How to avoid a steep fall
By Shahid Javed Burki
Monday, 22 Mar, 2010
PAKISTAN’s spectacular economic decline over the last few years and an equally spectacular decline in the country’s future prospects should worry the policymakers.
That this is not the case is revealed by the actions of those who currently wield power in Islamabad as well as their policy pronouncements. Now that a new finance advisor(minister) has been appointed, this may be a good time to look at what has gone wrong and how some lessons could be learnt from history. Today, in this column, I will view Pakistan in the context of the geographic region to which it belongs.
The country is losing ground with every passing day and as each day passes it will be difficult to address the damage that has been caused. It is useful to compare Pakistan’s situation with that of other large countries in the neighbourhood. In 2010, the Chinese economy is likely to expand by 10 per cent. India is aiming to achieve a rate of growth of 7.2 per cent in the year 2010-11. At best Pakistan will manage a paltry increase of three per cent in its GDP, coming on top of only two per cent in the previous year. Translated into income per head of the population these growth rates mean increase of 9.2 per cent for China, of six per cent for India but only 1.2 per cent for Pakistan. The country is slipping badly in its own neighbourhood.
This is unfortunate since Pakistan belongs to the part of the world that stands at the threshold of an economic and social take-off. Several eminent economists have called the 21st century the Asian century. The countries in the region that have realised that this indeed is the case are gearing to take full advantage of the opportunities that are currently becoming available in Asia. There are also opportunities in the continent’s rapidly changing role in the global economy. If that recognition has come to Islamabad, there is little evidence of it in the making of public policy.
Islamabad owes the country’s citizen to formulate a medium-term strategy that will arrest the serious declines in output and equally serious increase in the incidence of poverty. Properly developed and articulated such a strategy will help the people to gain confidence in their future. With confidence should return investment. A well formulated economic and social strategy should also help to revive foreign interest in the Pakistani economy. Without this, it will not be possible to stimulate the economy.
It is interesting how different are the world’s priorities with regard to India and Pakistan. When senior government officials come to Pakistan they have only one thing on their mind: the role Pakistan must play in countering terrorism of which it is said to have become the epicenter. That was the preoccupation of Robert Gates, the US Secretary of Defence, who recently came calling on Islamabad.
He wanted to ensure that Pakistan’s resolve to beat back the terrorists operating from its soil was not weakened. When India is visited by the world’s powerful, their main concern is to ensure the Asia’s third largest economy – after China and Japan – will play in their fields as well.
The most recent visit to India by a high level international figure was by Vladimir Putin, Russia’s prime minister. The visit was considered to be important enough for the Financial Times to write an editorial on it. “Russia is trying an old flame”, wrote the newspaper.
In the gift basket Putin brought with him to New Delhi were “suggestions that Russia might accelerate its nuclear plant building programme in India and partner the giant democracy to produce new military equipment…Stronger ties with Russia carries some appeal for India which likes to keep its options open, and will be weary of over-reliance on the US.” When seasoned news analysts write about India and Pakistan they focus on economic potential in the case of the former and terrorism in the case of the latter. For instance, in a recent article written after a visit to India, Financial Times’ Martin Wolf was impressed with the “strong sense of the technocratic elite in India’s performance and prospects. Similar confidence is palpable among the business elite. I have little difficulty in imagining that India can sustain growth of close to 10 per cent a year. Under conservative assumptions, the Indian economy would be bigger than the UK’s in market prices in a decade and bigger than Japan’s in two.” However, when something positive is written about Pakistan the focus is on terrorism. For instance, Fareed Zakaria noted in a recent article published in The Washington Post that “a spate of good news has been coming out of that complicated country which has long promised to move against Islamic militants but has rarely done so.” Pakistan’s policymakers would argue that their options have been limited by the rising tide of Islamic extremism that the West greatly fears and that will have to occupy Islamabad’s attention for as long as it is not beaten back. The West is currently not interested in Pakistan’s economic potential and how it could be exploited by it for its own profit.
But then India also has many insurgencies and they too have taken a very large human toll on that country. In fact, India lost more people to insurgencies in 2009 than Pakistan did in that year. There are two reasons why the West is consumed by Islamic militancy than by the armed conflicts in many parts of India. One, it is affected by militant Islam as well while the troubles in India are of consequence only for that country.
Two, India has done a very effective job of getting the world to focus on the economic opportunities it offers and not on the many problems it faces at home.
The “Incredible India” slogan coined by an advertising firm and displayed at Davos a few years ago has worked well for the country. For Pakistan the description that it is the “most dangerous place on earth” first used by the magazine Newsweek has stuck and resulted in turning the financial world’s attention away from the country. There is a lesson to be learnt by the policymakers from the Indian approach.
One important lesson is that the world pays attention to the tone adopted by the country’s leaders. In India, the leadership from all parts of the political spectrum has been telling the world that the country has the potential to grow at the rates that have become common in East Asia and have been achieved by China. If there are armed insurgencies in the country they should be seen in terms of the products of economic growth and modernisation that are inevitable in rapidly changing economies. This was pointed out almost fifty years ago by the political scientist Samuel Huntington of Harvard University.
The Indian leaders, in other words, have provided the context for the many problems their country faces. They also emphasise the positive about their country: the size of the middle class and the market that that size represents, the size of educated workforce that can provide the people-deficient West with many of the services it needs, the country’s location next to the most rapidly growing part of the global economy, and the development of entrepreneurship in the country that can challenge the best in the world. It is time that our leaders also begin to think and speak positively.