Sunday, January 19, 2014

Musharraf Accelerated Financial and Human Capital Growth in Pakistan

Pakistan experienced rapid economic and human capital growth in years 2000 to 2008 on President Pervez Musharraf's watch. Savings, investments and exports hit new records and the rate of increase in human development reached new highs not seen before or since this period.

Savings and Investments:

Domestic savings rate reached 18% of the GDP and foreign direct investment (FDI) hit a record level of $5.4 billion in 2007-8. This combination of domestic and foreign investments nearly tripled the size of the economy from $60 billion in 1999 to $170 billion in 2007, according to IMF. Exports nearly tripled from about $7 billion in 1999-2000 to $22 billion in 2007-2008, adding millions of more jobs. Pakistan was lifted from a poor, low-income country with per capita income of just $500 in 1999 to a middle-income country with per capita income exceeding $1000 in 2007.

Pakistan Per Capita Income 1960-2012. Source: World Bank 

The PPP government summed up General Musharraf's accomplishments well when it signed a 2008 Memorandum of Understanding with the International Monetary Fund which said:

"Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

Human Capital Development: 

In addition to the economic revival, Musharraf focused on social sector as well. Pakistan's HDI grew an average rate of 2.7% per year under President Musharraf from 2000 to 2007, and then its pace slowed to 0.7% per year in 2008 to 2012 under elected politicians, according to the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World”.

Primary Enrollment Source: Economic Survey of Pakistan

Youth Literacy Rate Source: Economic Survey of Pakistan

Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent. Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.

R&D Spending Jumped 7-fold as % of GDP 1999-2007 Source: World Bank

Acceleration of HDI growth during Musharraf years was not an accident.  Not only did Musharraf's policies accelerate economic growth, helped create 13 million new jobs, cut poverty in half and halved the country's total debt burden in the period from 2000 to 2007, his government also ensured significant investment and focus on education and health care. The annual budget for higher education increased from only Rs 500 million in 2000 to Rs 28 billion in 2008, to lay the foundations of the development of a strong knowledge economy, according to former education minister Dr. Ata ur Rehman. Student enrollment in universities increased from 270,000 to 900,000 and the number of universities and degree awarding institutions increased from 57 in 2000 to 137 by 2008. Government R&D spending jumped from 0.1% of GDP in 1999 to 0.7% of GDP in 2007. In 2011, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including Pakistan Steel and PIA, both of which  continue to sustain huge losses due to patronage-based hiring.

Pakistan's High-Tech Exports Tripled as % of Manufactured Exports. Source: World Bank

To see a discussion of the above subject and the current situation, please watch the following video:

Civil-military Stand-Off on Musharraf Trial; Musharraf Govt's Performance Record from WBT TV on Vimeo.

Related Links:

Haq's Musings

Musharraf Earned Legitimacy By Good Governance

Musharraf Wants to Face Trial; Military Opposed to it

Saving Pakistan's Education

Political Patronage Trumps Public Policy in Pakistan

Dr. Ata-ur-Rehman Defends Pakistan's Higher Education Reforms

Twelve Years Since Musharraf's Coup

Musharraf's Legacy

Pakistan's Economic Performance 2008-2010

Role of Politics in Pakistan Economy

India and Pakistan Compared in 2011

Musharraf's Coup Revived Pakistan's Economy

What If Musharraf Had Said No?

Human Development in Musharraf Years


M said...

How much power generation capacity was added during the 8yrs of Musharraf regime?

Riaz Haq said...

M: "How much power generation capacity was added during the 8yrs of Musharraf regime?"

Overall 2900MW of electricity was added to national generation capacity. The new energy projects initiated included the Ghazi Barotha hydro electricity project (1600MW), the Chashma-II nuclear electricity plant (300MW). The Neelum-Jhelum hydroelectricity project was initiated (1800 MW), the Satpara Power project in Skardu, and the Naltar power project in Gilgit.

Majumdar said...

Prof Riazul Haq sb,

2900 MW in 8 years!!! Even Bhindia which you are so fond of deriding added 20000 MW p.a. for the last 2-3 years. Power was Mushy's big failure.


Riaz Haq said...

Here's an ET story on graduate student enrollment in Pakistan:

The Higher Education Commission (HEC) has produced 8,161 PhD scholars up till 2012. As many as 10 to 15 scholars are currently completing their degrees each week, HEC Media Project Manager Murtaza Noor said on Tuesday.
As many as 1,039 scholars have completed PhDs in agriculture and veterinary sciences, 1,211 in arts and humanities, 1,692 in biology and medical science, he said. As many as 1,978 scholars have been awarded PhDs in social sciences, 1,810 in physical science, 288 in engineering and technology and 143 in business education.
“Pakistan is publishing more research papers per capita than India,” he said.
The scholars completing their PhDs are placed in different universities under the Interim Placement of Fresh PhDs Programme (IPFP), said Noor.

The HEC provides several incentives to these scholars, including a Rs0.5 million research grant to each returning scholar, he said.
“Hundreds of fresh PhDs from foreign universities are being inducted into universities across the country,” Noor said, “The number of PhD faculty in public universities has increased by almost 50 per cent…from 4,203 to 6,067 over the last two years.”
“Scholars are also being sent abroad to pursue studies in leading universities,” said Noor.
The number of PhD students enrolled in universities has increased by over 40 per cent [from 6,937 to 9,858 students] in the past year.
More than 28,122 students are registered for the MPhil/MS. The number of MPhil/MS students has increased by 65 per cent [from 16,960 to 28,122] over the past two years, he said.
The number of PhDs awarded has increased from 628 to 927 in the last three years. The number is expected to surge exponentially in the future as more PhD faculty and students join universities, Murtaza said.

Riaz Haq said...

Majumdar: "2900 MW in 8 years!!!"

It's because Pakistan did not and does not have the issue of insufficient installed capacity. The issue since Musharraf left has been accumulated unpaid bills to power generation companies which are refusing to buy fuel and operate the plants at full capacity unless they are paid past dues. Nawaz Sharif paid them $5 billion this year and it dramatically reduced load shedding in Pakistan.

What Pakistan must do is crack down on power thieves and debt beats and raise rates to match production costs which are rising with cost of fuel.

Anonymous said...

Human Capital and Economic Growth: Time Series Evidence from Pakistan

Faisal Sultan Qadri, Faisal and Dr. Abdul Waheed, Waheed (2011): Human Capital and Economic Growth: Time Series Evidence from Pakistan. Published in: Pakistan Business Review , Vol. 1, No. Jan 2011 (2011): pp. 815-833.

Human capital is generally considered as a positive contributor in the economic growth. In this study, we estimate this relationship using time series data of Pakistan for the period 1978 to 2007. A health adjusted education indicator for human capital is used in the standard Cobb-Douglas production function confirms the long run positive relationship between human capital and the economic growth in Pakistan. A sensitivity analysis was also performed in order to check the robustness of the initial findings. The estimation results supported the findings of the previous studies that human capital is positively related to growth and also that the results are robust. The health adjusted education indicator was found to be a highly significant determinant of economic growth, which indicates that both the health and education sectors should be given special attention in order to ensure long run economic growth.

Majumdar said...

Prof Riaz ul Haq sb,

It's because Pakistan did not and does not have the issue of insufficient installed capacity.

You seriously consider all those 1000s of MWs of liquid fuel based power plants as real "capacity"?

In any case, you build power capacities for future demand not current demand 'cos you take anywhere between 5-10 years to build power plants from planning to production.


Riaz Haq said...

Majumdar: "In any case, you build power capacities for future demand not current demand 'cos you take anywhere between 5-10 years to build power plants from planning to production."

There were several major water and power projects started during Musharraf years...Neelum-Jhelum, Bhasha, Chashma 2, 3 and 4, Gomal Zam, Mirani Dam, etc etc

Riaz Haq said...

86% of Pakistanis say Musharraf should not be tried alone for his actions of declaring emergency in 2007, according to a nationwide Gallup survey:

Majority Pakistanis (86%) believe individuals privy to and in favor of declaring emergency in the country in 2007 should be tried for treason along with Musharraf. GILANI POLL/GALLUP PAKISTAN

According to a Gilani Research Foundation Survey carried out by Gallup Pakistan, majority Pakistanis (86%) believe individuals privy to and in favor of declaring emergency in the country in 2007 should be tried for treason along with Musharraf.

A nationally representative sample of men and women, from across the four provinces was asked “In your opinion, should individuals who were privy to and in favor of former President Musharraf’s act of declaring emergency in the country in 2007 be tried for treason under Article 6 or do you believe that Musharraf should be tried alone?” Responding to this, 86% were in favor of trying all individuals associated with declaring emergency in 2007 while only 12% think Musharraf should be tried for treason alone. 2% did not respond.

Riaz Haq said...

Democracy in #Pakistan: GDP grew avg 2.9% rate since 2008, less than half of 7% on @P_Mushharaf's watch until 2007.

Riaz Haq said...

Post-2000, the awkward, inconvenient truth is that, particularly during the regime of retired General Pervez Musharraf and former chief minister Arbab Ghulam Rahim, the physical infrastructure of Tharparkar reached an unprecedented level of progress.

Where, for example, in previous times, only about two kilometres of metalled road was built in a whole year, roads of the same length and more were built every month, and in even less time, for several years.

Grid electricity to main towns, water pipelines to large settlements, preparatory infrastructure for exploitation of coal reserves including work by the post-2008 PPP government, rapid proliferation of telecommunication and mobile phones have vastly enhanced mobility, access and information flow.

Riaz Haq said...

Here's a Express Tribune report on Pakistan Education Atlas 2013:

For the last few years, Pakistan’s adult literacy rate has stagnated at 58% – almost half the country’s adult population is unable to read or write. The figure is not surprising when you consider that only 50% of the country’s rural population has ever attended school; the number is higher for urban populations, at 73%.
According to the Pakistan Education Atlas 2013, launched on Tuesday, improvement in the education sector moves at a snail’s pace, with 32% of children aged 5-9 years out of school. 17% of primary schools consist of a single room.

It’s not all grim news, though – 91% of girls make it from primary school to middle school (higher than the number of boys, at 78%).
State Minister for Education, Trainings and Standards in Higher Education Balighur Rehman formally launched the report on Tuesday and reiterated the government’s pledge to improve education in the country. Even though education has been devolved to provinces, he said, they ‘have agreed to the constitution of a National Curriculum Commission to bring the education system on the same page across Pakistan’. Speaking at the launch, World Food Programme Representative and Country Director in Pakistan Lola Castro said the WFP had contributed to the report as it wished to ‘support and promote this important educational undertaking’ in the country.
According to the report, almost seven million children are out of primary schools in the country. “The quality of education across multiple levels is also lagging by most standards,” the report states. Some provinces fare relatively better than others in the education sector, with a ‘survival rate’ – the percentage of students completing primary school education – of 96% in Islamabad Capital Territory and a robust 95% in Gilgit-Baltistan. Khyber Pakhtunkhwa clocks in at 64%. The number is lowest in Balochistan and Sindh – 43% each. Survival rates in Punjab stand at 56%, 48% in Fata.

From primary to middle school
The results are encouraging with regards to the number of students able to reach middle school in Pakistan, particularly in Fata, where the number has crept up from 44% in 2010 to 61% this year. 100% of Islamabad students make it to middle school and 87% in Punjab. The number stands at 89% in G-B, 72% in K-P, 69% in Azad Jammu Kashmir and 67% in Balochistan. Sindh has the lowest number of students reaching middle-school level, at 59%.
Poor grade
Students in 64% of primary schools in the country have access to drinking water – in Azad Jammu Kashmir, the number plummets to 27%. In Islamabad, 185 schools out of 191 have access to clean water.
Meanwhile, 49% of government primary schools have electricity. Of more than 10,000 schools in Balochistan, only 1,662 schools are provided with electricity....

Riaz Haq said...

The experience of Nawaz Sharif’s earlier terms in office (1990-1993, 1997-1999) shows that Nawaz Sharif and his close associates overestimated their electoral clout in dealing with the military. In January 1993, differences developed between Prime Minister Nawaz Sharif and President Ghulam Ishaq Khan on the selection of the army chief after General Asif Nawaz Janjua died of a heart attack. Nawaz Sharif’s famous speech of not accepting anybody’s dictates in April ultimately brought him in conflict with the army top leadership when it worked towards seeking the resignations of Nawaz Sharif and Ishaq Khan to break the political deadlock in July 1993. Another example of poor management of civil-military relations is Nawaz Sharif’s interaction with the army top brass in the post-Kargil period, especially in August-October 1999. Shahbaz Sharif went to Washington to obtain American support for democracy. This support could not secure civilian rule as Nawaz Sharif attempted to remove General Pervez Musharraf in a dramatic manner and appointed his protégé as the army chief.........In a country like Pakistan, where internal and external security pressures are intense, the military cannot be pushed to the sidelines. Civilian leaders will have to change Pakistan’s internal security profile and build peace on its borders in order to cut back on the role and status of the military.If Pakistan continues to suffer from violence and terrorism and its ultranationalists want to wage war against India, dominate Afghanistan and keep Iran under pressure, the military and its needs and requirements will override other considerations influencing policymaking and its execution..............At a time when the “performance legitimacy” of the PML-N government has slipped downwards, it has embarked on two extremely contentious policies: talks with the TTP and the trial of Pervez Musharraf for “high treason”. The talks with the Taliban in an apologetic manner cannot go on for an indefinite period. The civil government will have to produce positive results by the end of April in terms of the TTP giving up violence and agreeing to work within the framework of the Constitution. The army cannot afford to let the summer of 2014 pass by and let the Taliban consolidate their position in the tribal areas. This will increase the cost of defending Pakistan’s security for the military in 2015.....The civilian government needs to undertake a dispassionate review of its policies on both issues. Stepping back on these issues may subject the civilian government to criticism by a section of political leaders. However, the cost is likely to be higher for sleepwalking into the Taliban trap in the name of dialogue and settling old scores with Musharraf. ...

Riaz Haq said...

Ayaz Ali stands outside the only school in his southern Pakistan village, struggling to recall the last time the lone teacher showed up. It was at least five years ago.

“I’d come back but we haven’t really seen the teacher for some time now,” said Ali, 16, who now spends his days in the fields picking cotton and wheat near Allah Warayo village in Sindh province. “I don’t think he’s returning.”

The school is strewn with plastic bags, while urine stains and dried-out feces emit a foul smell. Since district education officials say the school is technically still open, Ali has no alternatives that he can afford.

Ali’s plight shows how Pakistan’s government often poses a bigger obstacle to a quality education than Taliban militants who shot Nobel Peace Prize winner Malala Yousafzai in the face two years ago. One in three students now attends a privately run school, up 50 percent from a decade ago, as a failing public system produces one of the world’s highest truancy rates.

“People are rushing to private schools,” said Mosharraf Zaidi, campaign director for Alif Ailaan, an education advocacy group in Islamabad, who added that poor students like Ali who can’t afford private school are the ones who suffer most. “The answer isn’t private, private, private. The answer is to fix the government.”

The country has seven million children who are out of school, two-thirds of them girls, and most of them lack minimum mastery of math and reading, according to a World Bank report in April 2014. Pakistan ranked 113 of 120 countries on the United Nations’s Education for All index.

Pakistan is a young country, with a third of its population less than 15 years old. Even so, spending on education fell for a second straight year to 2.1 percent of gross domestic product in 2012, among the lowest in the world, according to the latest available data from the World Bank. That’s about half as much as the nuclear-armed nation spends on its military, budget documents show.

Since his election in May 2013 Prime Minister Nawaz Sharif has focused on stabilizing an economy hit by a power crisis that curbed growth. Provincial governments are responsible for overseeing education, according to the constitution.

Ali’s school in Allah Warayo is typical of government-run schools, which are often in decaying buildings that lack running water, toilets or proper furniture. Teachers are frequently absent or don’t attend at all.
Private schools are increasingly filling the gap. Pakistan now has more than 150,000 for-profit schools, at least 25,000 madrasahs and hundreds of other non-profit schools. That compares with 233,300 public schools, according to the government’s Economic Survey 2014.

Elite private schools in well-to-do sections of big cities can cost as much as 30,000 rupees ($300) a month. These offer better salaries to attract highly qualified teachers and provide a good standard of education.

Politicians often stand in the way, said Atta-ur-Rahman, a former chairman of the constitutionally mandated Higher Education Commission. Poorly qualified teachers are routinely hired as a way to dish out favors in return for votes.

“The feudal landlords who have ruled over us are determined to keep the people of Pakistan uneducated,” Atta-ur-Rahman said. “This allows them to loot and plunder the national exchequer at will.”

In Allah Warayo village, Ali is stuck toiling in the fields as he waits for his school to reopen.

“I really miss my math class,” he said. “If I can go back to school, I will leave this farm work and finish my education so I can get a proper job and take care of my family.”

Riaz Haq said...

Four Pakistani and three United States universities will undertake collaborative research under the project of `Centres for Advanced Studies’ (CAS) to harness applied research to find innovative solutions in water, agriculture and energy challenges for Pakistan.

A $127 million US investment is being executed by the United Stated Agency for International Development (USAID) and the Higher Education Commission (HEC) for the US-Pakistan Centres for Advanced Studies to support Pakistan’s economic development by strengthening universities.

This was revealed by officials of US Embassy and USAID during a roundtable discussion with media held here on Monday.

Participating universities in this programme include University of Agriculture, Faisalabad and University of California, Davis in agriculture sector and National University of Science and Technology (NUST), University of Engineering and Technology, Peshawar and Arizona State University in energy sector.

While Mehran University of Engineering and Technology, Jamshoro and University of Utah will collaborate in water sector.

The participants were informed that the project was structured as three partnerships in the fields of energy, water and agriculture between three US and four Pakistani universities.

Each CAS would form public-private partnerships and interest specific networks by bringing together leaders in academia, government and the business community to identify the applied research solutions in the agriculture, energy and water sectors.

The project would prepare around 1000 graduates for employment in the private and public sectors and provide them opportunities of limited resources or from disadvantaged groups to pursue higher education.

The CAS project would support self-sustaining applied research through an enhanced working relationship between universities and industry-producing graduates and research conducive to Pakistan’s economic growth and raise the quality of faculty.

The project would assist in several areas including providing curricula, financial management, governance, teaching and other reforms to make university education and research more relevant to the needs of industry and government.

The project would help develop scholarship programmes, leading networking activities, developing strong links with private sector and facilitating relevant policy dialogues and reforms.

The meeting was also informed that a high level US delegation and Pakistani government officials would hold inaugural session of the newly established US-Pakistan Education, Science and Technology Working Group on June 3 (Wednesday).

This session would underscore the ongoing long-term cooperation between the United States and Pakistan in the fields of higher education, science and technology.

The officials who spoke during the roundtable included Assistance Coordinator, US Embassy, Brian Aggeler, Counsellor for Economic Affairs, US Embassy, Daniela Ballard, Cultural Affairs Officer, US Embassy, Judith Ravin, Director, USAID Education Officer, Tom LeBlanc and Deputy Director, USAID Education Office, Garth Willis.

Riaz Haq said...

"Speaking fee for #Musharraf in $150K-200K range for a day," says Embark USA President David B. Wheeler. #Pakistan

"The [speaking] fee for Musharraf would be in the $150,000-200,000 range for a day," says Embark President David B. Wheeler, "plus jet and other V.I.P. arrangements on the ground." Wheeler says Clinton, for whom Embark has arranged speaking engagements in the Middle East, commands up to $250,000 per appearance. "If we did multiple events in multiple cities, [Musharraf] could get closer to the $500,000 to $1,000,000 range [for a series of talks]," he said. Embark, which promises "unique experiences that educate, entertain and enlighten," has also booked speeches for former U.S. President George H.W. Bush and former U.S. Secretary of State Colin Powell.

Pakistanis who know Musharraf well say this is good news for the former president, who is not believed to have salted away a fortune as some of his predecessors have done (Musharraf will only receive a modest army retirement pension). But he is a long way from the poor house. Workers are putting the finishing touches on a mansion, said to be worth some $2 million dollars, that he is building on five acres of prime land just outside Islamabad. Since his resignation he has been playing golf and tennis with friends, surrounded by heavy security, and is also planning to write a sequel to his successful 2006 autobiography, "In the Line of Fire," which could easily net him another seven-figure windfall.