Why Pakistan is a winner
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.

The survivor and a winner:

• -The Area comprising Pakistan has some of the oldest civilizations in the world. It is reasonable to expect that the civilization will continue to exist in this part of the world when many other civilizations will disappear. There are many climatic, social, and religious factors supporting this view.

• Pakistan's economic performance during its first 25 years of existence was noting short of extra ordinary  like its creation itself. From a very low base it attained such growth that it became a subject of study and duplication by countries like S.Korea- now the 5th largest economy of the world. Unlike S.Korea during the next 20 years Pakistan distributed the wealth created in the first 25 years. This killed the enterprise and de-energized the economy but it expanded the high-income consumer base rapidly. It is now estimated that out of its 140m population some 50-m people have such purchasing power that they can afford every world class product and service at world price. On the other hand some 40m people are still suffering from lack of basic necessities like full nutritional food. The remaining 50m are between these two extremes. This situation is prelude to explosion in economic activity and Pakistan's dash to become a major economic power in the world. The hungry 40m people need job at whatever wage. The rich 50m want to enjoy all amenities. The 50m middle class want jobs at reasonable wages and wants to enjoy everything even if they can not afford it. All this means that huge pent up energy is about to explode if the current brakes are released. Once this happens there is reason to believe that Pakistan will become the 7th largest economy of the world to match it military status.     

Pakistan enjoys following advantages, which lend support to this theory:

• A balanced society.

They say the biggest asset of Pakistan after abundant water is its spiritual nature. Pakistan can be described as an "Empire of Spirit" Its Sufi tradition and bend of mind along with a scientific advancement provides a unique balance between material and spiritual spares of life, both of which are considered essential for human well being and happiness.   Pakistan is neither an orthodox country denying material necessities nor a fully material society governed by hedonistic forces. A system of check and balance exist which makes it more livable place.  The revival of Islamic value in recent past has further strengthened the underlying Islamic nature of the society. This means that while economic goals are pursued the environment is not neglected. Recycling is possible and used extensively for sustainable growth.  

2. A natural habitat. A conducive place for life to flourish:
Unlike countries like USA, Canada, Australia and New Zealand which are not suitable for Human habitat, (the reason why there was no significant population in these countries upto some 250 years ago and even now these countries will come to halt if fresh injection of migrated population stops) Pakistan is a natural habitat. There are conditions, which generates, attracts and nurture large population. Those who choose to leave it regret silently for rest of their life. No amount of population outflow, brain drain, transfer of funds reduces its vibrancy and life goes on in an easy and enjoyable manner with all essentials of life.                   
The known and proven history so far indicates that civilized life existed in Pakistan some 7,000 years ago, the oldest known civilized human habitat in the world; older then that of Egypt and Iraq.
It is observed that the continuous flow of melted water from the cluster of large mountains in the north feed the rivers flowing through the Indus plains throughout the year and this combined with moderate climate provide an ideal condition for human life form to flourish. The total amount of rainwater (or melted water from mountain) which falls in the area is enough to support a population of 520m, four time the current population of 140m. Currently only 16.8 billion cubic meters of water is retained while the remaining 45.6 billion cubic water flows into the sea on the average every year.
Pakistan enjoys a moderate climate, which reduces the cost of living to a fraction of what is required in extreme climates like in Canada or Gulf. It has a range of climatic condition from high mountains in the north to seacoast in the south. This enables a large population to survive on little amount of money and in return sell their labour and time at a low cost providing competitive advantage to its agriculture, services and industry sectors.

3. Small  government attitude:
People in Pakistan largely tend to ignore the rulers and governments now, as in the past, until they are forced to inter-face. A large segment of economic activity does not get recorded in government books. This was true in Mogul times and this is true today. Governments are seen as a burden rather then a help and thus reluctantly accepted. In the present age it is estimated that 70% of the economy exist in the so-called informal sector which is hidden from the government eyes. This sector of the economy is self reliant and does not enjoy any support from the government in the form of cheap credit or subsidies and yet manage to produce 60% of all the goods and services produced in the country. This sector sell its labour and effort at very cheap rate thus help keep the cost of living much lower then other countries and also give competitive edge to the larger industry in the formal sector.

4.A vibrant economy:
The vibrancy and  extra ordinary energies that flows through Pakistan's economy from Karachi on Arabian Ocean to the  remotest  corners of  Northern Areas. can not  be explained in writing  but can only be realized by a visit to the country. There are self contained pockets of  population almost everywhere One can see brisk trade going on almost around the clock everywhere . The quality of service and  its price is unbelievable. When visitors enjoy these they want to live on for a longtime. 

5. A self-reliant economy:
Non dependent on international trade:
Rulers have come and gone but life has continued uninterrupted in this land with or without any help from the rulers or technology. Since all that is need for life was produced in this area there was no need to do any international trade. The Area was self sufficient in every thing.
When western traders reached its shore they were surprised at the appulance of its ruler and moneyed class and vibrancy of the economy and lands capacity to meet needs of so many people. The Mogul Ruler Akbar was reported to have annual revenue, which was hundred times more then, any European Ruler. There was simply no comparison between the GDP and per capita income of the sub continent with European countries. The situation is similar in the reverse direction now.  When they tried to trade they were amazed to find these people did not need any thing from outside nor they had a desire to sell anything to the outsiders. This was very frustrating to these traders, as they could not get involved in the large amount of transactions going on within the country.   They were bystanders until they managed to sell some Chinese cloths and buy indigo for exports. Gradually they added machine made cloths, tea, railways etc to the list by force once they had acquired political power.  In that sense they needed to rule in order to make us buy there goods or else we would have preferred to rely on our own industry and products and ignored them.

6.The  competitive advantage:
A natural cheap manufacturing base:
Even today anything produced in the sub continent is many times cheaper then the similar thing produced in the western countries. Thus the sub continent enjoys a marked competitive edge over most other parts of the world. Therefore it can be urged that in the ideal world when all barriers to movement of capital, labour, management and technology is removed a very large percentage of economic activity will once again converge in the sub continent. Be it computer programming, internet related business, manufacture of car or plane, computer, shipbuilding, manufacture of planes, arms including Atom bomb or anything else, all these things can be produced cheaper in the subcontinent then any other part of the world. This is simply because in the end to produce all these one needs human being. And due to nature's generosity we in the sub continent can afford to have children at a fraction of cost then in other countries and we can also reasonable train and educate them at a very affordable cost. The advent of Internet and global libraries are creating a level field in terms of knowledge thus the advantages enjoyed by western students in the past will be lost. With this development and given the fact that population in the western countries is declining and the population is aging fast and the percentage of older people compared to younger people is increasing, the future belongs to the countries like Pakistan.

7.A liberal economy.
The  first follower of two gaps economic development model:
Pakistan was led to nationhood by Quaid-e Azam  Mohammed Ali Jinnah a modern western educated and well dressed person who was a professional lawyer. Unlike Ghandi who laid the of ideological foundation of India, corner stone of which was an advocacy of isolationism, as he considered interaction with western powers as the cause of all ills and reason for enslavement of India.  Jinnah called in Economist/consultants like any rational person, to help in formulate economic policy. He enlisted the services of Harvard University for this purpose as they were considered and are still considered the best educational institution in the world.
Harvard University came up with a plan known as Two-Gaps model. Which called for planned and managed gap in external trade and internal budget. The import of machines and technology funded by foreign aid and loans was expected to create the first gap. The second gap was expected in the domestic economy as government expenditure was planned to exceed the government revenue to stimulate growth. These two gaps were expected to be filled in eventually with exports exceed imports and government revenue exceeding expenditure once the economy has grow sufficiently as result of investment activities financed by these gaps. The first gap was planned to start filling in 1970s with the start of export of higher value added goods like machinery and engineering goods. The second gap was planned to be maintained within a range of GDP acceptable among other nations.

This model was studied and then adopted by other countries like South Korea to become the fifth largest economy of the world. In early 1980's South Korea had accumulated a total debt of USD 40 bio while it export was less then 10 bio. At that time Bankers were reluctant to lend more, as they thought the country will not able to pay back. Now this looks like a joke.

The resultant current Foreign and Domestic debt burden:
Unlike Korea, which was able, to pay off its initial development debt easily due to continued following of the two gaps model. Pakistan finds itself trapped in debt burden due to disruption of the development process and erosion of investors confidence.
However the total foreign debt of USD 36bio and similar amount in domestic debt is not something which can not be paid back. If we consider the large informal economy and the presence of some 4 million Pakistanis outside the country the debt, which appear very large in comparison to the formal economy is not that large. If we only take the annual earning and saving capacity of Non resident Pakistani alone the debt is manageable. These Pakistani on the average say earn USD 800 per month or 9,600 per year that makes a staggering USD 38.4 billion. If these non Pakistanis can be forced or persuaded to deposit say USD 100 per month in a National Self Reliance Fund as retirement saving plan which say pays 2% more interest then the international market. This will generate USD 4.8 billion per year and the entire external debt can be paid off in 7.5 years. Once the country is in a position to pay off the debt of this fund proceeds could be invested in other investment like property, shares etc
 There are examples of this kind of exercise by other countries like Philippine and Sudan. Even S. Korea sent a large number of work forces in 1970s and 80s who worked on large infrastructure projects. These workers were mostly ex army personnel who were paid a small sum in cash in the country where they worked while the rest of the salary was sent to their country to be invested in a development fund.
 
8. A country with extra ordinary economic growth record:
 (1947-1972)
At the time of its birth all leading economist of the world including Gust (who later joined Pakistan Planning Commission) declared that the country could not survive for more then few months and would be forced by economic condition to rejoin India. To every ones surprise Pakistan not only survived but attained such growth rate which was unseen at that time 
Soon after giving up India and Pakistan Britain Pound become very weak and was devalued by 30%. While India followed Pakistan refused to reduce the value of its currency. At that time 60% of Pakistan's export was to India thus it meant that India was forced to pay 30% more for essential imports like Jute and Pakistan's export income jumped. Before India could find alternative source of Jute Korean War erupted thus creating a shortage and increasing the price of Jute further. The extra ordinary FX income during 47-54 period provided a substantial FX reserve for the country. Which it decided to invest in industrialization process particular import substitution industry. The incentive provided were such that within a short span of time a whole range of domestic industry sprang up from none at the time of independence. The rate of growth in GDP during this time was on the average 10-15% a record growth rate for all times.
In 60's Pakistan paid attention to Agriculture sector and started the Green Revolution which led to high growth rate of 10-15% in this sector as well and by 1970 Pakistan was able to triple its Agricultural production from what it was in 1950.
These extra ordinary performances in very adverse circumstances indicate that if the right policies are adopted Pakistan can once again attain leadership role in economic development. It can be hoped that like S. Korea, Pakistan can become a leading economy. There is no reason why it can not become the seventh largest economy to match its  seventh Nuclear power status in the world.     

9. An egalitarian society
The distribution of wealth and expansion of consumer base:  (1972-2000)
The rise of twenty two families:
The economic growth model followed by Pakistan between 1947- 1971 encouraged concentration of resources in fewer hands in order to have high rate of savings and reinvestment led to widening the gap between "haves" and "have nots". So called 22 families became owner of large chuck of the newly produced wealth which led to social movement calling for re-distribution of national wealth. This underlying demand led to the winning of Peoples Party, which had promised reforms.
In  1972 as promised in PPP manifesto, the planning process was derailed or rather reversed with the nationalization of industries, land reform and mild social upheaval.
During the  Zai ul Haq's rule starting 1977  Pakistan faced a new challenge of survival in the form of Soviet invasion of Afghanistan.  Warding off this aggression became the top priority and in the process of helping Afghanistan fight Soviet aggression the economy was ignored. The job creation lagged, and a gun and drug culture invaded the country. The Islamization process generated additional tensions in the society. With entertainment and freedom curtailed Pakistani society become very tense. This led to emergence of regional protest groups like MQM, Sipha e- Shaba, Jya Sindh etc. Lot of blood was spelled upto 1996.

Although apparently pragmatic democratic rule was partially restored in 1988, the new rulers were not been allowed to make major changes. Yet since 1988 the society has cooled down gradually to some extent 

10. A 140 m target market with 50 m middle class consumer base:           Despite of all the above the society progressed forward as in one way or the other during period 1972 and 2000 the wealth was distributed widely among the population so that instead of say one million middle class or upper middle class consumers in 1972 the number of such consumers increased to 50 million by 2000. Now this segment of the society is the target market for multinational Cos. who are doing roaring business.    

The future prospects:
On the whole Pakistan had done quite well in the past and a very bright economic future awaits it. It has a large population base with a mix of population which ensures that a  large hard working population is available to make any dream a reality. Its 71m under 25 years old population which is more then the population of USA, in that age group, is its biggest assets. Its vast water resources can sustain population of  550m almost double that  of USA. Its spiritual values( with strong sufi influence) provide stability to its society and a culture of tolerance, sharing and caring.  Its status of the 7th nuclear power in the world and the first in the Islamic world has made Pakistan a nation, which can not be ignored or taken lightly. It is a power to be reckon with as it represent the Islamic block in the world as its leader in technology, social and intellectual development. Pakistan can now feel safe and make peace with India and other neighbours with confidence and lower its guards.
From now onwards Pakistan can concentrate on economic development and rapidly expand its economy to quickly provide employment opportunities. It can afford to re-deploy some of its budgetary resources from Defense to Social and economic sectors.

Suggestions for rapid economic and social progress:

Political and social:

• Introduce real democracy without  interference from the Army.
• Ban and destroy all  Extremist and Terrorists Groups in the country as they and their activities are the biggest barriers to job creation in the country.
• Make peace with India as equal partner with a confidence that it can not harm Pakistan.
• On the strength of Missile and Nuclear capability reduce conventional forces from current 550,000 to say 150,000 and direct saved funds towards neglected  Education and Health sectors
• Energize and expand  SAARC movement to gradually build a common market from Afghanistan to Burma. With such ease of movement that borders will not mean much. To be followed by a common currency. 
• Restore all right taken away from women during the Zia regime.
• Repeal all laws enacted during Bhutto and Zia's regime which has reduced personal freedom of choice to build a more relaxed and tolerant society as it existed before 1978.

Economic:

• Remove all barriers to the working of market forces of demand and supply.
• Introduce death penalty for taking bribe as is practiced in China.
• Introduce very harsh property confiscation law  for people found guilty of  taking bribe or involved in making money by illegal means. The law should cover property in the name of all dependents like wife and children.
• Remove all existing laws governing industry and commerce and introduce a simplified code or conduct drafted in consultation with concerned parties to root out corruption and harassment by different government agencies.
• Create a multi billion-dollar Fund to channel Overseas Pakistanis Savings to serve their retirement requirement and help development in Pakistan.
• Create a multi billion Rupees Fund with the help of Overseas Pakistani to refinance Mortgages on US pattern (e,g Federal Mortgage, Guaranteed by US Federal Govt) to give a big boost to employment and economic activity.
• Create one free economic zone in each province of the country, which would be independent of Pakistani laws, and be governed by independent Boards of Investment. Such zones will have very low taxes and one windows service for all needs.