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    Pak economy on the recovery :k:


    US centre sees progress by Pakistan in restoring financial credibility
    AHMED MUKHTAR
    .......ISLAMABAD : After the success message conveyed to donors in mid-March at
    the Pakistan Development Forum, the international image regarding the
    governance level in Pakistan has improved significantly. The Centre for
    Strategic and International Studies, USA, in its South Asia Monitor on May 1
    said that General Pervez Musharraf's government has made progress, restoring
    its financial credibility, and has begun the Herculean task of rebuilding its
    institutions.
    .......The Centre has explained its studies, saying that "the government has
    made considerable progress in getting its finances under control. Pakistan has
    met virtually all the targets for its International Monetary Fund Standby and
    has received the second instalment of the programme. Other multilateral donors
    are resuming new lending.".
    .......It also says: "The Asian Development Bank announced that Pakistan will
    receive $ 2.5 billion in loans within the next five years, and new resumed
    World bank loans totalling about $ 400 million are moving forward. Pakistan
    hopes to move to a multiyear IMF programme before the end of the year, making
    possible a multiyear debt rescheduling."
    .......On the reforms programme the report says, "The government's structural
    reforms programme will take longer. It is considering wide-ranging proposals
    for reforms of the Central Board of Revenue, key to both its revenue problems
    and rebuilding of state institutions. Tax collections in the first half year
    were 15 percent higher than in the same period last year. Privatisation, if
    successful, will generate funds for debt retirement and the social sector.
    Banking reforms are on the agenda, though these may be complicated by the
    Supreme Court decision requiring Pakistan to institute 'Islamic banking', a
    directive that in the past has been met by 'subterfuge'.
    .......On the minus side, the report says: "This year's drought has reduced all
    major crops and will cause immediate hardship in the rural areas. Finance
    Minister Shaukat Aziz has estimated the cost to the national economy at $ 2
    billion. Investment has fallen dramatically: the last significant inflow of
    foreign direct investment was for the private power industry in the mid-1990s
    and the first half of the current fiscal year showed a 71 percent drop compared
    with last year. The growth estimates for the national economy has been lowered
    to 3.5 to 4.0 percent for this year from 4.5 percent.
    ......."The balance of payment will remain under pressure. The trade deficit is
    up by 8 percent and reserves in late February fell to the equivalent of five
    weeks' imports. Exports were up by 8 percent though this year's weak crop will
    make that growth harder to sustain. The drought will also lead to increased oil
    imports, especially since the government has had to hold back water normally
    used for hydroelectric power generation."
    .......A bright spot was the 20 percent rise in remittances in the first half
    of this fiscal year, after several years' decline. Groups of expatriates,
    especially in USA, have begun funding private development efforts in education
    and health, an especially welcome effort to mobilise talent and energy from
    within Pakistan. So far, the report continues, expatriates have generated
    little investment; that will await a more stable economic situation.
    .......Besides the reform of the CBR, the government has targeted the police,
    the judiciary and the civil service. In an early move towards transparency, the
    Finance Ministry has begun putting economic data on its web site, revealing
    very frankly the country's economic and financial situation. The job is an
    immense one, however, which will require extended and steady follow-up.
    .......The prospect of a change in government in October 2002 raises questions
    about policy continuity and about how policies can be sustained during an
    election campaign. Another 18 months is a short time in which to create popular
    pay-off from reforms and reduce pressure for populist policy changes. It is
    clear from reaction to Musharraf's coup that visible moves in the direction of
    transparency and accountability enjoy tremendous popular support, even if they
    trouble political and business elite.
    .......O the stance of US towards Pakistan the report says: "Senior US
    officials stress that the US has no intention of 'abandoning' Pakistan in
    pursuit of closer ties with India. However, relations with the United States
    will remain troubled by Afghanistan's unwillingness to release Osama bin Laden
    to American justice and Pakistan's inability to change Afghan policy.
    Pakistan's stance toward militant organisations that operate in Kashmir has put
    the country in danger of being declared a 'state sponsor of terrorism'. Even if
    the militants avoid the terrorist label, violence against military targets
    increase the risk of India-Pakistan war. Most fundamentally, given the weakness
    of the state, the US government has doubts about effectiveness of a supportive
    policy towards Pakistan."
    .......On the issue of 'redefining security and self-help', the report writes,
    "The Musharraf regime can take satisfaction in its progress in managing the
    country's precarious economy and knows that the remedy of Pakistan's ills must
    come from within the country. But its concept of Pakistan's security is still a
    limited one, centred on military defences. Kashmir and the threat from India,
    Pakistan's poverty, its economic fragility, and especially the challenge to the
    authority of the state may represent a greater risk to Pakistan's integrity
    than more conventional military questions. Unless these questions are addressed
    with the same urgency, Pakistan faces a future dangerous for itself and for the
    region."
    .......The report has also given a brief on the political situation of
    Pakistan, defining the developments in major political parties and questions of
    restoration of democracy.
    .......Copyright 2001 Business Recorder (http://www.brecorder.com)

    #2
    abdali,u r really a patriot(and also a mid-time joker too).,pls tell me why pakistans defence budget hasbeen frozen for a year?

    Comment


      #3
      I think what Abdali does is that he makes up his mind to post a topic on a Pakistan glorifying subject and then sets about looking for an article to corroborate the subject he has in mind.The result sometimes are bits-n-pieces copy-n-paste efforts such as the one above from Business Recorder(a Paki Business site)


      If you read the article above , you will notice that it mostly says that Pakistan has been successful in conforming to IMF stipulations and is in line to receive further loans from ADB/World Bank etc. to help it reschedule payments of existing debts.(Freezing of Defence Spending in the current budget is the final pointer to the fact that Pakistan Govt. has been succumbing to the IMF)

      At one place in the above article it is said :
      "The growth estimates for the national economy has been lowered
      to 3.5 to 4.0 percent for this year from 4.5 percent."

      Read this quote in context of the subject of this post and you will realise that the author of this thread ("Pak economy on the recovery") hasn't carefully read the above article himself.

      Comment


        #4
        Originally posted by spatehk:
        abdali,u r really a patriot(and also a mid-time joker too).,pls tell me why pakistans defence budget hasbeen frozen for a year?
        Why Pak defence budget has been frozen please read on.

        PS: As for jokers its like pot calling the kettle black.

        There is no arms race

        Brian Clougley

        There is no arms race in the subcontinent. Pakistan has frozen its expenditure, and India, in spite of increasing its military outlays over the last three budgets by 10% plus 28% plus 14% to a whopping $13.6 billion a year, has barely got a major weapons system that works, and won't have for years. It isn't a one or two horse race: it's a no-horse race.

        Over half the Indian Air Force's combat planes are either unserviceable, inadequate or dangerous to try to fly, and the jiggery-pokery that went on in contract arrangements for the Su-30 'multi-role' aircraft has not only affected air force morale but dented credibility all round. The affair is scandalous, not only because there are questions about who took what in brown envelopes, but because Russia did not provide aircraft to the specification agreed. The Comptroller and Auditor General recorded that "acquisition of Su-30 aircraft approved by government in 1996 at a cost of Rs6,310 crore as replacement of the retiring fleet leaves much to be desired. Barring delivery of eight Su-30K air defence aircraft in May 1997, not a single Su-30MK multi-role aircraft had been delivered even by the end of 1999, despite investment of Rs2,432 crore and delay of 24 months."

        The picture is becoming grimmer for the IAF, for there are enormous problems affecting every aspect of Su-30 procurement: rebuild of the current 18 sub-standard aircraft is gravely behind schedule, the purchase of a further 32 depends on in-service upgrade which is as yet unplanned; and preparation for construction in India of another 140 is nowhere near definition stage. The construction deal is said to be for $3.3 billion, excluding $1.8 billion already agreed and partly paid, but standardisation of the current holding and of the 32 to be delivered will not be effected until 2004 at the earliest. Given that Hindustan Aeronautics Ltd is supposed to be rebuilding 120 clapped-out MiG-21s during the next three (plus) years, as well as trying to produce the 'indigenous' Light Combat Aircraft (LCA) in quantity, the extension and construction of new facilities to make a totally different type of machine will be difficult and costly. Probably impossible and costly. It is likely a compromise will be reached, in that the Su-30s will be supplied in kits and assembled in India with a 'Made in India' plate on them, but this is still expensive, and it seems the programme has not been thought through, either in terms of force structure requirements, budgetary projections (for there is no rolling programme of budget forecasting; everything is done on an ad hoc basis), or in technical aspects such as ensuring compatibility between avionics obtained from foreign sources.

        The Su-30 affair was shoddily managed, and the Comptroller and Auditor General observed that "The manufacturer (Russia) violated contractual provisions and supplied old, used and unserviceable items. "which is an appalling state of affairs that has, alas for India's defence forces, become only too common. The MiG-21 rebuild programme is also a disaster, because it is many years behind target and conflicts with the ambitious and chaotic project to build the LCA which flew for the first time in January.

        The LCA will never see service in any but token form, but it is allocated vast sums because it is supposed to be 'Indian' and it cannot be admitted that it is a failure. In fact it isn't 'Indian' at all, because it has an American power plant, and avionics and other technology from Israel and France. The Indian 'Kaveri' engine has testbed problems and it is unlikely that it will ever power the LCA unless there is drastic re-engineering with major foreign support. The project is estimated to cost $4.6 billion dollars. This would be $21 million a copy if the planned 220 are produced without any cost overrun an impossibility. It would have been better to have taken the French offer for Mirage 2000-5 at $30 million each while cancelling all orders of suspect Russian planes, and, especially, stopping the LCA project India would have found itself about $3 billion dollars ahead of the game, even if middlemen got themselves a comfortable ten per cent, which seems to be the going rate at the moment. (Not as much as a certain Pakistani husband got from the French submarine deal; but not bad; not bad.)

        Then there is the 'indigenous' Arjun tank, which is too heavy for its German engine. The army has been forced to take 124 of these slugs which could not survive on a modern battlefield. There is no space to go into detail, but it should be pointed out that the T-72 tank rebuild programme is in chaos and that the purchase of 310 T-90s from Russia is suspect in both technical terms and brown envelopes, and that these will not be in service for another three years at least.

        On paper, India is supposed to have 3,400 main battle tanks, but it can muster less than a thousand in battle condition. Its Vijayantas and T-55s are scrap-worthy, and it is insulting to the proud Armoured Corps to have to operate them. Arjun was supposed to replace them, but is the collective bad hair day of world tank development. The T-72 build, rebuild and upgrade programmes could have ensured that India's armoured regiments would be decently equipped for the next two decades, but have been allowed to disintegrate into an unstructured, stop-go-stop-start again non-programme over which nobody has control. Neither the army, nor the Defence Research and Development Organisation (Pakistan's secret weapon), nor the Ministry of Defence knows what is going on.

        On April 9, General VP Malik, the last Army Chief, published an article describing inadequate procurement procedures. It is not the first time he has spoken out, for with considerable courage he did so while still serving, thus irritating senior civil servants who are the main obstacle to reform of the present chaotic process. Indeed he states that because they "lack military background and technical knowledge they take a long time in 'establishing the necessity' of a new weapon or equipment," and that "The file-pushing from one office to another goes on endlessly." In summary, the general says that the procurement system is "not responsive to the needs of the military", which is a terrible indictment of his country's approach to national defence. But the key issue in all this is that India's defence forces are not prepared for war. They are undoubtedly professional, dedicated and competent, but they lack the equipment necessary to fight effectively. There is no command system in place that is capable of coordinating nuclear forces, such as they are, and conventional weapons are manifestly inadequate. A sorry state of affairs.

        The message for Pakistan is that it need not commit itself to trying to keep up with Indian military spending. Pakistan's armed forces are just as competent as those across the border, but have the advantage that their planes, tanks and ships actually work and that its rebuild and upgrading programmes are demonstrably effective. It is worrying, however, that Pakistan's nuclear attack capability is so much in advance of that of India, for if there were to be war there would be considerable temptation to take advantage of India's inadequacies in that regard.

        There is no arms race in the subcontinent, but it is not because India does not wish one. After all, one of its influential hawks has said that it would be a good thing to outspend Pakistan, just as the US outspent the former USSR, thus hastening its collapse. There is nothing to be complacent about in India's defence posture, because it is forced upon it by systemic incompetence rather than benevolence. The plus side for Pakistan is that it can continue to maintain and refine its present defence forces within a modest budget, which is all to the good for other and much more important priorities in the social sphere.

        The author is a commentator on political and military affairs

        Comment


          #5
          Are you ashamed to put a link lest we find out its a Pakistani source. I know for sure that this particular "author" mostly writes for the Pakistani media (and I guess is based in Pakistan).

          Comment


            #6
            Old Mok:

            This Brian Cloughley is an Australian paid by Pakistani PR people to write about South Asia.

            Here is a link that throws light on Abdali's topic, economic recovery.

            Seminar sees 4 per cent growth in GDP, 6 percent in inflation http://www.dawn.com/2001/06/25/nat3.htm

            -this means a Negative 2 percent growth in PPP terms .

            If we take the government estimate of 2.6% growth then, it is going to be a Negative 3.4% growth in PPP terms .

            The above two stats theoretically mean that average an Pakistani is going to become poorer by next year.


            My conclusions/estimates:
            Pakistan is definitely on the road to economic recovery. But it is too early to talk of recovery. (like talking about space race with India, without being able to launch even a radio sattelite - just kidding!)

            Nobody, including Musharraf and his coterie (or even the best of the best analysts of the world) knows how Pakistan's strategy will work in the long run.

            Pakistan has capped its growth oriented expenditures and is paying back their loans. May be that is a good idea, because next year the debt burden will be lesser. May be it is a bad idea because sustained poor growth brings in macro-economic difficulties like exponential increase in poverty level and corresponding decrease in socio-economic indices.

            Time will tell. But, at this moment, any celebration is vain!

            [This message has been edited by kumarakn (edited June 25, 2001).]

            Comment


              #7
              Originally posted by kumarakn:
              [B]Old Mok:

              This Brian Cloughley is an Australian paid by Pakistani PR people to write about South Asia.
              How do you explain that. May be some Pak Guppies can shed some light.

              Comment

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