Development Journey of Pakistan from 1947 to 2022; Lessons Learnt viz-a-viz Other Countries

        

                                         Outline 

 A) Historical Introduction to   Development in Pakistan;

1.        Development of Pakistan between 1947 to 1958

2.     Pakistan as a model of development for developing states under the President Ayub era ( 1958-1969);
3. Development under the socialist policies of PM Zulfiqar Ali Bhutto;
4. Islamic model of development and Zia-ul-Haq;
5. Political instability and reversal of earlier development;
6. The military coup of Pervez Musharaf in 1999;
7. Government of PPP and development;
8. Government of PML(N) and crony capitalism;
9. PTI government under Imran Khan and development;

B) Development models for Pakistan:

      1)Reforms of Deng Xiaping and Chinese model of development;

      2) Bangladesh and its development model;

      3) Reforms of Doi Moi and Vietnamese development model;

C) Lessons learnt by Pakistan viz-a-viz other countries:

1)    Shifting from geopolitics to geo-economics;

2)    Enhancing spending upon human resource development;

3)    Reforming decaying state institutions;

4)    Achieving political stability to attract FDI;

5)    Increasing Tax-to-GDP ratio;

6)    Making political and economic institutions inclusive;

7)    Lowering gender gap;

D) Conclusion:

       Pakistan was established on the conception to create an environment in which Muslims of the sub-continent can practice their religion freely and create an environment in which they can be provided with basic social services on an equitable pattern. Colonial exploitation and negligence of present-day Pakistan had caused it to be highly underdeveloped with little industrial and physical infrastructure. After independence Pakistan faced various social, economic, political and security challenges, in response to them the political elite adopted the capitalist model of development in order to modernize and develop the state and society. After coup Ayub Khan adopted trickle-down effect model of development, Bhutto replaced it with socialist model, Zia adopted Islamic model of development, While Benazir Bhutto and Nawaz Sharif adopted neo-liberal model of development; Pervez Musharraf used consumer credit model and government of Nawaz Sharif relied on crony capitalism. Thus, development models of Pakistan have been changed with change in government. In the post-independence era, the political elite resisted painful internal structural reforms necessary for sustainable development and remained continuously dependent upon the burrowed growth, which has made Pakistan economically unviable.

 

          In 1947, the government machinery was preoccupied with post-partition challenges, which diverted attention from development; this period is known as the “era of experimentation” in national development. Political instability and constitutional framing issues excessively hindered the state's endeavour for transitioning from an agrarian to an industrial economy. The weak political system created a vacuum for the military coup, which brought Ayub Khan into power, who introduced the presidential system.

         Ayub Khan brought significant land reforms, prioritized economic growth and created ideal conditions for industrialization, which made Pakistan an ideal state of development for the other developing states of the global south but it increased regional vertical and horizontal inequalities by adopting a “trickle-down effect”. The green revolution of the 1960s completely transformed agriculture, which allowed it to grow at the rate of 5%. In the first half of the 1960s large-scale manufacturing grew at the rate of 16%, which got lowered to 10% after the war of 1965. Geostrategic alliance with the US-led capitalist against the USSR provided Pakistan with the necessary resources to modernize its economic and military infrastructure. During the Ayub era, various institutions played a significant role in formulating objective policies such as the Planning commission, Pakistan Industrial Development Corporation, Agricultural Development Corporation, Pakistan Industrial Credit and Investment Corporation and other urban development authorities. The policies of Ayub Khan created a sense of deprivation among the people of East Pakistan for the inequitable distribution of resources, development, political power, and representation in the institutions of the state. Yahya khan as a successor of Ayub remained unable to maintain political stability, which is the main condition for economic growth. For civilian government, he arranged elections in 1970 in which Sheikh Mujib-ur Rehman gained the majority in East Pakistan and demanded the establishment of a government to which Bhutto and Yahya disagreed leading to political instability and the emergence of Mukti Bahini supported by India. In response, Yahya khan initiated ‘Operation Searchlight’ against the rebels supported by India and a pre-emptive strike against the latter leading to a large-scale war which in turn led to the separation of East Pakistan from the west.

            Zulfiqar Ali Bhutto after assuming power relied heavily upon the socialist principles by sidelining the ‘trickle-down effect’ model of Ayub Khan, was suspicious of the planning commission and brought reforms to end the economic monopoly of 22 families and adopted socialist policies. He through the constituent assembly formulated the constitution of 1973 and brought reforms into the civil services which are viewed by Ishrat Hussain as the main reason for the institutional decadence of state institutions because it politicized them and allowed lateral entrants. He brought land reforms, which to large extent remained ineffective due to the politicization and inefficiency of state institutions. Moreover, Bhutto nationalized Banks, Industries and other private economic enterprises, which negatively impacted the entrepreneurial potential of the private sphere. In the Bhutto era, the low economic growth was due to international oil inflation, collapse of the Bretton Wood system and loss of East Pakistan and internal nationalization policies.

           Zia-ul-Haq after military coup in 1977 did not reverse the nationalization of Bhutto, instead used its dividends to legitimize his rule and initiated an “era of the twisted economy” and adopted Islamic model of development. Erosion of state institutions continued during his rule, which lowered their capabilities to generate enough revenues for the state leading to a fiscal deficit and thus, compelled the government to seek the help of the International Monetary Fund. He Islamized the economy by introducing Usher and Zakat taxes, reduced government regulations and used the inflow of US dollars to fill the fiscal deficit, support the Afghan mujahideen and continue the development projects internally. His policy to support the Afghan refugees negatively impacted the sustainable development of Pakistan through Kalashnikov culture, the proliferation of drugs, crime rate, terrorism, political instability and created an ‘aid-based economy’. Their collective interaction not only caused deindustrialization but also lowered overall foreign direct investment in last quarter of the 20th century and in the post-9/11 era.

           President Ghulam Ishaq khan excessively used his presidential powers to dismiss the alternating governments of Benazir Bhutto and Nawaz Sharif on various grounds by misusing his constitutional powers of 8th Amendment 2(b). It caused policies to be inconsistent, the fiscal deficit to be further widened and broke the momentum of economic growth. Both governments were fragile and remained unable to focus on economic growth, institutional capacity building, and bringing reforms to make the environment suitable for foreign direct investment to spur industrialization. The main distractions were battles with the superior judiciary, strained civil-military relations, lack of political consensus over the foreign policy especially over Afghanistan. Both governments used the civil bureaucracy for their political ends, which excessively eroded their own institutional capacities. Nawaz Sharif initiated the privatization, which to some extent unleashed the entrepreneurial potential of the private sector. From the early 1990s, the fiscal deficit and current account deficits further increased, political instability, patronage-based economic governance, excessive negligence of human resource development, population explosion and sanctions after the nuclear tests of 1998 acted collectively to prevent FDI and slow down the economic growth. Moreover, they approached IMF for bailouts to run the state’s machinery and continue development projects but failed to utilize them effectively, which in turn led to the vicious cycle of ‘debt trap’ leading to the current economic subordination of Pakistan.

            General Musharraf upon coming into power 1999 through a military coup brought economic reforms, established the National Accountability Bureau, a strong Higher Education Commission, introduced local governments to improve governance at the grass root level and the Police Order 2002 allowed the government to provide a politically stable environment, which spurred higher economic growth. Musharaf introduced ‘the consumer credit model’, in which he started to provide loans to the educated class to help them start their own businesses and uplift the middle class. The strategic inflow of dollars in the wake of Pakistan's support to the US in the War against terrorism allowed the government to spend without politically painful reforms and have higher economic growth. Power devolution to local government helped to reduce the level of poverty, illiteracy, and health-related issues.

Reforms of Musharraf in the post-2008 era were hindered and reversed by the democratically elected government of the People’s Party, proportion of the provinces in the federal divisible pool was increased and local governments were abolished, law and order situation deteriorated swiftly. The US stopped its aid and the energy deficit significantly lowered industrial productivity which in turn paved the way for circular debt. Resultantly, the average growth between 2008 to 2013 remained under 3%, the budget deficit widened to 6% of GDP and the overall investment ratio declined. The emergence of Tehrik-e-Taliban Pakistan emerged as a strong force in the Tribal regions of Ex-FATA, which conducted terrorist attacks across Pakistan.

The government of PML (N) faced the dragons of twin deficits, energy deficit, low foreign exchange reserves, and low exports, which compelled the government to take the IMF bailout.  PM Nawaz Sharif introduced the model of crony capitalism, in which he supported the small class of industrialists in his own circle. His government signed a multi-billion dollar CPEC project, which increased the inflow of FDI, created Special economic zones, and developed infrastructure causing Pakistan to increase or stabilize its economy to some extent.

The Government of Tehreek-e-Insaf upon coming into power started to crackdown against the crony capitalists of previous governments and gave the concept of ‘Riyasat-e-Madina’. To support the poor class Prime Minister Imran Khan initiated Ehsaas, E-rozgar, and Insaf Sehat Card Programs. The twin deficits compelled his government to seek an IMF bailout to run state machinery. The Corona pandemic created havoc upon the development of Pakistan by jamming its wheels and lowering economic growth. Levels of absolute poverty, illiteracy, unemployment, inflation, and the gap between revenues and expenditure have increased highly. The government of Imran Khan was dissolved because he lost the support of his coalition partners in the parliament leading to a vicious cycle of political instability.

 

          The political elite of Pakistan seems to be adamant about learning lessons from its history and the success stories of its neighbors and the countries located in its peripheries. Resultantly, the economic and political structures have remained excessively extractive. Various countries such as China, Bangladesh, Singapore, Vietnam, Malaysia, Turkey and India have developed and they were much behind Pakistan economically in the 1960s. The latter was a model of development for them.

         China gained independence in 1949 and had lower economic growth patterns than Pakistan up to 1980. The Leaf Forward and Cultural revolution of Mao failed to bring dividends to the Chinese state. Thus, as Deng Xiaoping assumed power in 1978, he brought liberalizing reforms and shifted to market economy. He privatized agriculture and skilled human resource, which lead the state toward a textile revolution, especially cotton. In the 1990s, electronic multinational corporations started to outsource their industries to China due to low cost and skilled labour, developed infrastructure, political stability, strong state institutions, and a better environment for doing business on the technology transfer conditional foreign direct investment. Moreover, China established Special economic zones, among which Shenzhen remained the most successful, which collectively acted to move about 850 million population out of absolute poverty. With the information revolution, a suitable environment facilitated the Chinese economy to shift towards a service economy, which increased its contribution to 54% of GDP in 2019. Currently, China is the second largest economy of the world and spends heavily on research and development which has allowed it to excel in modern technologies such as artificial intelligence, quantum computing, big data surveillance technologies, 5G technology, biotechnology, cyber security and 3D printing. Thus, Pakistan can learn from China to end the absolute poverty, illiteracy, political instability and underdevelopment, strengthen its state institutions and bring structural reforms over the long run to infuse vigor into the decadent economic and political institutions of the state.

            Bangladesh in 1970 as a part of Pakistan was an underdeveloped state but due to decades of sustained economic growth, and consistent policies, it has improved the socioeconomic status of its citizens. Textile sector especially readymade garments boom due to consistent policies, women empowerment through micro-financing ( Grameen bank), liberalization to global economy, normalized civil-military relations, unitary form of the government, and absence of sectarian and violent religious groups helped Bangladesh to improve its socioeconomic indicators and sustain long-term economic growth. Pakistan can learn from Bangladesh the way it empowered women and brought them into formal economy and improve the status of women in the Gender Gap index, which in 2022, was 145th out of 146 countries. Moreover, establish political stability to attract foreign direct investment.

         Another success story for Pakistan to learn from is Vietnam. It was heavily devastated by Vietnam war. Reforms of Doi Moi in 1986 opened the way for the modern-day resilient economy of Vietnam. Per capita GDP was about 200 dollars in 1980 and reforms of Doi Moi moved it towards Socialist oriented market economy. Three factors according to World Bank spurred the growth of Vietnam: firstly, acceptance of trade liberalization; secondly, it implemented external liberalization with internal reforms by deregulation and lowering the cost of doing business and thirdly, heavy spending upon human and physical infrastructure. Currently, the economy of Vietnam is the most resilient, FDI-attracting destination and with total exports of 334 $ bn in 2022, while the exports of Pakistan have stagnated for the decades causing Pakistan to be dependent economically upon international financial institutions and friendly nations that have compromised its sovereignty. Thus, Pakistan can learn lessons learn from Vietnam to develop economically.

 

    Among the lessons learnt, one is the shift towards geo-economics from geopolitics to boost the economic productivity and connectivity of Pakistan. The geographic location of Pakistan increased its importance in the cold war era and allowed its political elite to earn geostrategic rent from the US-led capitalist world in both the cold war and in war against terrorism. Resultantly, reliance on the burrowed growth prevented them from bringing internal reforms. Thus, a shift among the policymakers of Pakistan has been seen towards the geo-economics to achieve economic sovereignty. Thus, China Pakistan Economic corridor, Tajikistan-Afghanistan-Pakistan-India gas pipeline, Iran-Pakistan-India gas pipeline, Pakistan-Iran-Turkey railway line and 400$ bn investment of China in Iran is likely to boost the geo-economic relations within the region, from which Pakistan can benefit.

Spending on human resources by making access to social services inclusive is another lesson learnt by Pakistan. Historically, state’s spending on human resources has been minimal due to tough geostrategic environment, which increased defense spending. Developed and skilled human resource helped China to attract FDI and in the same way spending on human resources and social services can help to utilize its demographic dividends, especially women's potential in Pakistan. The quality of human resource determines the economic productivity of the state. Thus, without qualitative human resource Pakistan is less likely to have a bright future.

   Institutions of Pakistan have decayed over the decades due to their politicization, which has eroded the governance and provision of social services. Weak state institutions make doing business harder, and more expensive; it allows the political elite to monopolize the institutions of governance such as Judiciary, Legislature and Executive and use them to protect their own interests. Weak governance allows for the non-state actors to provide social services and recruit members for their own militant, terrorist, sectarian and separatist organizations; thus, using them against the state for their own nefarious designs. Therefore, the depoliticization of state institutions is the main lesson to be learnt by Pakistan to prevent the non-state actors from filling  the vacuum.

    Establishing political stability and certainty helps to increase the confidence of private sector and allow for the economic policies to be predictable and certain. Predictable economic policies attract foreign direct investment which in turn will help to increase economic growth and end the absolute poverty. Political stability helps to maintain consistent policies and models of development and makes the incumbent government continue to the statecrafts of previous governments and thus, pave the way for development.

       Enhancing Tax-to-GDP ratio from 10% to 15% will help the state machinery to provide the necessary conditions required for sustainable development. Efficient use of the resources to modernize its institutional capacity, provide social services, develop human resource, build physical infrastructure and spend on the research and development. Moreover, allow for the policies to be fully implemented in spirit due to resource backing.

      Making economic and political institutions inclusive by increasing the participation people more accessible, and easy. It will break the monopolization of elite class and allow the policies to be sensitive to the interests of every class. Resultantly, it will increase overall productivity and access to the services provided by the state.

      According to the Gender parity index 2022 Pakistan ranks 145^th out of 146 countries. Higher gender inequality restricts access to resources and prevents half of the population from effectively participating in the productive sphere. Bangladesh, China and Vietnam have effectively reduced their gender inequality, which in turn has allowed them to grow sustainably.

      To sum up, the historical development of Pakistan has seen ups and downs due to charged geostrategic environment and short-sightedness of leadership class which caused the economic growth to be unsustained. But to some extent the leadership class has realized that without reforming internal political, institutional and economic structures the way to sustainable development is bleak. Moreover, Pakistan has diverse geographical, demographic, economic, political and social capital, which can be utilized to usher a new era of development.

“Where there is will there is a way”.   

 

Samiullah, (University of the Punjab, ISCS, samiullahkakar463@gmail.com)