Wednesday, February 13, 2008

Feudal Power Dominates Pakistani Elections

As Pakistanis go to the polls on Feb 18, 2008, the role of the feudal class in Pakistan as power brokers is getting scrutiny from the world media. Some Pakistani feudals and politicians, including Makhdoom Shah Mahmood Qureshi of PPP, Syed Fakhr Imam of PPP, Imran Khan (Tehreek Insaf), and others argue that the feudal influence is overrated. They say the feudal power is declining and represents more of a mindset than reality. However, the media men traveling through rural Sind and rural Punjab are finding that most, if not all, of the candidates of the major parties are big landowners. And the people living on their lands must choose from them. When asked by the BBC correspondent Shoaib Hasan why none of the farmers or other poor people consider standing as candidates, a group of village people burst out laughing.

Here are some of the foreign media reports that caught my attention:

William Dalrymple, writing for the Guardian in London says: "There is a fundamental flaw in Pakistan's political system. Democracy has never thrived here, at least in part because landowning remains almost the only social base from which politicians can emerge. In general, the educated middle class - which in India seized control in 1947, emasculating the power of its landowners - is in Pakistan still largely excluded from the political process. As a result, in many of the more backward parts of Pakistan the local feudal zamindar can expect his people to vote for his chosen candidate. Such loyalty can be enforced. Many of the biggest zamindars have private prisons and most have private armies."

Writing about Mumtaz Bhutto, whose son is a candidate for parliamentary seat, Aryn Baker of Time Magazine reports: As one of Pakistan's largest landowners, Bhutto is both a victim and a perpetrator of the corrosive feudal system that has shaped Pakistani society for most of its 60-year history, and still dictates how politics are done today. Bhutto's family has owned this patch of fertile land alongside the Indus River for nearly half a millennium, and on the wall of his stately home is the family tree to prove it. (He is a cousin of the assassinated Benazir Bhutto.) Sharecroppers till the lands, exchanging half they produce — rice, wheat and sugarcane — for a place to live, seeds and fertilizer. And patronage. "If my tenants are happy with me, they work more efficiently on the lands," says Bhutto. "You help the people and they will help you." That exchange extends into the political realm. Bhutto isn't running in this year's parliamentary elections — he's retired — but his son is. With some 10,000 acres of land being cultivated by a vast network of thousands of sharecroppers dependent on feudal largesse, the Bhutto family can count on a large turnout of supporters at the polls.

BBC South Asia service talks about the power and influence of the feudal lords near Multan in Makhdoom Shah Mehmood Qureshi's district as follows: The term "feudal or "feudal lord" refers to the large-scale landholding families in Pakistan.By dint of their landholdings, which they rent to tenant farmers, the feudal lords are able to exercise immense financial and political influence. In many cases they are also able to claim the loyalty of thousands, sometimes hundreds of thousands, of "murids" (devotees) who believe they are directly descended from local saints. On top of this, they usually control the "station and katchery" (the police and the courts) which ensures the compliance, willing or not, of the local populace.

Regardless of which party or parties emerge as the winners on February 18, one thing is certain: The power and the influence of the feudals will be very well represented in the corridors of power. And the ordinary people of Pakistan will continue to be at their mercy in the name of democracy, unless the military refuses to cede power to the elected feudals.

Amidst all the cries for democracy, independent judiciary, human rights, and fair polls in Pakistan, nothing will change fundamentally on Feb 18. Regardless of the party labels and promises, the feudal power will endure in the name of democracy. The choices remain narrow for Pakistanis: Choose between military and the feudal class. There is no third choice as long as the middle class remains small and unable to exert any real influence. The only hope for real democracy lies in continued robust growth of the middle class over an extended period of time of another decade or two. There are no guarantees that feudal rulers will permit that.

Is Bombay Bubble Bursting?

In addition to the performance of BSE-30 index, there are two recent reports that seem to suggest that Indian and foreign investors are starting to worry about the bubble in Bombay. The first report indicated that Reliance Power IPO did not meet expectations. While the issue price was Rs. 450, it opened at Rs. 530 but declined soon after closing at Rs.372. The second report said Emaar, the Dubai-based real estate giant, has decided to delay its Indian IPO.


With the impressive growth in the Indian economy and very healthy returns in the stock market for several years, a lot of investors have flocked to Bombay to profit from Indian stocks. This phenomenon has pushed the P/E ratios of Indian shares to new heights. According to the Bombay Stock Exchange which computes PE for its dozen odd sectoral indices, the average PE of BSE Realty Index was as high as 71.55 as on January 4, while the average PE ratio for BSE Capital Goods was second highest at 51.20. The BSE Power Index PE ratio was at 42.94. The P/E ratio for Sensex is 28.31. This compares favorably with Shangai stocks average P/E ratio of 33, which also is considered to be a bubble by many analysts. These PE ratios are about twice the PE ratio of 16.21 for Karachi KSE-100, making it an attractive opportunity for investors willing to accept political risks. Merrill Lynch Chief Strategist Mark Matthews believes that these political risks are worth taking for the bargain basement share prices and high returns based on the KSE track record.

Sources: Bloomberg
IGI Research
Yahoo Finance

Tuesday, February 12, 2008

Pakistan's Military Brass: Is It Distancing From Musharraf?

General Kayani's Orders
Pakistan's Army Chief Gen. Kayani has initiated a number of changes that establish a divide between the uniformed army and Mr. Musharraf, say senior Pakistani officers. Last month, Gen. Kayani, 55 years old, issued an order barring officers from any unauthorized meetings with Pakistani politicians, including the president. The army commander also said the military wouldn't play any role in staging next week's parliamentary elections, outside of providing security, according to the Wall Street Journal.

ISI Political Cell
The moves, say senior Pakistani officers, stand as a clear signal to Mr. Musharraf that he can't rely on his former allies in the military to get "desirable results" from the vote, says an active Pakistani general. "We don't want the army to be seen as involved in political affairs in any way," he says, a move the army hopes will inoculate it from being tarnished by any potential electoral improprieties.

If these reports are credible, then the ISI's political cell can no longer to be used to manipulate the results of the February 18 elections this year. It was former Prime Minister Zulfikar Ali Bhutto who issued the executive order creating this political cell within the Inter Services Intelligence (ISI) with the purpose of influencing political processes in Pakistan. This fateful decision eventually brought ZA Bhutto's own downfall when he used this cell to unnecessarily rig the 1977 elections and was overthrown and executed by General Zia-ul-Haq. It was also this cell that helped Nawaz Sharif , a protege of General Zia-ul-Haq, get elected as Prime Minister of Pakistan after the General's death in a mysterious air crash followed by a brief term in office by Benazir Bhutto. In 1990 the ISI received 140m rupees (US$2.2m at current values) to rig national elections, according to supreme court testimony by the then chief of army staff, General Mirza Aslam Beg.
As recently as two weeks ago Chaudhry Shujaat Husain of PML-Q argued that this cell should continue working. It seems that General Kayani disagrees and has decided to not allow the use of the cell for influencing the upcoming vote.

Fair Polls
There have been a number of specific allegations of poll rigging such as ghost polling stations, ballot stuffing, and counting irregularities made by the opposition. Each of these allegations have been rebutted quite well by Staffan Darnolf, Pakistan Country Director of IFES in his responses to a blog post by Barnett Ruben. However, the one issue that hung over the elections was the acknowledged existence of the ISI political cell. These latest reports of Gen Kayani's orders, if true, should eliminate this issue as well.

Monday, February 11, 2008

RAND Report: US Strategy In Muslim World Counterproductive

The RAND Corporation, a highly respected non-profit policy research institute in the United States, says in its latest report on the ongoing War on Terror: "Large-scale U.S. military intervention and occupation in the Muslim world is at best inadequate, at worst counter-productive, and, on the whole, infeasible."

“Violent extremism in the Muslim world is the gravest national security threat the United States faces,” said David C. Gompert, the report's lead author and a senior fellow at RAND, a nonprofit research organization. “Because this threat is likely to persist and could grow, it is important to understand the United States is currently not capable of adequately addressing the challenge.”

The study finds that when infected by religious extremism, local insurgencies become more violent, resistant to settlement, difficult to defeat and likely to spread. The jihadist appeal to local insurgents is the message that their faith and homelands are under attack by the West and they should join the larger cause of defending Islam. This makes U.S. military intervention not only costly, but risky.

While the recent military surge has improved security in much of Iraq, “it would be a profound mistake to conclude from it that all the United States needs is more military force to defeat Islamist insurgencies,” Gompert said. “One need only contemplate the precarious condition of Pakistan to realize the limitations of U.S. military power and the peril of relying upon it.”

The report recommends that the United States should shift its priorities and funding to improve civil governance, build local security forces, and exploit information — capabilities that have been lacking in Iraq and Afghanistan."

It is good to see that the US policy think tanks and researchers are finally beginning to recognize the follies of US policies. Let us hope that the current and incoming US administrations pay heed to what these researchers are finding and make dramatic policy changes before it is too late. I am hopeful that the world leaders can still pull us back from the brink and avoid catastrophic consequences of the Bush-Cheney policies of the last seven years.

Poll: Musharraf Hits New Low

A new poll in Pakistan conducted by the US-based International Republican Institute shows President Musharraf's opposition receiving support from 72% of respondents. Only 15% of the poll participants approve of Mr. Musharraf, lowest ever positive rating registered for him to date. The sympathy wave for PPP in the wake of Benazir Bhutto's assassination has lifted it to 50% of the respondents voting for it, with PML (Nawaz Sharif) at 22%. This poll of 3,845 adults was conducted Jan 19-29 and has a margin of error of plus or minus 1.69%, reports the Washington Post in today's edition. Only 14% said they planned to vote for PML-Q, the main pro-Musharraf party.

While this poll result does not augur well for pro-Musharraf forces, there are questions about the sample size, the regional differences, and the presence of other smaller ethnic parties affecting the final outcome in terms of the number of parliamentary seats won by PPP, PML (N), PML (Q), MQM, JUI, and ANP. Similar polls have notoriously failed to correctly predict the outcome in the recent primaries in the US.

In answer to the question "Would you say the ruling coalition has done a good enough job to deserve re-election", 29% of the respondents said yes, 62% said no and the rest did not know or did not answer. This suggests that there's some ambivalence among 10-20 % of the people in this sample as to who to vote for.

Based on this poll, it is likely that PPP will emerge as the single largest party, though not necessarily with 50% of the seats. The rest of the seats will probably be won by PML(N), PML(Q), MQM, JUI and ANP in that order. The composition of the future government will likely depend on whether the traditional rivals in the PML(N) and the PPP can really work together and reach an accommodation with Musharraf, at least for a while.

The fear still remains that, if the results are substantially different from this expected outcome, the predictable mass protests in Pakistan will succeed in upending the entire nation and its economy with severe negative, long term consequences for Pakistan.
Such a situation could lead to another military takeover and Martial Law setting the political process back. It is in the best interest of all Pakistani leaders to show flexibility in the interest of advancing the political process without repeating the vicious cycle Pakistan has been in for the last 50 years.

Sunday, February 10, 2008

Mobile Internet For Pakistan

With the personal computers and the Internet penetration in Pakistan in single digit percentages and the mobile phone penetration approaching 50%, should Pakistanis still aspire primarily for the Western style PC/Internet access model? The answer to this question is clearly a resounding NO. Here is an opportunity for a strategic leapfrog to ubiquitous Internet connectivity via the most prevalent device owned by the largest number of people--the mobile phone. It makes sense from many perspectives: Device cost, connectivity options, electricity availability, usefulness for the vast majority of people, etc. It seems that the Japanese have already been pursuing the mobile connectivity model with widespread voice and data connectivity through the cell phones, popularity of text messaging, use of cell phone as a gaming/entertainment and payment platform.
While the efforts such as OLPC (One laptop per child) for developing nations including Pakistan are laudable, a similar or even greater focus on robust mobile phones is likely to be a faster and cheaper method to accomplish the OLPC program goals. There is no reason why these robust mobile devices could not be used to help students in their academic pursuits. With new capabilities in mobile phones such as voice recognition, speech-to-text, real time audio, video, and translation, students learning can be enhanced at the same time as higher business productivity
is realized for an increasingly mobile workforce in Pakistan, India, and the rest of the developing world.
The policy makers and planners should initiate public-private partnerships to make mobile Internet a reality in Pakistan. The government should work with the mobile phone companies such as Mobilink and Motorola as well as the Internet giants such as Cisco, Google and Microsoft to ensure that the widespread mobile phones in Pakistan are leveraged to improve education and business productivity.

Friday, February 8, 2008

Does Pakistan Face Debt Crisis?

A number of Pakistani economists and newspaper columnists are fretting about what they call "Pakistan's Debt Crisis". They claim that Pakistan's national debt has risen dramatically over the last 8 year. Putting in perspective, it seems to me that they are raising an unnecessary alarm. While it is true that Pakistan's total external debt has increased by about 10% since 1999, it is also true that Pakistan's GDP has more than doubled.
Here are the facts:
In 1999 Pakistan’s total debt as percentage of GDP was the highest in South Asia – 99.3 percent of its GDP and 629 percent of its revenue receipts, compared to Sri Lanka (91.1% & 528.3% respectively in 1998) and India (47.2% & 384.9% respectively in 1998). Internal Debt of Pakistan in 1999 was 45.6 per cent of GDP and 289.1 per cent of its revenue receipts, as compared to Sri Lanka (45.7% & 264.8% respectively in 1998) and India (44.0% & 358.4% respectively in 1998).
Most recent figures in 2007 indicate that Pakistan's total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999. It also compares favorably with India's debt-to-GDP ratio of 59% and Sri Lanka's 85% in 2007. From being the highest debtor nation in South Asia, Pakistan has, in fact, become the lowest debtor nation in its region and achieved economic growth rate of about 7% a year during the last 6 years.

Sources: CIA World Fact Book
Jubilee Research
State Bank of Pakistan

Pakistani Media: Where Are The Fact-Checks?

Fact Checks
Politicians in all parts of the world deal in hype, half-truths, exaggerations, conspiracy theories, inaccuracies and wild allegations. This applies to politicians of all stripes; ruling parties, opposition, left, right, center, etc. Pakistan is no exception to this reality. While there has been a tremendous growth in the media outlets, Pakistan still seems rather unique in that its burgeoning media lack the knowledge, the ability and the desire to expose these infractions as independent, objective observers and reporters of facts. The tradition of investigative journalism and fact-checking has not taken hold in Pakistani media. There are no examples of outfits such as USA's CBS 60 Minutes, India's Tehelka.com or CNN's Fact-Checks.

Examples
Examples of media representatives' failure to challenge their guests are many. I'll cite just a few of them here. While there are lots of factual data available on Pakistan Governments missteps in the wheat crisis, the pro-government politicians continue to argue that the government was not at fault. The media reps, however, do not cite the data from reputable sources such as the US Dept of Agriculture to challenge these politicians' statements. My blog post at South Asia Investor Review addresses wheat crisis in Pakistan.
In an interview with an economist favoring opposition, Dr. Shahid Masood was surprised and alarmed to hear that the national debt has increased over the last 5 years. The economist then went on to further exaggerate the debt without also mentioning the fact that the GDP has doubled and the debt has actually dropped significantly as percentage of GDP(from 90% to 54% of the GDP) during this period. Shahid Masood did not have a clue on how to intelligently handle the subject. Any half decent journalist talking to an economist would have prepared for this subject and challenged the guest. Please read my blog post at South Asia Investor Review on the subject of Pakistan's debt.
It is very fashionable to talk about poll rigging in Pakistani media just prior to the elections of February 18, 2008. There are many general and specific allegations made without seriously pursuing the facts behind any of them. In fact, I find much better coverage of these allegations and rebuttals in the US and International blogs where knowledgeable international analysts and observers contribute. One such blog I have found is Informed Comment: Global Affairs. You can also check my recent blog post at Haq's Musings on this subject.

Navel Gazing
I am a big fan of Pakistani media, particularly the TV channels such as Geo and ARY. Pakistani media have come a long way in the last five years. In order to continue to improve their performance, they and their supporters should not become defensive when their shortcomings are pointed out to them. They should do much more self-analysis (also known as navel gazing in the US) and look at themselves more critically. I would suggest that they watch and start producing TV shows such as CNN's Reliable Sources by Howard Kurtz that look at the journalism standards and practices on a regular basis.

Excellence
While I fully expect accusations of being an ivory tower commentator from the defenders of the media in Pakistan, I would suggest that the media not use any government restrictions as an excuse to avoid doing their jobs well, to the extent it's reasonable and possible. This is the only way they can avoid mediocrity and achieve excellence.

Thursday, February 7, 2008

Scotland Yard: Benazir Killed By Blast, Not Bullet

Early reports in York Times and Times Online indicate that Scotland Yard's conclusions support Pakistan Government's findings on the cause of Benazir Bhutto's death. Investigators from Scotland Yard have concluded that Benazir Bhutto, the Pakistani opposition leader, died after hitting her head as she was tossed by the force of a suicide blast, not from an assassin’s bullet, officials who have been briefed on the inquiry said Thursday, according to the New York Times. The British inquiry also determined that a lone gunman, whose image was captured in numerous photographs at the scene, also caused the explosion, said the officials, who spoke on condition of anonymity because the report has not been made public. Pakistani authorities originally said there were two assailants, based partly on photographs splashed across the front pages of the nation’s leading newspapers.

Apparently, these conclusions are based on the brain scans, video and photographic evidence, eyewitness accounts and other forensic evidence gathered without an autopsy or other crime scene evidence washed away immediately after the tragedy.

This report is likely to anger Bhutto supporters and re-ignite charges of conspiracy and cover-up. It may also intensify demands for a UN inquiry into the tragic event.

Pakistan Election Rigging 101

Rigging Allegations
The allegations of poll rigging are getting louder as Pakistan approaches the Feb 18, 2008 parliamentary elections. When you hear the opposition politicians, particularly from PPP and PML-N, describe the details of alleged rigging in Pakistani and world media, it seems that they have a great deal of personal knowledge and expertise in
this specialty, the kind of depth that can only come from having engaged in it for themselves. I am writing this blog post to try and explain the crux of the issue as I understand it.

ISI Political Cell
As I read through a lot of material in my quest for the answers, what caught my eye was a PPP report alleging that "Military Intelligence sits in the offices of returning officers, police officials and other elections officials." The question is: What does the military intelligence have to do with organizing elections? To find the answer, I had to go as far back as 1975 when Zulfikar Ali Bhutto ruled the country with an iron hand under emergency rules. Talking about ISI's role in Pakistani elections, former ISI chief Gen. Hamid Gul recently said in an interview to Tehelka.com, " The ISI has played an important role and it has in its charter — through a prime ministerial decree signed by Zulfiqar Bhutto — a political cell, so the politicians are at fault and the Army chief and his coterie of generals are at fault."

Bhutto Legacy
It was Zulfikar Ali Bhutto who issued the executive order creating a political cell within the Inter Services Intelligence (ISI) with the purpose of influencing political processes in Pakistan. This fateful decision eventually brought ZA Bhutto's own downfall when he used this cell to unnecessarily rig the 1977 elections and was overthrown and executed by General Zia-ul-Haq. It was also this cell that helped Nawaz Sharif , a protege of General Zia-ul-Haq, get elected as Prime Minister of Pakistan after the General's death in a mysterious air crash followed by a brief term in office by Benazir Bhutto. In 1990 the ISI received 140m rupees (US$2.2m at current values) to rig national elections, according to supreme court testimony by the then chief of army staff, General Mirza Aslam Beg.
Described aptly as "Bhutto Legacy" by Pakistani newspaper Dawn's columnist Mr. Aredeshir Cowasjee, this political cell in the ISI continues to exist and it is still being used by the pro-government politicians to influence the outcome of the elections. Recently, Chaudhry Shujaat Husain of PML-Q, argued that this cell should continue working. Obviously, the opposition politicians want it disbanded, as long as they can not use it to their advantage.

Specific Allegations
In terms of the specific allegations such as ghost polling stations, ballot stuffing, counting irregularities, etc, each of these are rebutted effectively by Staffan Darnolf, Pakistan country director of IFES with lots of experience in elections in developing nations. Responding to a blog post by Barnett Ruben, Staffan wrote: "In this article you mentioned that the elections are likely to be rigged with the assistance of ISI and district administration as “[t]hese ballots, already printed, filled out, and prepared, are then added to those transported from polling places for the final count.” Could you elaborate a bit more here, as I simply don’t understand your argument. The reason being that no central counting of ballot papers take place. The ballot boxes are opened at the polling stations and the ballot papers are counted at the individual polling stations.
On ghost polling stations, Staffan says: "What my argument boils down to is that this notion of ghost polling stations is a red herring. Why go through this huge exercise involving thousands of people to try to siphon off ballot papers, get your hands on ballot boxes, security seals, the right stamps, the original forms, prep the ballot papers and then have them sent to the Returning Officers' premises where no counting of the ballots are taking place? Also, how do you produce faked voters list for these ghost polling stations now when the voters lists are computerized and can be easily verified?"
Staffan goes on: "To me, this seems as far-fetched as the allegation by some political parties in late November and the first week of December stating that 108 Punjab NA constituencies had been selected for rigging, as the ruling party's representatives had already received 20-30K (the reported number varied) extra ballot papers for stuffing. The problem with this accusation is that candidate nomination only ended on Dec 15. And before that no one knows which parties and candidates will actually run for office. Hence, it is only on December 16th that the final design of the real ballots are known and they can be produced for any of the 849 directly elected constituencies."
While specific allegations are rebutted well, just the existence of the ISI cell creates doubt as to the fairness of the polls in Pakistan.

Disband ISI Cell
Given the acknowledged existence of this political cell within ISI, can we expect any confidence in the results of the upcoming elections? The answer is clearly NO. Would such a cell give the losers the justification to launch mass protests, even if the elections are largely free and fair? The answer is clearly YES. I think it would be in the best interest of the nation if all politicians and generals agree to disband this ISI cell to make sure the elections are, in fact, free and fair and seen to be completely free, fair and transparent.