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Pakistan in the third millennium

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Politics & Policy
Pakistan in the third millennium

Prof. Dr. Khawaja Amjad Saeed
August 30 - Sep 05, 1999


An objective assessment of Economy of Pakistan for the last 52 years is the crying need. Every ruling Government has been claiming success stories. On the other hand, opposition to the ruling Governments have all along been harping on the theme of economic failure. Public wishes to know the truth of our economic performance of the past and have a yearning desire for a prosperous future.

It is interesting to refresh our memory relating to our socio-economic conditions at the time of birth of our country.

Ideological background

Quaid-e-Azam Mohammad Ali Jinnah, Father of the Nation, had visualized a stable and prosperous Pakistan with benefits flowing on wider frontiers and to all segments of the society.

It would be refreshing our minds, if we study the speeches made by the founder of Pakistan. Pertinent Excerpts from his speeches are quoted below:

"Nature has given you everything; you have got unlimited resources. The foundations of our State have been laid, and it is now for you to build, and build as quickly and as well as you can. So go ahead and I wish you God-Speed." (Message by Quaid-e-Azam on the first anniversary of Pakistan i.e. August 14, 1948).

"It is in your hands; we have undoubtedly talents; Pakistan is blessed with enormous resources and potentialities; providence has endowed us with all the wealth of nature and now it lies with man to make the best of it." (Radio Speech delivered by him from Lahore on October 30, 1947).

"I also hope that in planning your factory, you have provided for proper residential accommodation and other amenities for the workers for no industry can thrive without contented labour." (while laying foundation stone of Valika Textile Mills Limited on September 06, 1947).

"that enough there were many rich merchants in the Muslim Chamber of Commerce, he could hardly think of anyone who was running a heavy industry. Great and heavy industries formed the backbone of a nation." (Speech delivered in Bombay on October 01, 1943).

"Commerce, gentlemen! is more international than culture and it behooves you to behave in such a way that the power and prestige of Pakistan gain added strength from every act of yours. I have, no doubt, the commerce of Pakistan would be an effective instrument in the establishment and maintenance of high standards of business integrity and practice. If Pakistan goods are establish for themselves a reputation all their own, a beginning must be made now and here. I assure you, Gentlemen! that anything my government can do to achieve this end, they shall do. I would like Pakistan to become a synonym and hall-mark for standard and quality in the market place of the world."

"Pakistan has no desire to unduly interfere with your internal freedom. On the contrary, Pakistan wants to help you and make you, as far as it lies in our power, self-reliant and self-sufficient and help in your educational, social and economic uplift and not be left as you are dependent on annual doles, as has been the practice hitherto which meant that at the end of the year you were not better off than beggars asking for allowances, if possible a little more. We want to put you on your leg as self-respecting citizens who have the opportunities of fully developing and producing what is best in you and your land. You know that the Frontier Province is a deficit Province but that does not trouble us much. Pakistan will not hesitate to go out of its way to give every possible help financially and otherwise to build up the economic and social life of our tribal brethren across the border." (Addressing Tribal Jirga on April 18, 1947 in Peshawar).

Dr. Mohammad Iqbal, Thinker of Pakistan, had visualized teeming millions as Muslim to come out of the clutches of ruling British and Hindus. He dreamed of such a Pakistan as would be inhabited by prosperous Muslim on wider canvas. His great desire was to see that Muslim got rid of economic strangulation of vested interests. Some excerpts from his speeches and writings are quoted below:

"The problem of bread is becoming more and more acute. The Muslim has begun to feel that he has been going down during the last 200 years. Ordinarily he believes that his poverty is due to Hindu money-lending or capitalism. The perception that it is equally due to foreign rule has not yet fully come to him. But it is bound to come." (wrote on May 28, 1937).

"The character of a Muslim State can be judged from what the Times of India pointed out some time ago in a letter on the Indian Banking Enquiry Committee.

"In ancient India," the paper point out: "the state framed laws regulating the rates of interest, but in Muslim times, although Islam clearly forbids the realization of interest on money loaned, Indian Muslim State imposed no restrictions on such rates." I, therefore, demand the formation of a consolidated Muslim state in the best interest of India and Islam. For India it means security and peace resulting from an internal balance of power; for Islam an opportunity to rid itself of the stamp that Arabian imperialism was forced to give it, to mobilize its laws, its education, its culture, and to bring them into closer contact with its own original spirit and with the spirit of modern times." (correspondences with Quaid-e-Azam between May 1936 and November 1937).

"One nation pastures on the other, one sows the grain which another harvests, Philosophy teaches that bread is to be pilfered from the hand of the weak, and his soul rent from his body. Extortion of one's fellowmen is the law of the new civilization. And it conceals itself behind the veil of commerce." (wrote in 1936).

"What they call commerce is a game of dice: For one, profit, for millions sweeping death. Their science, philosophy, scholarship, government preach man's equality but drink man's blood."

"Let me tell the honorable representatives for Simla that the first European author to refuse his theory was the Frenchman Perron in the year 1777. Later in 1830, Briggs made a very extensive inquiry as to the law and practice in India and relating to the theory of state ownership of land. He gave in his book an accurate description of the Muslim law, and practices prevailing in various parts of India-Bengal, Malwa, the Punjab etc. and arrived at the conclusion that at no period in the history of India the state ever claimed the proprietorship of land. In the times of Lord Curson this theory was put forward, but Taxation Committee's report, which was published some time ago, had come to a very clear finding that this theory had no basis at all ...

However, we have to see in the first place, how far the present system of assessment is just, workable and sanctioned by a very old tradition, but we have first to see whether or not it has justice on its side. My submission is that it is not at all just. The injustice of it is perfectly clear. If a man happens to be a land-owner, big or small, does not matter, he has to pay land revenue. But if a man earns from sources other than land less than Rs. 2,000 a year, you do not tax him at all. This is when injustice comes in."

"We do not apply the principle of Progression in the case of land revenue whereas we apply that principle in the case of income-tax."

"Whether a man holds two kanals of lands, he is liable to pay the land revenue. In the case of income-tax the principle of ability or the principle of progression is applied, that is to say, there is a graduated scale an some people do not pay income-tax at all." (speech on land revenue on February 23, 1928).

"We spend practically nothing on industries. And as I have said before, and as many other speakers have pointed out, industrial development alone can serve us from the curse of unemployment. There is a good future for weaving industry in this province, and for shoe-making industry also, and if we encourage these industries, I think we shall be able to save the province from unemployment, provided we protect these industries against Cawnpore and Ahmedabad."

"The modern struggle, Iqbal believed, was conditioned by trade and industry. "Among the Asian nations, the Japanese were the first to comprehend the secret of revolution. They dedicated themselves to industrializing their national economy. Today, they are recognized as one of the industrially advanced nations of the world. They had achieved this distinction because of their highly industrialized economy and not because of the contributions of any national philosopher, poet or literature."

Economy of pakistan: an appraisal of past

Our decade of 1950s passed off in Political Uncertainty and a struggle to settle down. Our First Five year Plan (1955-60) did not get approval until in the middle of 1957. Martial Law was imposed in 1958. Our Second Five Year Plan (1960-65) was a great success. It is generally said that South Korea took most of the ideas from it, but implemented it to achieve a high degree of success. We bracketed with South Korea with a figure of US $ 2.5 billion in exports in the middle of 1960s. Whereas South Korea, despite recent economic difficulties, has achieved great heights in exports to the extend of US $ 128 billion, we are dreaming an export target of US $ 9.00 billion.

The 1965 war with India pushed us seriously. Socio-economic tensions mounted high and social upheavals, industrial strifes and strikes coupled with several factors tore our country and we lost the then East Pakistan (56% of United Pakistan). It became Bangladesh in December, 1971.

During 1960s, we achieved food autarky. Our GNP was 8.3% - second highest in Asia after Japan. We innovated new varieties in Wheat and Rice. Our spectacular growth in industry was the envy of many. Several countries considered our economic policies to be model for their implementation. Our paybacks periods were the lowest - in many cases seven months.

Our 1970s was the turbulent period in our economy history. Due to socio-economic compulsions, nationalization of industries, agro-based sector, financial institutions, social infrastructure projects, shipping services and various other productive sector industries was resorted to without appropriate and adequately cushioned logistics. Payments to wage earners went up without productivity increase. Massive devaluation was made. Incentives did not exist for private initiative. Hundreds of Public Enterprises were established and were beefed up with political motives, Corruption grew, Inefficiency developed. Economy in expenditure was never followed as an inflexible rule. Effectiveness got punctured. All in all we progressed on retrogression on economic frontier. Martial Law was again imposed in the middle of 1977 and the then ruling junta never addressed Economic Agenda as priority one. Attention was focussed on Afghanistan and other outside issues. The result was that the later part of 1970s and considerable part of 1980s saw Pakistan operated on the famous principle of Business As Usual.

The decade of 1990s saw change of guards from Nawaz Sharif to Benazir. Both continue to rule one after the other. Both have so far spent time to politically demolish, if not eliminate each other. We wonder who were the winners. However, the country has been a net loser on several fronts, specially on economic front. Our economic performance has been a dismal one. Despite public announcements of self reliance desire, actions continue to be on routine basis. Our borrowings are increasing. Our exports are declining. Loan defaulters are not behaving with the spirit of returning the borrowed money. Nearly 5000 industrial units are sick. So far several committees have been appointed. The citizens of Pakistan are awaiting productive results. There are announcements to alleviate poverty, but the poverty-striken continue to yearn for prosperous times. Fixed income earners received little to protect their wage basket. The business community is totally uncomfortable, if not fed up with the multiplicity of taxes at several levels. Economic gains on agricultural and industrial front have been marginal, if not significantly low. Indeed the decade of 1990s, excluding the 28th May 1998 when Pakistan became nuclear, did not emerge as economically prosperous period for the country.

However, we need not get despaired. Pakistan has a tremendous potential which needs to be properly harnessed to our advantage. We need to address Economic Agenda on priority basis. The later part of this piece addresses the major issues which are screaming for our attention in the next millennium.

Our preparation for the third millennium

Our future course of action is suggested below in terms of twelve regimes:

Regime no. 1 - governance

The driving slogan for every government is Good Governance at Macro level and Good Corporate Governance at Micro level. We hope that the cabinet and elected members will follow our humble advice which is as under:

a) Minimum qualification for becoming a member of Federal and Provincial Assemblies be prescribed. For National Assembly the minimum qualification should be holding a Master degree from a recognized institution and for Provincial Assemblies, the minimum qualification ought to be a Bachelor degree. Every contestant must have paid income tax for the last three consecutive years.

b) Accountability at all stages is the crying need. Strengthening moral frontier and transparency are highly significant tools to pave the way for march forward towards accountability. Divine values have been included in Holy Quran. Gist of these is given below:


( Do Justice: between person & person and between person & God.

( Do good to Others: Extend welfare to others.

( Extend Charity to the kindred - incapacitated, downtrodden, impoverished.


( Avoid obscenity: By men and women

( No Coercion: at any cost

( Avoid Wickedness: In toto

There will be an urgent need to effectively communicate the above for operationalization in real life in the next millennium. Transparency of decisions is a strong instrument for ensuring accountability. Islamic approach is self accountability. In Surah Yaseen of Holy Quran, the Almighty Allah has said:

"On the day of resurrection, we will seal the human mouths and their hands will talk to us. Their feet will stand testimony regarding what they used to do".

A cardinal pre-requisite of Islam is a staunch belief in the Hereafter. Accordingly, there will be a great need to create an effective awareness about the above aspect. This will usher in an era of self accountability. The Western model is to enforce measures through strong constitutional provisions. Judicial Systems are strong and enforcement is ensured. Many Japanese Prime Ministers lost their jobs because through transparency it was clear that they burst the prescribed limits of receiving gifts. Examples from USA, UK and European countries are replete with similar conduct.

However, in developing countries systems are weak and mostly fragile. Laws exist on statute book and yearn for implementation. Street justice is then an obvious preferred solution.

It is high time that all of us should learn from enlightened leaders. Mr. Mitteran, President of France released his wealth statement to the public when he took over in his first tenure. Later he got reelected, at that time he released his wealth statement publicly with a reconciliation of the first wealth statement and the later one. This was an outstanding example of transparency and accountability. On the other hand, in India, a member of Federal Parliament issued a five-point Charge Sheet to Mr. Rajiv Gandhi, the then Prime Minister of India. One of these included a vital question namely, reconcile the opening wealth of his father in law when Rajiv Gandhi took over as Prime Minister of India with the closing balance when he died. He preferred to ignore it. When another Member Parliament enquired of him whether he would like to reply, he said that he need not reply to a barking dog. Reacting sharply, the earlier member Parliament sent a message to Rajiv Gandhi highlighting that dogs start barking only when there were thieves in the neighborhood.

The future era looks forward to declaration of all assets (at home or abroad) by all Government functionaries. This will be a step forward towards transparency and will strengthen accountability.

c) Financial scams, defalcations, manipulations have resulted in lack of good performance reflected in financial statements of Corporate Sector. Stock Exchanges have lost their credibility and consequently faith in Corporate Governance is eroding. The third Millennium looks forward to institutional measures to inspire hope in our financial system. The earlier this is done the better. The screaming call is to install Good Corporate Governance.

Regime no. 2 - depoliticisation

Our politicians ought to be role models. Their life styles clean in all respects must be manifested for inspiring people to follow them. But politicization of institutions has beefed up the organizations with incompetent persons. It is generally believed that corruption has not done as much damage to our country as incompetence. The future era looks forward to a total depoliticisation of institutions. Lee Kawn Yee, the Senior Minister of Singapore and its architect, while delivering a lecture in Pakistan during the First round of Mian Nawaz Sharif Government had explained that Meritocracy was the inflexible guiding principle on the basis of which Singapore sky rocketed in development. Starting as a boat country in 1964, Singapore has outshined in the world considering various socio-economic indicators. Its saving rate is the highest in the world. Its financial system is the envy in the world. With a population base of 3.3 million, its exports are around US $ 128 billion. Our performance on export front was US $ 7.2 billion for 1998-99 and we wish to accomplish the target of US $ 9 billion in 1999-2000.

Our political set up needs education. At present there is no staff college for training them. The Third Millennium looks forward to institutionalizing the depoliticisation of financial system, employment system, and related systems. The earlier we understand, the better.

Regime no. 3 - long range planning (lrp)

Ad-hoc measures for political survival do not last longer. Our approach for quick success through short-term measures does not produce fruitful results. A good ray of hope is 2010 program. The learned State Minister is doing a fine job by injecting new spirit of long term planning. Participation of youth and others at the grass root level is the clarion call of the Third Millennium.

The future Government needs to strengthen Planning Commission with financial analysts, Cost and Management Accountants, Sociologists, Psychologists, anthropologists, education, development economists, management experts and many others to ensure that we give a kick start to LRP. Only then strategic moves can be initiated, failing which we will keep operating in the style of "Business as Usual".

Our previous experience in LRP was introduced by Dr. Mehboob-ul-Haq when we introduced a perspective plan (1965-85). This was given a good-bye because of separation of the erstwhile East Pakistan which later became Bangladesh. Later another effort was undertaken in this direction. The misfortune is that our system believes in making decisions on moment to moment basis. The Ninth Five Year Plan (1998-2003) was to start w.e.f. July 01, 1998 but it has yet to see the light of the day. One of the real challenges of the Third Millennium is to develop faith in LRP and later operationalize it, failing which we will continue to be victims of adhoc decisions and this will not augur well for our future in the next millennium.

Regime no. 4 - self reliance

Every political Government of our country had been harping on the music of "Self Reliance". Except for some emotional and low profile decisions, Self Reliance yearns for a concrete plan for its implementation. Micheal Hammer, father of the concept of the Re-engineering had stressed on analysis of the business process. Every announcement must be backed up with logistical support measures to ensure a steady start to the above theme. If we continue with existing system, we will keep on adding to our borrowings (at home and abroad), will keep on seeing increase in absolute amount of budget deficits and will continue to see targets not achieved on several socio-economic fronts. The next millennium looks forward to first conceiving the Self-Reliance Plan and then backing it with logistical support to cushion it and later the rewards will follow to our country.

There is need to boost exports to achieve a quantum jump. The Eight Five year Plan (1993-98) had forecasted exports to be US $ 13 billion plus. During 1999-2000, our export target has been fixed at US $ 9 billion. Moreover, our foreign remittances have been showing a steep decline. We achieved a height of US $ 2.8 billion during 1981-82. During 1998-99, our remittances did not cross the threshold of US $ 1 billion. The next millennium expects a tangible plan to be prepared supported by capable and competent full time and well trained Minister to be the incharge of remittances so that at least we must register substantial increase to reduce the pressure of short term lending. Export Led Growth strategy must be properly understood, its details be developed and implemented in reality. Moreover, there will be an urgent need to reflect austerity in real life. This will have genuine demonstration effect. The present Government of Nawaz Sharif has pages of newspapers full with the wish List of Self reliance.

However, concrete measures appear to be the agenda of the next millennium. This area requires special attention so that we are not only politically sovereign but also economically viable and confident enough to make our economic and financial decisions on our own.

Self reliance does not mean that we should close our doors to new technology, new thoughts and new systems. Introversion is a suicide and while the next Millennium will look forward to a new and innovative thinking, we must stay in the main stream and adopt with firmness new initiatives to ensure strengthening the foundation of Pakistan.

Regime no. 5 - managerial revolution

It is certainly believed that Good Management is the key to opening several new doors of development. This did play an important part in the socio-economic development of Far East. Japanese were driven by the concept of theory Z. Taiwan developed due to implementation of Corporate Concepts of Lord Buddah. Chinese and several other Far Eastern Countries developed due to implementation of Theory "C" - following thoughts of Hakim Confucius. The west grew and developed due to enlightened Management theory and concept.

It is generally believed that for promoting foreign investment, cheap labour and availability of capital are not as important today, as good management practices. Management as a discipline is growing. From principles to practices, it is now getting into quantified results. The last three decades have seen the rise of new concepts e.g. Balanced Score Card, Reengineering, Sigma Six, Total Quality Management, Learning Organizations, Strategic Planning, Strategic Management, Just-in-Time, Materials Requirement Planning (MRPI and II), ISO series of 9,000 and 14,000 etc. Pakistan, in the next Millennium, needs to comprehend the latest management techniques and implement these to reap dividends and apply Strategic Intent Model to revolutionize our spirit to be higher achievers in the next millennium.

Every Government functionary needs to ornament himself/herself with modern management concepts and introduce these to achieve three Es namely, Efficiency, Effectiveness and Economy. Bureaucracy must be thrilled with the Max Webber's concept and must implement its spirit. The crying need of the third Millennium is instant decisions, good bye to red tapism for all times, service to the system, which finances the salary and wage payment.

Regime no. 6 - tax culture

We have a very narrow base of income tax payees in Pakistan. In a total population of 131 million, the total number of income tax assessees is around 1.4 million - around one percent. This ratio in Singapore is 52%. This is 25% in Hong Kong. The next millennium will look forward to shop by shop survey, industry by industry survey, farm by farm survey, institution by institution survey, etc. Second schedule annexed to the Income Tax Ordinance 1979 should be eliminated. The golden principle of Public Finance that every person above the threshold of taxable income should be subjected to income tax, irrespective of colour, caste, creed, sex, name of income of status. This principle should be implemented in toto without any exception. Self assessment system should be resorted to on a wider scale. Feedback on the operational aspects be institutionalized for corrective action to pave the way for continuous improvements.

Regime no. 7 - financial system

Financial defense has attained greater significance in today's time. Territorial defense is always kept as first priority, however, countries which are financially weak or fragile are unable to enjoy respect for political sovereignty. Our misfortune is that we are under a very heavy debt. Our internal debt is more than 1.16 trillion Rupees. Our external debt is around US $ 30 billion. Our debt servicing ratio to GDP is very high. We continue to suffer from fiscal deficits and current account deposits. We are all the time trying to have rescheduling of debts in Paris Club and London Club. Our financial affairs need drastic changes. The demands of the next millennium require a revolutionary plan to reverse the earlier negative trends and to accelerate the socio-economic development on self-financing basis. This will require determination and wise action planning on the part of our Government(s) to work on the following strategic objectives.

a) Drastic Reduction in Fiscal deficit and current account deficit in the short run and elimination in the long run.

b) Significant reduction in debt servicing.

c) Developing strategic plans to ensure self-financing of development projects. We must realise that sense of urgency should be developed to declare financial defense of Pakistan on high priority agenda, failing which our financial position will continue to become weaker and weaker.

Regime no. 8 - community development

Several countries in the world have registered tremendous growth due to contributions extended by community. Kerala state of India achieved 100% literacy due to contribution by the community. There are few outstanding names in history of Pakistan which have outshined due to their noble service to the socio-economic development of Pakistan. A vigorous orientation is needed to motivate the community development programs so that in future grass root association may be established and rather than expecting the miracles from the Government in every respect, community's contribution should be on the upswing.

Regime no. 9 - weapon free regime

Run gunning needs to be abolished for ensuring law and order in the country. The next millennium clarion call is to ensure that Pakistan should become weapon free country. The crime rate will come to a grinding halt and peace and tranquility era will usher in.

Regime no. 10 - functional literacy

Unfortunately the literacy rate in Pakistan has been very low. Social sector has been a story of neglect. The next millennium screams for development of knowledgeable society. There should be knowledgeable workers, knowledgeable management, knowledgeable governments, knowledgeable organizations, etc. Consequently, the dire need in the next millennium will be to accelerate the pace of functional literacy in the country. Action plan is needed to be prepared to achieve this objective.

Regime no. 11 - poverty elimination

Poverty is a curse, which needs to be eliminated. However, those who possess big wealth are not prepared to share it with the have-nots. The yawning gap between the rich and the poor needs to be first reduced significantly and later on eliminated. Implementation of fiscal laws and initiation of enlightened socio-economic policies for eliminating the poverty in the long run and alleviating the same in the short run will remain challenges of the next millennium.

Regime no. 12 - islamic socio-economic system

On July 21, 1948, while inaugurating the State Bank of Pakistan, Quaid-e-Azam Mohammad Ali Jinnah, the father of the nation had advocated for developing socio-economic system of Islam for enforcement in the country. This dream has not yet materialized. The next millennium, big challenge will be to first evolve socio-economic system consistent with Islam, implement it and ensure its enforcement.

* Dean: Executive Programs, Punjab College of Business Administration, Constituent College of Mohammad Ali Jinnah University, Lahore

President, Institute of Cost and Management Accountants of Pakistan (ICMAP)

Member, Governing Council, International Federation of Accountants (IFAC)