Pakistan's Economy-II: Challenges facing Musharraf

28 Jan, 2000    ·   317

D. Suba Chandran says Gen. Musharraf and his sincere efforts seem to be the only way out to clean Pakistan’s economic mess

What are the major economic challenges facing the military regime? They are to revive the confidence of investors in Pakistan . This is important, as more than 80 percent of the investments come from abroad. It would be difficult to boost the investor’s confidence, because of the policies pursued by the previous governments. Any investor, domestic or foreign, will look at two factors before making any investment – political stability and continuity in a country’s economic policies. Unfortunately, both the factors have been missing during the past decade in Pakistan . No government, whether under Benazir Bhutto or Nawaz Sharif, completed its tenure of five years. It was either dismissed or forced to resign. 



Worse, both Benazir Bhutto and Nawaz Sharif were determined to discontinue the economic programmes and policies initiated by the other. Benazir Bhutto, when came to power for the first time initiated her own populist programmes caring less for Junejo’s five point programme. Sharif, when assumed power, terminated the programmes initiated by Benazir and introduced his own. The same trend continued even when they were re-elected. 



Besides the lack of continuity in the policies, the attitude of the ruling elite to the foreign investors, especially that of the Pakistani Muslim League (PML), have created a huge doubt over the latter’s mind. The best example could be that of Sharif government’s handling of the Independent Power Producers (IPPs). The Government of Pakistan during Benazir Bhutto’s second tenure signed an agreement with the IPPs that the Water and Power Development Authority (Wapda) of Pakistan would buy a specific amount of electricity at a particular tariff. When the Shariff came to power in the next elections, for certain political reasons, decided not to honour the previous agreement signed between the IPPS and the Benazir government. Worse, the Shariff regime and the now infamous Ehtesab Bureau started pressurising the IPPs that they should supply power at a reduced tariff. The issue resulted in the Pakistan losing the confidence of foreign investors, which also ended up in drying up of foreign investment in the last two years. 



Understanding the nature of problem, the present military government has started re-negotiating with the IPPs and in his address Musharraf announced that it has reached an agreement with nine IPPs.



Besides, the greatest mistake of the previous regime was freezing the foreign currency accounts during May 1998. When the foreign investors were already in a dilemma to invest further, the freezing did immense harm to Pakistani the economy.



Though Musharraf has apologised for these measures of the previous government, during his speech when he announced the economic recovery plan and assured the investors of better economic management, one has to wait and see, whether these assurances make a real impact among the minds of the investors.



The second major challenge to the military regime is how to recover the defaulted loans and ensure accountability. Both depend on the following factors: An efficient, unbiased investigating agency, which is corruption free; its ability to bring and sustain the efforts against those defaulters and the looters in the courts; a swift judicial action etc. According to an estimate, around 225 billions rupees remain unaccounted in various financial institutions of the state, with more than 480,000 bank defaulters. Since much of the looted wealth is deposited in banks and invested in various forms abroad, it will be extremely difficult to achieve anything significant in a short span. 



With all sincerity, the military regime has set up National Accountability Bureau (NAB) to ensure across the board accountability, recover the defaulted loans and to tackle corruption. Ever since its inception, the military regime was able to recover Rs 9 billion of the total Rs 225 billion defaulted loans. The NAB is continuously being revamped and its strength is being increased to fasten the accountability process. Of course, as the Chief Executive mentioned, it is a difficult job. On the one hand, the people are expecting quick results and fast recovery of the looted wealth, on the other, the officials are not well equipped to deal with white-collar crimes such as money-laundering, as they lack adequate experience. Besides the military government has to be very careful to avoid getting the tag that it is being partial or biased and conducting a vendetta against the former ruling elite. Already there is a criticism regarding the decision to exempt serving officials of the military and judiciary from the NAB.



Will Musharraf be able to overcome the economic challenge? Given the performance of the political leaders in the last decade, Gen. Musharraf and his sincere efforts seem to be the only way out to clean Pakistan ’s economic mess. It is irony that Pakistan has to look up to its Generals, even to deliver the economic goods.