Oh God, Kursed... is there no rest for the weary? I haven't slept in two days... one of the myriad joys associated with the gentle pursuit of knowledge that takes place at the end of every academic year. And know this... my response, for now, will be short. I promise I'll come back to it once I've gotten some rest.
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Originally Posted by KuRsEd
MD, why don't you see the honest intentions that Gen. Musharraf brought along with him? The country in the days of Nawaz Sharif, was already at the brink of going bankrupt, how could they possibly attract more business from the outside world? We were about to go default on our loan payments, and that would have made life hell for the people of Pakistan. Gen. Musharraf changed that for us, even during his tenure between 1999 and 2001. Did he not?
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There were a number of factors that contributed to the economic stagnation that occurred during the 1990s. None of those factors were new or unexpected and, in my opinion, are still endemic to the Pakistani economy. For instance, Pakistan's tremendous reliance on the export of primary products, and its lack of a manufacturing base capable of producing high-value goods, are both as present today as they were during the 1990s.
What's changed? How does one explain growth under Musharraf? Well, we should not forget that 9/11 changed everything for the Musharraf regime. In fact, during 2000 and 2001, growth rates under Musharraf were actually lower than they had been in 1998 and 1999. Don't believe me? Check out the data
here and
here. By supporting the War on Terror, the Musharaf government benefitted tremendously from a windfall of US aid and increased standing in the international community. A good article on the factors contributing to Pakistan's economic 'miracle' under Musharraf can be found
here.
I realise I'm simplifying the dynamics of economic growth post-2001. I also agree with any of you who believe that GDP growth rates are not sufficient indicators of economic strength. Inflation, for instance, was high in the 1990s, as was unemployment. Poverty reduction was also a very low priority.
My argument, however, is this: the only thing the Musharraf government can point towards is higher macroeconomic growth rates i.e. GDP growth. Has there been a substantial decrease in poverty? Not according to the data. Inflation? Still high. Health and education? Still at less than 2.5% of the GDP. Balance of Payments? Worsening. Fiscal deficit? Widening. Debt repayment? Musharraf actually took billions of dollars in aid and, if you look at the data, a lot of the 'rescheduled' debt is due to be repaid now. To see just how screwed Pakistan is due to its increasing debt servicing liabilities, courtesy of Musharraf and co., check
this article out.
After the 1997 nuclear tests, Pakistan was placed under stringent sanctions. Some had been lifted by 1999 but the fact of the matter is that until Musharraf started helping out the US in 2001, he had screwed things up as badly as Nawaz Sharif. The 'reversal' we have seen in the last eight years is not fundamentally different from what happened under Zia, another general who was a beneficiary of the USA's benevolence.
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Originally Posted by KuRsEd
And while yes, Mobilink was set-up before Gen. Musharraf, the real boom in the telecom sector and it's expansion came after the declaration of his telecom policies. Before that, Mobilink was the sole GSM cellular service provider in Pakistan, now we've 5.
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When you're an international pariah thanks to some ill-advised nuclear tests, noone is going to invest in you. Musharraf was such a pariah in 1999 and remained so until 2001. Supporting the US' War on Terror was something any government would have done, and they all would have benefitted from the windfall. Had 9/11 not happened, there is nothing to suggest that the Musharraf government was executing some kind of amazing economic turnaround. If anything, if the data is anything to go by, things were getting worse. I always feel its important to point out how bad things were from 1999-2001. It illustrates nicely just how lucky the Musharraf regime got with 9/11.
As for its 'telecom' policies. All the government did was open up the Pakistani market at a time when Telecom was taking off around the world. It wasn't just a boom in Pakistan... the telecom boom was a global phenomenon, and pretty much every country on earth experienced a tremendous amount of growth in this sector as the technology became more widespread and affordable. That's why I said, in my earlier post, that the spread of mobile technology is not something that would have leapfrogged Pakistan had Musharraf not been around.
Finally, the market liberalisation policies that the Musharraf government put in place were nothing new. Even in the 1990s, particularly during the caretaker governments, successive regimes implemented IMF policies pertaining to opening up Pakistan's markets. There was nothing unique to what the Musharraf government did.
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Originally Posted by KuRsEd
Even if, Musharraf got lucky, you've to give him the credit for capitalizing on that lucky chance, no? Because these type of 'lucky chances' also came in 80's and 90's, but instead of being grabbed with both hands, were wasted, and whatever little they offered, was being used in building Palaces.
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The 'lucky chance' Musharraf benefitted from involved supporting a US-led war. That's all. It wasn't as if he capitalised on unique economic opportunities. The last time such a chance presented itself was in the 1980s when Zia and his cronies oversaw record growth rates, kind of like Musharraf himself. Did they fundamentally alter the structure of Pakistan's economy? No. And neither has Musharraf (as, I hope, the articles I've linked to will show).
Once Pakistan had fulfilled its purpose for the US, it was forgotten. That is the story of the 1990s, and will be true once the conflict in Afghanistan draws to a close. Anyone who believes Pakistan and the US are in some kind of permanent partnership really needs to pay more attention to history.
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Originally Posted by KuRsEd
Why don't you understand the difference between 'what actually happened' and 'what could have happened'? If a democratic government, (which you call s dictatorship) had not intervened and saved Pakistan from that disastrous situation.
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Oh. Please.
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Originally Posted by KuRsEd
MD, when people here say 'growing' or 'flourishing' economy, they are not comparing it with the best economies in the world like China, America, etc, having the best exports. But are trying to differentiate the current, on-track economy, from our past of a pathetic and looted economy.
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How has the economy diversified? Last time I checked, we were still producing cotton. Just like the good ol' 1960s.
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Originally Posted by KuRsEd
As for the FDIs and a 'strong export economy', please tell me just one way, in which you could have a "strong export economy" or a 'equitable distribution of wealth' or 'indigenous industries' , when your country almost got bankrupt few years ago.
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All the FDI is concentrated almost exclusively in the service sector. Any of the profit that isn't taken out of the country is not really utilised to expand Pakistan's industrial base. What sectors have seen expansion? Telecom? Cement? And? I ask you the same question I ask anyone who claims Musharraf has altered the structure of Pakistan's economy... what does Pakistan produce? Have any steps been taken to shift away from an emphasis on the production of cash crops like cotton and tobacco? Even if there is FDI, it isn't being directed towards those ends. Undertaking any kind of substantive shift in industrial policy requires considerably more foresight, planning, and courage than the Musharraf government has shown.
What has Musharraf done, then? All he's done is lower various barriers to the free operation of the market. Given the post-Fordist nature of global production and MNC operation, it would be ridiculous to argue that FDI must necessarily equate to indigenous industrial development. To the extent that there has been an expansion in manufacturing, it has not been the result of any meaningful expansion in indigenous expansion.
As for poverty reduction... the government seems to believe that the fruits of economic growth trickle down. If history is anything to go by, and there are plenty of examples of this worldwide, such a belief is absurd. Equitable economic redistribution doesn't need economic growth. What it needs is pro-poor government policy initiatives. Like actually taxing the rich and providing better services to the poor. All it takes is political will.
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Originally Posted by KuRsEd
Will you first try to get the economy on its feet, allow sufficient money to flow in, or will you directly jump to achieve a 'strong export economy', with insufficient money?
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Where is all the money going? And as the examples of South-East Asiacountry, China, and India will show, no export-driven economy is going to emerge without a degree of protectionism (less FDI! OMG!), and state intervention in certain sectors of the economy. What is the current government doing? It's increasing its reliance on foreign capital and imports, and is keeping its involvement in the economy to a minimum.
Sounds good.
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Originally Posted by KuRsEd
You will first allow sufficient money to come in and set along building the country, and that by creating good environment, allowing FDI's to flow in, set major industries like IT industry etc, set multinational firms, set up major construction work all around, build up more private sectors and give them roles, increase your GDP growth, repair all that bad which was done, etc etc.
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How do you 'build' a private sector if you let MNCs come in and wipe out indigenous firms? FDI isn't always a good thing. How do you set up an industry for cars, for example, if you keep protecting Toyota and Honda?
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Originally Posted by KuRsEd
This is called foundation, and even this was not seen before, and this is what we're call as 'growth' in the economy, not a 'perfect' economy.
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Right.
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Originally Posted by KuRsEd
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Did you even read these articles yourself? The first one says what I've been saying i.e. the government needs to encourage export-oriented growth through state intervention and support for key sectors. As for the second articles... when have I said that exporting cotton is a good idea? I have always said that we need to move away from primary products, such as cotton, and towards value-added products, like electronics (to pick a random example that may not be applicable). Even in the 'textile' sector, it's not like we sell finished products. We sell yarn! All the value is added abroad.
Next time, link to articles that don't prove my point.
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Originally Posted by KuRsEd
MD, you went on to quote that 72% of the people live under $2/day, but you did not mention the decrease which has taken place in these numbers, i.e during 90's, the poverty rate increased by 10-14% as compared to 80's, but has under Gen. Musharraf, decreased by 5-9% as compared to the 90's, which means that IF, 72% of population lives under $2/day today (IF, because I'm not sure) then almost 80% of population used to live under $2/day before Musharraf.
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There is no denying that poverty was high in the 1990s. The point is that it's still high, and higher than it should be given all the 'growth'. If you want an accurate look at poverty in Pakistan, I suggest you go to the UNDP's website and look up Pakistan's rank on the Human development index over the last 10years. You will be shocked, I am sure, to find that Pakistan's level of human development is pretty much the same today as it was back then.
What is the human development index? It is an aggregate measure of illiteracy, life expectancy, and poverty. On all three fronts, Pakistan has made negligible progress when compared with similar countries. For all the growth that has arguably occurred under Musharraf, the fact remains that little has actually been done to address low levels of spending on the social sector, or to address the seriously high levels of economic inequality that characterise the economy at present.
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Originally Posted by KuRsEd
Doesn't this decrease in poverty level looks like growth to you? Or is it that if someone claims 'economic growth', you automatically assume poverty levels to be decreased to a complete 0% and that anything over 0% does not mean economic growth to you?
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What is the government's favourite trick for showing poverty reduction? Very cleverly, it changes the definition of poverty by revising the poverty line upwards. In real terms, there is very little reason to believe that there has been any substantial poverty reduction. As
this article by an extremely well-respected economist at LUMS shows, the government's methodology for calculating povery lines is subject to debate. More importantly, the government's poverty reduction strategy suffers from serious conceptual problems. A quick google search on the subject will reveal additional sources documenting the way in which the government has manipulated its
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Originally Posted by KuRsEd
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Notice how all the figures quoted, where they are quoted, depend on data provided by the government. The CIA factbook and WB both use data collected by the government. Yet, how credible can the government be when its own chief economist quit because he believed the government was lying about its poverty reduction figures? See
here and
here.
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Originally Posted by KuRsEd
Mir, Malik,Masood and other "super analysts", will not tell you this, becoz they are not paid to.
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Yeah. Some of Pakistan's most prolific and talented independent economists, with global reputations, are wrong and you're right.
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Originally Posted by KuRsEd
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Please. Go take a look at the budget and tell me what social sector spending is as a percentage of the total GDP. Then, tell me if the 'increase' is commensurate with Pakistan's demographic pressures and worsening infrastructural problems.
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Originally Posted by KuRsEd
While, its true that Pakistan military got a good amount of spending, but education and health sector also received an increase in funding, which was not even seen in the 90's.
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Let's say I agree. How do you account for the fact that, as a percentage of GDP, the increase touted by the government in these sectors is minimal. Forget demographic pressures... is the budgetary allocation for health and education even commensurate with the government's much trumpeted growth rates?
It's not even close.
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Originally Posted by KuRsEd
So, please compare and then check whether we're on the right path or not, as being on the right path is the most important thing.
Again, not studying the importance of what progress has been made, and being unaware of what has been achieved, especially as compared to the 90's.
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Two issues here:
1) Is the 'growth' really due to any special insight on the part of the Musharraf government, or did it just get lucky?
2) Has the 'growth' really changed anything?
MD