Wednesday, April 8, 2009

Pakistan's Choice: Talibanization Versus Globalization

"Pakistan has to be part of globalization or you end up with Talibanization. Until we put these (Pakistan's) young people into industrialization and services, and off-farm work, they will drift into this negative extremism; there is nothing worse than not having a job," says Salman Shah, finance adviser to former Prime Minister Shaukat Aziz of Pakistan, in an interview published by the Wall Street Journal today.

With Pakistan's growing population and rising expectations of its young people, it appears to me that the radical Islam is now spreading beyond its traditional home in NWFP and FATA to Pakistan's heartland of Punjab. It is also clear that the new generation of Pakistanis do not want to accept life under a feudal or tribal system that denies them basic human dignity. In the absence of significant economic growth (even the phenomenal 8% growth roughly equals 2.5m jobs), not enough jobs are being created for 3 million young people ready to join the work force each year, resulting in growing availability of recruits for terror outfits who pay them fairly well by local standards. According to Rand corporation estimates, the Taliban pay about $150 a month to each fighter, much higher than the $100 a month paid by the governments in the region. This fact has been amply illustrated by recent growth of the Punjabi Taliban who have been found recruited by terrorist groups for suicide bombings and violence within and outside Pakistan.

Here's the text of the report by Paul Beckett of Wall Street Journal:

Talking to Salman Shah, Pakistan's de facto finance minister until a year ago, you are immediately struck by the similarities between his country's long-term economic challenges and India's.

Pakistan, he notes over green tea in his Lahore home, has a huge youthful population as India does: roughly 105 million out of 170 million Pakistanis are under 25 years old. It will be these people who drive Pakistan's economy in the decades ahead. "Pakistan is a mini-India," Mr. Shah declares.

Pakistan, like India, also is relatively light on exports as a part of the overall economy. In Pakistan, exports account for less than 15% of gross domestic product, he says, compared with about 25% in India and 40% in China.

Like India, Pakistan saw a domestic economic boom time until recently. Sales of cellphones, cars, motorbikes and other consumer durables soared.

And Pakistan's future, as India's, lies in the nation's ability to move workers from the fields to manufacturing plants and in engaging more with the world rather than retreating from it.

But India has done a better job with that global engagement, led by its technology companies and through tapping international markets and international investors.

Pakistan made some headway in the last few years by successfully selling global depositary receipts of state-owned companies and issuing bonds and convertible bonds on international financial markets. International investors were taking heed, which in turn projected Pakistan's industrial potential to the wider world.

But recently, as with so much else in Pakistan, it's gone awry. The current administration nixed the international money-raising program, even before the seize-up in global markets could do the job for it. The government – Pakistan's first democratically-elected in a decade – decided it was akin to giving away the "family silver," Mr. Shah scoffs.

International investors, not surprisingly, also have bailed: Pakistan by almost any measure fails to meet the definition of a low-risk investment that is attracting money today. As a result, its economy is slowing dramatically. In part that's because the central bank has kept interest rates in double digits, hemmed in by the strictures of its IMF package.

Where India and Pakistan's paths diverge dramatically is in the consequences if their governments fail to do what is necessary now -- stimulate their economies, bring foreign investors back, and create employment for all those youth.

In India, where about 12 million people come of working age each year, commentators frequently warn that if sufficient jobs aren't created, there could be social unrest.

The important phrase here is "could be social unrest." It's a possibility, not a definite. It is very vague.

Not so in Pakistan. Pakistan, by Mr. Shah's estimate, needs to create 3 million jobs a year to employ those coming of working age. Growing at 8% a year creates up to 2.5 million.

The central bank recently forecast growth in the year ending June 30 of 2.5-3.5%.

Shaukat Tarin, Pakistan's new finance minister, recently was quoted in Pakistan's Daily Times as saying growth could reach 8% over the next three years.

But the World Bank recently predicted Pakistan's economy would grow by 1% in 2009. Mr. Shah calls 1% "suicide for Pakistan."

Unlike in India, the consequences seem all too predictable if Pakistan fails to reengage with global commerce and do what's needed to get things rolling again.

"Pakistan has to be part of globalization or you end up with Talibanization," Mr. Shah says. "Until we put these young people into industrialization and services, and off-farm work, they will drift into this negative extremism; there is nothing worse than not having a job."

You just have to hope it's not already too late.

—Mr. Beckett is the Wall Street Journal's bureau chief in New Delhi

Related Links:

Insights Into a Suicide Bombing in Pakistan

Feudal Punjab Fertile For Terrorism

Shaukat Aziz's Economic Legacy

Valuing Life in Afghanistan and Pakistan


Anonymous said...

The difference is not about growth story-the problems are huge for India no doubt and the chaos are frustrating but one thing is for sure-it will just grow no matter what because its young people are violent but have not been fed with religious poison so far.For pakistan its a bit too late-as its young have taken guns and are roaming on streets in the name of killing infidels. The differences seem subtle but the destiny is very very different and cannot be compared. The author has written a decent article but with all due respects-Pakistan is NOT mini India anyday- it can never be one -such is the diversity of India!!!

Anonymous said...


Friends that is the difference between the hindu culture and abrahmic culture. Hindu culture puts the blame on the individual for the suffering either in the name of sin of this birth or earlier. That is the reason the violence is less and people commit suicide.

Whereas the abrhamic relgions put the blame on others and hence it is with blood from time immemorial and it continues as per the history.

Riaz Haq said...

Anon: "Hindu culture puts the blame on the individual for the suffering either in the name of sin of this birth or earlier. That is the reason the violence is less and people commit suicide."

While I agree with you that Indian farmers are committing suicide in large numbers because "shining India" has left them behind, I also think you are wrong about "violence is less" in Hindu culture. Hindu fanatics are just as violent and murderous, if not more so, as fanatics of Abrahamic faiths. You just look at Muslim massacre in Gujarat, Christian massacre in Orissa and pan-India anti-Muslim riots after Babari Masjid.

Anonymous said...


In fact i support the hindu fundamentalism as that is providing the fear of god in the minds of the islamic fundamentalism

Can you speak about the systematic elimination of kashmiri pandits ? Things started only post 1992, but please read before the vote bank politics played by muslim in india politics of appeasement. Further pakistan can do soul searching about its own human rights records. ATleast there is a forum in the indian space for ngo and human rights activitist to make their stand.

For the first time, has suggested the individual to vote on the basis of the candidate rather than muslim or hindu. Vote bank politics was further nastied by bjp in gujarat and karnataka which has given them more benefit to polarize. HOwever at the same time i feel hindus are having common sense not to allow to much that is the reason bjp lost in rajastan which was their stronghold.

Indians do go like herd on either side, which i feel is the essense of democracy

That is the reason advani said that jinnah is a great leader to bridge his gaps with muslims.

Good for india is 9/11 which has put the whole islamic fundamentalism on the wrong side of the super power and the bull is in the china shop for utter destruction.

Christians once again needs to be checked as they think it is their fundamental right of conversion. India had accepted conversion and thing were going smooth. HOwever today idea is the demographic change which i think any hindu will fight for its survival.

Pls read about christian dominated north east [ hindus are minority ] terrorism which is being sponsored by our benevelont neighbours.

Unknown said...

Mohammed Murad, wrote; It is the best thing for Pakistan to create a economy that develops long term jobs. What needs to happen immediately that Pakistani government put forth a plan with in 90 days to expend rail road system and bring rail road to areas of Pakistan that has been neglected for last 60 years. Establishing a network of rail road will bring all provinces closer. Unfortunately we have people/leaders in the government that never think far in the future and they are focused on their little empires. We do not have leaders that can rally the entire country on one platform. The other most important step would be to develop an education system that leads young people into vocations. The system needs to focus on current economic environment. If the accountants are needed let’s establish a accounting school that focus on world class accounting principals, similarly if the rail road network need drafts man to create drawings must work with other countries to bring those expertise. When steel is needed to build the rail road ask the countries who are giving money help establish industry in Pakistan to supply products for project. Focus need to be to develop local resources (know-how). Everyone will not be Albert Einstein, we need to establish a system that will create many Albert Einstein. These are very simplistic ideas can be established in a very short time frame, it happened in Korea and other countries. You know the difference it was done by one man (or a group that followed instructions very well) and that person loved his country and it’s people. If things get tough in Pakistan Mr. Zardari will be running out of country to the mansions in UK or UAE. Same goes for Mr. Sharif. America or the West cannot fix the problems of the country people and leader have to sort those out.

I hear Pakistan will be getting $5.28 billion from FOP’s. This is good news, my question is who is going to keep an eye on where the money goes, the IMF or UN whoever is going to be the entity that monitors the money must ask all government officials banks and financial information as they are today, with potential earnings for next 5 years. This money most go to the projects that will help people of Pakistan. This is like an investor of a company, if you want my money I need to know where it goes and what am I getting for the investment. Need to have blunt quarterly meeting and Mr. Zardari need to be in the meeting answering the questions.

It is very positive that Pakistan’s President asked for Martial Plan for Pakistan from the world. I want to hear his detailed plan what is he going to do with the $5.28 money. He has an opportunity to make his image as a leader that lead his country from brink of disaster to success. This will not happen overnight there will be tough times. Pakistani people and opposition leaders need to leave the government intact until next election. Make these guys accountable for every penny they spend. It is time to leave the past and for love of Pakistan move with the world. If the current situation continues there will be no Pakistan. That will be the sad day. I come from a family, which has sacrificed much during the partition and after wards. This has to work, no looking back. May Allah save the country and bring peace and prosperity to the people.

Unknown said...

Hi,my name is vajeeha and i am doing my thesis on PERCEPTION ABOUT TALIBANIZATION AMONG THE YOUTH OF PAKISTAN.i request for your help to get me find some literarure with relevence to my topic.
looking forward to your help and coperation
best regards

Riaz Haq said...


Please feel free to search my blog posts and related/embedded links regarding Taliban.

mozia said...

Awesome post. I love stuff like this.


Riaz Haq said...

Here's an interesting explanation by India's former commerce minister Dr. Swamy of the impact of PNs, or participatory notes, on India's markets, and how PNs benefit corrupt poloiticians:

Indian economy had a set-back not because of financial contagion spreading from US, or because of the interdependent global trade system, but because of our own perfidious financial derivative called Participatory Notes [PNs] compounded by an anti-national agreement with Mauritius to permit even $ 1 paid-up companies incorporated in that country to invest in Indian stock markets and not be subject to capital gains tax. This was a “gift” from previous Finance Ministers, Yashwant Sinha and P. Chidambaram.

The Finance Ministry’s PN is unprecedented in world financial history. It is a piece of paper issued by designated financial institutions abroad such as Fidelity Investments and Morgan Stanley, which paper does not carry any detail except the money worth, and can be purchased by anyone with cash even without disclosing to any regulatory authority his or her name and the source of the funds! That piece of paper was acceptable for transactions in the Indian stock market for buying and selling shares as also short selling.

By a special order, the Finance Ministry under Chidambaram exempted the PNs from the purview of SEBI, RBI, Enforcement Directorate and CBI ! The SEBI headed then by Damodaran protested and repeatedly wrote to the Ministry to permit it as in any other stock market transactions to require reporting of the buyer and the seller as also the source of funds. The Tarapore Committee on Financial Reforms strongly condemned PNs and wanted it scrapped. The RBI Governor Reddy kept warning of dangers from PNs. All were ignored. Damodaran and Reddy were denied usual extensions of tenure. Their successors have fallen in line. Hence the perfidy continues without any accountability.

Thus, billions of dollars of “hot”money entered into the Mumbai stock exchange, that was used for buying and selling shares with PNs almost like cash, in fact better because cash transactions of over Rs.10,000 have to be reported with details to the Income Tax Department. Moreover if it came via Mauritius, it did not have to pay capital gains tax. By September 2008, PNs accounted for 60 percent of the FII funds in the stock market.

When the financial crisis was officially acknowledged in the US following the collapse of Fannie Mae and Freddie Mac, two government owned loan providers, followed by Lehman Brothers in September 2008, a liquidity crunch developed in US and later in Europe. Interest rates rose. Liquidity froze and funds were in demand. The PNs, which were “hot money” or Portfolio funds, just shipped out of India without any hindrance to the tune $60 billion in October 2008-January 2009 causing a stock market crash symbolized by the steep fall in the Sensex index. It is this that caused the financial crisis in India and not the US sub-prime loan defaults.

Why was Mauritius Tax Treaty and PNs invented by the then Finance Ministers of India ? Because it was to assist corrupt politicians and business persons to earn on their loot parked in Swiss Banks, Isle of Man, Cayman Island, Macao etc.. Till PNs came into existence this loot was just stashed away in secret accounts and they were paying service charges to the banks for keeping it secretly ! Now these bandits and pirates could earn easily on their ill-gotten money by playing anonymously on the stock market, and through consequent capital gains without having to pay taxes that honest citizens have, thanks to the Mauritius Treaty.

Riaz Haq said...

Here's an IMF official talking to Business Recorder about Pakistan's economy growing 5-8% in future years:

ISLAMABAD (February 25 2010): The biggest challenge Pakistan facing now is to improve growth rate to over 5 percent on sustained basis by overcoming structural challenges, says an IMF official. "There is no reason Pakistan can not grow over five percent on sustained basis by increasing exports and investments; all opportunities are there", said Masood Ahmed, IMF Director of Middle Eastern and Central Asian Division, in an exclusive interview with Business Recorder.

"To do so, Pakistan has to address impediments of increasing investment and to provide infrastructure, educated and skilled human capital, improve business environment, and level of governance", he said. "But in three to five years Pakistan, strongly growing on the structural reforms path, can also catch a growth rate of 8 percent, equal to its Asian rivals. That is also an average growth rate of Asia next year," he added.

Masood called for national consensus among all political parties on structural reforms so that in future these reforms should stay on course, and growth pattern should not be that much disturbed, and the government should show more political will in implementing these reforms. "Pakistan needs tough political decision to take on reforming its commercial entities, cutting its losses", Masood said.

Good macroeconomic practices to ensure strong pubic finances and competitive exchange rate to bolster high growth are also essential, he added. Pakistan grew 2 percent last year; has estimated to grow at 3 percent this year; and the Fund forecast to get to 4 percent next year. Unlike previous years' growth, based on consumption, future growth should be based on exports and investments.

In a scenario of growing global growth at 4 percent from negative 1 percent last year, exports demand would grow and competitive price advantage would support local exporters, making up for modest growth this year. "But, this is not enough, and Pakistan can achieve 8 percent of growth in coming years if structural reforms are really undertaken," the IMF Director said.

Pakistan government can save up to 8.5 percent of GDP to deploy from increasing tax revenue, and reduce losses of public sector inefficient enterprises. "Resources that are currently wasted in the loss, making public enterprises and taxes that are collecting taxes that are not collected, making public spending more efficient are estimated by Finance Ministry is over 8 percent of GDP which are almost $12 billion", says Masood, quoting Finance Ministry reports.

These resources could be deployed to finance the much-needed infrastructure, reliable electricity provision, better health and education for millions of Pakistanis, he added. Among other challenges, international oil prices can augment again next year posing balance of payments problems and inflation which had once come down to 9 percent. He said the government should also be reducing fiscal deficit, which is around 5 percent this year, that would crowed out private sector borrowing from banking sector.

"Inflation, once reduced to around 9 percent, is now again increasing, and rebounding at 13 percent, which is very harmful for the poor segment of the society. This is the biggest help for the poor class; this also helps increase investment, that ultimately helps reducing poverty," Masood said. He said help from donors, like Tokyo pledges, are slow, and IMF urges the donors to come up and support Pakistan, he added.

Riaz Haq said...

China has become Pakistan's largest trading partner, replacing the US which slipped to third place, according to Dawn News:

China has emerged as Pakistan’s largest trading partner replacing the US and is being closely followed by the UAE. The US has slipped to third position on the list of the top ten trading partners.

Germany and the UK occupy eighth and 10th slots respectively and Japan is no more on the ten top list. The latest rankings based on the FY11 statistics indicate that Pakistan is doing much more trade within Asia and its reliance on American and European markets is on the decline.
Emergence of the new rich in China and expansion in middle-income consumers in the Middle Eastearn countries opened up new opportunities for Pakistan to boost trade with all these nations. Moreover, the trade gravity played its part in redirecting our external trade towards South and East Asia including Malaysia and Indonesia.

Small wonder then, that in the last fiscal year seven out of the top ten largest trading partners of Pakistan were all Asians—China, the UAE, Saudi Arabia, Kuwait, Malaysia, Afghanistan and India. And all of them except Saudi Arabia and India showed an improvement in their respective rankings, in a small span of three years.

“Interestingly whereas recession in the US and troubled political relationship between Islamabad and Washington affected growth of bilateral trade, the surge in the US troops in Kabul aimed at winding up the military operation there increased our exports to Afghanistan,” according to a senior official of Trade Development Authority of Pakistan (TDAP). That explains, at least in part, why Afghanistan’s seventh slot among our largest trading partners in FY11.

Our exports to Kabul totaled $2.3 billion in FY11. This growth trend is continuing and in the first five months of this fiscal year, exports to Afghanistan have touched a billion dollars mark------------
Business leaders say Pakistan’s top bilateral trade partners are changing not just because of economic miracle of China and overall better average economic growth in Asia than in America and in Europe. “Increase in imports from China, for example, is also related to the Chinese investment projects in Pakistan part of which are scaling down American influence,” said a former president of the Federation of Pakistan Chambers of Commerce and Industry.
India and China are two of the six countries on the list of the top ten trading partners with whom Pakistan runs trade deficits.
The other four are the UAE, Saudi Arabia, Kuwait and Malaysia. Whereas Pakistan imports large amounts of costly fuel oil from the first three countries, it runs trade deficit with Malaysia primarily due to huge import bills of palm oil.
With four countries out of the ten largest trading partners, Pakistan boasts of a trade surplus. These are the US, Afghanistan, Germany and the UK. “Whereas it is easier to retain Afghanistan as a major export market and it is encouraging that Bangladesh has emerged as a billion-dollar market for our products, the US, Germany, the UK and other European countries are equally important for sustained growth in overall exports,” remarked chairman of Pakistan Bedwear Exporters Association Mr. Shabbir Ahmad. He and many other exporters believe that normalisation of political relationship with the US and continuing of efforts to win trade concessions in European Union are required for keeping exports on a high growth trajectory.

Riaz Haq said...

Here's PakistanToday on Pak trade figures in FY 2012-13:

KARACHI - The country’s trade balance slid by a significant 19.7% MoM to a comfortable $ 1.743 billion in Jun-13, said the analysts at InvestCap Research citing data recently issued by the Pakistan Bureau of Statistics. Whereas the exports on a monthly basis inched up slightly by 1% MoM to $2.197 billion in Jun-13, the imports stepped down by 9.4% MoM to USD3.940 billion. “Such a trend can be explained by the absence of fertilizer imports in Jun-13, whereas the same stood at 97k tons in May-13 (USD53.7mn), the contribution of Urea to Jun-13 figures was absent due to delay in supply which is now expected to be received by the end of July-13,” said InvestCap analyst Muniba Saeed. Further, she said, contributors to the declining imports are expected to be fall in palm oil imports (importers already having stocked up for Ramadan), decline in imports of textile machinery and falling imports of generators. On an annual basis, the imports remained essentially stagnant increasing by a meager 0.08% YoY, climbing to a level of $44.950 billion in FY13. “Such a trend was witnessed despite decline in imports of petroleum products, fertilizer and the food group; the three heads combined contributing roughly 60% to total imports for the year,” the analyst said. The same was, however, negated by increased imports of machinery and the textile group leading to the imports head remaining effectively the same as last year, she said. Exports on the other hand increased by 3.78% YoY adding an additional USD894mn to the head to reach USD24,518mn. Such expansion is expected to be led by increased exports from the food group where sugar is projected to be the major contributor in fuelling such growth. Exports from the other heads are however expected to have subsided during the same period where major contribution is anticipated from the textile and petroleum group. The trade balance for FY13 as a result posted a decline of 4% YoY, descending to an amount of USD 20,432mn.

Riaz Haq said...

#Pakistan’s problem is moderation, not extremism. #Taliban #corrupt #elite …

by Ayaz Amir
Extremism, hate speech and sectarianism – the ills we are familiar with – are products of Pakistani moderation. The maulvi, the cleric, the doctor of the faith did not create the mess Pakistan is in. The maulvi was never in command of politics and power. He was always, and still is, a figure on the sidelines…a nuisance at best, the creator of too much noise, the specialist with the loudspeaker, but he never was the driving force behind national policies.
That was the prerogative, the monopoly, not of the maulvi, not of the Tableeghi Jamaat, but of the English-speaking classes, the real rulers of Pakistan. Who runs Pakistan even today? The army, the civil service, the political class, the enterprising seth, the sharp-eyed real-estate tycoon. Where is the Islamic warrior in this distinguished coalition?
The Kakul-trained and Quetta Staff College-perfected army command gave us the fruits of jihadi Islam. They pushed the nation into the Afghan cauldron. Even today you can come across generals and bright diplomats who will swear that Pakistan’s leading role in that evangelism, sustained by Saudi riyals and American dollars, was essential because after Afghanistan would have come Pakistan’s turn, the Soviets with their eyes transfixed on the warm waters of the Arabian Sea.
It was on the back of such nonsense that Pakistan’s then generals, oblivious to Pakistan’s own problems, set about the liberation of Afghanistan. The maulvi and the seminary student were the foot-soldiers in that venture. They did not frame the policy or set out the larger goals. The guns, the cash and the Stinger missiles came from elsewhere. The foot-soldiers of jihad were fortified by the belief that they were marching to heaven.
Eminent divines spoke in favour of the Objectives Resolution but they were not its authors. That was the work of the enlightened Muslim members of the Constituent Assembly, led by Prime Minister Liaquat Ali Khan, who tore out their lungs in praise of that resolution, paying little heed to the plaintive cries of the Hindu members that this was not what Muhammad Ali Jinnah had envisioned or promised them in his famous August 11 speech.
Incidentally, the most learned and eloquent speech in favour of the Resolution came from the foreign minister, Sir Zafrulla Khan, an Ahmadi by faith. Shouldn’t this be grounds for calling for an annulment of the Objectives Resolution?
Maulvis or religious leaders did not lead us into Seato and Cento, the American-inspired defence pacts of which Pakistan became such an eager member. India phobia – and it is a phobia, let’s be clear about this – was not made part and parcel of the thinking of the new state by the clerical establishment. That was the work of the most educated, cultured and enlightened sections of the intelligentsia and the ruling classes who had migrated from India.

What has the maulvi or the seminary student to do with any of this?
Pakistan needs a transformation of state and society. How long can it live with plundering robber barons who have democracy on their lips and exploitation in their hearts? This transformation can only come from a strong and radically-inclined leadership, with the strength and outlook to clean the national stables, knock heads together, lessen some of the hypocrisy which is the republic’s leading currency and change the Pakistani landscape for the better.
The extremism of the Taliban is primitive extremism, the product of narrow minds. Pakistan needs the extremism of the pathfinder, the pioneer, the searcher of the depths, the climber of the highest mountains. Of quaking moderation, belting out empty slogans and mouthing empty promises, it has had enough. Seventy years is a long enough time to test any experiment. It is time to give that a decent burial.

Riaz Haq said...

Globalisation Index 2016 (Trade, capital, information and people) : As world became less connected, India fell 16 spots over 11 years; scores lower on trade, FDI

As flows of trade and people fell the world over since the 2008 global financial crash, India dropped 16 spots to 78 (Pakistan 99) from 62 among 140 countries in 11 years , from 2005 to 2015, on a globalisation index brought out by international logistics company DHL.

The Global Connectedness Index 2016, the fourth since it was first released in 2011, prepared by Pankaj Ghemawat and Steven A Altman (both teach management at New York University Stern School of Business, United States) was released on 15 November, 2016.

The authors slotted India in the central and south Asia group along with Georgia, Turkey, Nepal, Pakistan, Armenia, Uzbekistan, Kazakhstan, Bangladesh, Azerbaijan, Kyrgyz Republic and Sri Lanka.

India ranked 133 (Pakistan 137) on depth and 21 ( Pakistan 32) on breadth among 140 countries in 2015.

The index measures the parameters on depth and breadth. Depth evaluates the extent to which countries' international flows are distributed globally or more narrowly focused, while breadth compares countries' international flows to the sizes of their domestic economies.

Trade flows are measured by exports as a share of a country's gross domestic product, capital by foreign direct investment as a share of a country's gross fixed capital and international stock market investment, information by international connectivity and people by share of international tourists and university students and migrants as a share of the population.