Economic evidence, however, belies the benignity and efficiency of the techno-structure raised by the chief executive in fiscal years 1999-2000, 2000-01 and 2000-02. With an annual GDP growth of three per cent and an inflation rate of 3.8 per cent, the economy was in recession. Fixed investment was declining, implying low demand for the import of capital goods. These low imports, together with the doubling of remittances by overseas Pakistanis in a single year owing to the 9/11 attacks, meant that the current account deficit was also low. A policy of austerity was adopted. Despite a small cabinet, absence of assemblies and political allocations, a cut in the defence expenditure was also taken in order to demonstrate the seriousness of the policy, while fiscal deficit averaged 4.7 per cent per annum.
It was in these three years that the seeds of the present energy crisis were sown. Wapda was stopped from undertaking any new thermal projects. Its role was confined to hydroelectric generation. The private sector was expected to invest in thermal units. A competent technocratic set-up, backed by the unchallenged authority of the state, failed to start construction of any major dams. In fact, the chairman of Wapda, a general inherited from the Nawaz Sharif government, spent more time hounding the independent power producers than pushing for hydro projects. The net result was that the public sector failed to invest in hydroelectric projects and the private sector was chased away from investment in thermal projects. Inevitably, the installed capacity declined from 18,700 MW in 1998-99 to 17,700 in 2001-02. In contrast, the gas supply increased from 818.3 MCF to 923.8 MCF. Honesty was not considered the best policy in the distribution of CNG stations and the allocation of this valuable resource to friends and relatives was done with impunity.
The poor and the social sector were neither on the radar screen of the chief executive, nor among the core competencies of his platoon of technocrats. The headcount of the poverty ratio rose sharply from 30.6 per cent in 1998-99 to 34.5 per cent in 2000-01. The unemployment rate increased from six per cent to 7.8 per cent. The health expenditure stagnated at 0.7 per cent of the GDP and education expenditure fell from 2.1 per cent of the GDP to 1.7 per cent.
A technocratic set-up, the so-called Bangladesh solution, is advocated to stabilise the economy, resolve structural issues which have been ignored by politicians and curb corruption. However, the Bangladesh solution failed in Bangladesh. The two ladies are alive and kicking. Thus, unsurprisingly, it also failed in Pakistan and Musharraf himself took most of the corrupt politicians back under his wings. The lesson to be learned here is that political problems can only be resolved politically. In this very process, the increasing maturity of the political class and the participation of the people, create and nurture stakeholders for economic stability and growth. The route to a lasting constituency for sustainable development is through more and more democracy, not technocracy.
Published in The Express Tribune, September 28th, 2012.
COMMENTS (11)
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@meekal a ahmed:
everyone has an axe to grind. while i appreciate mr. PTs viewpoint, he fails to point out the situation prior to 1999, when the country was bankrupt, with only 2 weeks of forex for imports, shattered foreign investor confidence, and a weakened and instable political environment. what PM brought was a cleaner, more efficient, and well run government. rome was not built in a day. what no can argue against was his intentions were good and they faced some positive accomplishments. instead of focusing on things that didnt work out, lets write an article of things that did, no?
Musarraf acted as an excellent economist for Pakistan in the sense that he correctly identified the root couse of economic down fall and gave a last and final opportunity to the Islamic forces to annex Kashmir in the form of Kargil war on the ground of religion . Later on he attempted to solve the issue by promoting trade with India . Tha present govt. also followed his policy and granted MFN status to India . Gradually the issue would have been dilluted and the Islamic forces sheltered by Pakistan in the past would have lost their ground in due course of time . Now the international war against the terrorism is doing the same job .
PT,
I am surprised that you as a professional economist would say that a growth rate (year-on-year) of around 3% denotes a "recession".
What was happening (and is still happening) is that the economy was/is growing at below its trend potential (which was recently calculated by the IMF at around 7-7.5% per annum) with a large negative output gap (in terms of unused capital and labor).
Furthermore, while it is true that the economy grew below trend in the initial period, it moved to above potential in subsequent years. The output gap closed and was now positive and, as happens every time, inflation started to accelerate.
It is not all roses in Bangladesh, but it is doing way better than Pakistan. In some fields Bangladesh is even ahead of India. The Pakistan solution (undermining of politicians by the army followed by a coup) has really proven to be a sure loser for the country as a whole.
They (self appointed custodian ) first threw Zaid hamid in the air,then IK on the stage then they brought in heavy weight of hypocrites SR aka tully to preach the nation the blessings of technocrates (self appointed thekedar of Pakistan) and now ex commando, as a last (hopefully) resort,to convince this nation that democracy is a luxary that can not be afforded.How desperate is this lot.Get away and let the sun shine on this poor land.
How can technocrats succeed when all economic decisions are political in nature. Whether it is increase in tax revenues, reduction of subsidies, reforming state enterprises or making the choice between 'guns and butter',investing in people , the technocrat has little influence. And where are the good technocrats? Thus far, technocratic leadership has meant decisions by the IMF and look where we have ended.
How will technocrats achieve anything when all decisions affecting the economy are political in nature. Whether it is increased tax revenues, reduction in subsidies, reforming state corporations or choosing between 'guns and butter', it is the politicians that must decide and invoke enough support from the people for implementation. A technocratic economic team means decisions by international institutions and look where we have ended up.
But our political class is made up of career-politicians, who are any thing but literate, corrupt, and unwilling or unable to solve the country's problems. We need a mix of technocrats and politicians.