Bigger Dangers of military rule
More than corruption, it is political instability and terrorism that destroy a country. Cover up of military crimes from Hamood ur Rehman commission report, Zia's assassination report, Ojari camp report, Kargil report, Abbottabad commission report.
Nurturing ethnic (MQM) and jihadi militias at home, weakening political parties and civilian governments, obsession of military parity with India, exporting terrorism in Afghanistan and India, incessant refusal to trade with India, centralized rule feeding resentment and separatism in all provinces other than Punjab, loss of opportunities for foreign investment and economic development thanks to covert or overt military interventions causing political instability and terrorism of "rogue" state-sponsored militias.
Myth of Musharraf's economic boom
Terrorism got worsened under his nose. Energy crisis started under Musharaff regime. His economic performance owed to post-9/11 aid from West. He made a pact with urban terrorists of MQM, kleptokrats of PML(Q) and theocrats of MMA. Got Bugti killed and ignited separatism in Balochistan.
Lastly and most importantly, even if some of his economic reforms were successful in the short term, they were not sustainable because of the dubious political legitimacy of his regime.
http://www.pakpassion.net/ppforum/archive/index.php/t-170854.html
"The global economy was booming during 2000-2007 so how can people attribute the economy to him - people forget Musharraf's last two years when inflation was high, the cost of living was increasing and unemployment rapidly increased. Nothing was done about electricity shortages. There was the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML-Q government and ultimately led to President Musharraf's departure.
The vulnerability of the economy to external funds was revealed by the data on investments and its sources by the finance ministry. During the Musharraf period, the rate of investment had increased by a third, from 17.2% of GDP in 2001-02 to 23% in 2006-07. However domestic savings have declined from 17.8% to 16.1% of GDP in the same period. This means that the economy was even more dependent on foreign flows than was the case in the 1990s.
The sale of Pakistan Steel Mill is just one example of Musharraf's corruption. He was going to sell it for nothing. It was Supreme Court who stopped this madness. And then after 2005, Musharraf ran roughshod over every civilian institution such as the Supreme Court and the media. There was the State of Emergency which created unnecessary chaos. It was under Musharraf that the drone programme started."
http://jang.com.pk/thenews/aug2008-weekly/busrev-25-08-2008/#1
"the banking sector boomed and many foreign banks from the Middle East and other parts of the world came flocking to Pakistan. Banking profits soared, and banks were soon awash in liquidity, fueled partly by the diversion of home remittances by overseas Pakistanis from the informal havala system to regular banking channels.
http://teeth.com.pk/blog/2008/01/27/kaiser-bengali-explains-the-economic-performance-of-shaukat-aziz/
"GDP growth rate is an average of growth in its component sectors. So in the years that GDP growth rate was around 8%, in 2003 for instance, banking sector growth rate was 29% and the automobile sector growth rate was 45%. Now if you have some sectors where growth rate is so high, your average will go up, even if the variance is very high.
The banking sector growth rate was high because the government, or the State Bank rather, allowed consumer financing from 2002 onwards. The monetary was you could get a loan for a house, car, fridge, camera, if for nothing else, a vacation or a personal loan. Banks made enormous profits out of consumer credit and profits are a component of GDP. A lot of this credit was going in for buying cars so automobile production went up by 40-45%.
So basically it was a one legged growth and that one leg is consumer financing. You remove consumer financing, everything else collapses. You are only managing an economy for your numbers to look good, for headlines."
....
"TNS: What is wrong with consumer financing?
KB: What it did was that it increased money supply in the economy. In the first two years, inflation remained low because there was excess manufacturing capacity in the country. So factories which were operating at two shifts began to operate at three shifts and the supply increased. But once that capacity was reached demand continued to increase because people kept going to restaurants and kept paying out of credit cards. Once supply was constant and demand continued to increase inflation was the result. Sp today we have runaway inflation, nearly double digit and food inflation which is certainly more than12%.
Another things that has happened is that a lot of demand has been created for imported products. W are importing billion dollars worth of mobile phones. We are importing cars, because we only assemble cars here. And with cars come petroleum imports as well.
So we have created two problems: inflation that is out of control and a trade imbalance. Our imports have risen sharply while the exports are stagnant. And this is what the coming government is going to inherit. Just as Zia gave a debt mountain to the incoming government, the Musharraf regime is going to give the next government a massive foreign exchange crisis."
......
"Since 1999, the Musharraf regime has not invested n a single megawatt of power. In 2001, we had surplus power, today we are living with power shortage. When Benazir’s govt. contracted to buy power at 6cents per hour, there was excessive criticism. Today, for one project they are contracting at 11.5 cents per hour."
http://www.dawn.com/news/799634/the-bubble-that-burst
"The regime’s economic managers set about creating a macroeconomic environment that heavily favoured the banking sector, 80 per cent of which was sold to foreign interests during the regime’s tenure. The principal benefits to the banks accrued from the opening of the large window of consumer credit; with the result that the financial sector value added growth for 2004-05 and 2005-06 was at an all-time high at a record 31 per cent and 42 per cent, respectively.
Two industries that benefited the most from the liberal expansion of consumer financing were automobiles and electrical goods, with credit-financed sales of automobiles, television sets, etc, skyrocketing. Average value addition growth over 2003-2005 in the automobile and electrical goods industries was 43 per cent and 45 per cent, respectively, compared to 14 per cent for the manufacturing sector as a whole.
Thus, it was the extraordinary credit-financed growth in banking, automobiles and electrical goods sectors that provided the narrow base for overall GDP growth. The rest of the economy, particularly agriculture, stagnated.
However, the credit-finance bubble began to burst by 2007. When the doubling of inflation from four per cent over 2000-04 to nine per cent over 2005-08 forced a rise in interest rates, consumer credit disbursements declined by half, slowing financial sector growth to less than 15 per cent. With reduced consumer credit, production of automobiles and electrical goods dropped and with output of television sets falling by one-third GDP growth was back to below four per cent. What was trumpeted as extraordinary growth was actually a mirage, a hot-air balloon that burst at the first whiff of crisis.
High performance figures were also managed by what was apparently the manipulation of data. Post-1998 population census, the population growth rate was estimated at 2.5 per cent, based on the 1981-1998 inter-census growth. However, the population growth rate was arbitrarily reduced to two per cent in 2004, to 1.9 per cent in 2005 and to 1.8 per cent in 2007.
Given that no census had been carried out after 1998, there was no basis for concluding that the population growth rate had declined. The motive for depressing population growth figures emanated from the desire to show enhanced per capita income, i.e. average national income.
An average is derived by dividing the numerator by the denominator and a lower denominator raises the average. Per capita income is a product of national income divided by population. By lowering population estimates by the stroke of a pen, the Musharraf regime managed to contrive an increase in per capita income for the corresponding years.
Another apparent case of data manipulation is that of tax collection.
Budgetary data for customs duty receipts is provided for 13 categories of goods, ranging from chemicals, iron and steel, and machinery to rubber and plastic products and medical and photographic equipment. Clearly, one would not expect customs duty collection in any one year for different import categories to increase by the same percentage.
Ironically, however, that is exactly what happened. Customs duty collection for 10 out of 13 categories of imports is reported to have grown at a uniform 3.1 per cent during 2002-03, at 9.7 per cent during 2003-04 and at 27 per cent during 2004-05."
http://www.dawn.com/news/705473/four-years-of-economy
"Between FY04--FY08, the economy grew at seven per cent per annum on average—though during the FY08, growth rate fell significantly to 3.7 per cent. Exchange rate remained relatively stable—although, again, the second half of FY08 saw sharp depreciation of the rupee. The country on average received FDI inflows of $3.25 billion a year and both during FY07 and FY08, FDI crossed $5 billion mark.
However, other major economic indicators presented a bleak picture. Trade deficit increased to a record $20.74 billion in FY08, current account deficit exceeded $14 billion—8.47 per cent of GDP. Fiscal deficit rose to Rs777 billion--7.6 per cent of GDP—while revenue-GDP and tax-GDP ratios fell to 13.7 and 9.9 per cent respectively. External debt and domestic debt reached $46.16 billion (31 per cent of GDP) and Rs3.21 trillion (32 per cent of GDP) respectively. Average CPI inflation was 12 per cent at the close of FY08. Investment-GDP ratio was 21.6 per cent, while savings-GDP ratio was 13.9 per cent.
This means that the economic growth during the Musharraf regime was not based on strong fundamentals and the growth was largely on account of inflow of foreign capital. By October 2008, the external account position deteriorated to such an extent (foreign exchange reserves depleted to $7.31 billion—as on October 17, 2008—and the exchange rate nosedived to Rs82.37 per dollar that the government was forced to borrow from the IMF."
More than corruption, it is political instability and terrorism that destroy a country. Cover up of military crimes from Hamood ur Rehman commission report, Zia's assassination report, Ojari camp report, Kargil report, Abbottabad commission report.
Nurturing ethnic (MQM) and jihadi militias at home, weakening political parties and civilian governments, obsession of military parity with India, exporting terrorism in Afghanistan and India, incessant refusal to trade with India, centralized rule feeding resentment and separatism in all provinces other than Punjab, loss of opportunities for foreign investment and economic development thanks to covert or overt military interventions causing political instability and terrorism of "rogue" state-sponsored militias.
Myth of Musharraf's economic boom
Terrorism got worsened under his nose. Energy crisis started under Musharaff regime. His economic performance owed to post-9/11 aid from West. He made a pact with urban terrorists of MQM, kleptokrats of PML(Q) and theocrats of MMA. Got Bugti killed and ignited separatism in Balochistan.
Lastly and most importantly, even if some of his economic reforms were successful in the short term, they were not sustainable because of the dubious political legitimacy of his regime.
http://www.pakpassion.net/ppforum/archive/index.php/t-170854.html
"The global economy was booming during 2000-2007 so how can people attribute the economy to him - people forget Musharraf's last two years when inflation was high, the cost of living was increasing and unemployment rapidly increased. Nothing was done about electricity shortages. There was the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML-Q government and ultimately led to President Musharraf's departure.
The vulnerability of the economy to external funds was revealed by the data on investments and its sources by the finance ministry. During the Musharraf period, the rate of investment had increased by a third, from 17.2% of GDP in 2001-02 to 23% in 2006-07. However domestic savings have declined from 17.8% to 16.1% of GDP in the same period. This means that the economy was even more dependent on foreign flows than was the case in the 1990s.
The sale of Pakistan Steel Mill is just one example of Musharraf's corruption. He was going to sell it for nothing. It was Supreme Court who stopped this madness. And then after 2005, Musharraf ran roughshod over every civilian institution such as the Supreme Court and the media. There was the State of Emergency which created unnecessary chaos. It was under Musharraf that the drone programme started."
http://jang.com.pk/thenews/aug2008-weekly/busrev-25-08-2008/#1
"the banking sector boomed and many foreign banks from the Middle East and other parts of the world came flocking to Pakistan. Banking profits soared, and banks were soon awash in liquidity, fueled partly by the diversion of home remittances by overseas Pakistanis from the informal havala system to regular banking channels.
Easy access to low-cost consumer finance led to a
sharp rise in the sale of consumer goods such as cars, motor cycles, cell
phones and home appliances. The sale of cell phones, in particular,
registered a spectacular rise, with the total number of cell phones in the
country soaring from less than 1 million a few years ago to 80 million
today.
On the one hand, this rise in the number of cell
phones vastly increased communications connectivity in Pakistan, allowing
huge numbers of people across the country to talk to each other and
conduct business transactions by phone. On the other hand, however, the
absence of cell phone manufacturing plants in the country meant that all
the phones had to be imported, adding to the country’s import bill and
further widening the already growing trade gap.
The Musharraf-Aziz government, for its part, seemed to
be oblivious to this negative aspect of the communications revolution, and
often cited the huge increase in the number of cell phones as an example
of the success of its economic policies.
Moreover, since the ever-increasing revenues earned by
the cell phone companies (most of which were foreign-owned) were
automatically included in the annual GDP figures (total value of goods and
services) compiled by the Federal Bureau of Statistics, it allowed the
government to claim that its economic policies had boosted the GDP growth
rate to over six per cent – in marked contrast to the average growth
rate of below four per cent that had been seen through most of the 1990s
under the Nawaz Sharif and Benazir Bhutto governments.
What the Musharraf-Aziz government tended to gloss
over, however, was that the bulk of the billions of rupees in revenue
earned by the foreign-owned cell phone companies were being remitted
abroad because the government had imposed no limit on such transfers. If
one were to factor these transfers into the GDP equation, the economy’s
growth rate, in real terms, would not have been as high as the government
portrayed it to be.
Other types of statistical legerdemain were used by
the government to support its argument that the country’s per capita
income had risen dramatically in recent years, from about $ 450 in 1999 to
about $ 1,000 in 2007. In making this case, the government chose to ignore
the fact that a falling dollar required that the per capita income figure
be proportionately scaled down to give a more realistic picture of the
actual figure.
The government also tended to gloss over the fact that
it had artificially propped up the value of the dollar against the rupee
by directing the State Bank of Pakistan to regularly buy dollars from the
open market. Under this arrangement, the State Bank was said to have
bought several billion dollars from the open market over a four-year
period. The government said it had propped up the rupee’s value to help
exporters, arguing that a higher rupee-dollar exchange rate would have
meant that exporters would have earned fewer dollars for their exports,
thereby putting additional pressure on the country’s balance of
payments.
While there was considerable merit in this argument,
the downside of the State Bank’s interventionist operations in the
currency market was that it made imports more expensive in rupee terms,
fuelling inflation and driving up the prices of many types of goods,
including capital goods. Higher-priced capital goods, in turn, increased
the cost of expanding manufacturing plants or setting up new factories,
resulting in a slowing down of the industrialisation process."http://teeth.com.pk/blog/2008/01/27/kaiser-bengali-explains-the-economic-performance-of-shaukat-aziz/
"GDP growth rate is an average of growth in its component sectors. So in the years that GDP growth rate was around 8%, in 2003 for instance, banking sector growth rate was 29% and the automobile sector growth rate was 45%. Now if you have some sectors where growth rate is so high, your average will go up, even if the variance is very high.
The banking sector growth rate was high because the government, or the State Bank rather, allowed consumer financing from 2002 onwards. The monetary was you could get a loan for a house, car, fridge, camera, if for nothing else, a vacation or a personal loan. Banks made enormous profits out of consumer credit and profits are a component of GDP. A lot of this credit was going in for buying cars so automobile production went up by 40-45%.
So basically it was a one legged growth and that one leg is consumer financing. You remove consumer financing, everything else collapses. You are only managing an economy for your numbers to look good, for headlines."
....
"TNS: What is wrong with consumer financing?
KB: What it did was that it increased money supply in the economy. In the first two years, inflation remained low because there was excess manufacturing capacity in the country. So factories which were operating at two shifts began to operate at three shifts and the supply increased. But once that capacity was reached demand continued to increase because people kept going to restaurants and kept paying out of credit cards. Once supply was constant and demand continued to increase inflation was the result. Sp today we have runaway inflation, nearly double digit and food inflation which is certainly more than12%.
Another things that has happened is that a lot of demand has been created for imported products. W are importing billion dollars worth of mobile phones. We are importing cars, because we only assemble cars here. And with cars come petroleum imports as well.
So we have created two problems: inflation that is out of control and a trade imbalance. Our imports have risen sharply while the exports are stagnant. And this is what the coming government is going to inherit. Just as Zia gave a debt mountain to the incoming government, the Musharraf regime is going to give the next government a massive foreign exchange crisis."
......
"Since 1999, the Musharraf regime has not invested n a single megawatt of power. In 2001, we had surplus power, today we are living with power shortage. When Benazir’s govt. contracted to buy power at 6cents per hour, there was excessive criticism. Today, for one project they are contracting at 11.5 cents per hour."
http://www.dawn.com/news/799634/the-bubble-that-burst
"The regime’s economic managers set about creating a macroeconomic environment that heavily favoured the banking sector, 80 per cent of which was sold to foreign interests during the regime’s tenure. The principal benefits to the banks accrued from the opening of the large window of consumer credit; with the result that the financial sector value added growth for 2004-05 and 2005-06 was at an all-time high at a record 31 per cent and 42 per cent, respectively.
Two industries that benefited the most from the liberal expansion of consumer financing were automobiles and electrical goods, with credit-financed sales of automobiles, television sets, etc, skyrocketing. Average value addition growth over 2003-2005 in the automobile and electrical goods industries was 43 per cent and 45 per cent, respectively, compared to 14 per cent for the manufacturing sector as a whole.
Thus, it was the extraordinary credit-financed growth in banking, automobiles and electrical goods sectors that provided the narrow base for overall GDP growth. The rest of the economy, particularly agriculture, stagnated.
However, the credit-finance bubble began to burst by 2007. When the doubling of inflation from four per cent over 2000-04 to nine per cent over 2005-08 forced a rise in interest rates, consumer credit disbursements declined by half, slowing financial sector growth to less than 15 per cent. With reduced consumer credit, production of automobiles and electrical goods dropped and with output of television sets falling by one-third GDP growth was back to below four per cent. What was trumpeted as extraordinary growth was actually a mirage, a hot-air balloon that burst at the first whiff of crisis.
High performance figures were also managed by what was apparently the manipulation of data. Post-1998 population census, the population growth rate was estimated at 2.5 per cent, based on the 1981-1998 inter-census growth. However, the population growth rate was arbitrarily reduced to two per cent in 2004, to 1.9 per cent in 2005 and to 1.8 per cent in 2007.
Given that no census had been carried out after 1998, there was no basis for concluding that the population growth rate had declined. The motive for depressing population growth figures emanated from the desire to show enhanced per capita income, i.e. average national income.
An average is derived by dividing the numerator by the denominator and a lower denominator raises the average. Per capita income is a product of national income divided by population. By lowering population estimates by the stroke of a pen, the Musharraf regime managed to contrive an increase in per capita income for the corresponding years.
Another apparent case of data manipulation is that of tax collection.
Budgetary data for customs duty receipts is provided for 13 categories of goods, ranging from chemicals, iron and steel, and machinery to rubber and plastic products and medical and photographic equipment. Clearly, one would not expect customs duty collection in any one year for different import categories to increase by the same percentage.
Ironically, however, that is exactly what happened. Customs duty collection for 10 out of 13 categories of imports is reported to have grown at a uniform 3.1 per cent during 2002-03, at 9.7 per cent during 2003-04 and at 27 per cent during 2004-05."
http://www.dawn.com/news/705473/four-years-of-economy
"Between FY04--FY08, the economy grew at seven per cent per annum on average—though during the FY08, growth rate fell significantly to 3.7 per cent. Exchange rate remained relatively stable—although, again, the second half of FY08 saw sharp depreciation of the rupee. The country on average received FDI inflows of $3.25 billion a year and both during FY07 and FY08, FDI crossed $5 billion mark.
However, other major economic indicators presented a bleak picture. Trade deficit increased to a record $20.74 billion in FY08, current account deficit exceeded $14 billion—8.47 per cent of GDP. Fiscal deficit rose to Rs777 billion--7.6 per cent of GDP—while revenue-GDP and tax-GDP ratios fell to 13.7 and 9.9 per cent respectively. External debt and domestic debt reached $46.16 billion (31 per cent of GDP) and Rs3.21 trillion (32 per cent of GDP) respectively. Average CPI inflation was 12 per cent at the close of FY08. Investment-GDP ratio was 21.6 per cent, while savings-GDP ratio was 13.9 per cent.
This means that the economic growth during the Musharraf regime was not based on strong fundamentals and the growth was largely on account of inflow of foreign capital. By October 2008, the external account position deteriorated to such an extent (foreign exchange reserves depleted to $7.31 billion—as on October 17, 2008—and the exchange rate nosedived to Rs82.37 per dollar that the government was forced to borrow from the IMF."
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