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Nationalizing “Bundoo Khan”

World War 2 sustained communism far beyond the 50 years it should have gone on its own momentum, the impetus of that war acting as a “manufacturing force-multiplier” for the socialist economy. As it is Communist China chose economic emancipation in the mid 70s under Deng Tsao Peng, President Jiang Zenin nailing the coffin of its socialist ideology last October by allowing free enterprise entrepreneurs officially into the Communist Party. By the late 60s it had been clear that the romantic notions of socialism that the leaders of independent third world States newly created in the 50s was seriously flawed. Saddled by an inefficient and indolent public sector which was into railways, telecommunications, water projects, electricity, sewerage, etc but flanked by socialist ideologues like JA Rahim and Dr Mubashar Hussain, Zulfikar Ali Bhutto plunged Pakistan into three decades (and still counting) of economic wilderness by his nationalization-binge of the early 70s.

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Back to the Future, with Hope

Four years ago, despite the devastating floods of late 1992, 1993 had started with the hopes of a vast majority of the nation firmly rooted in the promise of economic Valhalla promised by then PM Mian Nawaz Sharif. The death of the COAS Gen Asif Nawaz in the first week of January set loose latent fears and ambitions putting into motion events that saw the exit, return and re-exit of Mian Nawaz Sharif as PM in the space of three months beginning April and ending in July 1993. The year’s end saw the contrived return of Ms. Benazir, the ensuing Zardari dominated nightmare running a full course till her exit as PM less than 60 days ago. In less than a month, the people of Pakistan are to go to the polls and while election fervour is muted because of the constant public refrain for accountability, the masses are gingerly hoping to pick up the threads of the economic aspirations lost four years ago. A crude and early rough poll shows the people’s mandate presently running clearly in Mian Nawaz Sharif’s favour. Having lost considerable ground economically as a nation since 1993, anyone who becomes Pakistan’s PM must first make the nation financially stable before energizing the various economic sectors to the same level as was obtaining then.

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The Great Silent Majority

Charismatic leaders of the third world may come to power on a wave of public adulation but retain their chairs only through the support of the Great Silent Majority among the masses. This support may initially be based on the residuals of euphoria of an election campaign, can be sustained only through achievements taken note of by the masses, particularly pertaining to their economic well-being, not unrelated to a sound law and order situation. When the public confidence in hollow rhetoric starts to erode, the balloon of popularity starts to deflate fairly rapidly, the end reaction can be quite damning.

Ms Benazir Bhutto’s ascent to power was pre-ordained for several reasons, some positive and some negative. The positive reasons were her undeniable charisma, a lasting admiration for her late father, her stated manifesto and above all the massive western media support based on admiration for her brave struggle, translating into vital support within the vocal liberal wing of the political structures of the western nations, particularly in the Democratic Party in the US. Though PPP got a supposedly split mandate, she enjoyed the grudging support of even those who probably did not vote for her party. The negative support for her was because of antipathy towards late Gen Zia and his dictatorial rule, May 29 Junejo Government massacre being the last straw for even his moderate supporters. This was further accentuated by the penchant of the masses for genuine unadulterated democratic freedom and the natural inclination for change after a long hiatus, any change. After May 29, 1988 change just became a matter of time, Aug 17 was simply a tragic milestone along nature’s way to a free and fair election, as much as any election in a third world country can be called as such. To their undying credit, the military hierarchy kept the constitutional faith, strengthening the hands of the President in his clear choice of the leader of the majority party in the National Assembly, Ms Benazir of PPP, to form the Federal Government. For many reasons, again positive and negative, Ms Benazir needed to become the Prime Minister of Pakistan, despite her detractors there is no ambiguity or controversy about her ascent to power, this was as it should have been, added to that she seemingly had overwhelmed the regionalists in Sindh.

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Money and Power

The three major reasons for the deterioration of the financial institutions in Pakistan are (1) nationalisation (2) dependence of both the government and the private sector for liquidity exclusively on the banking system and (3) pre-emption of substantial part of the credit by the government. A myriad number of smaller inter-locking factors have contributed to the decline of the credibility of financial institutions in Pakistan but most can be traced back to these aforementioned over-riding reasons.

Two major concerns led to the nationalisation of the banks in the early 70s by the first PPP regime. Of primary concern was the fact that control of finances of the country interfacing with that of assets were in the hands of a very small minority. The other reason was that the priority sectors were neglected inasmuch social and even economic development were not supported by credit allocation viz, agriculture, small industries corporation, transportation, construction, etc. Money was concentrated in the urban areas at a severe cost to the rural areas. A great bulk of the credit was going to industry and trade which claimed about 67% of the credit given to the private sector with only the balance 33% going to the rest of the private sector economy.

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Deterioration of Financial Institutions

The three major reasons for the deterioration of the financial institutions in Pakistan are (1) nationalisation (2) dependence of both the government and the private sector for liquidity exclusively on the banking system and (3) pre-emption of substantial part of the credit by the government. A myriad number of smaller inter-locking factors have contributed to the decline of the credibility of financial institutions in Pakistan but most can be traced back to these aforementioned over-riding reasons.

Two major concerns led to the nationalisation of the banks in the early 70s by the first PPP regime. Of primary concern was the fact that control of finances of the country interfacing with that of assets were in the hands of a very small minority. The other reason was that the priority sectors were neglected inasmuch social and even economic development were not supported by credit allocation viz, agriculture, small industries corporation, transportation, construction, etc. Money was concentrated in the urban areas at a severe cost to the rural areas. A great bulk of the credit was going to industry and trade which claimed about 67% of the credit given to the private sector with only the balance 33% going to the rest of the private sector economy.

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The Presidential Candidate

The process of electing a President by means of an electoral college has been shown up to be an absolutely ridiculous exercise that demeans the concept of democracy. Ten days before the actual election we do not even know the actual choice of the two major political parties, various permutations and combinations are being considered.

Of the serious candidates, only one, Ghulam Ishaq Khan, continues to remain extremely controversial. The PPP “jirga” that met him on Monday night at Anwar Saifullah’s house failed to convince him not to do a “PIF” on PPP. One does not see the PPP seriously considering his candidacy in the face of its own experience at GIK hands. However, politics brings together stranger bedfellows. PPP’s support for a GIK candidacy will be taken as a clear signal for confrontation with PML(N). Perhaps Akbar Khan Bugti from Balochistan excites somewhat similar emotions but in a much lesser degree for much different reasons, primarily that he has the potential of being an unguided missile. Even then he remains in the class of mostly honourable men who are inclined to become the President of Pakistan.

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The Men Who Would be President

The General Elections has evoked such focus of attention that the Presidential elections, most important of all in the context of the practical experience of politics in Pakistan over the years, has been virtually sidelined. The period between the end of the General Elections and the Presidential elections being less than a fortnight, the parties must at least indicate their possible choices, their actual preference could be announced till after the Elections. The present conspiracy of silence will give room for backroom manipulations. The Constitutional requirements about fulfillment of qualifications by the Presidential aspirants should be so transparent that not an iota of doubt or controversy should exist. Though his bureaucratic shortcomings were well known, Ghulam Ishaq Khan (GIK) made a fine start as President, succumbing later to his baser instincts and destroying the respect he had earned in the ushering in of democracy. GIK brought the country to the brink of political and economic apocalypse by manipulations that froze all government activity. Such tendencies for malfeasance and subterfuge must be examined thoroughly in the individual Presidential aspirant.

As the point man in the struggle against late Gen Zia’s Martial Law, Nawabzada Nasrullah Khan was the obvious preference of Ms Bhutto and her allies but he was ditched by her in December 1988 in fulfillment of the package deal (made in Washington, not in Heaven) she had to accept to come to power. Often derided for his lack of a popular base of support, the Nawabzada has been a necessary cog for the Opposition for the last three decades in combining against a ruler, dictatorial or democratic. As a COP leader, he saw the end of President Ayub Khan, as a PNA leader the last of Prime Minister Zulfikar Ali Bhutto and as a PDA leader, first the dismissal and later the resignation of Prime Minister Nawaz Sharif. Respected among the politicians’ community, the Nawabzada nevertheless does not command that much admiration within military or bureaucratic circles as a potential President should. A possible candidate of the rapidly unravelling PDA, PPP’s political pragmatism may mean he is already deemed expendable. There are rumours that former CM Mir Afzal Khan, much more of a wily fox than GIK, may have opted out of taking part in the elections to the Assemblies on “health grounds” to remain a viable PPP candidate for President. His tendency to switch sides and principles on an “as required basis” are well known.

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The Perception of Impartiality

To end the political impasse that was rapidly bringing the country to economic apocalypse as well as civil war conditions, the COAS Pakistan Army Gen Waheed brokered an agreement between the President and the PM that accepted the demand of the Opposition for the conduct of free and fair mid-term elections. A significant part of the unpublicised agreement was that the COAS became the guarantor of the terms accepted by all the sides. The former PM felt that as long as the President was able to carry out extra-constitutional interference in the day to day running of the country, fair elections were hardly possible. GIK and the Opposition reciprocated this mutual feeling of distrust as long as the former PM called the shots in the Federal Government. As the ultimate compromise it was agreed that both the President and the PM would step down in favour of a generally neutral regime. The Army’s role as guarantor would hopefully restrict the propensity of the various security agencies to influence the results in the manner that they would deem fit.

The choice of Moeenuddin Qureshi to head the Caretaker Regime was motivated out of a genuine need to have an impartial non-controversial but effective person responsible for the affairs of Pakistan in the interim period. That the Caretaker PM is a man of some international stature and known integrity as well as a world respected economist was an additional plus point. There are those who decry his lack of experience within Pakistan but in the present state of extreme polarisation where anybody who is anybody has got involved in one way or the other with one side or the other, one considers that particular “inexperience” to be a necessary virtue. Spelling out his first priority as the holding of free and fair elections in Pakistan, Moeen Qureshi gave out the sorry state of our economy as his second priority. This dual capability is a bonus for Pakistan. On a brief private visit to Washington for a medical check-up, the PM kept up a busy schedule of official engagements arranged at short notice, primarily including US Vice President Al Gore and the major international finance institutions, the World Bank and the IMF. Before leaving for the US, Mr. Moeen Qureshi laid the base for the concept of impartiality by inducting into Cabinet office such eminent persons as are generally considered to be without any party affiliations, both in the Federal and Provincial set-ups. With respect to his choice, to his credit there has been no criticism as yet. A number of subsequent steps need to be taken to ensure that the concept of neutrality remains paramount throughout the election process and the capacity of those who are past masters of subverting a neutral process to their nefarious designs is restrained.

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The Countdown Begins

The Caretaker PM, Mr. Moeenuddin Qureshi, has given as his first priority the conduct of free and fair elections. With 70 days to go the polls for the National Assembly, the Countdown may have started but electioneering has not yet commenced in earnest. Despite that we are much further advanced today in the pre-election process than we were on May 26 when the Supreme Court scuttled the July 14 date set by Ghulam Ishaq Khan and Co, which only goes to show that there is much more confidence about the elections of October 6 being held in comparison to the July 14 date. One must also state that the present Caretaker arrangement inspires confidence about their neutrality as opposed to the Supreme Court-terminated Balakh Sher arrangement which was clearly partial.

While elections are certainly a priority, the first priority remains the economy. Because of the prolonged state of limbo, Pakistan’s economy has been under severe pressure. The uncertainty has added to nervousness among potential investors thereby knocking down the sequence of events that was to lead us towards economic amelioration. Inflow of investment is the main prop for bolstering the economy during the state of transition. To cater for the shortfall, PM Moeen Qureshi will certainly ask his friends in the World Bank and IMF for international aid to start flowing immediately. One feels that he would do better by asking for a Debt Moratorium/Debt rescheduling for a three-year period. The policy of liberalisation has meant the removal of bureaucratic controls in order to attract investors to a free economy. Unfortunately investors have stayed away due to the political instability but the free economy environment and its lack of checks and curbs has created an adverse economic imbalance to the detriment of Pakistan. Our foreign exchange reserves have dwindled alarmingly. Massive devaluation by India had already effectively undercut our major export earners, cotton textiles, the hiatus in early reaction has contributed to taking us to the verge of economic apocalypse.

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The Continuity Factor

Mr Moeenuddin Qureshi, formerly Senior Vice President in the World Bank, effectively No. 2 of this international finance institution, has been appointed Caretaker PM of Pakistan for the period covering the elections and the installation of the elected Federal Government after the polls. In his first informal chat with reporters and journalists, he has emphatically emphasized free and fair elections as his first priority, adding that the polls should not only be free and fair they should be perceived by the general public as such.

While it is true that Moeen Qureshi is not exactly a household word in Pakistan, in Pakistani economic circles he is revered and respected as one of Pakistan’s finest economists, a man who had reached the pinnacle of international recognition on sheer dint of merit. After more than a decade (since 1980) as the No. 2 man in the World Bank, Mr Qureshi took voluntary optional retirement as only a US citizen could be President of the World Bank according to the Bretton Woods agreement. Having reached his level he wanted to devote his time to private pursuits as an international consultant. With established credentials as a non-political person acceptable to all parties but having international recognition, Moeen Qureshi’s selection was brilliant because it fulfilled both political and economic purposes. In this interim period where it is extremely important to re-open the in-flow Consortium Aid, there would be no better individual qualified to address this issue with his former colleagues in the international finance institutions. He has obvious credibility as a respected finance person in the capitals of the World, both among developed and developing countries. Lastly and most important, as a committed free market exponent he brings an economic continuity factor to Nawaz Sharif’s policies so that Pakistan does not stay in economic limbo. The people of Pakistan will decide in early October whether they want to support Nawaz Sharif or give a different mandate to his opponents. As such while Moeen Quereshi has ostensibly been brought in for political purposes as a neutral person having international experience, he has the added advantage of being a major force-multiplier on the economic front.

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