth of an Authoritarian Security State: Pakistan in 1947

For most of its history, Pakistan has been governed as a centralized authoritarian state although it came into existence as a democratic federal state. 

Pakistan was a multi-ethnic, multi-lingual, multi-cultural and multi-faith state when it was born. It still is and will continue to be. Thus, it stands as regrettable that, instead of celebrating this diversity and respecting different cultures, ethnicities, languages, and faiths, Pakistani authorities – starting from its founding members – resorted to undemocratic means and unconstitutional acts to impose a unitary and monolithic system immediately after Pakistan was created.

Since 1947, Pakistan’s number one priority has been “security” in the narrowest sense of the term. It has not been economic development. If we understand the full implications of this, it would be easier to understand what went wrong. This is true regardless of who – civilians or generals – was in power. Therefore, there stands a critical question that merits deep discussion: is the political economy model of the security state, as practiced (and indeed, failed) by Pakistan a durable form of governance? 

A national priority of security began to influence the newly independent state, arguably, before even its common citizenry could. The first India-Pakistan War of 1947–1948 was fought over Kashmir. Following a Muslim revolt in the Poonch and Mirpur area of Kashmir, on October 22, 1947, a Lashkar of tribals from north-western Pakistan, some five thousand strong, led an incursion into the valley from Abbottabad. Even as the Indian army came to the rescue of Kashmir’s maharaja, the joint incursion of the Lashkars and regular troops enabled Pakistan to acquire roughly two-fifths of Kashmir which it established as Azad Kashmir. On October 30, 1947, Mir Laik Ali, a special emissary of Quaid-e-Azam, met with the US state department officials in Washington and requested American financial assistance.

The two events, the use of tribal Lashkars and the request for US financial assistance, took place within three months of Pakistan’s birth and were to cast a long shadow over Pakistan’s policies.

On September 7, 1947, Quaid-e-Azam told cabinet ministers that, “Pakistan is a democracy and communism does not flourish in the soil of Islam. It is clear therefore that our interests lie more with the two great democratic countries, namely the United Kingdom and the U.S. rather than with Russia.”

Balochistan, the largest Pakistani province by area, was forcibly annexed by Pakistani authorities after the ruler of the state of Kalat declared independence on August 15, 1947. Balochistan has been simmering with discontent and its youth have been seething with anger for decades since the first Baloch insurgency led by Shahbad Abdul Karim in 1948. 

Another unconstitutional act took place just days after partition. Jinnah dismissed the North West Frontier Province’s (later renamed Khyber Pakhtunkhwa) duly elected government of Dr. Khan Sahab on August 22, 1947. Pashtun leaders opposed and even clashed with the military-dominated federal government throughout Pakistan’s history. In recent history, many prominent Pashtun leaders have accused the military of supporting the Taliban to suppress Pashtun nationalists.

Sindhi leaders developed differences with the central leaders soon after the independence. The Sindh Assembly unanimously passed on February 2, 1948, a resolution opposing the “contemplated move of the Pakistan Government to remove the city of Karachi from the control of Sindh administration and place it under its own immediate jurisdiction as a centrally administered area.” Ayub Khuhro, the first elected chief minister of Sindh after the independence, was dismissed on April 26, 1948. Much to the chagrin of Sindh’s elected representatives and against their expressed wishes, Karachi was declared the capital of Pakistan by the Governor General’s order issued on July 23, 1948. 

During the February 1948 session of the Constituent Assembly, a Bengali member moved an amendment motion to include Bengali as one of the languages of the Assembly, arguing that the majority of the population of Pakistan spoke Bangla. Prime Minister Liaqat Ali Khan vehemently opposed the motion. On reaching Dhaka in March 1948, Quaid-e-Azam Mohammad Al Jinnah declared that only Urdu would be Pakistan’s official language, “If anyone tries to mislead you in this regard, he is Pakistan’s enemy.”

That too was hypocritical because it was English that continued to be the official language and that of the ruling elites. This sowed the seeds of the language movement in East Bengal leading to the killings of February 21, 1952. This day was commemorated as Martyrs Day in former East Pakistan and marked the beginning of the politics of Bengali nationalism within Pakistan. 

Contradictions in State-Religion Dynamics and Widening Disparities in Governance – 1947-1988

Pakistanis have long been tormented about the role of religion in their state. Pervasive double standards and bigotry have prevented honest public discourse about the place of religion in society and its relationship with the state. Pakistan has degenerated into a society where intellect is considered a handicap and hypocrisy a pinnacle of wisdom. The roots go back to the 1947-48 period in the context of post-independence history. Jinnah had declared in his address to the Constituent Assembly on August 11, 1947:

“We are starting with this fundamental principle: that we are all citizens, and equal citizens, of one State. The people of England in [the] course of time had to face the realities of the situation, and had to discharge the responsibilities and burdens placed upon them by the government of their country, and they went through that fire step by step. Today, you might say with justice that Roman Catholics and Protestants do not exist; what exists now is that every man is a citizen, an equal citizen of Great Britain, and they are all members of the Nation. Now I think we should keep that in front of us as our ideal, and you will find that in course of time Hindus would cease to be Hindus, and Muslims would cease to be Muslims, not in the religious sense, because that is the personal faith of each individual, but in the political sense as citizens of the State.”

However, in his October 30, 1947 speech at the University Stadium Lahore, Jinnah’s words contradicted not just the words but the essence of his message to the Constituent Assembly. He told the Lahore crowd:

“Take inspiration and guidance from the Holy Quran, the final victory will be ours [….] You have to develop the spirit of mujahids. All I require of you is that everyone … be prepared to sacrifice all, if necessary, in building Pakistan as a bulwark of Islam.”

From giving an example of Great Britain as a secular country, Jinnah went on to criticize the Western world in his address at the foundation ceremony of the State Bank of Pakistan on July 1, 1948:

“The Western world, in spite of its advantages, of mechanization and industrial efficiency is today in a worse mess than ever before in history. The adoption of Western economic theory and practice will not help us in achieving our goal of creating a happy and contented people.  We must work our destiny in our own way and present to the world an economic system based on the true Islamic concept of equality of manhood and social justice. We will thereby be fulfilling our mission as Muslims and giving to humanity the message of peace which alone can save it and secure the welfare, happiness, and prosperity of mankind.”

And this was how Pakistan came into the world – as a state of contradictions – dependent on Western financial assistance and a centralized security apparatus, while cherishing Islamic ideals and rejecting Western economic systems. This state was run by a military and civilian bureaucracy that had little representation from the majority province – East Pakistan. In April 1952, out of the 91 Federal government secretaries, joint and deputy secretaries, none belonged to Baluchistan; 40 were Punjabis, 33 Muhajirs, 5 Bengalis, 3 were Pashtuns and only 1 Sindhi.

In 1949-50, the level of per capita income in West Pakistan was only 10% higher than in East Pakistan. This disparity had risen to nearly 38% by 1969-70. This was despite the fact that the Eastern wing for years, through jute exports, earned more foreign exchange than the West.

Pakistan’s history remained bleak in this period. The Objectives Resolution and the military takeovers of 1958 and 1969 were to define Pakistan’s future course. 1971 is a tragic chapter by itself – over fifty years later, we are still in denial over the departure of a majority of the state. A lot has been written about the period from 1948 to 1971. I will just mention a few blunders. 

Post 1971, under Zulfikar Ali Bhutto’s democratic government, ordinary mortals arrogated to themselves the right to determine the relationship between God and an individual. They did so through the 2nd amendment in the constitution and declared Ahmadis as a minority, sowing the seeds of fanaticism and militant extremism that were to rock the country later. The army operation in Balochistan was Bhutto’s second major blunder. 

Ziaul Haq represented the worst of a fascist and bigoted mindset. The Afghan jihad was a complete fraud. Zia accepted weapons from Mossad, Israel’s intelligence, to send to Afghanistan, allegedly joking with the Israelis, “just don’t put any Stars of David on the boxes.” An American-backed military dictator armed various religious and ethnic groups, as part of divide and rule policy, and, in the process, tore apart the entire fabric of the society. 

As one of Pakistan’s most prominent political scientists, Ishtiaq Ahmed wrote, a feeling that the country is a “fortress of Islam” has been cultivated as part of national identity. Still, a visitor to Pakistan cannot but notice that ‘Islamist rhetoric has profoundly affected society, creating a mindset that is “violence-prone”. The country could never really recover from the wounds inflicted during Zia’s traumatic rule. Some economists analyzing Zia’s period using standard metrics miss this much bigger and crucial point.

By 1987-88, defense spending had overtaken development spending and averaged 6.5% of the GDP for the next several years. Development spending during Zia’s regime was curtailed to 3% of the GDP resulting in infrastructure bottlenecks and neglect of education and health.

Under Ziaul Haq’s military regime, Pakistan became one of the biggest hubs of narcotics and arms trafficking in the world. The state of Pakistan became a criminal enterprise as the government supported militant groups brutalized and criminalized politics and, in the process, did severe damage to the future of democracy and development in Pakistan. 

The Military-Elites Nexus and Rent Seeking: A Persistent Tradition Birthed in 1977

Another factor that aggravated these problems was opportunistic kleptocracy. Soon after independence, the Muslim League came to be dominated by a feudal aristocracy that had contributed little to the Pakistan movement. It was full of opportunists who jumped on the Muslim League bandwagon and had no vision for Pakistan’s future beyond empty rhetoric and exploitation of religion for political purposes.

A SECURITY STATE THRIVING ON ‘THREAT’

The focal point of the security state has been the threat – both real and exaggerated – from India and the stated need for a large standing Army and its need for military hardware and money. Development issues such as land reforms, the need to broaden the tax net, and develop export-oriented industries were put on the back burner. 

Ziaul Haq’s military regime, soon after the military coup of July 1977, repealed a law that had introduced agricultural income tax earlier that year. Years later, in 1996, the provincial assemblies reintroduced agricultural income tax but the implementation has been almost non-existent due to influence of the powerful landlords. The Shariat Appellate Bench of the Supreme Court declared land reforms (introduced in 1972 and 1977) in Pakistan as un-Islamic in 1989. 

A combination of aid, subsidized loans, protectionist trade policies, and a lax tax regime benefited the civil and military bureaucracy, inefficient industries, and tax-evading business magnets. This earned the military their support at the expense of the vital economic reforms that should have been undertaken to prepare Pakistan for the 21st century. 

While China, Korea, Taiwan, and the rest of East Asian countries adopted policies for exports-led growth, the trade regime in 1988 [at the end of Zia ul-Haq’s rule], according to a World Bank report, “still seems to be biased in favor of import-substituting production. Domestic markets are insulated from foreign competition through non-tariff barriers and high tariffs.”  

The average expenditure on education as a percentage of GNP was criminally low at 0.8% in the 1980s, while  General Zia and his corrupt fortune-making cronies boasted of defeating the Soviets. While the Afghan war, nuclear program, Islamization, non-party elections, ethnic and sectarian conflicts, and other such issues dominated the headlines, the real ‘political economy’ or the game was mostly about protecting the security state apparatus that provided the maximum benefits to key stakeholders, i.e., army, big business and landed elites.

In 1988, Pakistan’s nominal tariff rates (around 66%) for manufacturing industries were among the highest and Pakistan’s tax-to-GDP (13.6%) was among the lowest in the developing countries. These policies were instrumental in promoting the robber baron culture under what was a patronage-driven protectionist economy incapable of standing on its feet. In an increasingly competitive world market, Pakistan’s economy lost out. 

Major Consequences of Policies

The policies followed by the military-elites complex, with exploitation of religion as a key instrument, have caused great damage leading to a dysfunctional state, faltering growth, diminished international standing and, last but not the least, to the status of women in the society. Pakistan today suffers from an inner cancer. Let us review these issues.

The Status of Women

Women, who form about 48% of the population, are largely disenfranchised from decision-making at all levels. I have traveled to all continents but nowhere else (except in some parts of the Middle East and Afghanistan) have I come across such a male dominated society. 

“The typical “framing of women in Pakistani public discourse as daughters, sisters, wives and mothers implies that they are secondary — the supporting cast hovering around men, who are the central characters on our socio-political stage.”

Pakistani females have one of the lowest literacy levels in the developing world. According to the World Development Indicators, female adult (over 15 years of age) literacy rate in Pakistan is lower than even most African countries – e.g., lower than that Ghana and Congo – as shown in the chart. 

In 2018, only 10% of women in Pakistan used mobile internet compared to 31% of women in Kenya and 18% of women in Tanzania.

Growth Without Development

In a 2001 World Bank case study, William Easterly labeled Pakistan’s political economy as a paradox of growth without development. Even this growth has faltered during the last 25 years as compared to most of Asia. This begs the question: what went wrong?

There is little recognition in Pakistan that as globalization swept across the world after the fall of the Berlin Wall, countries like India, China, and Bangladesh seized the opportunities offered by trade liberalization and progressed, but Pakistan’s ruling elites continued to view the world through a Cold War mindset and thought foreign aid would continue to enable Pakistan to extract geo-strategic rents, if not from the U.S. then from China. 

What we are witnessing now is not due to some “policy missteps” in the last 10-15 years or so; it is the consequence of wrong policies pursued over decades. To attribute the current situation to a few decisions or politicians is a disservice to Pakistan’s public discourse on the fundamental reasons for the failures.

Diminished Geostrategic Importance

Pakistan’s recent efforts to resume the IMF’s 2019 program have involved the toughest negotiations in its history. The differences between China and Western economies over how to provide debt relief to developing countries in debt distress have also contributed to unprecedented delays to secure bailouts. 

Gone are the days when the United States would quietly use its influence to help Pakistan. Pakistan did approach the United States after failing to get concessions from the IMF but it did not help much. 

Pakistan’s diminished geostrategic importance has further complicated the situation. American interest in Pakistan since the end of the Cold War was episodic and transactional. America’s quest to dominate the Middle East and its rivalry with the former Soviet Union was largely driven by the need to ensure the uninterrupted flow of oil to America and its allies. The United States imported 20.3% of its oil from the Arabia Gulf countries as recently as 2012, a percentage that dropped to 8.2% in 2021. With the growth of non-fossil energy sources, the discovery of large oil and natural gas deposits outside the Persian Gulf, and increased domestic U.S. oil and natural gas production, the Middle East’s vast energy resources have become of declining strategic significance to the United States.

The Dysfunctional State

I wrote in 2012, in the preface of my book, Balkanization and Political Economy of Pakistan, that:

“The US failure in Afghanistan could result in a civil war in Afghanistan. Such an outcome is borne out of its apparent unwillingness to accept her failure or defeat and inability, for whatever reason, to arrive at a political settlement and prepare for an orderly transition according to a plan acceptable to all the major parties. These developments have far-reaching and grim implications for Pakistan’s future, but its ruling elites seem to be paralyzed by the traumatic experiences of the past decade. They hope to muddle through this period with the help of friends like China and Saudi Arabia. Historically, they treated Washington as the center of the world, India as their main rival, and accumulating wealth as the main goal. In the future, the US may not bail out Pakistan as it did during the Afghan war and the War on Terror. India sees China as a rival and merely considers Pakistan an irritant that has the potential to destabilize the whole area. The country has an acute leadership crisis and its fragile democracy – or, more accurately, a plutocracy – governs only in theory. The army still calls the shots but the state has never been so weak.”

Since 2012, a lot has changed in Pakistan, but for the worse. 

Pakistan’s army chief and his senior commanders still sit atop the real power structure. Decades of quasi-army rule, the ‘jihad against the Soviets, and the War of Terror saw an unchecked and extraordinary rise in the influence and power of the intelligence agencies who practically control Pakistan’s broken and predatory institutions, all while reporting to the army’s high command. Besides a rise in militancy, sectarian and ethnic extremism, and proliferation of arms, the use of militant and non-militant groups by the intelligence agencies has a less obvious and ominous dark side: the rapid growth of the ‘black economy” fueled by the rising power of property mafias and criminalization of the society. The rule of law, governance, and civilian institutions are the major casualties of this phenomenon. 

The Faltering Growth

We are going through more than an economic meltdown. We are witnessing the failure of the state at all levels. Hence, economists or technocrats who ignore or do not understand the background of this failure are unlikely to make a meaningful contribution to the conversations about Pakistan’s way forward, if any. To put Pakistan’s failure in the context of economic progress made by other developing countries, let’s look at a key indicator: growth in the real GDP per capita income during the 25 years between 1997 and 2021. 

During the 25 years from 1997 to 2021, the real per capita income of the developing countries in East Asia and the Pacific (excluding those of high-income countries like Japan and Australia) more than quadrupled and grew at an annual average of 6.2%. The Asia-Pacific region remained an attractive investment destination even during 2020 – when Covid19 hit the globe – accounting for 53.6% of global Foreign Direct Investments (FDI). East Asia and Southeast Asia were the largest recipients in the region, attracting roughly 80% of Asia’s inward FDI.

Developing countries in Latin America and Africa grew their per capita incomes at a much smaller rate of around 1 %. Latin America was a poor place in 1980. Its gross domestic product per person amounted to only 42% of that of the average citizen of the so-called Group of Seven rich nations that then ruled the roost. And last year, Latin America’s domestic product per person amounted to 29% of that of the G7 nations, according to Bloomberg. 

The economic output of the average citizen of Africa declined from 17% to 10% of that of the average citizen of the rich world over those 42 years, measured at purchasing power parity.

It is therefore not surprising that Latin American and African countries are among the largest borrowers from the IMF. In March 2023, twenty borrowers accounted for 82% of the total IMF lending of around $150 billion. The top 20 borrowers were in Latin America or Africa except for Ukraine, Pakistan, and Bangladesh. Pakistan is the fifth largest borrower. The last time India needed the IMF’s help was in 1991, Korea and the Philippines in 1998, and Indonesia in 2000. Is IMF the problem or Pakistan’s own policies?

In fact, outside East Asia and South Asia, progress has been poor. The South Asian real per capita income grew at an annual average of 4.1 % but Pakistan was the laggard with a growth rate of just 1.9%, a bit better than the averages of Latin America and Sub-Saharan Africa but much lower than that of Ethiopia.

This chart shows the dramatic rise in the per capita incomes (Purchasing Power Parity Terms) in Bangladesh and India compared to Pakistan whose per capita income was 60 % higher than Bangladesh’s and 47% higher than India’s in 1997. Just in 13 years, that is in 2010, Pakistan’s per capita turned lower than that of India and the gap with Bangladesh was reduced to just 20 % from 60% in 1997. In 2021, Pakistan’s real per capita income was 11.5% lower than that of Bangladesh and 21 % lower than that of India. During the 25 years, Pakistan’s GDP growth lagged behind its two neighbors by more than 2.5 percentage points per year. This is not a small difference because it has a huge impact over the long term on the overall size of the economy and standard of living. 

As shown in the table, Pakistan has experienced a higher population growth rate, but the decline in its real per capita income relative to other countries is largely due to its slower economic growth rate, measured in purchasing power parity (PPP) terms. The population growth rates peaked in the 1980s at around 3.5%. However, Pakistan’s population annual growth rate shows a declining trend over the past 25 years, as reflected in the decline of the 5-year average from 2.7% during 2000-2004 to 1.6% during 2017-2021.

Even if Pakistan’s population had grown at the same rate as that of Bangladesh, its GDP per capita would have been only 3.9 % higher ($5,438) than it was in 2021 ($5,232) but still lower than Bangladesh’s $5,911.  

China’s one child policy was not what brought down China’s fertility rate as is commonly believed. Stefan Dercon, professor of economic policy at the University of Oxford, maintains (Gambling On Development, 2020) that “China’s fertility rate fell in response to better health and education and greater access to it – in short, broader development.”

The Human Development Index (HDI) developed by Pakistani economist Mahbub ul Haq is a summary measure of average achievement in key dimensions of human development, such as a long and healthy life, knowledge, and a decent standard of living. According to a UNDP report, only Pakistan (161st position) and Afghanistan (180th position) are in the low human development category among South Asian countries, while Bhutan (127), Bangladesh (129), India (132), and Nepal (143) are in the medium human development category.

While a higher population growth rate is a significant concern, it is the widening gap between Pakistan’s economic growth rate and that of the rest of developing Asia that poses the greatest challenge to the state, military, politicians, and the people of Pakistan. Can we transform a national security-focused (often a client) and inward-looking state with a hugely young but relatively unskilled population into a growth economy that can compete internationally?

The Inner Cancer 

In an article published by Karachi’s Newsline magazine in May 1992, I wrote:

“Now faced with the fundamental changes in power structures, political parties have two choices: either they play the role of junior partners or give a new and original program to the masses. This is a historic opportunity. Will Pakistan become a battleground for xenophobic ethnicism, religious fundamentalism, and eco-medievalism or will the secular and democratic forces be able to prevent the explosion this combustible convergence of forces may cause if not in 1992 then perhaps in 2001.”

Ayub Khan believed that Pakistan had, indeed, the same traditions as Prussia. The cancer of militarism spread in Pakistan, from the “we are like the Prussians” complex of General Ayub, to the insatiable appetite for the army budget (to which all civilian prime ministers also pandered), to the equally insatiable appetite of the military hierarchy for sheer power for the sake of power; first the appetite of the top generals for political power and later the appetite of the colonels and majors for administrative power in every detail all the way down from state-owned corporations to local authority.

Zulfikar Ali Bhutto made many mistakes but he was one of the most brilliant statesmen of his times, if not the most intelligent as Henry Kissinger once described him. The establishment must pay attention to what Bhutto wrote in his book,” If I am Assassinated.” 

“Engulfed by the revolutions of Europe, the Prussian Junkers expanded their standing army. In due course, the Prussian Army had expanded beyond the resources of Prussia. It was evident that the size and capacity of Prussia would not be able to bear the burden for long. The situation became so untenable, that it was said: “Prussia is an army with a country and not a country with an army.”

The Prussia Junkers were well aware of the consequences. Three choices stood before them. Either:

(a) Prussia had to expand to become the pivot of the German fatherland; or

(b) The large standing army had to be reduced; or

(c) Prussia would collapse under the weight of the large standing army.”

Pakistan is sinking under the weight of its once omnipotent and omnipresent military complex. It has run the country like a centralized state: from hand-picking prime ministers to manipulating elections, from starting wars to conducting covert cross border operations, from rewriting the constitution to dictating judges, from running large businesses to directing local governments, and so on. 

Is there a Way Forward?

The establishment has toyed with the idea of bringing in ‘technocrats’ to fix what it perceives to be just an economic crisis. Economic commentators generally describe Pakistan’s troubles in terms of its chronic twin deficits: recurring current account deficits and fiscal deficits. Pakistan’s number one issue is the intellectual bankruptcy and short-sightedness of its military, political, business, and land-owning elites. The intellectual crisis has been exacerbated due to systemic suppression of freedoms, abysmal quality of education, and steady brain drain over the decades. 

One of the biggest problems in Pakistan is the misguided policies that are sometimes produced under the influence of a toxic combination of ignorance and arrogance, leading to unintended consequences. One such example is Afghanistan. Despite supporting the Taliban for almost two decades, celebrating their return to power in August 2021 as an instance of “breaking the chains of slavery”, in former prime minister Imran Khan’s words, Pakistan now finds itself diplomatically isolated internationally, with little leverage even with Afghanistan and has been unable to stop terrorist attacks from militants based in Afghanistan.

Corruption is another issue in Pakistan, but it needs to be viewed in a wider context. The public discourse in Pakistan tends to oversimplify issues. “Remove corruption and everything will be fine” is a common refrain. High post-1990 rates of GDP growth in China have been clearly compatible with high levels of corruption. Transparency International (2017) puts China, with a score of 40, in the 79^th place among 176 compared countries. Other East Asian countries with a relatively high incidence of corruption (Japan, South Korea, Taiwan) have also experienced high growth rates. In 2021, India was put in the 80^th place among 180 compared countries but Pakistan was 140^th. 

The corruption mantra has also been used to divert attention from far more bigger issues and what may be described as legal and institutionalized corruption.

Pakistan’s military spending is among the top ten globally, in terms of percentage of the GDP. Its tax-to-GDP ratio of around 9% is among the lowest in the world. It has to borrow more every year because there is no money left in the budget to spend on development after servicing debts and military spending. 

According to a United Nations Development Program (UNDP) report, the military establishment owns the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects. 

Some political activists call Pakistan “plotistan” alluding to the fact that buying and selling plots of land is the most lucrative business in Pakistan due to an extremely favorable tax regime that has the support of the military establishment. No wonder that around 80% of household wealth is concentrated in the property sector.   

Is there a Growth Model?

A country with over 230 million people cannot be governed at the whims of a few men in uniform. Some provide the example of China in support of their case for an authoritarian rule. The ideological debate in Pakistan, if there is one, tends to oversimplify the issues with liberal use of the jargons such as democracy and dictatorship, neo-liberalism and socialism.

Capitalism played a critical role in making America the richest and most powerful country in the world. Admittedly, there is not just one market model. There are striking differences between the Japanese version of the market system and the German, Swedish, and American versions.

China and South Korea chose the path of state-directed growth despite the differences in their political systems. It is wise to remember the reasoning – associated with among others, the Indian Nobel Prize-winning economist Amartya Sen – that the question of whether democracy encourages or retards development is part of a false distinction. Democracy and institutional development are part of the development and so are not to be judged as drivers of it. 

Historically, Japan followed a slow but steady course toward a democratic culture and initiated Asia’s first modernization program. South Korea and Taiwan followed an authoritarian route for decades after the Second World War before moving towards democratization in the 1980s. China has been a one-party state but so has North Korea. Hence, it is difficult to argue whether democracy or authoritarianism alone can explain Japan’s remarkable success or China’s miracle. 

Some Pakistani intellectuals like Hamza Alvi attributed Pakistan’s problems to an “overdeveloped state” – a legacy it has inherited from the colonial-era government. However, this is true for many countries including South Korea, Taiwan, and Singapore. Perhaps, even that theory does not offer a sufficient explanation of why Pakistan could not evolve as a tenable state and failed to develop.

How Asia Works: Success and Failure in the World’s Most Dynamic Region, written by Joe Studwell, is structured around the argument that the key to economic success in Northeast Asia has been a combination of land reform, export-oriented industrialization, and strategic state intervention in the economy, while the key to failure in Southeast Asia has been the failure to implement land reform, the reliance on commodity exports, and the absence of effective state intervention. 

Studwell makes valid points notwithstanding the criticism of the book that it oversimplifies the factors that drive economic development, ignoring the role of cultural factors, geopolitical considerations, and global economic trends in shaping the economic trajectories of different countries. For example, the book’s narrow focus on state intervention as the key driver of economic growth fails to account for the role of private enterprise and entrepreneurship in fostering innovation and competitiveness, such as in South Korea, which produced global brands such as Samsung and Hyundai. 

Ha-Joon Chang, a Korean economist at Cambridge University, is a leading advocate of state-led development but even he accepts that “both democracy and markets are fundamental building blocks but we need to balance them.”

A globally-renowned economist William Easterly, who worked for the World Bank for sixteen years, maintains that global poverty has largely been viewed as a technical problem that merely requires the right “expert” solutions. According to him, experts recommend solutions that fix immediate problems without addressing the political oppression that created the problems in the first place. They address the symptoms of poverty but ignore the true cause: the absence of political and economic rights.

Yuen Yuen Ang, a leading expert on China, maintains that there is no one-size-fits-all right model for development. Particular solutions for market promotion vary over the course of development, within countries, and even within the locales of a single country.

Joseph Stiglitz has been a fierce critic of global financial institutions such as the IMF. However, he maintains that abandoning globalization is neither feasible nor desirable. ‘Globalization has also brought huge benefits –East Asia’s success was based on globalization, especially on the opportunities for trade, and increased access to markets and technology.” Stiglitz believes that the problem is not with globalization, but with how it has been managed.

It has also become more challenging to simply copy the manufacturing-led export growth models from the 1980s due to an array of issues. There exists an international rules-based order which makes it difficult to erect high tariff barriers. Moreover, automation in manufacturing coupled with the rise of artificial intelligence, anti-globalization trends and Pakistan’s relatively uneducated and low skilled workforce all stand as obstacles towards such a strategy.

Dercon, one of the world’s leading development economists, argues that the answer lies not in a specific set of policies, but rather in a key ‘development bargain’, whereby a country’s elites shift from protecting their own positions to gambling on a growth-based future. Despite the imperfections of such bargains, China is among the most striking success stories.

Throughout the Chinese Cultural Revolution, political ideology took priority over the economy. After Mao’s death in 1976, an internal power struggle ensued between Mao’s supporters and those who thought that the dominance of the political ideology posed an existential threat to the party and the state. In 1978, Deng Xiaoping emerged as the architect of the reforms that put economic development as the top state priority.

China’s success was especially remarkable because in the two decades prior to 1979 growth in per capita terms had been 2.8% a year (still higher than Pakistan’s recent 25 years average), in contrast to the 8.5% a year in the subsequent four decades. 

China started with what were fundamentally governance reforms. That was still state-led development, but the Chinese state had to change fundamentally how it governed the economy. Initially, the economic structure was not changed; what changed was who could make decisions. 

The vehicle for change in the early stages of development in China, Japan, South Korea, and Taiwan was a series of land reform programs that involved distributing land and empowering the farmers. In general, the traditional landlord-tenant relationship was abolished, and a new class of self-employed farmers emerged as an outcome of the land reforms process. 

Both China and Vietnam have been ruled by strong and well-organized communist parties.  China had built powerful public administration structures over a very long period of its history. However, even in China, some of the biggest companies (like Tencent and Alibaba) are privately owned. 

Both China and Vietnam opened the doors to foreign private investors and benefited. In 2020, China overtook the U.S. as the world’s top destination for new foreign direct investment. In 2020, Vietnam was among the 20 top countries in the world in terms of FDI attraction with US$28.53 billion. The figure rose to US$31.15 billion in 2021, which stood at US$27.72 billion in 2022. In Vietnam, the average GDP generated in the FDI sector makes up 19.8% of the GDP of the whole economy. It employs nearly 5 million laborers and produces 42% of the total profit of the business sector. 

In Indonesia, rulers and elites have had tendencies like what we see in Pakistan. Indonesia is the largest country in Southeast Asia; whether you look at it by the size of its economy, population, or sheer landmass. It’s a very far-flung country made up of some 17,000 islands and is home to the world’s largest Muslim population and fourth largest overall. Indonesia’s economy relies heavily on exporting commodities, such as palm oil, coal, and nickel. Indonesia has come a long way from 1998 when its economy contracted by 13 %. Despite its population growth rate of 1.2%, its real GDP per capita grew at 3.8% per annum (twice that of Pakistan) during the past 20 years.

Indonesia did not have a strong and competent state, like China’s, that could align itself easily to act in a determined, persistent way to drive growth and development. After the removal of Indonesia’s military dictator General Suharto’s family from power in 1997, Indonesia gradually moved to a more accountable democratic system. There was too much contestation, and too many different interests at play in Indonesia. So, to achieve success, the state had to withdraw from regulating the economy too rigidly, opening up and letting market forces play a bigger role. Following the fall of Suharto in 1997, governance structures underwent sweeping reforms, with four constitutional amendments revamping the executive, legislative, and judicial branches. Chief among them is the delegation of power and authority to its 38 provinces.

While governance reforms incorporating deregulation of decision making, agriculture reforms, infrastructure, export orientation, and urban growth are useful ingredients for growth in any country, we should be careful before jumping to the conclusion that a state-led development would always work elsewhere by just copying what China or Vietnam did. Ultimately, any growth strategies that Pakistan adopts should balance democracy, markets, and state-led development in a broader international context to achieve long-term economic prosperity and development.

CONCLUSION

I would like to emphasize that there is no silver bullet that can solve Pakistan’s crisis. I wish it were as simple as some or many would like to believe. The challenges are formidable but not insurmountable. This section, while acutely conscious of this reality, provides a comparison with some other countries that faced far worse situations. It also notes the need to address some of the issues on a priority basis. I don’t pretend that they will solve all the problems but given the gravity of the crises, prioritization of immediate policy initiatives is warranted as a practical matter. 

Pakistan’s political leaders agree that political stability is necessary to move forward, and that the military’s interference in politics is the principal reason for Pakistan’s failure to evolve as a functioning democracy. However, the distinction between the military and civilian politicians is partly false. Every major political leader in Pakistan has been willing to cooperate with the military for the sake of getting into power. Since the political leaders view the military, not their voters, as the source of power, they pay little attention to improving governance and reform. 

The military establishment has demonized, and has criminalized politics to a degree that, save for incompetent and corrupt individuals or creations of the establishment, few wish to participate in. The people yearn for change, but Pakistani military and political leaders seem to excel in only one game: the pursuit of power. 

Good governance and inclusive institutions have become popular buzzwords following the publication of the influential book Why Nations Fail authored by Daron Acemoglu and James Robinson. However, Oxford’s Stefan Dercon has termed it as a “deeply pessimistic agenda for change or how change may be supported if history is to blame: countries appear to be told to ‘buy yourself a better history’.”

China, South Korea, Taiwan and more recently Indonesia and Bangladesh did not have inclusive political and economic institutions when they started their reform programs. Korea was widely criticized for promoting ‘crony capitalism’ of Chaebols. China, after the destruction wreaked by the cultural revolution, hardly had strong institutions to deliver the kind of take-off it achieved post-1979. 

Bangladesh with its volatile, violent, and corrupt politics was once described by a U.S. diplomat as a basket case – a phrase later popularized by Henry Kissinger – still, it survived and moved ahead, its current difficulties notwithstanding. In Bangladesh, infant mortality is 26 deaths in 1,000 live births, lower than the 28 in India. Female literacy is 72%, higher than India’s at 66%. The female rate of labor force participation is 36%, compared to 20% for India. 

Areas of Immediate Policy Initiatives

A practical implication of Pakistan’s vulnerabilities is that its economic, political, defense and foreign policy issues have become entangled and complex. That we must rid ourselves of the current elite bargain and shift to a development bargain is critical, such that we are able to adequately respond to growing priorities of our state in the horizon. 

These priorities are as follows: external debt restructuring, energy security, food security, and technology and education. Concurrently, we need to take urgent measures to build capacity of the government institutions, because without it, no policy implementation would have a reasonable chance of success, no matter how good it might look on paper.

Debt

The topmost priority for Pakistan and its foreign policy should be to persuade China, the IMF and the Paris Club of creditors to start debt-restructuring negotiations. There is no way Pakistan can hope to meet its external debt obligations of around $75 billion during the next three years, so reprofiling or restructuring its external debt is essential. Any further delay in starting this process will only aggravate the country’s economic problems – by then, even the IMF bailout and some more loans from friendly countries will not be enough.

China is Pakistan’s largest bilateral creditor with about $30bn in total debt, which represents around 30 per cent of the country’s total external official debt. In addition, Pakistan owes $1.1bn to Chinese Independent Power Plants (IPPs) for electricity purchases. Last December, the Pakistani government agreed to repay this debt in installments. But this is likely to have displeased the IMF, which in August 2022 expected the government to renegotiate its power purchase agreements. Pakistan tried to renegotiate but China refused.

Pakistan is squeezed between IMF demands and Chinese interests. Rescheduling debts will provide some relief, but who will bite the bullet first? China or the international financial institutions that are owed $41bn?

Energy

No sector of the economy is more important at the current juncture than power generation and distribution. The price of electricity feeds into everything, and the escalating cost has a crippling effect on ordinary lives and all economic activity.

Pakistan’s energy sector is particularly vulnerable to exogenous shocks and rising input costs due to the country’s reliance on imported fossil fuels. In 2021-22, about 61% of the power came from fossil fuels, 24% from hydro, 12% from nuclear, and a pittance — 3% — from renewable energy such as wind, solar and biomass. In 2022, U.K. renewables provided 38% of the country’s electricity generation. Coal remained the most important energy source for electricity generation in Germany in 2022. Around one-third of the electricity generated in Germany came from coal-fired power plants, but wind power was the second most important energy source in Germany last year with a share of 24.1%. 

Pakistan faced a massive energy crisis even before the floods, as its energy import costs skyrocketed due to soaring global commodity prices. Islamabad paid $4.9 billion for its LNG import bill alone for the year ending June 2022. 

Pakistan’s flawed energy policies lie at the core of the recent economic crises and rising circular debt. According to Kamal Munir, pro vice chancellor of the University of Cambridge, the World Bank, IMF and many advisers to the government have been at the forefront of creating the myth which suggests that the energy crisis is essentially a product of user subsidies, stealing of electricity and distribution losses. The reality is that, rather than users, it is the producers who are being generously subsidized and that is where the government will have to intervene if they wish to ever reverse the rot. Dogma is not healthy, be it of leftists or that of market fundamentalists. The latter would do well to remember that even in South Korea and Singapore, electricity generation and distribution is largely under control of state-owned entities. The reason is simple: energy security.

Pakistan may need to take extraordinary steps to find a sustainable solution to the energy crisis. I do not see a sustainable resolution without a major state intervention aimed at taking over the private power generation by buying the equity at market prices and replacing the foreign currency debt with local currency debt. This may entail negotiations with China at the highest levels of the government.  Besides restructuring of the existing power sector, investment in solar, wind, hydro, and nuclear energy sources will be needed. Pakistan’s fiscal policies are anti-investment because they directly or indirectly encourage investment in low productive areas such as property. It is difficult to attract investment in productive sectors unless these policies are radically changed. If they are not, Pakistan is doomed to sink deeper into the quagmire of debt. 

The privatization mantra for fixing the woes of the power distribution sector is common but suffers from a major conceptual flaw. It is hard to find private sector investors with deep pockets who have the resources to invest in the distribution sector, which would require large investments. It would be more practical to ask the provinces to accept the responsibility of power distribution and fund, at least in part, the distribution companies through better collection and provincial resources. The governance of regional power companies should involve private sector capital and expertise through listing them on stock exchanges as South Korea has done.  

Climate Change and Food Security

Weather events are increasingly occurring with greater frequency and severity in temperate and tropical regions. The extreme weather in the region has made all major and minor crops extremely vulnerable to climate change.

An average Pakistani household spends 50.8% of monthly income on food. This makes them particularly vulnerable to shocks, including high food prices. With food inflation running at the annual rate of over 40%, food security is of utmost relevance to most Pakistanis. A national nutrition survey 2018 showed that 36.9% of the population faces food insecurity. Primarily, this is due to limited economic access by the poorest and most vulnerable group of the population – particularly women – to an adequate and diverse diet.

On the other hand, crop agriculture productivity in Pakistan has declined over the last 25 years at an average annual rate of –1.15% while its population has been increasing at the rate of around 1.8% per year. 

Food security is also linked to energy security. Vaclav Smil is one of the world’s top environmental scientists and was named by Foreign Policy magazine to its list of Top 100 Global Thinkers. He believes that “for decades it will be impossible to adequately feed the planet without using fossil fuels as sources of energy and raw materials.”

Hence, ensuring long term supply of natural gas must be a cornerstone of energy and food security policies. Iran is the second biggest supplier of natural gas to Turkey after Russia. Pakistan needs to attach the highest importance to securing natural gas from Iran and should make it a top foreign policy priority to seek sanction waivers from the United States.

Education and Technology

Why must education and technology be the top most national priority both in the immediate future as well as in the long term? We can look onto the rest of the world for answers.

Between 1909 and 1949, when the U.S. economy doubled its gross output per hours of work, 88% of that increase was attributed to technological advances by Robert Solow, a Nobel Laureate and a Professor of Economics at the Massachusetts Institute of Technology. Furthermore, Edward Fulton Denison, a distinguished American economist, came up with the following allocation for U.S. economic growth between 1929 and 1982: 52% due to advances in knowledge, 16% due to improved resource allocation (labor shift farming to industry) and 18% due to economies of scale.

On the other hand, India’s homegrown instant payment system has remade commerce and pulled millions into the formal economy. The scan-and-pay system is one pillar of what has been described as the country’s “digital public infrastructure,” with a foundation laid by the government. It has made daily life more convenient, expanded banking services like credit and savings to millions more Indians, and extended the reach of government programs and tax collection. The use of technology cannot be expanded at mass scale without increasing literacy levels.

Once one of the poorest countries following the Korean War in the 1950s, South Korea rebuilt its economy from scratch. With barely any natural resources available, the only asset that Korea has had to rely on is its people, who have acted as a cornerstone of the extraordinary economic growth known as the Miracle on the Han River. The country’s number one focus was to elevate education, and within just 10 years following the Korean War, illiteracy plummeted from 78% to 4%. Education played a similar role in Taiwan. By the late 1980s, vocational training (mostly focused on manufacturing) constituted 55% of tertiary education in Taiwan, while less than 10% of students took humanities subjects.

With regard to education, the Covid-19 pandemic has accelerated a global digital and data-driven transformation, with digital technologies now being leveraged for work, leisure, and learning. Digital literacy has become almost as important as traditional literacy. Bangladesh is reaping the benefits of a higher literacy rate and reducing gender-based discrimination. Bangladesh is the second largest source of online workers, according to a study by the Oxford Internet Institute (OII), a multidisciplinary research and teaching wing of the University of Oxford. The result of the study put Bangladesh just below India and on top of the United States. India, the largest overall supplier of online laborers provides 24% of the total global online workers followed by Bangladesh with 16% percent and the US with 12%.

Additionally in Bangladesh, the UNDP’s Aspire to Innovate (a2i) initiative is providing training on digital literacy to thousands of female entrepreneurs, and through their teacher’s portal, more than 200,000 female teachers now have access to high-quality online educational materials. 

In comparison, Pakistan greatly contrasts with other actors when it comes to education. Vietnam spent 4.9% of its GDP on education in 2011-20 according to the National Institute of Educational Sciences. As a % of GDP, it is more than 3 times that of Pakistan. Average years of schooling in Pakistan is 5.2 vs 10.4 in Malaysia which spends 4% of GDP on education. A private sector solution even in urban areas will not work. It has not worked even in Kuala Lumpur or Singapore. Except for a few institutions, Pakistan’s education system is a disaster. Four out of five children in Pakistan cannot read by age 10. According to one academic – Dr. Ayesha Razzaque – “we are witnessing the gradual breakdown in internal and external governance of universities.” 

Pakistan must use technology to reduce adult illiteracy and revolutionize the primary and high school education system. It must launch this effort on a war footing to achieve a 90% literacy rate within 10 years. Pakistan’s total spending (federal and provincial) on education is 1.4% of its GDP, compared to India’s 2.9%, and an average of 4% of the GDP in South Asia, Africa, and Latin America and around 3.5%-4% in the developing countries of Southeast Asia. 

Following the adoption of 18^th amendment in the constitution in 2010 provincial governments have increased their education budgets but have failed to mobilize resources and increase revenues. Provincial and local governments must raise revenues by (a) increasing tax collections from agriculture sector and (b) imposing taxes on property. The federal government should eliminate tax exemptions to the rich and divert a portion of revenues, as raised, directly to the local governments. Tax reform must include proper taxation of and its collection from the real estate sector; a reform that has been avoided by all governments and the military’s top brass. This is one of the biggest distortions in the economy and must be removed.

Education boards at divisional level should have the primary responsibility for managing primary and high schools. The transition to a new system would have to be gradual but this should be ensured through legislation, if necessary. These boards should have representation from district administration, teachers, and parents. 

The recruitment of teachers should be decentralized with responsibility transferred to the divisional boards. However, all teachers should be required to sit for a common exam to test if they meet minimum standards. The federal and provincial governments should set up an independent body with the exclusive task of conducting these exams. 

To meet this ambitious goal of reducing literacy, teachers will need to be trained at a mass scale and the existing teachers will need to upgrade their skills given the abysmal quality of education. Pakistan should enter strategic partnerships with countries like South Korea, Japan, Singapore, and Australia and seek assistance. 

A word on our curriculum: Pakistan’s current system is designed to serve the upper and upper middle-income classes. Their children normally take O and A levels exams and can apply to foreign universities. The rest are condemned to live as second-rate citizens. This wall built around protecting class interests must be brought down. The class issue has been clouded by the debate on the instruction in mother tongue. This is not such a complex issue. One just must visit Dalian province in China or state-run schools in Singapore to understand why. They teach both English and mother tongue. Given the information explosion in the new digital world, children without good English language proficiency will be at a disadvantage, perhaps forever. If we want to have an egalitarian system, no child should suffer from such a disadvantage. The provincial and the local governments will have to take the lead if Pakistan is to win the war against illiteracy with an explicit goal of achieving 90% literacy rate within 10 years. 

Capacity Building

Decades of mismanagement, political manipulation and corruption have rendered Pakistan’s civil service incapable of providing effective governance and basic public services. The country’s civil servants are widely seen as unresponsive and corrupt, and bureaucratic procedures cumbersome and exploitative. The military has done little to build or improve capacity, regardless of their intentions. Whatever the motives, Pakistan’s wealthy never bothered about institutional capacity because they operated through informal power networks linked by social, family, and economic connections. In the process, the institutional capacity has steadily hollowed out over decades. 

Ruling elites everywhere want to dominate the system and extract benefits – but enlightened elites, for example in many Asian countries, have also been wise to invest in people. Pakistan’s ruling elites have proven to be notoriously short-sighted and, in the pursuit of short-term gains, have hurt their own long-term interests. Pakistan has become a very difficult country to govern.

The iconic Chinese leader Deng Xiaoping while visiting Shenzhen in 1992 made the widely cited statement that “Singapore’s social order is rather good. Its leaders exercise strict management. We should learn from their experience, and we should do a better job than they do.” Since then, over 55,000 Chinese officials  have been sent to Singapore on almost a monthly basis to receive training about good governance. Only a great leader like Deng could be so humble and wise as to request a tiny country like Singapore to train Chinese bureaucrats.

Local institutes in Singapore exemplified by Nanyang Technological University (NTU), National University of Singapore, and the Civil Service College have been extensively involved in this knowledge transfer process by providing customized education programs for Chinese officials, covering subjects ranging from economic development, public administration, housing and grassroots politics to urban planning and anti-corruption. As the then Vice President Xi Jinping highlighted in 2011, “Tens of thousands of Chinese officials at various ranks have been to Singapore for visiting and studying,” and “this has played an important role in promoting bilateral relations and China’s construction for modernization”.

Can Pakistani leaders show even the tiniest bit of humility and far-sightedness compared to that of Deng Xiaoping who demonstrated it by asking Singapore to train Chinese civil servants? 

The key lesson from the success stories in Asia is sobering and simple: 

It is the people, stupid. Invest in people and empower them, especially women.

The advice about educating and investing in people may disappoint those who are looking for a grand plan or a charter of economy. But the fact is stark: the citizens have to come forward. However, for a movement to succeed in Pakistan’s current conditions, it must and has to involve, mobilize and relate to the masses and not just the educated few. It is therefore the need of the hour that citizens, males and females, and especially the young, introspect about Pakistan’s failures since its independence, shun conspiracy theories and dogma, stop waiting for a messiah, and take charge of their destiny. They must force the ruling elites to strike a development bargain that makes economic development the number one national priority and makes achieving 90 percent literacy rate within 10 years as the most important goal. This can be done through the use of technology and knowledge transfer from countries like Singapore, who can help with training of both civil servants and teachers.

Until and unless a movement emerges that represents the people’s aspirations to create a genuinely democratic state that works for the people and not just for the ruling elites, Pakistan’s chances of survival in its current state are slim in the context of history. 75 years may be history in the context of our times but in the context of history, it is just a heartbeat. 

Shall Pakistanis rise to the challenge posed by the current crises, or they would let the opportunity pass? It will depend on the collective will and effort of the people and those sensible among the ruling elites whether Pakistan would end up like Afghanistan, Iran, or North Korea or whether it can make progress like South Korea, Indonesia, or Malaysia have. These nations rebuilt their countries from the ruins of armed conflicts and civil wars that they experienced during and after the colonial era. Can Pakistanis do that? 

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Yousuf Nazar

The writer is former Citigroup Head of Emerging Market Investments, author and columnist. He worked with Benazir Bhutto during the Movement for the Restoration of Democracy during 1977-81 as a student union leader.

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