Today we are living in a confused environment. Everything is looking moving towards segmentation. Government is claiming revival of economy with 5.3% GDP growth. This is the same trend where US and other countries are claiming to have moved towards somewhat growth. But on social side this means nothing but creating some portion of middle class. With this no country can dent poverty prevailing in their respective countries.
In this way layer of middle class has spread from 20% to 40% of total population in Pakistan with few people above this layer including Nawaz sharif, Zardari or Imran Khan. The people living below middle class have gone more poor with less than Rs 6000 income with 6 family members. Their numbers are also in dispute. For example Ministry of Planning has presented a report in senate on August 2017 by saying that 29% of population is below poverty line. The same Ministry has presented a report in the UN in June 2016 by saying the numbers are 39% of the total population. The World Bank in its recent report says the numbers are above 50%.
However apart from this increase, surge in middle class has moved the purchasing power somewhat upward in Pakistan. This development has provided leverage to people like Malik Riaz to do his business and Imran Khan to do his politics.
In fact Economic and social outcomes in Pakistan over the last seventy years have remained a mixture of paradoxes. The economic growth rate has averaged 5 percent annually since 1947. Politically, however, the interplay of religious fundamentalism, sectarianism, ethnic cleavages and regional economic disparities has made the country volatile and unstable. Various East Asian countries that were behind Pakistan in the 1960s have surged far ahead in most economic and social indicators. Pakistan has thus been unable to realize its potential.
Despite sharing a common historical, cultural and social milieu, Pakistan and India have pursued different paths since independence in 1947. India has, emerged as a stable and vibrant democracy while Pakistan has spent half of its post-independence years under military dictatorships and is currently struggling to quell an Islamic insurgency all over of the country. The democracy-development nexus appears to be well entrenched in the case of India, while it is faltering in Pakistan. A great deal of recent literature has suggested that China and India are the typical representatives of authoritarian and democratic regimes, but fewer attempts have been made to resolve this puzzle in the case of India and Pakistan, two countries that are more akin to each other and share a common legacy.
Pakistan came into existence as a moth-ridden country at the time of the partition of India with tribal setup in KPK, Baluchistan, Baltistan with Khans and Sradars at the top, Punjab with south and upper Punjab with stronger Feudal system in the south and little weaker in Upper Punjab forming main source of British Army and now in to Pakistan Army, Sind with Feudal lords with turning Urban areas through migrants mostly lower middle class have now emerged. The East Bengal later East Pakistan was dominated by lower and lower middle class with migrants coming from Behar as part of lower middle class. The physical separation between eastern and western Pakistan, with Indian territory in between, put Pakistan at a serious disadvantage from its inception.
The foundation of an authoritarian streak in the polity was laid fairly early in Pakistan’s history. After the death of the first prime minister, Liaquat Ali Khan, and the ascent of bureaucrat Ghulam Mohammed to the office of Governor-General, the supremacy of politicians in the political order was lost.
Different parts of Pakistan since inception moved towards their own paths with separatist movements in East Pakistan, Baluchistan, Sind and even KPK. This led towards separation of East Pakistan. Baluchistan is still living in uncertainty with Sradars in rule and young Baluchs with different aspirations. Sind has been made bastion of Zaradri and Faryal Talpur to rule. They have very successfully diluted the PPP by making it a servant of their properties mostly in Sind. Punjab has now Mian Nwaz Sharif with uncertain future and talking like a leader of Punjab with separatist mind.
In this whole scenario religious parties and groups have taken their own path. From day one they came to know that people of Pakistan would never vote them so they adopted way of terrorism by raising flag of Islam. They usurped million of acres of lands for their madressahs making them sanctuaries of terrorism and dividing people on the basis of sects. Now 100% of them don’t believe on lawful activities. Smuggling of oil, narcotics and ammunitions have become their business.
Their one of the strong base Karachi under Jamaate Islami moved towards MQM with secular thoughts but with command in some other hands. Now they have also been broken with preparation to hand over Karachi either to Mustafa Kamal or Imran Khan.
So with these uncertainties economic challenges have emerged mostly on the external front with huge deficits in trade and current account. External debt has also moved upward not in sense of % of GDP but with the question that how that would be repaid. June 2017 report of SBP says that total government debt is above Rs 21 thousand billion equal to 78% of GDP with repayable external debt as Rs 6 thousand billion.
Now for this every one refers towards CPEC. Everybody is arranging conferences on CPEC by highlighting its favorable points just to mint money from the government. In fact for the next 30 years Pakistan would pay 90 billion dollars against investment of 50 billion dollars in CPEC. This shows that return on this investment is 40% and Pakistan would pay Rs 300-400 billion each year.
We must realize that in China the main focus today is on one belt one road (OBOR) with investment of 5 trillion dollars in 60 countries. In this Silk Road and Maritime Silk road are included. This would link Iran Turkey, Russia, Germany, Egypt, Africa, Sri Lanka Indonesia, Vietnam including Pakistan. So it is a huge gamble. Since 2009 China has invested 6.8 trillion dollars in it, increasing china own government debt to 250% of GDP. Hence many Chinese businessmen are calling this as “One road one trap”.
So in this environment nobody knows what is going to happen in Pakistan in 2018 as in politics of electable no party is intact and can fragment any time. There is no chance of any interim government or military intervention as it can lead towards a civil war. Politically we need a political party in fact representing 90% of population including middle class and people with below poverty line. How it would emerge. Of course it would not come from the sky but with fragmentation going on in the political parties would help it to emerge.
External environment i.e. changes in the Middle East and in the region would also play a role in this. But how much, this all depends on inner politics going on in the country. One should not take threats of Trump lightly as he wants to get away from Afghanistan. Proxy wars started since 80’s have now become a burden on Pakistan. Afghan war has now infiltrated in to Pakistan. Pakistan is standing in between Saudi-Qatar tussle. To hold Kashmir, Modi has waged a war against Pakistan blaming Pakistan for terrorism and religious extremism. This war is providing reason for Pakistan and India to incur huge defense budget and to keep large armies. But in spite of this external forces want to keep Pakistan intact as if it disintegrate than it would create a huge crisis in the region.
Apart from what is happening in the power corridors and speeches with third grade language of PTI, PPP and PML N, following steps are required immediately-
1. Rule of law for all needs to be implemented including Judiciary and Establishment. No need is required for any judicial commission or any Act apart from what has been provided in the constitution.
2. Madressah system needs to be reformed by making them part of current educational system. Dual educational system in Pakistan should be abolished.
3. Taxation laws for Services sector, agriculture, Retail and wholesale needs to be prepared and passed through assemblies and Senate with proper place for FBR and its branches on provincial level.
4. Current Government borrowing Act followed by the Government and SBP as Public Debt Act 1944 should be changed. If Government desires Editors Club and CAIF (website-islamicfinancecaif.com) can provide draft of new Government securities Act 2017.
5. For Islamic Banking and Finance government should bring proper legislation.
6. For CPEC government including parliament and allied institutions should keep an eye on the project from Pakistan point of view otherwise it would turn in to British empire who built roads and Railway lines all over India but with the purpose to keep India under British rule.
With this short list let us start and see how government or political parties react and formulate their implementation programs.
Finally it must be remembered that humanity does not progress in a straight line. Some time it goes back, sometime it stays and sometime it moves forward. Humanity does not stay on one place. Why because class struggle going on within the society always keep it alive. However for this a party representing lower classes is always required. If a society is not able to move forward than it starts going back and this is the element which is Pakistan facing right now.
The writer is Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), former Member of IFSB on Islamic Money Market, former Head of FSCD SBP, former Head of Research Arif Habib Investments, Member visiting Faculty/ KASBIT/BIZTEK/Sheikh Zayed Institute University of Karachi/PAF KIET/MAJU.