Reasons for failure
‘Functionality’, not ‘form’, plays the central role in determining the effectiveness of institutional arrangements for economic development
By Zubair Faisal Abbasi
Bureaucracy is extortionist, politicians are untrustworthy, the military rule — in connivance with a post-colonial civil administration — has always been an authoritarian and elitist arrangement, and civil society is not empowered to play any meaningful role in the development, execution and evaluation of public policy. These are some of the broad contours of the dominant viewpoint on Pakistan’s institutional performance.

The superficiality of intellectual and political discourse in this country is evident in innumerable respects, perhaps no more so than in the economic realm. While it is perfectly understandable that the layperson would not be able to make sense of the complexities of economics beyond associating increases in the cost of living with the government in power, it is inexcusable that ‘experts’ and policymakers alike refuse to go beyond the rhetoric.

So, for example, while it is important to emphasise the disastrous legacy of the Musharraf-Aziz dispensation, and particularly the criminal decisions towards the end of last year to avoid withdrawing subsidies on basic amenities that had already been agreed upon with donors, it is high time that the Pakistan People’s Party (PPP) government starts outlining a clear alternative economic vision, if of course it is inclined to do so.

Unfortunately, recent events suggest that the elected regime has no such plan. Instead, Zardari & co have been scuttling around the world asking for handouts. First it was the Saudis who were lobbied to allow Pakistan time to may payments for oil, then the so-called ‘Friends of Pakistan’ consortium was created amidst crazy exhortations by the president that Pakistan needs $100 billion to stay afloat. And now China has been asked to jump on the ‘Save Pakistan’ bandwagon.

Beyond alarmist appeals to rescue what our government is representing as a sinking ship, there is little substantive debate on how to address the long-term structural impediments to economic and social change that benefits working people. Indeed, the international financial institutions (IFIs) are once again firmly established as the real decision-makers behind the scenes, the government more or less acceding to the dictates of neo-liberalism, even while free market orthodoxy has been rendered completely illegitimate by the financial crisis currently unfolding in industrialised countries.

Perhaps the best example of the sad fact that very little has changed on the economic front is the decision to sell the Qadirpur Gas field in Sindh. One of numerous profitable fields owned by the Oil and Gas Development Corporation (OGDC), Qadirpur is turning out to be a political hot potato for the PPP, because Sindhi political and intellectual circles have vociferously opposed the privatisation decision, terming it a conspiracy against the province.

Let alone the nationalist argument, the fact of the matter is that selling a profitable enterprise like the OGDC (the plan seems to be to sell off gas/oil fields one by one rather than offer for sale the whole company at once) simply makes no economic sense in the long-run. The PTCL’s disastrous privatisation should have made it clear that no government can possibly justify the sale of profitable state enterprises when revenues are already such a serious problem.

Clearly, as was the case with privatising the PTCL, with the OGDC too there is no other logic at work than that of the IFIs; they say that the government must find ways of reducing the fiscal deficit and selling the OGDC is the fastest way of raising hard cash. The fine print is that foreign capital takes control over natural resources that are the historical preserve of local people.

That this manner of thinking is incredibly short-sighted is painfully obvious. What is even more painful is the lack of political will in the elected setup that such flagrantly harmful decisions cannot be resisted. Having said this, it will be quite difficult for the PPP to actually complete the sale of Qadirpur Gas field given the hostility that it faces within Sindh, which, of course, is its political base. Even if this one decision does not turn ordinary Sindhis against the government decisively, it can be expected that similar decisions will follow, because there is no sign that the PPP is planning to recover its once-upon-a-time economic populism.

It should, however. In some ways, the PPP is meekly submitting to the dictates of a highly ruthless world order even though it has almost no bargaining power (if anyone retains bargaining power in Pakistan vis-a-vis the outside world, it is the army). The PPP should learn from the example of the dependent economies of Latin America that have broken ranks with the international financial hierarchy and gone their own ways. For example, Argentina simply decided to default on its debt some years ago, deeming most of it illegitimate. While the country’s working people have not necessarily enjoyed great prosperity subsequently, neither have they been suffocated economically in the way that the IFIs and Western governments suggested would happen after default.

It is, of course, surprising that the Washington-based IFIs actually have the gall to continue demanding ‘fiscal responsibility’ from Pakistan and other Third World economies. The model of economic development that they are pushing is based on the rabid free market orthodoxy that prevails in the United States, and that is based on ever-spiralling amounts of debt and no ‘fiscal responsibility’.

So really there are many reasons for the PPP to display some backbone and try something new. There is a pragmatic side to this question too, as the PPP is losing public support quickly (helped by a heavy dose of propaganda that surely originates in the GHQ) on account of the downward economic slide. The PPP, as far as it has strayed from the populism of Zulfikar Ali Bhutto, still makes its living as a party of the working classes, and it is quickly relinquishing this mantle.

There are no quick fixes to Pakistan’s economic woes, but there are definitely some easy-to-identify policies that can be undertaken if the political will is generated. Vision is perhaps less important than courage and till now there is little indication that the requisite courage exists within the elected regime. In any case, looking for handouts is definitely not a sustainable solution. If the government does not generate the courage to stop asking for handouts and doing things on people’s terms, it will inadvertently be helping the cause of those who are out to do away with it.

The Marshall Islands are a chain of atolls in the Pacific that lie scattered like a string of pearls between Latitude 7 degrees and 20 degrees North and Longitude 155 degrees and 178 degrees East. All Pacific Islands countries have sea areas larger than their land areas. This makes the area very valuable, especially for fishing.

The Law of the Sea Treaty of 1979 means that Pacific Islands countries have control of economic resources 200 nautical miles (320 km) from their coastlines or outer reefs. This area is known as the Exclusive Economic Zone. The Marshall Islands, with a total land area of only 181 square km (less than the area of Islamabad), have a sea area of 2,131,000 square km (2.65 times greater than Pakistan’s area).

The Marshall Islands were a US colony until 1986, when they became an independent country and a member of the United Nations. The numerous atolls in the Marshall Islands include Ebon Atoll, Namork Atoll, Jaluit Atoll, Arno Atoll, Majuro Atoll, Ejit Atoll, Knox Atoll, Jabwot Atoll, Namu Atoll, Aur Atoll, Maloelap Atoll, Lae Atoll, Ujae Atoll, Likep Atoll, Ailuk Atoll, Wotho Atoll, Taka Atoll, Bikar Atoll, Kwajalein Atoll, Kili Atoll, Rongerik Atoll, Rongelap Atoll, Enewetok Atoll and Bikini Atoll, among others.

The people living on these atolls are a peaceful people, fisher folk who have never done anybody any harm. After World War II, however, the US government chose Bikini Atoll as a nuclear testing ground because of its location away from sea and air routes.

Because of the danger of radiation from the tests, the population of Bikini Atoll (then 167 people) was forcibly moved to Rongerik Atoll. This was an uninhabited atoll 200 km east of Bikin Atoll. Food shortages on Rongerik Atoll eventually meant that the Bikinians were moved again — this time to Kwajalein Atoll and then to Kili Island in 1948. Meanwhile, tests of atomic and hydrogen bomb tests continued on Bikini Atoll and nearby Enewetok Atoll.

In July 1946, the US carried out two atomic bomb tests — ‘Able’ and ‘Baker’ — on Bikini Atoll. In April 1948, it carried out three atomic bomb tests at Enewetok Atoll. In April 1951, it carried out four atomic bomb tests at Enewetok Atoll. In November 1952, it carried out the first test of the hydrogen bomb at Enewetok Atoll. In March 1954, it carried out the ‘Bravo’ and ‘Romeo’ hydrogen bomb tests at Bikini Atoll. In May 1956, it carried out 17 nuclear tests at Bikini and Enewetok atolls. Two years later, in May 1958, it carried out 32 nuclear tests at Bikini and Enewetok atolls. In August 1958, it carried out its last six nuclear tests at Bikini and Enewetok atolls. In all, the US carried out a total of 66 atomic and hydrogen bomb tests in the Marshall Islands, making them the most bombed places on earth by weapons of mass destruction — all, of course, without the consent of the people of the islands.

During the ‘Bravo’ hydrogen bomb test on Bikini Atoll, winds carried radioactive dust (fallout) to other atolls, where the people suffered from radiation poisoning. ‘Bravo’ was a thousand times more powerful than the atom bombs dropped by the United States on the Japanese cities of Hiroshima and Nagasaki in August 1945, which killed more than 250,000 people instantly and tens of thousands more subsequently due to radiation poisoning.

Nuclear testing by the US in the Marshall Islands finally ended in 1958, but the problems for the people continued after testing stopped. Food shortages and typhoons made life a struggle for the Bikinians on Kili. In 1969, a plan was prepared to return the people to Bikini Atoll. However, radiation levels were too high for human safety and the people who had returned to Bikini Atoll in 1975 were moved again in 1978 by US officials. The enforced wanderings of the people living on the affected atolls have shattered their lives, making it impossible for them to lead an existence free from fear and disruption.

In 1947, people living on Enewetok Atoll were moved 250 km southwest to Ujeland Atoll, from where, in 1980, they were moved back to Enewetok Atoll — only to be forced to move again a year later. In 1954, people living on Rongelap Atoll were moved to Kwajalein Atoll, from where they were moved that same year to Majuro Atoll some 400 km to the south. Then, in 1957 they were moved some 900 km northwest back to Rongelap Atoll, from where, in 1985, they were once again moved to Kwajalein Atoll.

In recent years, people affected by the tests have made claims for compensation granted through the ‘Compact of Free Association’ (what a name!) between the Republic of the Marshall Islands and the United States. The US has established trust funds to compensate Bikini and other atolls affected by the tests, but it is not clear just how much money, if any, has been paid from these trust funds to Bikinians and the inhabitants of other affected atolls.

Today, Bikini, Enewetok, Rongelap and Rongerik still show levels of radiation too high for human safety. Scientists say that the radiation levels may never go down far enough to make these atolls safe for human habitation. Indeed, the only living creatures on Bikini today are cockroaches. Through no fault of their own, the people of Bikini and the other affected atolls are barred forever from going home, making them the only permanently homeless people in the world.

So where are the people of Bikini now? About 1,150 of them live on Kili, 900 on Majuro Atoll, 250 on Ejit Atoll and 250 on other Marshall Islands atolls. Some 450 of them live in the United States and other countries. Has any US president, including President George W Bush, ever apologised to these people for poisoning their islands and destroying their homes?

Amid unfolding public discussion on increased US incursions into Pakistan, the public pressure for revising Pakistan’s role in the so-called ‘war on terror’ and the public demand for adopting a tough stance vis-a-vis the United States, the Government of Pakistan arranged an in-camera briefing on security issues for the joint session of the parliament. Director General Military Operations Gen Ahmad Shuja Pasha briefed the parliamentarians on Oct 8 and 9 on security matters, while Minister Information Sherry Rehman made a presentation on Oct 14 on the government’s strategy for combatting militancy and extremism.

Considering the opposition’s demand for a detailed discussion and answers to its questions, the government decided on Tuesday to extend the joint session for another five days for a general debate and to answer the parliamentarians’ queries. The briefing is a good initiative, no matter what its objectives are: to take the parliamentarians into confidence on the government’s role in the ‘war on terror’ with a view to bring about necessary changes in it or to seek approval from them for its current policies. Whatsoever the case may be, the briefing has triggered a nationwide debate.

The debate raised some critical issues about Pakistan’s role in and support to the US-led ‘war on terror’. Why did Pakistan join the ‘war on terror’ and what has it gained from it? What progress has been made to counter militancy and violence? Has the law and order situation improved or deteriorated in Pakistan after the country joined the ‘war on terror’? Is the ongoing military operation providing peaceful living conditions to the citizens or is it making their lives insecure and unsafe? Is Islamabad’s policy of becoming a US ally in the ‘war on terror’ in line with its national interests? Can Pakistan independently devise or pursue its policies? Can Pakistan withstand the US pressure in matters related to the ‘war on terror’? Is the Pakistani establishment willing to change its policies in line with national aspirations? Are the policymakers bold enough to publicly acknowledge their blunders and accept responsibility for them? The success of the briefing was dependent on answers to these vital questions, as well as on the adoption of corrective measures by concerned authorities.

Considering the public disapproval, concerned authorities deliberately avoided taking politicians into confidence in the past and the military establishment headed by Gen (r) Pervez Musharraf single-handedly decided to join the US-led ‘war on terror’. After creating a mess and an irreparable loss, the same military establishment is now looking towards the political leadership to take the country out of the ongoing crisis.

There was a mixed response to the in-camera briefing. The ruling Pakistan People’s Party (PPP) and its allies were satisfied with its results, while the opposition was unsatisfied with its results and demanded a clear policy on the ‘war on terror’. Besides the Pakistan Muslim League-Nawaz (PML-N), others who were unsatisfied with the briefing included the Jamaat-e-Islami (JI), Pakistan Muslim League-Quaid (PML-Q) and Pakhtoonkhwa Milli Awami Party (PkMAP). Moreover, PPP allies, such as the Jamiat Ulema-e-Islam-Fazl (JUI-F), Awami National Party (ANP) and the parliamentarians from the Federally Administered Tribal Areas (FATA), complained privately that they were not given enough time, and that replies to the questions raised by them were incomplete and unsatisfactory.

The ANP has strong reservations about the conduct of operations in FATA and some parts of the NWFP. The legislators from FATA also said they had long been asking for a parliamentary debate and it would be a futile exercise if their views were not considered. They also warned that the situation in the tribal areas could deteriorate further if they were not taken into confidence by the government regarding the military operation in their areas.

The PML-N, JUI-F, JI and the parliamentarians from FATA also demanded an immediate halt to the ongoing military operations in the tribal areas as well as some parts of the NWFP. Those demanding halt to the military operations argued that these measures alone could not address the issue of terrorism, and the best option was to resort to political dialogue. Some parliamentarians belonging to the JUI-F and JI also supported the Taliban’s demand that they should be given a chance to present their case in the parliament. JUI-F chief Maulana Fazlur Rehman even said he was willing to present the Taliban’s viewpoint in the parliament if permitted, as the Taliban could not apprise the parliament of their apprehensions regarding the government’s role in the ‘war on terror’.

Expressing their dissatisfaction, some members of the opposition said the briefing was not up to their expectations and the government only wanted to maintain the status quo in the ‘war on terror’. The PML-N, JI, JUI-F and PkMAP also demanding that the previous government’s ‘war on terror’-related agreements with the US be made public. The opposition was more interested in a policy briefing, rather than operational details. Moreover, they were unsatisfied with the kind of information shared in the briefing and said there was nothing new in it. As expected, most of the parliamentarians believed that the ‘war on terror’ was not their war, and wanted its immediate end to avoid further wastage of time and resources.

Commenting on the briefing, PML-N Quaid Mian Nawaz Sharif said the opposition would neither stamp any external policy on the ‘war on terror’ nor would it own Musharraf’s policy in this connection. He added that the opposition wanted to know the exact details of the commitments and agreements reached with regard to the ‘war on terror’ and the government’s policy in this regard. Unlike the past, the present government seriously wants to widen the support base for its policies and to seek public approval for them. Through the briefing, the government tried to make the nation realise the gravity of the situation, and to find out viable and feasible ways and means to check the militancy.

The in-camera briefing focussed on a host of issues, such as the ‘war on terror’, militancy, ongoing military operations in Bajaur and Swat, overall political and security situation in the country, and the government’s strategy to counter terrorism. The parliamentarians were warned that an Iraq-like situation was expected in Pakistan if militancy was not crushed with full force. The government also asked the parliament to lend support to its strategy for combatting militancy. Not only has the present government failed to clear its position on the ‘war on terror’; it has also failed to bring about any significant shift in or to demonstrate departure from the previous government’s policies, which resulted in increase and spread of militancy and insurgency-like situation in FATA and some parts of the NWFP.

It is becoming increasingly difficult for the policymakers to justify continuation of old policies and they are still blindly following external dictates. While the deliberations on the briefing are still under way, it has apparently failed to evolve the desired national consensus. It is further sharpening the political and ideological divide in the country, as well as widening the gap between the PML-N and PPP. The ongoing debate on the briefing is turning into a movement for the empowerment of the parliament; if the concerns of the opposition are addressed and its demands met, then nobody can block the emergence of an independent parliament.

For the first time in Pakistan’s history, a government policy has come under public scrutiny and review, due to the unfolding public discourse around the briefing and parliamentary debate. It almost evolved a consensus on the issue of militancy, army operations, ‘war on terror’. and need for policy reversal and corrective measures. If public demands and aspirations were not translated into policies, it would disappoint the common people of Pakistan. The nation is tired of lip servicing and does not want debate for the sake of debate only; it wants a results-based productive discussion.

(The writer works with Sustainable Development Policy Institute, Islamabad.

Email: aimalk@yahoo.com)

German Ambassador to Pakistan Dr Gunter Mulack, in a recent interview, while emphasising the need to bridge the gap between Muslim and Western countries in the wake of 9/11, termed the present conflict "not as clash of civilisations but rather clash of uncivilised people or extremists." Dr Mulack pleaded for revival of rich tradition of Sufism in our part of the world, studied and introduced in the West by great German scholar Dr Anne Marie Schimmel, to counter increasing terrorism.

Terrorism, in its wider connotation, is use of violence by an individual or a group or a state to impose forcibly on others that is not acceptable voluntarily. On the contrary, Sufism as its antithesis guarantees full freedom to all human beings to adhere to their practices and belief. Terrorism, like fascism, is a self-destructive ideology, whereas Sufism is love for humanity — the only path leading to the Creator.

In the aftermath of 9/11, message of love and peace could have played an effective role in combatting terrorism, rather than military attack on Afghanistan — after seven years, British and NATO commanders have started admitting it is an "unwinnable war". Unfortunately, Bush et al have failed to realise that indiscriminate air strikes killing innocent civilians is counterproductive. Instead of using brutal and ill-directed force, efforts are required to win the hearts of people, who are living in abject poverty and are victims of socio-economic injustices. The Taliban and al-Qaeda terrorists and hired mercenaries have made these people captives in the name of fighting non-believers and their Muslim allies.

Camouflaging social disorder and sedition under the garb of ‘jihad’ is not a new phenomenon. This sacred concept aimed at establishing a humane society has been ruthlessly abused by fanatics and murderers of humanity. Securing of oil and gas resources of Central Asia, Afghanistan, Pakistan and the Middle East – the main agenda of the New World Order — has created the present chaotic situation. Perpetuation of fear, uncertainty and war in the aftermath of 9/11 is a well-thought-for strategy in which use of religious extremists is vital to create disorder for justifying military interventions.

The ongoing global terrorism is the product of an unholy alliance between global military complex and war industry. To counter their nefarious designs, the proponents of peace will have to revert to the message of love, harmony and unity, conveyed by the Sufis. The dependence on those who are serving the interests of global military complex and war industry to come out of prevalent crisis reminds us of great Urdu poet, Mir Taqi Mir, who aptly said for such situations: "Mir kya sada hain, beemar huay jis ke sabab/Usi attar kay londay say dawa laity hain" (What a simple soul is Mir who seeks cure from those who are the cause of his illness).

The need of the hour is to rediscover and implement the doctrine of jihad as an ideology for establishing a humane society, which is free from exploitation and oppression and is based on the principles of justice and equality, thus ensuring peace and tranquility for all. Such a society cannot be established by ignoring the ethical dimensions of jihad, practiced by all the great Sufis, requiring an individual to become an authentic being — a process converting men and women into human beings.

Humanisation of world societies, as propagated by Sufis, based on broader ethical connotations of jihad can guarantee international peace and prosperity. On the contrary, Western imperialism (with capitalism at its roots) is the biggest hindrance in the way of this process. The recent debacle of financial institutions in the United States and Europe, considered as pillars of capitalism, and rescue plans underway have once again exposed the hollowness of models based on exploitation, greed and self-interest.

In this scenario, jihad, as a tool to fight all kinds of oppressions, inequalities and injustices at individual and collective levels, holds the key to forging human unity at the international level. Knowing the consequence of such a unity, the forces exploiting the world resources at the cost of poor nations are purposefully portraying jihad as a hostile ideology synonymous with terrorism. This projection of jihad in Western media is part of a great conspiracy. In this game plan, despotic Muslim rulers, clergy and militants are their friends-in-arm. jihad as aggression is a misnomer, for which the blame is to be shared equally by self-acclaimed warriors of faith and biased anti-Islam intellectuals.

The self-proclaimed defenders of faith have never bothered to study and understand the Quranic concept of jihad. Unfortunately, malpractices committed by abusing this concept for temporal gains by Muslim Kings and clergy were accepted as scared by many. Their opponents took full advantage of this ignorance and started calling jihad an ideology of aggression and hate. Various wars waged in the name of religions, the recent example is Bush’s claim of ‘divine guidance’ for aggression in Iraq, were nothing but efforts to secure hegemony and seek temporal gains. These objectives are alien to the Quranic concept of jihad. The difference between ‘jihad’ (an all-pervasive struggle to establish a just human society as ordained by Allah) and ‘qattal’ (a war for self-defence against oppression) is so unambiguous in the Holy Quran that it needs no elaboration.

Unfortunately, in the post 9/11 era, the imperialist forces have cleverly managed to counter even genuine resistance movements against their occupation and hegemonic designs under the pretext of the so-called ‘war on terror’. This is, no doubt, the ugliest strategy employed by neo-colonialists, in which fanatics and hired mercenaries are their main supporters ñ responsible for giving jihad (a purely humanistic and ethical concept) a bad name. Under these circumstances, there is a need to follow Sufism as message of love and peace to counter the onslaught of forces of violence through peaceful means. Entering into armed conflicts is fulfillment of the agenda of neo-colonialists, who want to engage the nations in brutal and bloody wars for their own nefarious designs.

(The writers are visiting professors at the Lahore University of Management Sciences.

Email: ikram@huzaimaikram.com)

Leadership must radiate hope

Several global and national happenings have led the nation to face a pall of gloom. World capital markets’ crisis and consequent economic depression, an imminent food shortage, energy crisis, and worsening security conditions in the country have had a deep impact on the psyche of the common people. But nations are tested through challenges and the stronger nations always come out victorious. It is the responsibility of the leadership to instill hope among those who seem to lose it on the way. When Pakistan was being created, the leadership of All India Muslim League mobilised the otherwise demotivated masses through making them believe in the merits of the new state.

Who can forget Jinnah’s electrifying words delivered in the midst of law and order crisis in Bengal? "We are going through a life and death struggle. We must stand on our own legs and rely on our own strength if we are to achieve anything in this world," he said in February 1942. During the course of dismemberment of Pakistan, Zulfikar Ali Bhutto brought the nation back on track with his charismatic deeds and magic words. "We are facing the worst crisis in our country’s life, a deadly crisis. We have to pick up the pieces, very small pieces, but we will make a new Pakistan, a prosperous and progressive Pakistan," he said on December 20, 1971. The people rallied around the leadership and eventually got over the crisis.

In sharp contrast to the above examples, one finds the present leadership in many minds! It does not know as to how to mobilise its people for reposing confidence in the future, collective action and struggle to eliminate the looming perils. And the confused and unclear minds obviously deliver words that are hollow, least coherent, most unimpressive and far away from the inner souls of the masses. For example, the nation wants to know about the policy formulated to combat suicide attacks. Doused in naivety, the leadership has been harping on the theoretical merits of democracy, none of which is translated into action. The people are interested in learning about the ways and means of dealing with economic mayhem and programmes developed to mitigate their grave repercussions.

What they painfully observe is a reckless attempt of new appointments of faces that have been tested and found ineligible for respective assignments due to their past performance. The people want to see role models of political acumen, statesmanship and wisdom draped in the lifestyle of the common people on the street. In contrast, they have to bear with mediocre people and haughty drones often tainted with background of corruption. For obvious preferences, such leadership chose birds of the same feather to run departments, organisations and agencies of national importance. In short, the people of Pakistan are entangled in such quagmire of circumstances where hopelessness and despair are too overwhelming to be ignored.

Common sense informs that complex questions have complex answers. But every complex combination can be disaggregated into a sequence of simple steps. Without causing earthshaking changes, many positive measures can be adopted by the present leadership. Effective and meaningful communication is the first factor. Words of the leaders are important and weighed accordingly. Caution must be applied in delivery of utterances, especially on important occasions. If the leaders have had no experience of the same, then they must resort to self education and training to fit into that role.

At the same time, the people want to see their leaders among themselves during trying times. When people are braving out threats and damages of the worst kinds, it is their natural demand to have the top leadership among themselves to console and enact hopes for the future. In other words, the leadership must evolve a sense of association with the masses.

Security threats must not send them into fortifications of cowardice. It does not fare well with the descendents of the slain leader — that too a lady — who embraced martyrdom in public despite knowing fully well all the dangers that surrounded her. In the true sense of the word, she led from the front, spreading rays of hope among her audience. Disappointingly, lesser folks can be seen occupying highest offices and hiding behind faceless walls of the President House, Prime Minister’s House and ministerial lodges in disregard of that glowing example of bravery!

Leaders take tough decisions with courage in the hour of need and stand by them like a rock. They set examples by strictly observing the decisions themselves to let the masses emulate such bold attempts. The opposite is true for Pakistan. The leadership gloats about democracy, but it stops short of practicing it. One does not even find the crucial policy decisions taken through the platforms of central executive committees of parties or equivalent organs. Sensitive matters, such as key appointments, and fiscal, financial and administrative decisions are disposed in a quasi-feudal style. It adversely affects the performance of the overall system.

In existing difficult economic circumstances faced by the common people, it is an eyesore to find the national leadership displaying the most ostentatious lifestyle. Motorcades, police escorts, palatial residences, lavish banquets, frequent trips abroad and hefty rolls of personal wealth belie the claims to populist roots. When the rationing of food items was practiced in the United Kingdom during the Second World War, even members of the royal family used to religiously follow the injunction.

Leadership means self-sacrifice! There cannot be two ways about it. If the people are half fed or hungry and leaders enjoy parties, then they do not deserve the status per se. Our leaders must develop working comradeship with the people they claim to represent. By mingling with them in the hour of need and radiating inspiration, they can bring a turn around in the society. It should not be forgotten that much of what this country is suffering from has been the doing of the leadership. By announcing frivolous monetary compensations of few rupees for lost lives, they cannot absolve themselves of the gravity of situation. And complex problems can only be solved through intelligence and acumen. Let us hope that these commodities are not in short supply in the high places!

(Email:

nomaniconn@hotmail.com)

Hussain H. Zaidi 

A country’s balance of payments (BoP) is a summary record of its economic transactions with foreign residents over a year or any other period. It consists of two parts: current account and capital account. Current account balance equals export of goods and services minus import of goods and services minus net unilateral transfers abroad, while capital account balance records capital inflows and capital outflows.

A BoP crisis refers to a sharp decrease in official foreign exchange reserves. This decrease may be induced by a variety of factors, both external and internal. Pakistan is currently in the throes of a BoP crisis. During financial year 2007-08 (FY08), the country’s current account deficit reached $14.01 billion compared with $6.87 billion during financial year 2006-07 (FY07). The surge in current account deficit was due mainly to the country’s increasing trade deficit, which shot to $20.74 billion during FY08 compared with $13.53 billion during FY07. Had it not been for the $6.45 billion in overseas workers’ remittances, the country’s current account deficit would have been even higher.

A country’s current account deficit is financed by inflow of foreign capital, the credit items of capital account. However, Pakistan is facing problems regarding capital account too. Take foreign investment, for example. During FY08, Pakistan received total foreign investment (FDI plus portfolio investment) of $5.19 billion, which was $3.22 billion less than that of $8.41 billion during FY07. Though foreign direct investment (FDI) slightly increased from $5.14 billion during FY07 to $5.15 billion during FY08, foreign portfolio investment sharply declined from $3.28 billion to just $41 million.

Portfolio investment — the investment in stock market — is inherently volatile, because it does not entail a long-term commitment and it is seriously affected by political uncertainty. Since the last one year, Pakistan has remained in the grip of political uncertainty, which has increased political risk. This increased political risk mainly accounted for capital flight in recent months. On the other hand, the ongoing global financial crisis, particularly the one faced by the United States, Pakistan’s largest export market and a major source of FDI, is only likely to intensify in the days to come. In the ensuing paragraphs, an attempt has been made to pinpoint the factors lying at the bottom of a BoP crisis, with special reference to Pakistan.

Expansionary fiscal or monetary policies adopted to stimulate the economy are among the most important domestic reasons for a BoP crisis, because they may cause the aggregate demand to grow at a pace higher than that of domestic supply. The gap between aggregate demand and domestic supply is filled by imports. As a result, imports grow faster than exports, and current account deficit goes up. This deficit has to be financed through either decreasing foreign exchange reserves or capital inflows. However, capital inflows may not be forthcoming because of lack of trust in a country’s economic situation.

In Pakistan’s case, expansionary fiscal policies pursued by the previous government led to an increase in domestic demand without a corresponding increase in domestic supply. The gap was filled by imports. As the increase in exports did not keep pace with the increase in imports, current account deficit rose to 7 percent of GDP at the end of FY08. As is currently the case in Pakistan, the increase in current account deficit depletes foreign exchange reserves. This, in turn, puts pressure on the exchange rate and results in depreciation of the local currency. The depreciation may help in increasing exports significantly, but it also increases the real value of foreign debt, which compounds foreign exchange problems.

Fiscal deficit may also lie underneath a BoP crisis. To finance fiscal deficit, the government resorts to borrowing either from the central bank or from foreign sources. Borrowing from the central bank causes inflation that is bad for trade, because it distorts prices. In particular, inflation increases the input cost of exportable goods and makes them less price competitive. Fiscal deficit is a major source of inflation in Pakistan, where it has been heavily financed by borrowing from the State Bank. In short, the monetisation of fiscal deficit is the major cause of inflation in the country.

The next major factor leading to a BoP crisis is flight of capital. A real or perceived financial crisis may induce foreign and domestic investors to take their money out of the country. This may lead to a BoP crisis if the country does not have enough foreign reserves to cover these outflows and has other obligations, such as debt-servicing. This is exactly what is happening in Pakistan right now. Weaknesses in domestic financial systems also contribute to a BoP crisis.

Foreign capital also plays an important role in economic development. However, in many cases, capital inflows have been volatile; increased capital flows have been followed abruptly by equally massive capital outflows. Countries with weak and non-transparent financial systems are particularly vulnerable to this problem, as evidenced during the East Asian crisis. This brings home the need for a strong financial system to cope with volatile capital flows. A related factor is liberalisation of the financial sector, which
may be necessary to attract foreign investment. However, there is also a need for sequencing the liberalisation of financial markets.

Another reason for a BoP crisis is demand shock. The aggregate demand may significantly fall in the major export markets of a country leading to a slump in its export earnings. Countries having a narrow export market base are particularly vulnerable to such crisis. Fall in aggregate demand can be caused by such factors as changes in consumer preferences and fall in real incomes. Pakistan, in particular, is vulnerable to such a problem, because only the US and the 27-member European Union account for 55 percent of its exports. Price shocks — drastic changes in the level of prices — can also induce a BoP crisis. For instance, prices of major imports — such as oil — may shoot up, resulting in deterioration of terms of trade. In Pakistan’s case, oil imports went up by $4 billion during FY08 due to a record increase in international oil prices.

A country’s major trading partner may have an undervalued currency, which increases the price competitiveness of the latter’s exports. The current account problems of the US may in part be attributed to the fact that China, one of its major trading partners, has an undervalued currency. The next cause of a BoP crisis is hike in interest rates. It is customary for developing countries to borrow from developed countries and multilateral institutions. An increase in the interest rate of loans adds to the debt burden and increases the cost of debt-servicing, thus putting pressure on a country’s foreign exchange reserves. The global financial crisis has put upward pressure on interest rates, which in Pakistan’s case means borrowing at a higher rate from international donors.

To sum up, BoP crises can be attributed to both external and internal factors. The former are difficult to avoid. However, countries differ in their vulnerability to externally-induced crises. For instance, countries having a broad export market base are less susceptible to demand shock-induced BoP crisis than countries having a narrow export base. As for domestically-generated crises, they can be avoided to a great extent by pursuing the right fiscal and monetary policies, and by putting in place a sound and transparent financial system.

(Email:

hussainhzaidi@gmail.com)

October each year reminds one of Dr Abdus Salam, who was awarded the Nobel Price for Physics in 1979. Besides the Nobel Prize, he also won many other honours for his work. As founder director of the International Centre for Theoretical Physics and founder president of the Third World Academy of Sciences, Dr Salam trained a large number of scientists and engineers from around the world in advanced areas of science and technology. This, in turn, contributed a lot to scientific and technological advancement in the Third World in particular and the world in general.

Dr Salam was born on January 29, 1926, in the remote town of Jhang in Punjab. He showed promise at an early age, and secured first position in every examination that he took between 1938 and 1946, the year he proceeded on a scholarship to St John’s College, Cambridge. After obtaining a double first in Mathematics and Physics in just three years, Dr Salam enrolled for a PhD in Theoretical Physics. Right in the first year, he was awarded the prestigious Smith’s Prize for the most outstanding contribution to Physics by a pre-doctoral student.

After completing his education, Dr Salam returned to Pakistan in 1951. He was appointed head of the Mathematics Department at University of the Punjab, a post he held until 1954. In 1952, the Cambridge University awarded him doctorate for his work regarding the re-normalisation theory. In later years, as many as 36 universities from all over the world awarded him honorary doctorates.

Throughout his life, Dr Salam was driven by the desire to create a better world. It would have been far easier for him to keep busy with his scientific research, accept professional chairs in prestigious seats of learning, and make life comfortable for himself and his family. However, being strongly aware of his social responsibilities, he took the more hazardous road. All his life, Dr Salam gave as much importance to social concerns as to his scientific work. His life is a shining example of a person leading a full professional life with all its responsibilities, while being fully alive to societal obligations.

In one of his writings, titled Poor as a Nation (1990), Dr Salam says: "It is true that the Chinese system is working in such an efficient manner because it is equalitarian. A Chinese government minister goes to his office on his bike and he will use an official car only when he is to receive a foreign visitor. The effect of this exemplary behaviour is that the Chinese nation is willing to sacrifice. However, the fact that the Chinese nation is determined to learn technology has no bearing on the system itself.

"In this context, I would like to relate a story that was told by great Chinese leader Mao-Tse Tung and invariably you will hear this from almost every person in China. Once upon time an old man lived in northern China whose name was Mr Unlettered. The old man’s house faced south, and there were two huge mountains Bang and Wang situated right in front of his house. One day he suggested to his children that they should start digging these mountains. His neighbour, whose name was Mr Intelligent, said to his neighbour that he knew he was a stupid old man but not this stupid as to remove those mountains by digging with his hands.

"The old man replied: ‘My friend you are right but remember if I die then this work will be carried on by my children, when they die by their children, then when those kids die it will be carried on by their kids and this digging will go on and on and on. These mountains are not going to grow any taller. Every day we dig they are reduced in size and hopefully this menace will be completely removed from the front of the house.’ On hearing the old man’s tale, God Almighty sent two angels who immediately removed those old mountains in no time."

Dr Salam concludes: "Our society is inflicted with menaces like these two mountains. Try to remove them from your surroundings with patience. God will have mercy on you one day. Do not be afraid if your endeavours do not bear fruit, but keep on doing your job and God will indeed bless your efforts."

Dr Salam had deep love for Pakistan, despite the fact that he was treated unfairly and indifferently by the country. We were inhospitable to our hero. May be in the years to come we will rise above our prejudices and give him posthumous what we could not when he was alive. With his departure, an era has ended. Let me conclude by sharing with you the following lines of Omer Khayyam that Dr Salam loved to recite:

"Oh love! If thou and I with God conspired,

To change this sorry scheme of things entire,

Would not we shatter it to pieces,

And build it anew, nearer to our heart’s desire."

(The writer is an Islamabad-based freelance writer.

Email: naveedabbas.j@gmail.com)

The last two decades have seen an exponential growth in the number and influence of non-governmental organisations (NGOs) all over the world. As a result, the NGO sector has become a major economic and social global force today. A cursory look at the figures confirms this. In the mid-1990s, NGOs accounted for more than $1.2 trillion in expenditure, employing more than 31 million people. Translated into NGO/people ratio, there are between four to 20 NGOs per 1,000 people in Western Europe and the United States, while the figure for the Middle East and North Africa is 0.017 and 1.3 NGOs per 1000 people, respectively.

This shows how widespread and influential the NGO sector has become. From the 1980s onwards, the growth of NGO has been proceeding apace, showing no signs of slowing down. Like the rest of the world, Pakistan has not remained immune from this worldwide trend. According to a United Nations study, published last year, there are about 45,000 registered NGOs in Pakistan. These NGO are active in various areas, ranging from health and education to human rights. Since NGOs have come to assume such an important position in development discourse, it is high time that we appraise the sector more rationally.

NGO are commonly understood to be voluntary, not-for-profit organisations, independent of government and business, though distinction between the two is being increasingly blurred in recent years. Since the mushroom growth of NGO during the 1980s, when they were heralded as ‘magic bullets’ seeking to overturn the failed model of ‘top-down development’ in favour of ‘bottom-up development’, they have basked, uncritically, in the afterglow of heady rise and steadily growing influence. In recent years, however, the situation has changed, thanks to reflections on the role of NGOs from an array of in-house and outside critics.

Internationally, the auto-critique of the NGO sector has come from stalwarts of NGO movement like Michael Edward and Alan Fowler, who have publicly reflected upon the issues of accountability, cooption and identity. Other critics from the left have also voiced public concern about the NGO sector as an extension of imperialism. One such recent Marxist-coloured critique came forth from Julie Hearn, an academic at Lancaster University. She situates the rise of African NGOs in the Comprador theory, developed in the 1920s by Marxist scholars to theorise the unfolding nature of imperialism. The Comprador theory postulates that Southern bourgeoisie is dependent upon Northern bourgeoisie for its exalted position. In this context, Northern bourgeoisie acts as a comprador or agent, working for the interests of international capitalism against the interests of indigenous popular classes.

Though very little structured academic analysis of the NGO sector has been done in Pakistan, criticism has sourced from both right and left. The right sees the NGO sector as a creation of the West and a vehicle for spreading Western values. The religious right and conservative elements fully share this analysis of NGOs. In fact, their suspicion that NGOs are attacking traditional norms and promoting liberal values has only been confirmed in recent years, because of the intervention and robust advocacy of NGOs in cases involving women who want to marry according to their choice. The Muttahida Majlis-e-Amal (MMA) government acted out of this perception when it launched frontal assault on NGOs working in the NWFP during its period in power.

Besides value-laden criticism, the NGO sector is viewed as donor-dependent, elitist and unaccountable. From the left, Aasim Sajjad Akhtar, a Marxist academic and development activist, has criticised the NGO sector for depoliticising political discourse in Pakistan. He argues that while radical politics in the 1960s and 1970s was an entirely voluntary, selfless and passionate affair, NGOs have only served to blunt the radical edge of politics, by including a radical and alternative political agenda in their project-driven and paid-up activism. While there may be some merit in this argument, the decline of political parties in Pakistan has to share a large part of the blame too.

In discussing the NGO phenomenon in Pakistan, however, it is important to note its different evolutionary trajectory. While in Western Europe and Latin America, NGOs rose against either communist or military rule to demand democratic rights; in Pakistan, they traversed an opposite trajectory. Most NGOs in the country surfaced during the dictatorial regimes of Zia-ul-Haq and Pervez Musharraf. This expansion, argues Dr Mussadik Malik, a community activist, took place because NGOs bridged the communication gap between the people and the state during non-democratic governments (during democratic setups, political parties serve this purpose).

As democratic representation through elections is an erratic process, participatory representation through NGOs has been a much sought after policy option during dictatorial regimes. This pits NGOs against political parties. The peculiar history of the evolution of NGOs in Pakistan has resulted in difficult relations between them and the state. Dr Adil Najam, professor of Public Policy at Boston University, United States, has charted the topology of this complex relationship along cooperation, cooptation, and complementarity and confrontation continuum. When the government and NGOs share similar goals and strategies, there is increased cooperation. In a situation where goals are similar but strategies are different, the relationship of complementarity kicks in. Similarly, where goals differ but strategies are similar, there is cooptation. Confrontation results when both goals and strategies of the government and NGOs differ.

Since the NGO sector is here to stay by virtue of being an important service delivery provider at a time when the state writ is gradually weakening, there is a greater need for rethinking the relationship between the government and NGOs in pragmatic terms. Political governments, instead of seeing NGOs as adversaries, can work with them to enhance the quality of democratic life and to deepen democracy. As NGOs provide citizens’ perspective, they should be involved in policymaking to improve its quality and enhance its ownership. There is now increasing evidence that NGOs act as a mobilising magnet for those people who go on to make significant contribution to public discourse in later life.

In this way, NGOs are serving an important purpose by educating people in citizenship and producing future leadership. Therefore, the government should take active steps to encourage the participation of NGOs in advocacy and lobbying; the expertise of NGOs in research and advocacy can enhance the quality of deliberations inside government. This should also lead to a permanent forum where government and NGOs can interact in a more meaningful way.

As for NGOs, they need to be transparent and accountable, as well as financially autonomous. This would lead to NGOs becoming more independent of both the government and donors. Currently, most NGOs are dependent on either donor handouts or government grants. The example of Bangladesh is instructive in this regard, where NGOs have achieved financial autonomy to pursue a pro-change agenda independent of both the government and donors.

(The writer is an Islamabad-based policy analyst.

Email:

arif_azad6@hotmail.com)

 Treading the wrong path

What would you do to a person who has fallen into a deep pit and has been there for the last few days? Obviously, the person must be feeling extremely thirsty and hungry, and would die if s/he does not get food immediately. You can adopt one of the two approaches to save the person: either you can help him or her get out of the pit and provide him or her food may be once, so that s/he can go on his or her way; or you can let him or her stay in the pit and take upon yourself the responsibility to provide him or her food there forever.

The problem with the second approach is that the person remains in the pit, his or her condition continues to deteriorate and you are stuck with the responsibility to provide him or her food forever. Therefore, it is not a wise course to follow. Surprisingly, however, successive governments in Pakistan have deemed it appropriate to adopt the second approach in their attempt to address the issue of poverty.

The ‘success’ of this approach is reflected in a statement given by a former governor of the State Bank of Pakistan. Addressing a seminar at George Washington University, United States, in 2005, he said, "The biggest development challenge facing Pakistan is how to meet the millennium goal of bringing down the incidence of poverty from the current level of 33 percent to 18 percent by 2015. It may be recalled that by reaching this goal, we would have only regained the level that we had attained in 1988-89."

Why have successive governments in Pakistan failed to reduce poverty, despite tall claims and huge allocation of funds? Why have most of their efforts proved counterproductive, and increased poverty instead of reducing it? The answer is not difficult: successive governments in Pakistan have treated poverty as a disease, while it is only a symptom of other chronic social and structural diseases; once these diseases are cured, poverty will disappear automatically. In other words, the issue of poverty cannot be addressed by only providing the poor with money to cater to their immediate needs.

A recently launched government programme provides an excellent example of the second approach. An amount of Rs34 billion has been earmarked to provide financial assistance of Rs1,000 per month to selected poor households under the Benazir Income Support Programme (BISP). This can only be described as an ill-conceived move to provide food to the person who has fallen into the pit, without making an effort to help him or her get out of it. The worst part is that the amount to be given to the poor households under the programme is not enough to cater to even their basic food needs.

Even if this amount is spent judiciously (of which there is little probability), it will not bring about any major change in the lives of the beneficiaries of the BISP, and they will continue to remain poor and dependent on similar programmes for their sustenance. This is what the outcomes of other poverty reduction initiatives tell us. For example, billions of rupees are given each year to poor families and individuals from the Baitul Maal, but this money has not freed a single person from the web of poverty, or enabled him or her to lead a decent life.

Unfortunately, the incidence of poverty has doubled in Pakistan over the last two decades. By achieving the Millennium Development Goals (MDGs), other states would be hoping to improve the standard of living of their citizens, but the Pakistani state would only be giving its citizens back what they had two decades ago and what its wrong policies have taken away from them over the years.

Like most other developing countries, the poor in Pakistan are faced with structural challenges that stop them from keeping even their first foot on the ladder of development. Therefore, until structural reforms are introduced in true spirit, poverty will keep on increasing in the country. The local government reforms introduced by the Gen (r) Pervez Musharraf regime had in them the potential to bring about these changes. However, the problem with these reforms was that they were not backed by political will and commitment. In fact, these had only been introduced to nurture a clique of loyalists who otherwise had no role to play in the political system. That is why these reforms did not work well and now seem to have fizzled out.

Mollie Orshansky, an economist who worked for the social security administration in the United States, defines poverty as "lack of those goods and services commonly taken for granted by members of the mainstream society." This definition implies that poverty does not only mean not having enough financial resources; it also means not having access to those services that may help the poor in getting out of the web of poverty.

These services are not only confined to health and education; they also include other facilities, such as that of industrial infrastructure. The countries that have managed to break the web of poverty for their populace provided political stability and
security, besides industrial infrastructure, close contacts with rich nations, adequate energy resources and freedom from epidemic diseases. Only lending loans and providing meager financial assistance to impoverished families is not going to make all this happen.

The two best examples of fighting a successful war against poverty are right there in our neighbourhood. Both China and India have been successful in varying degrees in bringing down the incidence of poverty by adopting robust strategies. During the period in which the incidence of poverty doubled in Pakistan, China managed to decrease poverty by almost 300 percent. If we cannot devise strategies of our own, we can at least replicate the Chinese model. China began its reforms with a huge surge in agricultural production and radical market reforms in the food sector. An incentive-driven system helped in increasing food production and decreasing burden from the Chinese economy.

Political stability, secure law and order situation, and policy of not fighting others’ wars helped China develop a safe environment where it could set up special economic zones with lucrative incentives for foreign investors. The investors saw that they could bring technology and capital to take advantage of the enormous low-cost labour market, thus the economic zones proved immensely successful; they combined low-cost labour, international technology and an ever-increasing flow of investment, not only from foreign sources but also from domestic savings. All this was supported by a stable political system and safe business environment. The Chinese experience shows that good policies implemented in true spirit do not require a long time in bearing fruits. The process started in 1978 and by 2000, just in a span of 22 years, the fate of the Chinese people had been transformed.

It is about time that Pakistan’s economic managers learn from the country’s neighbors and stop coming up with schemes like the BISP (in fact, it would be appropriate to call them ‘scams’ instead of ‘schemes’). Our fragile economy cannot afford wasting precious resources on these programmes that do no help the poor come out of the web of poverty. We have been trying to fight poverty the wrong way for a long time. Let us not repeat mistakes, and for once adopt strategies that are rational and can have long-term effects.

(The writer is chief executive officer, Pakistan AIDS Control Federation, Islamabad.

Email: aftabmalik6@gmail.com)

Bureaucracy is extortionist, politicians are untrustworthy, the military rule — in connivance with a post-colonial civil administration — has always been an authoritarian and elitist arrangement, and civil society is not empowered to play any meaningful role in the development, execution and evaluation of public policy. These are some of the broad contours of the dominant viewpoint on Pakistan’s institutional performance.

In this context, this article stresses two points. First, ‘functionality’, not ‘form’, plays the central role in determining the effectiveness of institutional arrangements for economic development. Second, arguments for institutional catch-up in line with the Anglo-American or neo-liberal outlook need revision of emphasis, which needs to go beyond the approach of market fundamentalism to include institutional development, as well as embrace the wider public policy agenda.

As argued by many social scientists, the state in Pakistan has repeatedly failed to perform the functions of an effective ‘conflict manager’ and a visionary ‘public entrepreneur’, because state structures are relatively overdeveloped vis-a-vis the society and institutional imbalances squander developmental outcomes. Therefore, despite having certain modern forms, state institutions in Pakistan continue to remain inherently deficient and low-performing enterprises.

Italy, in the 1870s, at a comparable level of development as that of Pakistan in the 2000s, did not have many of the institutional arrangements — such as the central bank, judicial system and bureaucracy — that Pakistan has since long. The economic development in Italy without these institutional arrangements proves that their functionality takes precedence over their form.

In Pakistan’s case, repeated military interventions to ‘resolve’ socio-political conflicts and bring sustained ‘economic benefits’ have also shown suboptimal performance. Therefore, the country has progressively skidded into institutional atrophy (for example, losing centrality of the Planning Commission in the management of economic change) and institutional traps (for example, hackneyed system of civil administration perching on weak coordinating mechanisms), rather than venturing into long-term sustainable institutional innovations.

The majority of underlying reasons, perhaps, can be traced to the ‘governmentality’ of bureaucratic (hierarchical) and feudal (master-slave) cultural ethos of the state and society. This is in sharp contrast to South Korea and Taiwan that too experienced military interventions, but brought about viable institutional changes to introduce industrial discipline in their once-agrarian economic lives.

Despite assuming modern forms, the functionality of institutional arrangements generates highly unequal, polarised, conflict-prone and non-entrepreneurial socio-economic outcomes in Pakistan. In these circumstances, the enfeebled state loses administrative autonomy in a complex way; it is captured by special interests who take a lion’s share in income, power and opportunity distribution systems. The functionality of institutional arrangements alienates the majority of population from mainstream distribution mechanisms, and these people ultimately stop believing in the effectiveness of institutional arrangements to create secure and accessible pubic goods.

Contrary to Pakistan’s experience, Japan offers a classic example of institutional reform. It made the socio-institutional innovation of lifetime employment, while deciding to steer the economy towards rapid industrialisation. The country, along with Switzerland, still executes an active labour policy for human resource allocations. In fact, the functionality of institutional innovations creates the most successful economies of the world.

Prof Ha-Joon Chang argues that key functions of institutions include coordination and administration; learning and innovation; and income re-distribution and social cohesion. In Pakistan, institutional arrangements exhibit extremely weak performance against these yardsticks. There has hardly been any major achievement since the country’s inception more than 60 years ago. An example of almost similar performance may be that of Brazil, which experienced the so-called economic miracle during the mid-1960s and the 1970s.

Brazil’s industrial strategies, very much like that of Pakistan, have been more ‘industrial capacity-intensive’ than ‘innovation-intensive’, which did not allow the developmental state to take off in the long-run. Moreover, despite an open policy towards foreign investment, the economy did not grow equitably; it mostly served rentier interests, while income distribution and economic role of the state faded away from the public policy agenda.

In Pakistan’s case, since the late 1980s, a semblance of change in institutional forms has come only when the state has acted to implement liberalisation, deregulation and privatisation, in line with ‘getting prices right’ prescriptions of the neo-liberal orthodoxy. Such institutional grafting shows that the state responds to market-related governance conditionalities more quickly than the needs of institutions for social security.

Interestingly, while the need is to capacitate the state in becoming an entrepreneur that can provide vision for future and establish coordination mechanisms, the neo-liberal orthodoxy asks to roll back the state. While the role of the state is to provide sufficiently autonomous governance structures to determine and execute the public policy agenda, the orthodoxy wants the state to emphasise those institutions that can primarily ensure protection of market interests.

In fact, succumbing to the primacy of ‘free market’ institutions ultimately incapacitates the state to guide and govern markets in line with its own development objectives. In addition, it robs the state of opportunities to intervene for social equity beyond market-based resource allocations. A glaring example is the social safety net approach, which does not argue for making social security a crosscutting and overarching concern of public policy in Pakistan.

Looking at the picture from another angle, the institutional arrangements prescribed by the neo-liberal orthodoxy dismantle policy instruments that can help execute investment coordination and guide foreign direct investment (FDI) towards specific sectors. Under Trade Related Investment Measures (TRIMS) and Structural Adjustment Programmes (SAPs), the policy orientation is to remain divorced from specific industrial policy, investment coordination and prioritising mechanisms.

However, empirical evidence shows that historically almost all the now-developed countries — including the United States, United Kingdom, Japan and South Korea — have used diverse mechanisms to manage FDI, with state interventions ranging from out-right restrictions in selected sectors to administrative guidance. The basic idea was to promote industrial development in strategic sectors using the legitimate interventions by the state. For Pakistan, the need to guide FDI beyond oil, gas and telecom sectors is the case in point.

To conclude, for viable institutional development in both form and functionality, Pakistan needs to think beyond the neo-liberal orthodoxy. It should seriously strengthen and use the capacity of state structures to influence social outcomes of the economic transformation. The democratic government has the required political and legal legitimacy to make such interventions. A well-coordinated change in the public policy orientation and institutional functionality will inevitably reduce possibilities of social waste and long-term economic meltdown.

(The writer is a Chevening scholar.

Email: abbasi.zubair@gmail.com)

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