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Assessing Pakistan’s Decade 1999-2009

This December 31, 2009, is not just the end of the year; it brings a momentous decade of achievements in Pakistan to a chaotic and bloody end. After a relatively peaceful but economically stagnant decade of the 1990s, the year 1999 brought a bloodless coup led by General Pervez Musharraf, ushering in an era of accelerated economic growth that led to more than doubling of the national GDP, and dramatic expansion in Pakistan’s urban middle class. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan’s per capita GDP is approaching $3,000 per head. The decade also cast a huge shadow of the US “war on terror” on Pakistan, eventually turning the nation into a frontline state in the increasingly deadly conflict that shows no signs of abating. Along with the blood and gore and chaos on the streets, there are hopeful signs that rule of law and accountability is beginning to prevail in the country with the restoration of representative democracy and independent judiciary, largely in response to an increasingly assertive urban middle class, vibrant mass media and growing civil society. Let’s look at some of the highlights, low lights and then discuss the shape of things to come.

High-lights:

1. Pakistan’s tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1.2 trillion.

2. Pakistan’s GDP more than doubled to $170 billion (nominal) since 1999. It has reached $440 billion in terms of purchasing power parity (PPP).

3. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01.

4. The country has experienced a mass media revolution. There are now multiple, competing television channels catering to almost every niche, whim and taste—from news, sports, comedy and talk shows to channels dedicated to cooking, fashion, fitness, music, business, religion, local languages and cultures etc. It seems that this media revolution has had a profound influence on how many young people talk, dress and behave, emulating the outspoken media personalities, actors, preachers, singers, sportsmen, celebrities and fashion models. In addition to a smorgasbord of TV channels born out of a surge in advertising spending, there are many newspapers and tabloids, and serious and glossy magazines, and many FM radio stations providing local news, sports, weather and traffic.

5. The strong consumer demand in Pakistan drove large investments in real estate, construction, communications, automobile manufacturing, banking and various consumer goods. Millions of new jobs were created. By all accounts, the ranks of the middle class swelled in Pakistan. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan’s per capita GDP is approaching $3,000 per head.

6. Pakistan’s KSE-100 stock index surged 55% in 2009, a year that also saw the South Asian nation wracked by increased violence and its state institutions described by various media talking heads as being on the verge of collapse. Even more surprising is the whopping 825% increase in KSE-100 from 1999 to 2009, which makes it a significantly better performer than the BRIC nations. BRIC darling China has actually underperformed its peers, rising only 150 percent compared with energy-rich Brazil (520 percent) and Russia (326 percent) or well-regulated India (274 percent), which some investors see as a safer and more diverse bet compared with the Chinese equity market, which is dominated by bank stocks. According to Tariq Iqbal Khan, Chairman of Pakistan National Investment Trust(NIT), KSE-100 equities provided investors with average annual return of 21 percent during the decade 1999-2009 while the average inflation during this period was 7.2 percent.

7. The Wall Street Journal did a story in September 2007 on Pakistan’s start-up boom that said, “Scores of new businesses once unseen in Pakistan, from fitness studios to chic coffee shops to hair-transplant centers, are springing up in the wake of a dramatic economic expansion. As a result, new wealth and unprecedented consumer choice have become part of Pakistan’s volatile social mix.”

8. The PPP leadership under former Prime Minister Benazir Bhutto returned to Pakistan in 2007 following a US-sponsored amnesty signed by former President Musharraf. Unfortunately, Ms. Bhutto was assassinated before the elections in December 2007. However, the results of the free and fair elections held in 2008 were respected by former President Musharraf that allowed the PPP, led by Benazir Bhutto’s widower Asif Ali Zardari, to assume control of the government. Later, Mr. Zardari forced President Musharraf out and succeeded him into the office of the president.

9. Persistent and powerful mass movement led by Pakistani lawyers forced the PPP government to restore Chief Justice Iftikhar Chaudhry and several other senior judges earlier this year. The NRO amnesty that facilitated the PPP leaders’ return has since been annulled by the Supreme Court of Pakistan, and all of the corruption and criminal cases against Mr. Zardari and many of his ministers have been re-opened. The chief justice appears determined to pursue accountability and rule of law against all odds.

10. Pakistan’s information technology(IT) sector revenue grew from almost nothing to about $2.8 billion in 2008, with about half of it from exports.

11. Higher education reform initiated by Dr. Ata-ur Rehman Khan under President Musharraf resulted in over fivefold increase in public funding for universities, with a special emphasis on science, technology and engineering. The reform supported initiatives such as a free national digital library and high-speed Internet access for universities as well as new scholarships enabling more than 2,000 students to study abroad for PhDs

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