Tale of three Countries-China, S.Korea & Pakistan.
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.

Once equals-now poles apart!
In 1960 the Exports of the captioned three countries stood at $ 500 million each by 2006 China’s Export soared to $ 650 billion, of S.Korea to $ 350 billion while Pakistan was exporting less than $ 20 billion.  China with GDP of $ 3.50 trillion is now the 3rd largest economy while S.Korea with $ 2 trillion is the 6th largest. Pakistan with GDP of less than $ 200 billion is far in the league of big Economies of the World.
Pakistan under wise leadership of Founding Fathers emerged as an Economic miracle of 1950-60. Its “Two Gap Model” was adopted by S.Korea and other Asian Tigers. Why we lost our leadership role and sank to current levels where no one, including our closest friends, is ready to lend us $ 20 billion to avoid default.
Tale of S.Korea
In the case of S.Korea, they single mindedly kept following the two gap model and as per the plan by 1985 emerged as a foreign exchange  surplus country. By than it had amassed foreign debt of $ 40 billion and its foreign trade showed huge gap with Export of around $ 8 billion and Imports at $16 billion which included $ 5 billion oil imports. At this time the country was very depended on remittances of Overseas Koreans who worked on infra structure projects in new oil rich countries. Most of the overseas workers were serving or retired armed forces personnel’s; who were paid $ 200 per month plus accommodation. Out of this only $ 100 was paid in cash while the balance was invested in Equity market as per a national policy.
The huge debt and trade imbalance worried Lending Bankers like me endlessly as we committed large sums of Petro dollars to S. Korea.
In 1984-5 Oil price dropped to $8-10 level and we thought that new cities Abu Dhabi will turn to ghost towns. The lower oil price cut S.Korea’s import bill substantially and around the same time Korean cars, electronic items started to gain acceptance as cheaper alternative to Japanese products. The combined forces helped Korea produce its export surplus by 1985-6. Rest is history. Korea upgraded its electronic products like Gold Star to LG brand and Daewoo and Hyundai improved the reliability of their cars significantly and started to complete with Japanese product on more or less equal level.
Tale of China
China under Chairman Moa underwent a communist revolution and the conservative society was turned upside down. All religious and feudal leaders were killed by young soldiers; which included large number of girls. Anyone who claimed to have super natural powers was asked to stop the bullet. It is estimated that 10 million people were killed to free 700 million people from all old bonds.
The land was distributed equally and women were given important political positions to end age old oppression. All traces of old culture were wiped out in subsequent cultural revolutions.
China emerged as a rationale society in which all human issues were discussed openly and solved by logic. The aim of the humanist new society was to give best possible facilities for its people. Everyone was guaranteed house, job, education and health care. No distinction was made while making allocation. Bigger families got more according to their higher need compared to smaller.
Soon it was realized that resources were not enough to cater to needs of such large population and therefore strict family planning was introduced limit one child per family. Even this was enough to fill the resource gap and poverty became very serious.
By1990 Mao’s successor Dang Zoe Ping realized that China was in serious trouble and there was no internal solution and foreign help must be sought. He appealed to the large Overseas Chinese community for help. They demanded that in order for them to comeback along with their billions of dollars and skill acquired in capitalist countries like USA, they be given land in completely independent “Free Economic Zones (FEZ)”.  In 1992 against stiff opposition Dan announced opening of 1st such zone.  Subsequently six more FEZs were established all over the Country which attracted trillions of investment from all over the World. World was eager to exploit the huge labour force of China who were willing to work for fraction of wages that were paid in developed countries. The ageing Dang only wanted his people to be employed as agriculture was unable to provide employment to all. The surplus work force was absorbed by the FEZs.
Multinationals found that to transfer as much work as possible to china was the key to survival in the growing completive market. Co’s who failed to do so soon that they could not survive.
With increasing Exports China started to amass foreign exchange surplus which have reached $ 1.8 trillion by 2008 making it the most liquid country in the World. With GDP of $3.5 trillion and reserves of $1.8 trillion China is fast climbing the ladder of big economic power league. Now it ranks 3rd only after USA with $14 trillion and Japan with $4 trillion.  However USA with it $11 trillion and wage rates of $40 to 73 per hour is struggling to maintain its status as a manufacturing nation. Japan is facing a problem with its declining and ageing population and may also find it difficult to maintain its status. Therefore there are reasons to believe that China will surpass Japan in next few years and may also surpass USA in next 30 years.
Tale of Pakistan
Our obsession with Kashmir and its consequences
 Pakistan was expected to start exporting engineering goods by 1977-78 and gradually fill its import-export gap and pay off its accumulated debt like S.Korea did in mid 80s. However against the advice of USA and NATO, Pakistan started the 1965 war to capture held Kashmir. Nothing was gained in the bloody war but it created an upheaval in West Pakistan and great reservation in East Pakistan about their defence as it be became clear its defence was completely neglected. Therefore in West Pakistan PPP emerged on the manifesto of Socialist revolution and Awami League won on the manifesto of 6 point. By 1972 instead of getting Kashmir we lost East Pakistan in the most shameful and disgraceful manner. The remaining Pakistan underwent a huge transformation and embarked on nationalization of even school, colleges and small industry. Huge unemployment and inflation made the society very tense. PPP allowed large scale migration to ease the tension and large number of Pakistanis found jobs in newly rich oil producing countries.
In 1978 as PPP government was being challenged out of power it introduced harsh Islamic laws limiting the liberty of citizen and making society even tenser.
Dictator Zia instead of putting the economy back on track and eliminating sources of tension in the society introduced even more restricting Islamic laws which reduced the status of women and minorities and made Pakistan most undesirable place to live. This gave another impetus for migration of talented people and minorities.

Destructive Afghan policy and its consequences:
With his limited brain Zia did not realize that he has putting Pakistan on the path of destruction when he joined the Afghan War. He allowed some three million Afghans in the country while Iran allowed none. In return of small sum of money he allowed Jahadies from all over the World to come to Pakistan and turn it into a hell. The Jehadis and Pakistan army failed to end the civil war in Afghanistan. As this was fought for land ownership. Previously suppressed minorities like Hazaras, Tajiks and Uzbuks refused to return land to dominant old Rulers Pukhtoons. Thus the war goes on as Afghan stands divided between Northern Alliance of minority tribes in North and Pukhtoons in the East and South.  
From 1979 till date Pakistan has suffered huge financial loss due to our Afghan policy. The gains if any is not at all comparable to what we could earned by now if we had adopted the policy which Iran adopted. They did not allow Afghans beyond 10 kilometres of their border and kept their involvement to the extent of supporting tribes like Hazaras tribe with money and moral support from a distance. There supported tribe is a major political force in Afghanistan while our bet on Pukhtoons has failed. They keep fighting the new rulers and put Pakistan in most difficult and embarrassing position in front of Western forces. The so called Taleban who represent the Pukhtoons resistance have now turned on Pakistan after being beaten badly in Afghanistan.
Between 1972 and 2002 Pakistan became a most undesirable destination of local and foreign investment. Thus it suffered immensely. Unemployed and under nourished population to survive either migrated or joined the well paying foreign funded terrorist organisations like Al Qaeda.
Between 2002 and 2008 Pakistan become an attractive investment destination due to liberal economic policies of Musharraf's government. Although the law and order situation was not good but hope was raising that extremist element would be soon crushed with the help of West. Country saw a noticeable improvement in standard of living and it seems that Pakistan would be put back to track of economic development it abandoned in 1972.
However the hope was dashed as Feb 2008 election gave victory to PPP. The fear and pain of nationalization of 1972 came back to the mind of investors and despite repeated assurance from the now pragmatic PPP leadership the impression lingers on.
The current PPP leadership have spent extended period of time in pure capitalist countries and have acquired the understanding of how markets work. They know that there is no alternative to free market. High standard of living can only be attained by following capitalist model. Therefore they seem to be sincere in their pro market pronouncements however investors seem reluctant.

A way out for present government:
By following S.Korean and Chinese examples we can get out of our present problems.

1. First of all we should adopt an isolationist foreign policy and resolve to withdraw from all initiatives aimed at capturing Kashmir or Afghanistan.   
2. Concentrate all efforts on betterment of the people by creating a just and equitable society. For this land reforms like one done in China and Iran should be undertaken. Ideally each rural family be given 20 acres land on 30 year fixed lease subject to keeping domicile.
3.  To find employment for remaining teeming millions 8 FEZs should be established all over the country. To start with the entire coast from Korangi Industrial Area up to Kati Bandar be declared the Ist FEZ of the country. It may named after Benazir. The Benazir FEZ will take care of its entire requirement like power, water etc and will be run like a company. It will have its own security system linked with national security system. The entire area behind a high wall will have strict entry rules. Only people clearing all security clearance may be allowed in the area to ensure a safe and pleasant working environment.
4. Mandatory saving scheme for Overseas Pakistanis may be introduced linked to passport renewal to direct their savings in productive investments. Bulk of their saving may be directed to development of FEZs in the form of allotment of industrial lands which will ensure a stable value. This will draw a large number of 8 million Overseas Pakistanis back to Pakistanis with their estimated $ 500 to 1,000 billion wealth; like the Overseas Chinese did in 90s.
5. Overseas Pakistanis may be given opportunity to investment in Government Bonds in $ at 3 to 6% above market rate. This will bring in a huge sum of money and will not be counted as external debt. It is estimated that Pakistanis have $200 billion deposits in Swiss Bank accounts only. Pakistan can get rid of IMF by doing this. India avoided IMF by attracting such deposits from its Overseas citizen in late 1980s.