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Introduction: This article tries to expose lies used by current Pakistani government by claiming its economy has now recovered from near bankruptcy acknowledged by Dictator Musharraf immediately after over throw of elected government of Prime Minister Nawaz Sharif in 1999. Some economic information about India is discussed to present the contrast between economic developments in the two South Asian nations during years 2000-2004. Contrary to tall claims by the government, Pakistani press suggested that the 2005-2006 budget ignores needs of poor, which represents about a third of its population of 160 million. Finally the article also identifies an under current in the American War on Terrorism and Pakistan’s Kashmir obsession.

Military-Mullah Combine: What is the difference between Shiekh Chilli, the story-book fantasist who builds castles in the air, and a government planner? Well, Shiekh Chilli dreams with his eyes closed, but when something happens, he suddenly opens his eyes to return to the world of reality. A government planner makes his plans with his eyes open, but when something happens in the real world, perhaps a mishap, he promptly closes them.

Dictator Musharraf, Prime Minister Dr. Shaukat Aziz and the Mullah Brigade are adept manipulators. Ever since the painful birth of Pakistan truth has been a casualty. Its military-mullah combine has been thriving on the principle of repeating lies as daily propaganda so that they start sounding like truths. It is also a form of self-delusion. Pakistan has become a country where truth continues to be an extinct species.

Development of Two South Asian Nations: South Asia is dominated by poor nations. With independence in 1947, while India’s democracy was getting stronger as its democratic institutions gained increasing strengths Pakistan was mostly governed by military dictators, directly or indirectly.

India: India is a multi-religious, multi-lingual nation with a deep rooted caste system and several parallel societies represented by Hindus, Muslims, Sikhs, Christians, etc. Politically a constitutional democracy, the secular democratic India accommodates diverse religious, social, cultural, linguistic and economic aspirations of its population. Exploitation of communal cards may help politicians to an elected office but in 2004 the BJP dominated NDA government and before that in 1998 Congress government found out that their days in office are numbered if they fail to aggressively tackle poverty and rural development. More than Hindutva or the Anglophone cosmopolitanism of its urban centers, India’s voters – rich, poor and middle-class, urban and rural – clearly want the benefits of more economic growth, not less.

India has made steady progress in developing its educational infrastructure in addition to establishing required industries to support a credible force, its military-industrial complex. Over past fifty-eight years India has accumulated a reservoir of more than four million scientists, engineers, managers, technical personnel, etc. India’s educational institutions are now annually adding two million college graduates including nearly 300,000 engineering graduates and 200,000 scientists and technicians to its skilled work force.

India is a globally significant supplier of software products. Export of software, growing four times faster than gross domestic product, are clearly driving the Indian economy. Manufacturing contributes 28% and agriculture about 25% to its GDP. India’s auto-parts exports are expected to rise 50 per cent in a year, from $36.8 million in 2004 to $56.3 million in 2005. Over all, India’s manufactured exports have risen 50 per cent in 3-years, from about $37 billion in 2002 to about $54 billion in 2004, and they could rise six-fold reaching $300 billion by 2015 as multinationals invest more heavily in India as a manufacturing base. Exports of $300 billion will increase India’s share of global manufactured exports from 0.8 per cent in 2004 to 3.5 per cent in 2015, and leapfrogging other low-cost countries to become one of the top two exporters (along with China) of products like apparel, pharmaceuticals, specialty chemicals and auto components. India could also become a big supplier of consumer electronics, computer hardware and domestic appliances.

With 50% of its population below age 25, India’s educational infrastructure provides an ample supply of highly skilled workforce for supporting its steadily expanding industrial power in areas of IT, telecom and satellite technology, pharmaceutical and automotive manufacturing industries, steel, cement, energy and other such basic materials needed for its development. In India the early players are interested in the talent pool of chemists, designers and engineers, not low-skilled labour. Look at headlines from the past 12 months: Nokia and LG Electronics unveiled plans to begin handset production in India. Hyundai, which has already exported about 50,000 cars from India, plans to make India its export hub for auto components. Toyota opened a factory and Siemens announced plans to invest more than $500 million by 2009 in new and expanded factories in India. In 2004, IBM India recorded revenue growth of 45 per cent. By December 31, 2004 with roughly 23,000 employees in India IBM was India`s sixth largest IT employer. IBM is increasing its staff in high-growth countries such as India to meet increasing demands. IBM plans to increase its payroll in India this year by 14,000 workers as it cuts up to 13,000 jobs in Europe and the United States.

Most of the work in India’s factories today is done by brain power, with computer-aided drafting, lots of automation. Now most of them are building cars using 70 to 90 per cent local parts and materials. The IT boom essentially brought out the story that Indian engineering skills are good and Indian engineers can adapt to whatever the needs of the market are.

Relative to America’s per capita GDP of over $35,000 India’s PPP adjusted per capita GDP of about $3,300 is not impressive; however, India’s rapid economic growth, annually at 7% -8% will eventually see a growing number of Indians earning as much as average American and European; based on the World bank’s income distribution figures, the number in 2003 would be no more than 25-30 million. At some point in the next decade, when the figure reaches say, 100 million, India will clearly possess the critical mass of wealth to invest more in its own success (for example, pay for scores more IITs, IIMs, etc.) and accelerate its advantage further. This is only a matter of time.

Pakistan: Over last fifty-eight years Pakistan’s has been dominated by bureaucrats, ruling elites and generals conforming to a cold war garrison-state mentality. The country with a high level of bonded labor is under the grip of feudal and religious lords (chaudhries in Punjab, Sardars in NWFT, Baluch warlords, Bhutto, Durrani and muhajirs in Sindh, Maulanas, Qazis, Mohalvis, and Imams of various persuasions, etc.) and more and more army officers and bureaucrats are enriching themselves by exploiting power to acquire government controlled lands and businesses.

Politically Pakistan is a military democracy where a military dictator controls the government of elected officials in elections rigged by military’s ISI. Agriculture contributes 28% and manufacturing under 15% to its GDP. Pakistan’s economy is heavily dependent on foreign assistance; currently it is receiving over a billion dollars a year, both cash and debt forgiveness, primarily from America. Until 1999 it had been bailed out 17 times by IMF assistance and given the increasingly shaky nature of Pakistan, perennially near-failing-state, the likelihood of additional such future bail outs can’t be ruled out.

Pakistan’s educational systems are dysfunctional, dominated by madrassah brand rote and regurgitate methods. Not even one of its 60 public universities is among world’s top 500 universities possibly because there are less than 1,800 Ph.D. level teachers in these schools, and it requires an additional 22,000 Ph.D. level teachers to improve its quality of education and scientific research capabilities. (See also, Kishan Bhatia, “What’s Musharraf to do?”, India Cause June 18, 2005)

Pakistan has fallen behind all of South Asia in its human development index, including Nepal and Bhutan yet current Pakistani government puts out cooked up statistics to show that it is maintaining parity with India in economic development.

• For purposes of calculating per capita GDP a significant index is population growth rate; India’s population growth index is lower than that of Pakistan. Pakistan with population of 155-160 million has the high population growth rate of above 2% per year. For sustained economic growth, the economy must grow at rates of about three times the increase in population. For Pakistan, this would imply a rate of growth averaging at 6.5 per cent a year to be sustained over several years, if not decades.

• Conforming to its cold war garrison-state mentality, Pakistan’s defense budget continues to be close to four per cent of its GDP compared to 2.8 per cent for India.

• Investment, employment and production go together. Productivity is associated with availability of skilled labour force. The dysfunctional education system (see, Kishan Bhatia, “What’s Musharraf to do?”, India Cause June 18, 2005) is not geared to produce sufficient number of scientist, engineers and technicians needed to improve productivity and expand the manufacturing sector for engineering goods. Unlike in Pakistan, poverty in India is declining as India’s labour force is more productive.

• Pakistan’s per capita income, the prime minister claims, now stands at 730 dollars. According to the World Bank, it was only 470 dollars in 2003. Pakistan continues to project its per capita GDP higher than that for India. For the same period the average GDP growth for India (average at 7+% for 2001-04) is higher than that for Pakistan (average under 6% for 2001-04).

• Relative to Pakistan India has made significant progress in areas of education, IT, telecom, satellite technology, pharmaceutical and automotive parts manufacturing. Pakistan lacks sufficient number of adequately trained engineers, scientists and technicians needed for sustained economic growth.

Pakistani Media Comments on Latest Budget: Some comments from Pakistani press follow:

• In two Op-eds (Dawn, June 14 and 21, 2005) Dr. Burki pointed out several difficulties in understanding the budget document and the economic survey 2004-2005 as the base year and basic statistical data are not clearly presented. Dr. Burki observed, “The budget document and the Economic Survey for 2004-05 mention a “double-digit increase in per head income”. This can be the case only in nominal terms since with 8.35 per cent increase in GDP in real terms and 1.9 per cent increase in population, real income cannot increase by more than 6.4 per cent. Repeated references to double-digit per capita income increases create the impression that the government is playing a game with numbers.”

• Grand rhetoric aside, there is no real sensitivity to ameliorating (if not eliminating) the miseries of the poverty-struck. In the latest budget, relief has been given only in areas specific to the rich. How will reducing custom duties on luxury cars help the poor? For that matter why should those who cannot afford one square meal a day be so hot about the communications revolution? Cellular activity is in an area where taxation does not hit the realm of necessity. Even if the mobile companies were able to sell 10-15 million mobile sets in the next five years, will the 50-60 million of the populace that worries about their daily bread eat mobile telephones? On the other hand, a 20 percent built-in tax on all calls (with a bare minimum of Rs1000 per month as the monthly average) will fetch the exchequer Rs12 billion annually with five million sets activated only.

• The economic strategy adopted to fuel the present boom has been rather disingenuously crafted. While the government talks about making the poverty alleviation programme an integral part — indeed the core — of its development strategy, most of its economic policies are directed towards benefiting a small elite connected with the landed, military and industrial classes and the upper stratum of the urban middle class.

• The army is deeply engaged in economic activities. The military runs industrial and economic enterprises, including sugar mills, cereal processing, bakeries, cement, fertilizer, textiles, transport, banking and financial institutions, universities, oil and gas refineries, etc, besides a prominent role in the real estate sector.

• In Pakistan, the conflict of interest is not only at the individual but also at the institutional level. The military’s involvement in policymaking at the macro and micro levels represents an unprecedented conflict of interest which democracies try to avoid by requiring senior members of the government to de-link themselves from their business interests before assuming positions of executive authority. The trouble is that the military is its own prosecutor, judge and jury, and no independent inquiry has ever been held into the many scandals that have surrounded its activities.

• Pakistan`s problem cannot be resolved easily, being the cumulative effect of past policies, such as support to Jihadis and the Taliban regime in Afghanistan. Poor law and order, sectarian killings, violence against women and the minorities is common place in Pakistan. A fear is that Pakistan is an "epicenter of terrorism" and that its nuclear weapons could slip into the hands of Islamist forces. Some empirical indicators that point to all these problems are: a lack of democracy and political institutions, poor economic virility, poor infrastructure for development of science, education, culture, good governance, a lack of resources for aid-giving potential and the role played as an ‘American lap-dog’ in the community of nations.

Comparison of Budgets: The following data are from America’s CIA.

Pakistan: Revenues: $13.45 billion; Expenditures: $16.51 billion; capital expenditures not specified (2004 est.)
India: Revenues: $67.3 billion; Expenditures: $104 billion, including capital expenditures of $13.5 billion (2004 est.)
China: Revenues: $317.9 billion; Expenditures: $348.9 billion; capital expenditures not specified (2004 est.)

War on Terrorism and Pakistan’s Kashmir Obsession

A recent report, “Smokescreens in Afghanistan,” by M K Bhadrakumar (http://www.atimes.com/atimes/Central_Asia/GF25Ag02.html) quoted Musharraf, who claimed that Afghanistan needs ten years to rid of al Qaeda - Taliban terrorist. Musharraf assessed that in "do-able" terms, from a soldier`s point of view, "we should be able to bring a semblance of democracy that is sustainable, ensuring the integrity of Afghanistan" in a matter of 10 years. What has been achieved during the past three-and-a-half years since American troops landed in Afghanistan is that "we`ve broken [al-Qaeda`s] cohesion" and its ability to function as a "homogeneous body able to execute operations in a command and control environment". But it will take 10 years for an "ultimate dismantling, ultimate elimination" of al-Qaeda from Afghanistan.

Bhadrakumar observed, “Many issues have suddenly come into the open. What exactly is the balance sheet of the war on terror in Afghanistan? If 10 more years are needed to eliminate al-Qaeda from Afghanistan, what has been achieved so far?

He continued, “Some answers are available. On the security front, the war on terror has successfully dispersed various international militant networks thriving in Afghanistan under the Taliban regime. In October 2001, as American troops moved in, Taliban militia and its allied cadres gingerly retreated into the tribal agencies in Pakistan. But where did the Taliban go? American military commanders and authorities in Kabul have lately begun to admit that their claim that the Taliban were a spent force was made hastily and that the Taliban have regrouped. A pattern is setting in. A lull prevails during winter months, but with the advent of spring the Taliban reappear and another "fighting season" commences. Every year the hope is that by the next "fighting season" an Afghan force will be equipped to take them on. But with each fighting season the Taliban are becoming more audacious, better coordinated and apply new "techniques."

He asked, wasn`t this the pattern during the Soviet occupation of Afghanistan in the 1980s too? The US forces, too, are hitting back. (So did the Soviet army.) Almost every day we come across body counts of how many Taliban fighters have been killed. But the Taliban seem to have no difficulty in getting their ranks replenished.”

Looks like Musharraf’s assessment has a ring of truth to it. Keeping above analysis in mind let’s examine impact of above international events on the developments in South Asia.

In South Asia Musharraf has been in a hurry and trying to push India hard on Kashmir issue for past several years. Records so far show that any progress on this issue has come only after Musharraf accepted Indian terms for progress. He is welcome to do so even now to resolve the issue in two weeks, as he recently put it, simply by accepting Indian positions; but Musharraf lacks political courage to accept ground realities.

A question is why is Musharraf in such a rush?

An answer may be, I think, in Musharraf’s estimation both Afghanistan and Iraq would be stabilized in less than ten years or by 2011 from the day it were occupied by American forces. America has maintained its presence in Afghanistan for over four years now, provided Pakistan billions in aid and Musharraf as a military man thinks that in six more years both Taliban and al Qaeda would be a distant memory. As these American headaches disappear American dependence on Pakistan would also diminish. The logic for Musharraf`s estimation is his experience during Zia ul Haq period when Pakistan got involved in American push to free Afghanistan from USSR occupation; that phase lasted less than ten years before Pakistan was unceremoniously dumped by Americans.

So Musharraf has about five more years to settle contentious issues in South Asia and reestablish on a strong footing economic interdependencies through projects such as Iran-Pakistan-India and may be China gas pipeline so that he can replace American aid with revenues of about $700 million per years in transit fees. A failure to achieve this economic advantage may create conditions for Pakistan to repeat its poor economic performance of 1990s.

By 2011, the strategic partnership between India and America would be at an advanced state leaving little room for Pakistan to be a spoiler in South Asia. Pakistanis claim that China is Pakistan`s most dependable ally so by 2010s America would be counting on India, not Pakistan, to counter growing influence of China in the region.

India`s economic and military growth is rapidly eroding Pakistan`s influence. By 2011, growing at 7% a year India`s economy would be about 50% bigger than what it is today. For 2005-2006, India`s software export, just one component of India`s economy, of nearly $23 billion would be higher than Pakistan`s budgeted revenues of $13.45 billion. As economic gap between two nations widen, Pakistan would be automatically reduced to an insignificant nation, like most of other 56 Islamic nations.

Kishan Bhatia

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