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Wednesday, April 17, 2024

Development Journey of Pakistan from 1947 to 2023

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Introduction

After the provenance of Pakistan under the charismatic leadership of Quaid-e-Azam, it was envisaged that Pakistan would be a democratic Muslim welfare state where the principles of Islamic justice and economics would find fair play for the benefits of the poor masses and the country would have equal standing in the comity of sovereign nations promoting peace and prosperity. But the dream has yet to be materialized; the country even after seventy-five years is shellacked with political, religious, and economic problems, later being the cause of formers. Pakistan lags behind in development as compared to many developing countries which started their journeys with it that need incisive rumination.

Development of any country in the modern world is attributed to the sine qua non-elements of rule of law, operational principles of government, institutions of governance, equitable economic distribution, the effectiveness of government to curb inflation and stagflation, freedom from hindrances in trade, opportunities for investment of capital, lack of corruption, foreign reserves, educational opportunities, healthcare, protection of minorities, freedom of expression, gender parity and status of women, pluralism and modernity in worldview. The experience of Pakistan is topsy-turvy which rarely configures with these elements since its inception as compared to other developing countries.

Missed Opportunity: 1947-71

Post-independence, Pakistan has to develop from a non-existent base of infrastructure. It had to enact a constitution which was postponed as the country was in the quagmire of a number of crises due to the influx of refugees and ongoing conflict with India over Kashmir. The denial of due share of assets by India created a menace about survival and Time Magazine portended its collapse within six months. To put the country on track, policymakers rummaged through long-term policies to spur economic development. During the first decade, Pakistan adopted import-substitution industrialization as agriculture (59% of GDP) was not enough to stabilize growth and fulfill the requirements of the country. It embarked on five-year plans that considerably drove industrial development. Despite political doldrums, the first five-year plan surpassed projected targets and the menace of the collapse was successfully tackled.

The first decade was marred by political instability. Pakistan allied with the U.S. at the expense of making hostilities with the Soviet Union, the Muslim world, and the developing (non-aligned) world. Ayub Khan conceiving political class inept marked with cynicism and corruption unable to concur on a viable political and socio-economic system took over as president in October 1958.

The regime – celebrated popularly as the decade of development – was quite a success in terms of GDP growth. The government introduced the following measures: subsidies to exporters and importers; loans extended via Pakistan Industrial Credit and Investment Corporation (PICIC) and PIDC; export bonus scheme – an extension of bonus vouchers that encouraged the Industrial sector to surge production and exports. The import of high-yielding seeds, the sinking of tube wells, land reforms, the establishment of dams, and mechanization of the agricultural sector led to what is popularly known as the ‘Green Revolution’, albeit it was only concentrated in a few regions of Punjab, Sind, and NWFP shunning the Eastern wing and mostly peasantry was exempted from benefits.

The results indicated a spurt in growth of the manufacturing sector which grew up to 16.9% of total GDP, agriculture grew up to 6% leading to overall GDP growth of more than 5.8% during the decade though poverty remained alarmingly at more than 60% as Pakistan was pursuing functional inequality – that inequalities in income lead to economic development. Pakistan was a rising ‘Asian Tiger’ whose manufacturing sector exports surpassed that of combined exports of Turkey, South Korea, Thailand, and Indonesia in 1965. Ayub Khan apprehended that only Islamic invocation cannot hold the country together until and unless it is configured with modernity and the changing dynamics of the world. It was the first attempt to change the worldview of society by introducing modern reforms not only in the economic sector but also in the social milieu of society such as family laws and the encouragement of modernity.

The development was ephemeral as it was characterized by uneven economic development widening the gulf between East and West Pakistan’s disparities and concentration of wealth in few families, and unnecessary adventurism in case of foreign policy. Bhutto came to power promising to alleviate the grievances of peasants and the lower middle class pledging Islamic socialism that crippled the industrial base of the economy for the next decade.

Experiment with Socialism: 1972-77

To assuage the grievances of peasants and labor and to curtail the affluence of few families, Bhutto’s government embarked on a nationalization program, ergo deteriorating the Industrial foundation of the country. As the nationalization reached its apex, the private sector dropped to 15% of total investment in GDP and the public sector grew to 80%. To dispense the land among peasants 0.9 million acres were resumed, and labor unions were sanctioned. The sectors of banking, insurance, health, and education were nationalized. The failed socialist experiment of Bangladesh which led to famine in 1974 presented an ominous future of nationalization. India also unshackled the private sector and jettisoned the socialist ideals of Congress but Pakistan did not learn. For Pakistan results were disastrous: industrial growth plummeted to 2%, inflation skyrocketed to 30% and lack of monetary and fiscal disciplines led to huge budget deficits and overall GDP growth declined to 4% from 1972-77.

Despite the deterioration in economic conditions and the social sector, there were few significant developments. Pakistan achieved its constitution applicable up till now with certain amendments. The alienation of Pakistan from the Muslim world was mitigated by making amiable relations with the Muslim world, also stipulated in the constitution which would lead to $25bn in remittances next decade by labor Pakistani expats. A covert nuclear programme was also started and the first attempts for independent foreign policy were pursued. The nationalization in different sectors led to the subsequent handling of affairs by naive bureaucrats which led to malfeasance, misfeasance, and nonfeasance. Following the controversial election and diminishing law and order, the military took over.

Denationalization and Islamization: 1978-88

The following decade from 1978-88 was characterized by high GDP growth, denationalization, Islamization, and involvement of Pakistan in Afghan Jihad. Zia’s denationalization and neo-liberalization coalesced with Deng Xiaoping’s liberalization of the Chinese economy and the privatization and deregulation of Bangladesh’s economy. Contrasts were that Deng committed China to not indulge in any war for a century, Bangladesh made no enemies but to gain foreign assistance, and Pakistan plunged itself into other wars.

GDP growth in the 1980s was 6.5% exceeded only by China, South Korea, and Hong Kong, and growth in real wages was surpassed only by Thailand. Manufacturing surpassed 9%. Revival of five-year plans made performance exceptional by every standard albeit transient as Pakistan did not bode well in Human Resource Development. The controversial Islamization led to the servitude of minorities, surged sectarianism, and gender parity nosedived to its lowest levels. Society was highly polarized that still haunts Pakistan by breaking the social fabric of society. Women faced extreme violence and discrimination due to the government make shifting to the medieval worldview and the introduction of Hadood ordinances.

Zia’s government was physically involved in Afghan Jihad against the Soviet Union with the aid of the U.S. It caused the exodus of Afghans to Pakistan which it could ill afford, most of the refugees still dwelling in the country. Though, the involvement in a war filled the coffers of the country the culture of Kalashnikov and the ensuing civil war after Soviet withdrawal had disastrous impacts on Pakistan’s society and economy prevalent up till now. Moreover, Pakistan continued its covert nuclear program which strained Pakistan-U.S. relations in the next decade of lost democracy.

Structural Adjustment Programmes 1988-99

The decade of the 1990s featured the arbitrary use of power by the president using 58(2)(b) amended by Zia which allowed the president to unilaterally dissolve the parliament. Governments came and went but economic decisions were often made by caretaker governments under the auspices of IMF/World Bank. In the 1990s Pakistan entered IMF structural adjustment programs which committed Pakistan to deregulation and liberalization of the economy with major accentuation on the laissez-faire in the private sector. Due to political mayhem and rampant corruption, the GDP growth stagnated at around 3 to 4% approximately in the 1990s. Pakistan was ranked the second most corrupt country after Nigeria in 1995. The plans under the IMF/World Bank often would not reach targets which were readjusted to close proximate targets so that planners could claim success leading to self-deception.

The 1990s saw the onset of ethnic violence in Sind urban centers, the politicization of the Kalabagh dam, and the dragging of the military into politics. At the end of the decade, when Pakistan conducted nuclear tests in 1998 which was one of the biggest achievements of Pakistan since its inception, the U.S. passed the Glenn Amendment which terminated U.S. aid to Pakistan, denied export credit, and opposed any extension of loan by IMF to Pakistan. India also conducted tests but her successful foreign policy shielded her from harsh sanctions. Pakistan was on the brink of bankruptcy when the military came to power in 1999.

Authoritarian Development:1999-2007

Despite doubting the credibility of the U.S., Pakistan’s military government joined the U.S. war on terror after 9/11. A neutral foreign policy and only extension of diplomatic support would have helped Pakistan avoid a bleak future and gory terrorism saving 70,000 lives and avoiding a $150bn loss in economy but the necessity of aid (military and economic) to support the bankrupting country’s economy pushed toward alliance with NATO forces. The influx of aid and waiving of sanctions by the U.S. put the economy back on track. GDP grew 7% per annum from 2004-07 and debt cries were averted for the time being.

The government took some modernizing steps by freeing media from government censoring, introducing a women’s protection bill, creating schools, and constituting the Higher Education Commission for higher education. The number of universities grew at an exponential rate from 74 in 2001/02 to 184 in 2015/16. There was also a decline in poverty from 34.6% to 20% in 2007 but all these indicators proved fugacious. The transition to democracy in 2008 did not translate into development under the next government of PPP.

Battle for Democracy and Growth:2008-22

The PPP regime from 2008-13 was lackadaisical in responding to grave challenges the country faced. The surge in corruption, rampant terrorism in the years 2008-12, and the absence of any financial policy hampered the economic and social sector development. GDP nosedived from 6% to alternating between 2 to 3%. The only significant development was the 18th amendment with the devolution of presidential power of dismissing parliament and the announcement of the NFC award which gave more power and autonomy to provinces. Moreover, for the first time country, one political party gave way to another in a democratic way in 2013.

PMLN government with loans from the IMF put the economy back on track, averaging 4 to 5% during 2013-18. The education budget for the first time reached 4% of GDP. Pakistan also initiated China-Pakistan Economic Corridor which is aimed at $70 billion in investments by 2030. Instead of the unfettering private sector and adopting a laissez-faire approach as Bangladesh and India did, the government pursued patronized-based privatization which aims only at a few loyal businessmen, and rigging of markets for self-interests caused big lacunas in transparent and accountable private sector growth. After PLMN was voted out, PTI (2018-2022) struggled to put the economy on track with partial success.

The GDP slumped into the negatives in the first year and debt grew while the government failed to convince the IMF for a $6 billion loan tranche as the policies of the government and IMF did not collude. The government was struck by the worldwide Covid-19 pandemic which it managed effectively with the help of the military but it halted industrial growth. At the end of government in April 2022, there was a robust recovery in GDP growth which exceeded projected targets to 5.97%. Similarly, the agriculture sector contributed 4.4% while the Industrial sector showed 7.2% growth in 2022 and for the first time tax collection reached 28.1%. Investment also climbed to 15.1% though for sustainable development, economics pundits assert it must be above 25% for smooth GDP growth. But social sector development was shunned as always and the education budget was a minuscule 1.77 % of GDP. There were huge budget deficits due to subsidies and inflation also rose which crushed lower middle classes.

The new coalition under PDM has concluded talks with the IMF for a bailout to avert mounting economic crises. IMF imposed harsh conditions on the government and the already impoverished masses are now bearing the brunt of elite capture of the state and their crass policies. Only a free and fair election can help a country steer through troubled water which seems impossible in the offing. Certainly, the situation is being created for chaos and soon the masses and the youth would lead them would turn to revolt against the elite which is the need of the hour. The time is up for gerontocracy.

Annual Sectorial Share in GDP

SectorPercentage share FY21
Agriculture19.19%
Industry19.12%
Services61.68%
Ministry of Finance

Bangladesh after secession took a divergent path as compared to Pakistan. Despite alterations in government, Bangladesh kept favorable economic policies for the private sector eliminating impediments for the private sector while diminishing the government’s role as much as possible whereas Pakistan remained dependent on foreign assistance. Its GDP is growing by 7-8%, poverty declined to 20 percent and HDI increased by over 60%. That is why Bangladesh has surpassed Pakistan in almost every sector of development.

Indonesia and Pakistan had more similarities than any other. Indonesia embarked on the concept of ‘unity in diversity’ which created cooperation and harmony among different groups whether religious or ethnic. It gave autonomy to the groups over their lands while unfettering the economy from government control which led to an economic boom. By the end of the previous century, it brought 15 million people out of poverty and the country is now among the rapidly developing world with modern infrastructure and development. The centralized governance system of Pakistan gave no meaningful results that could translate into growth and development and the constant interference of the military in politics created doubts and fears among investors about the intentions of governments.

Social sector development presents a grim image of Pakistan’s development as compared to developing countries. Health care is obsolete. 9.6 million children are facing nutritional deficiencies; due to a lack of delivery hospitals,  out of every 10,000 women 250 die while delivering. Private sector health is too expensive to be affordable by pauperized masses. The poverty rate is still high at 37% which is growing due to ubiquitous inflation while India succeeded in suppressing it to 10% and Bangladesh is fairly better.

Pakistan is no better performer in education as 27.8 million children are out of school and most of them are females. HEC budget is gutted down which would lead to fee hikes and deficiency in higher education. Women in Pakistan are highly discriminated against; Pakistan has become the second worst country in the Gender Parity Gap. Women’s participation in the workplace is less than 25%. The Human Development Index is no better in that it ranks 154 out of 184.

Patronage, cronyism, tax exemptions, and tariff concessions to only a selected few for loyalty and affiliation erode the working of socio-economic institutions. To cater to development, as the developing and the developed world experiences show, Pakistan needs to discern that the key determinants of development such as institutions of governance, judiciary, media, and economic institutions such as the State Bank of Pakistan must be reformed. Political interference must end and meritocracy be introduced while the military bars itself from comingling in political processes.

Lessons from History

As democracy is for the people, the purpose of the elected official should be the betterment of the people, and policies for the benefit of the poor must be made as Quaid-e-Azam stated, ‘If we want to make this great State of Pakistan happy and prosperous we should wholly and solely concentrate on the well being of the people and of the masses and the poor.’ A major shift in worldview is the sine qua non for the way forward. Instead of indoctrination of obsolete medieval ideas, youth must be enlightened with a modern worldview based on rationalism and humanism that is in no way contradictory to Islamic principles of rationality. It is vital for Pakistan to separate religious extremism from politics and move toward a democratic polity.

Conclusions & road ahead

To cut a long story short, it must be noted that Pakistan’s development story cannot be written off. A recent economic survey by the finance ministry showed the great achievements of Pakistan despite political doldrums in the country’s history. Pakistan emerged as the 24th largest economy in the world after 75 years in purchasing power parity and 44th in nominal GDP. Pakistan’s GDP has grown to $383b compared to $3b in 1947. Pakistan has been an active member of the UN and succours peace and prosperity around the globe denouncing wars. It has a huge bulk of youth under age 30 which is the trump card for any upheaval task. Pakistan successfully countered terrorism in the country, exposed Indian atrocities in Kashmir, and supported the right of self-determination to the people.

Pakistan has had huge infrastructure development in seven decades. It has managed to build huge dams to facilitate agriculture, a vast network of highways connects large parts of the country, it has Asia’s biggest ports, one of the strongest armies, bustling middle classes clamoring for change and it has built the highest airport in Skardu which would enhance tourist attraction.

Moreover, Pakistan has a strategic geographical location that can help it to become an economic hub of the globe and CPEC is a step toward that goal. National Security Policy for the first time in the history of the country shifted Pakistan’s approach from geo-strategic to geo-economics, the lesson wisely learnt. It has accentuated neutral and independent foreign policy during recent conflicts. Pakistan is a nuclear power which it is peacefully utilizing for energy production. These are the reasons to be more sanguine about the future though it is hard to predict but easy to imagine, that a bright future lies ahead.

Azfar Khan Niazi Muhammad Saqlain Karrar
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Azfar Khan Niazi & Muhammad Saqlain Karrar both have recently graduated from the history department, at QAU and work as freelance writers.

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