June 5th 2004

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Articles from this issue:

EDITORIAL: Time running out for Marriage Act

CANBERRA OBSERVED: Is Howard Government running out of time?

CRIME: Drug trade behind police corruption

DRUGS: Needle exchange programs: the facts

OPINION: Shuffling deck chairs on the gay 'Titanic'

QUARANTINE: Pork producers appeal to the Federal Court

AGRICULTURE: Dairy farmers fight for survival

SOCIETY: Gen X foots bills for baby boomers

PAKISTAN: Behind Pakistan's economic revival

TAIWAN: President Chen's olive branch to Beijing

STRAWS IN THE WIND : More than a sandwich and a milkshake / Golden Goose / Surfing the Sunday soufflés

CO-OPERATIVES : Lessons from Mondragon

EDUCATION: Dumbing down our schools

COVER STORY: Mitsubishi - counting the cost of closure

Britain and the Arabs (letter)

Australia's sovereignty (letter)

Standards in education (letter)

BOOKS: CARL SCHMITT, By Paul Gottfried

BOOKS: THE MAN WHO DIED TWICE: The Life and Times of Morrison of Peking

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Behind Pakistan's economic revival

by Sharif Shuja

News Weekly, June 5, 2004
India's recent elections saw the ruling Hindu nationalist government voted out by millions of voters who felt left behind by the economic boom. In neighbouring Pakistan, the Musharraf Government faces a similar challenge as its surging economy benefits only a small elite, Sharif Shuja reports.

Pakistanis have much to smile about today, despite their cricket team's loss of the series against India. Economic growth is up, according to the conventional economic indicators. This good news comes after a dismal period of more than a decade, especially in the commodity-producing sector.

Exports have increased substantially in the past year and the current account shows ever-growing surpluses. Capital inflows are up, and the relatively small stock-market has boomed.

All this would have appeared unlikely even a few years ago. The 1990s were a very adverse decade as far as the material conditions of most Pakistani people were concerned.


Though the sanctions imposed on Pakistan during that decade over its nuclear program had been a factor, the economic mismanagement of the government played a greater role.

Industrial growth rates almost halved, from 8.2 per cent to 4.8 per cent per annum. The percentage of households living in absolute poverty increased from 21.4 per cent in 1990-91 to 40 per cent in 2000-01. By June 2001, more than 56 million Pakistanis were living below the official poverty line.

The Pakistani pattern has been characterised as "growth without development" because, despite its respectable per capita growth over the second half of the 20th century, the country systematically under-performed on most social and political indicators, such as education, health, sanitation, gender equality, fertility, corruption, political instability and violence, and democracy.

General Pervez Musharraf, immediately after taking power, concentrated on developing the economy and improving governance. With a population now approaching 150 million, and a high incidence of poverty, there can be no doubt that the primary challenge for any government would be to improve the living standards of the people.

Musharraf's administration has concentrated on the macro-management of the economy, in order to lay the foundation for sustained growth. Infrastructure, in terms of communications, energy and water supply, was given priority, with the long-neglected railway network receiving attention so that it became profitable.

Highways and ports remained priority areas, notably in Baluchistan, where the Gwadar Port project proceeded apace, as did the Saindak project, both with Chinese assistance. Social services, including education and health facilities, were allotted increased resources, with special emphasis on science and technology.

President Musharraf also sought the co-operation of major international financial institutions, such as the World Bank and the IMF, in stabilising the economy in general, and managing the country's debt problem in particular.

In several ways, the willingness of the Musharraf regime to be a key ally of the US in the war on terror had substantial effects upon the economy.

It has meant the waiver or rescheduling of more than one-third of Pakistan's external debt, which provided much-needed short-term relief. It has led to increased foreign aid flowing back to Pakistan.

Foreign investment

Pakistan has also taken measures to make the environment attractive for foreign investors. There has been a steady increase in Direct Foreign Investment (DFI) over recent years.

Some key results have been achieved. Revenue collection was improved, resulting in a substantial decrease in the budgetary deficit.

The rate of inflation that had been in double digits over several years came down.

The country's foreign exchange reserves grew at a fast pace, and rose to nearly $12 billion, which is equivalent to the cost of imports for 10 to 11 months. The most important breakthrough was achieved when exports rose above the static level of $8 billion in 2001, which was maintained, with the target of $11 billion for the current year well within reach.

However, it has still done little to improve the conditions of ordinary people, either in terms of more productive employment opportunities or better provision of basic services.

As has been the case, the current growth is essentially benefiting a small elite that includes both the landed and industrial classes and the urban professional groups.

  • Sharif Shuja

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