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14.06.2022
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Fabricating growth

  Published June 14, 2022

AN odd feature of Pakistan’s recent economic history is that its two best GDP growth rates of six per cent in 2018 and 2022 were followed by severe economic crises. This wasn’t coincidental. In fact, high growth was the causes of both crises. So while PTI flaunts its on-paper 6pc growth, economists and ordinary people lament[واویلا کرنا] high inflation and the risks of default it left behind. 

States like South Korea and China got sustainable growth spread over decades by upping investment and its productivity (ie increasing the outputs from inputs over time) via painful reforms. Unfortunately, no regime in Pakistan could implement such reforms to increase investment or productivity. Thus, our investment/GDP ratio is 15pc after peaking at 18pc in 1980-90s, while the average even in South Asia is double at around 30pc and higher in many East Asian states. Our productivity has been falling over the decades and is much lower than in dynamic East Asian states.

Unable to increase investment and productivity, our regimes have fabricated growth via short-term US aid or unsustainable monetary, fiscal and current account stimuli that soon led to an economic crisis in the shape of high twin deficits and inflation and falling foreign reserves. Between the 1950s and 2008, our best growth eras of only a few years each came via high but short-term US aid under Ayub, Zia and Musharraf. Despite it, sustainable increases in investment and productivity, and economic upgrading remained elusive [جو آسانی سے حاصل نہ ہو] and each era often saw high fiscal or external deficits and inflation and falling reserves that led us to an IMF loan. 

This boom-bust pattern has quickened since 2000. With US aid cut sharply, successive regimes have used monetary, fiscal and exchange rate/current account stimuli to jack up growth in the short run that soon bust. Thus, the last four regimes (Musharraf, PPP, PML-N and PTI) all left behind an economic crisis that led us to the IMF. Calculating their severity based on the levels of fiscal and current account deficits, GDP growth, inflation and interest rates and levels of relative reserves near the end of each regime it seems the 2008 crisis Musharraf left for the PPP was the most severe, followed by the one PTI left for PML-N in 2022. The one PML-N left for PTI was the least severe. Thus, the two dubiously elected regimes (as per EU election reports) left behind the most severe crises.

PTI left behind a worse economic crisis than PPP and PML-N

PTI left behind a more severe economic crisis than PPP and PML-N as its economic prowess over its term was poorer than even the weak economic outcomes of the PPP and PML-N. One sees many comparisons on social media showing PTI doing best economically based on comparing absolute levels of cherry-picked economic indicators and claims of attaining all-time high levels on them. But such comparisons are wrong as economies usually attain new all-time highs on almost all rupee-value indicators almost every year. Thus, all new regimes attain higher absolute levels than all past ones on most indicators. The correct way is to look at growth rates and ratios of all key economic indicators for the same length of time for each party using State Bank and finance ministry data. 

In comparing PPP, PML-N and PTI on 20 key GDP, fiscal and external macro-economic indicators (across three to four years’ given data availability for each indicator), PML-N does best on 13 indicators (GDP, per-capita real income, manufacturing, inflation, FDI, public external debt, foreign reserves and domestic debt growth rates; and savings/GDP, total revenues/GDP, direct tax, imports/foreign reserves and fiscal deficit/GDP ratios). 

PTI does best on none and PPP does best on seven indicators (exports, remittances, trade deficit, imports, tax growth and current account deficit growth rates and investm­ent/GDP ratio) despite facing the hardest external problems. These included inheriting the most severe of the four economic crises, electricity crisis, and high terrorism; and facing Benazir’s death, the 2008 global crisis, 2010 super floods, high oil prices, Arab Spring-related global turmoil and Pindi tensions throughout.

For PML-N, they included inheriting the electricity crisis and terrorism and facing the 2014 long dharna and Pindi tensions throughout. For PTI, they included Covid-19 and the Ukraine crisis at the end. While the PTI’s outcomes are the worst, the other two parties also failed to achieve sustainable growth.

Although it’s early to judge the current regime, the early signs are bad. The team lacks dynamic capacity in investment, commerce and industry, which shows up via lack of strong ideas for enhancing exports and manufacturing on a sustainable basis both in the new budget and otherwise. Thus, the severe pain the nation will go through in coming months may still not give sustainable growth. 

The writer is a political economist with a PhD from the University of California, Berkeley.
murtazaniaz@yahoo.com
Twitter: @NiazMurtaza2

Published in Dawn, June 14th, 2022

Will talks work?

  Published June 14, 2022 

NEWS from Kabul regarding peace talks facilitated by the Afghan Taliban between the outlawed Tehreek-i-Taliban Pakistan (TTP) and a state-backed jirga is of ‘positive developments’. The perception that we may be moving towards the restoration of peace has been reinforced by the announcement of an ‘indefinite’ ceasefire by the TTP. The question is whether these talks will bear fruit in the form of a permanent cessation [روکنا، ترک کرنا، بند کرنا] of terror attacks on Pakistani citizens, interests and installations.

Aside from the debate on how this jirga was formed, talks are always significant for implementing the classical paradigm of disarmament, reintegration and remobilisation of armed, non-state fighters. In addition, counter-extremism (CE) and counterterrorism (CT) strategies require a holistic approach based on narrative building, dialogue, blocking of recruitment and financial resources, and kinetic force.

After the Afghan Taliban took over Kabul in August 2021 and formed the ‘Islamic Emirate of Afghanistan’, they released several thousand fighters of the TTP and other terror outfits. As a result, against all expectations of the Pakistani government, which had been making every effort to facilitate the ‘friendly’ government in Kabul, attacks on military checkposts, police personnel, activists and polio workers increased in Pakistan in general, and in the different districts of Khyber Pakhtunkhwa in particular. 

This happened despite the large-scale fencing of the Durand Line. Some 40 attacks were recorded in the last six months, in which around 80, including security personnel, lost their lives. There was also an increase in extortion.

The history of deals with militants is not a positive one.

The worsening security situation prompted [بڑھاوا دیا] the powers that be to make another attempt at integrating the TTP into mainstream society. The dialogue was to be led by a jirga that consisted of parliamentarians and elders belonging to the newly merged districts. Though the jirga has no legal or constitutional approval and has allegedly been constituted under pressure, it has visited Kabul several times over the past months for confidence-building measures. Formal talks started during its most recent visit to Kabul.

It should be kept in mind the history of talks with religious extremist armed private militias is as old as terrorism. The last major attempt was made in 2014. Several agreements — like Shakai, Sararogha, Miranshah, Swat and Khyber — come to mind. The TTP emerged more potent after each, and after each deal broke, military operations were carried out. The National Action Plan was agreed to after the APS attack; later, Zarb-i-Azb and Raddul Fasaad were launched.

Some agreements resulted in the formation of armed ‘aman (peace) committees’, which exacerbated [مزید خراب کرنا] the situation as this was perceived as the formal handing over of state authority, including law and order, to private militias. Several hundred TTP ‘commanders’ and foot soldiers even surrendered after receiving handsome incentives, but many of them could not be integrated into mainstream society.

Major problems seem to remain in the way of the success of the ongoing talks. As parliament has not yet been taken into confidence, the issue of who will take responsibility on behalf of the state for any agreement with the TTP as a result of this dialogue will pose a significant challenge. Secondly, the issue of who the guarantor of the talks will be might always hang in the balance. Who will compel the TTP to act upon its agreement, as it has usually been tempted [اکسانا، ترغیب دینا] to violate terms on the basis of its own interpretation of what the agreement is? How will splinter groups be dealt with, which typically emerge after any such deal?

Some of the reported conditions laid down by the TTP would also need constitutional amendments, for which the entire process of negotiating with the TTP will first need to be brought to parliament. One of the conditions said to have been put forward is the reversal of the merger of ex-Fata. The merger was concluded after the passage of the 25th Amendment. If true, this condition will be perceived as handing over the newly merged districts to the TTP, which may be seen as a recipe for regional disaster, especially after the installation of the Afghan Taliban in Kabul.

Another reported conditionality concerns blanket amnesty to TTP commanders, which will create unrest, especially among the heirs of victims of attacks owned by the TTP. Also, how can the Nizam-i-Adl Regulation be implemented in the presence of the 25th Amendment?

The narrative of CE and CT is yet to permeate [سرائیت کرنا، پھیل جانا] the sociocultural veins of Pakistan fully. From the little work on the issue by the inactive National Counter Terrorism Authority to Paigham-i-Pakistan, and till the National Security Policy of 2022 — the CT and CE narrative has yet to be fully interwoven into textbooks, media, laws and policies; the same way extremism was once woven into these structures.

The writer is the author of The Militant Discourse.
Twitter: @khadimhussain4

Published in Dawn, June 14th, 2022

Allies to seek Pakistan’s removal from grey list

  Published June 14, 2022

 

WASHINGTON: China and some other allies are quietly working to get Pakistan off the Financial Action Task Force’s (FATF) grey list during the agency’s next plenary session, diplomatic sources told Dawn.

The FATF, a global body which monitors money laundering and terrorism financing, is holding the four-day — June 14-17 — session in Berlin, Germany, from Tuesday.

FATF delegates representing 206 members of the global network and its observers will attend the meeting. The observers include the International Monetary Fund (IMF), the United Nations, the World Bank, and the Egmont Group of Financial Intelligence Units.

Recent reports in the international media also mentioned this “quiet lobbying”, led by China, and one Indian media outlet reported that the plenary session “is likely to decide to move Pakistan out from the list of countries under increased monitoring, commonly known as its grey list”.

Diplomatic sources in Washington say that those favouring the move argue that removing Pakistan from the FATF grey list “is essential to revive the Pakistani economy”. Pakistan has been on the list since June 2018.

The sources say that an April 9 judgement by an anti-terrorism court in Lahore could also help Pakistan in removing this stigma. The court sent Lashkar-e-Tayyaba chief Hafiz Saeed, to prison for 33 years on terrorism charges.

Those who support the move to remove Pakistan from the list, point out that the two cases that led to his imprisonment were filled by Pakistan’s Counter Terrorism Department.

In its last plenary, held in Paris in March, the FATF noted that “Pakistan has completed 26 of the 27 action items in its 2018 action plan”. The FATF encouraged Pakistan “to address, as soon as possible, the one remaining item, — investigating terrorism financing and targeting” senior leaders and commanders of UN-designated terrorist groups.

FATF acknowledged that Pakistan had also met 6 of the 7 action plans it was asked to follow in June 2021 to counter money laundering.

The Ministry of Foreign Affairs has also prepared a presentation for the FATF plenary, showing how Pakistan has completed all the 27 tasks that it was given. Minister of State for Foreign Affairs Hina Rabbani Khar is likely to attend the plenary.

On May 22 and 23, Minister for Commerce Syed Naveed Qamar visited Brussels and briefed multiple Members of the European Parliament (MEPs) and the European Commission on Pakistan’s efforts to get off the grey list.

During the four-day plenary session, delegates will finalise key issues including a report to prevent money laundering through the real estate sector. Another report will urge financial institutions to use collaborative analytics, data collection and other sharing initiatives to assess and mitigate the money laundering and terrorist financing risks they face.

Delegates will also discuss the assessments of measures to combat money laundering and terrorist financing by some jurisdictions identified as presenting a risk to the financial system.

The outcomes of the plenary session will be published on June 17.

Published in Dawn, June 14th, 2022

US Envoy Donald Blome
US Envoy Donald Blome

 

ISLAMABAD: The new United States ambassador to Pakistan, Donald Blome, on Monday signalled Washing­ton’s intention to move on from the regime change controversy by engaging in a robust two-way communication with the country’s government, political parties and civil society.

Ambassador Blome, who arrived in Pakistan late last month, has taken over the charge of the US mission at a time of unique challenges and opportunities.

Though anti-American sentiments run deep in Pakistani society, the feelings got inflamed after former prime minister Imran Khan alleged that he was ousted through a US conspiracy for regime change and ran a mass campaign calling for 'freedom' from 'slaves of foreign powers'. This heightened anti-American sentiment has, therefore, become the foremost challenge for Washington in executing its foreign policy goals in Pakistan.

But then, newer opportunities have also emerged. Ambassador Blome — the first full-time American envoy in Islamabad after a gap of almost four years — assumed the charge of his assignment when Afghanistan is apparently no more a dominant issue in the bilateral ties following last year’s withdrawal of US forces from there at the end of 20-year-long war — the longest in American history.

Counterterrorism cooperation to remain ‘defining feature’ of ties

Ambassador Blome, in an interview with Dawn, reiterated the rejection of Mr Khan’s 'regime change' allegation and said Washington was “very clear” about that.

“However, I think the best thing we can do going forward is to keep engaging across all levels of Pakistani society, as we have for the past 75 years!” he said, adding the engagement wouldn’t be limited just with the government, but will extend to political leaders, the business community, civil society, and the youth.

In this two-way communication, he said, he will “listen to and understand” what’s happening here and “convey that understanding” to Washington and at the same time share US “views and positions as clearly and as transparently as possible” with audiences here.

Beyond polarisation in the domestic politics on US ties, the new government in Islamabad has always been open to revitalising bilateral relations. The first opportunity that came in its way in the shape of Secretary of State Antony Blinken’s invitation for Foreign Minister Bilawal Bhutto-Zardari for attending a food security conference at the United Nations was clinched.

Mr Bhutto-Zardari and Mr Blinken also met on the sidelines of the conference in New York on May 18, which was the first highest level face-to-face contact between the two sides in months.

Ambassador Blome disclosed that “a number of follow-ups” were being planned on the basis of the agenda set by the two foreign ministers at their meeting.

“I will do some of that here, and I expect we will see a variety of US visitors to Pakistan in the coming months to build on it further,” he said.

In what appears to be a step towards the resumption of structured bilateral dialogue that has been suspended for long, the two sides are set to launch the US-Pakistan Health Dialogue in Washington for deepening their cooperation on health issues.

The ambassador recalled the “partnership” between the two countries against the global Covid-19 pandemic as a good example of cooperation on health.

US had donated more than 61 million Covid vaccine doses, $69m in financial support, and an additional $9m in in-kind assistance to support Pakistan’s fight against the pandemic.

“We can build on this work not just in assistance but through growing private sector partnerships in the health field,” the envoy added.

Much like the emphasis on investment and trade during the foreign ministers’ meeting, Ambassador Blome too said that he was “committed to promoting further development of our bilateral trade and investment”.

He further identified health, climate, and education as other areas where cooperation could be expanded.

But, at the same time, it was too obvious from the discussion with him that counterterrorism cooperation will remain a defining feature of this relationship for some time to come.

Ambassador Blome said US was seeking “a strong partnership with Pakistan on counterterrorism” and expects from Islamabad “sustained” and indiscriminate action against all militant and terrorist groups.

The ambassador was specifically asked to clarify if US pursuit for strengthening counterterrorism cooperation with Pakistan included negotiations over drone basing access closer to Afghanistan, but he avoided a direct reply.

“The United States is committed to preventing the reemergence of terrorist threats, in Afghanistan or anywhere else. Fighting terrorism is a global effort. We will continue to engage partners, allies, and key states around the world on how best to address terrorism,” he said while referring to President Joe Biden’s statement in which he had talked about developing capabilities and deploying assets in the region to prevent the re-emergence of terrorists from over the horizon.

On Afghanistan, the envoy said, US would work with Pakistan to “press the Taliban to prevent terrorist groups from using Afghanistan as a base for external operations and to meet the international community’s expectations — including pressing the Taliban to adhere to their counterterrorism commitments, form an inclusive government, and protect the rights of women and girls”.

Ambassador Blome welcomed Pakistan’s “ongoing efforts in countering the financing of terrorism and prioritising anti-money laundering measures”.

His remarks come ahead of Financial Action Task Force’s plenary meeting in Berlin from June 14. The global illicit financing watchdog will review the progress made by Pakistan, which has been on its ‘grey list’ since June 2018.

Published in Dawn, June 14th, 2022



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