ECONOMIC MARCH OF ASIA

SHAMSUL GHANI
(feedback@pgeconomist.com)
Aug 15 - 21, 2011

Pakistan's economic march during its 64 years of existence does not show any intensity of purpose or sense of direction. By what has been achieved during all these years, we can only expect to win the tag of also-ran to get categorized on the 16-nation card.

On per capita GDP basis, we are placed at the bottom just above Cambodia and Bangladesh. What give us blushes even against these two bottom nations are our high inflation, unemployment and poverty line rates. In fact, no other nation from those chosen for comparison can challenge our elevated status in terms of these three indicators.

ECONOMIC CONDITIONS OF REGIONAL ECONOMIES THAT EMERGED DURING LAST 70 YEARS

COUNTRY DATE LIBERATED LIBERATED FROM THE RULE OF ERG (NOM) PER CAPITA GDP ($) INF. RATE CPI % Unem. rate% BPL
 %
FR. BILLION US$
Bangladesh 1971 Pakistan 57 638 5.4 5.1 30.0 12
Cambodia 26-09-89 Vietnam 119 834 4.1 3.5 25.8 4
China 1949 Changed to People's Republic at the end of civil war 2 4,382 6.5 4.1 NA 3,050
India 15-08-47 UK 10 1,265 9.4 9.4 37.0 312
Indonesia 27-12-49 Netherland 15 3,015 5.1 6.8 13.3 118
Israel 14-05-48 At the end of British mandate for Palestin 42 28,686 3.6 6.0 23.6 77
Lebanon 26-11-41 France 79 10,044 2.0 9.7 3.0 42
Malaysia 31-08-57 UK 37 8,423 0.4 3.0 3.5 153
Myanmar 04-01-48 UK 86 1,197 7.7 4.9 32.7 4
Pakistan 14-08-47 UK (separation from India 47 1,050 13.8 15 40.0 18
Philippine 04-07-46 US Recognition 46 2,007 4.5 7.2 NA 69
South Korea 15-08-48 Created as first Republic 15 20,591 3.0 3.3 2.0 305
Singapore 09-08-65 Separation from Malaysia 39 43,117 2.8 2.2 NA 242
Sri Lanka 22-05-72 Full independence from UK 73 2,435 3.4 3.4 7.6 6
UAE 02-12-71 End of treaty relationship with UK 33 59,717 1.5 12.7 NA 39
Vietnam 02-07-76 Reunification 58 1,174 11.8 2.9 2.9 13
ERG: ECONOMIC RANK BY GDP; Unem: UNEMPLOYMENT; INF: Inflation; FR: FOREX RESERVES; BPL: BELOW POVERTY LINE

Bangladesh's foreign exchange reserves, though smaller in comparison to ours, provide a 49 percent cover to its external debt, which stood at $24.5 billion as of December 2010. In our case, the foreign exchange reserve coverage of external debt ($57.1 billion) is only 32 percent. Bangladesh Taka is 14 percent stronger than Pak rupee.

Bangladesh, after its independence, went through a crushing period of economic turmoil. India helped Bangladesh with some of the money it got from the US and the then USSR the details of which are buried in CIA and KGB files.

Indian financial assistance was obviously never meant to securing long-term economic stability for Bangladeshi people who quickly learned to live within their means and succeeded in staging an excellent economic comeback. China is the topmost nation that reaped the benefits of sustained economic growth after coming into its own at the end of a prolonged social strife and economic chaos. It is positioned at number two spot and is well poised to dethrone the crisis-ridden No.1 economy of US.

To the surprise of majority of economic analysts, China has used a prudent mix of free market economy and sensible, centrally planned economic programs. The developed world made the cardinal mistake of shifting balance to the services sector at the expense of commodity producing sectors. China maintained a delicate sectoral balance and used its resource base to the maximum advantage.

Pakistan's economic backwardness is attributable much to our political inefficiencies than economic deficiencies. The alternation of autocratic and democratic rules that saw formulation and reversal of economic policies in quick successions hardly allowed Pakistan's economy to move forward. The reversal of policies was invariably based on vengeance rather than any economic sense. The much repeated democracy never came to any real fruition as those touting democracy were never sincere in implementing and establishing it.

The combo of natural-feudal and businessman-turned-feudal got fair share of opportunity to rule the country but none of them rose above the "Tom and Jerry" mentality. Toms - the army Generals - waited in the wings for 'Jerries' to make mistakes and pounced on them to keep them out of business for a period much longer than their term of rule. The game of democracy continues with Jerry-1 and Jerry-2 poised for taking turns with the implicit permission of Toms who are engaged these days with some other important business.

The democrats are yet to prove that they are better economic managers than their counterparts are as economic development during their rule has invariably been poorer.

On economic side, we lost much of our time in experimentation. During the course of a number of structural shifts-from agro to industrial economy and from industrial to services economy-we lost momentum and will to focus on our real strengths. During Musharraf's era, we focused on supply side and recorded unprecedented economic growth. The flaws that crept in and remained unaddressed were misuse of cheap credit and over-expansion of services sector. The telecommunication revolution was what we really needed. But, the expansion and growth of financial sector, especially banking, under the loose control of state bank proved to be a 'mixed blessing'.

The strong banking sector survived the global financial meltdown with fewer casualties. But, the blue-eyed bankers became a cartel force and denied their depositors a fair return. This created huge inequality of incomes as common person's money got stuck up in non-performing loans doled out to the political, business and industry elites.

State Bank's monetary tightening also backfired as the banker took full advantage of a high bank rate by enlarging their spread and blocking credit to the private sector through investment in government securities. The government's high borrowings and non-development spending sent inflation soaring. We still have the highest bank rate and inflation in the region.

Stifled economic growth, rising fiscal deficits, high poverty incidence, and acute shortage of energy are what the nation has got since its inception.