By Dr. Nayyer Ali

March 21, 2008

Dinner with Shaukat Aziz

Last  week I had the pleasure of attending a small dinner with Shaukat Aziz, the former Prime Minister.  In a wide-ranging  two-hour conversation, he gave his thoughts and perspectives on a whole host of issues facing the country and offered some insights into the past eight years that I found fascinating.
Aziz, as most readers are  aware, was a prominent figure in Citibank in New York in 1999 when he was asked by Musharraf to be the Finance Minister in the new regime.  The decision to work with a military government was criticized by some, but on the other hand, Aziz had an opportunity to tackle some fundamental problems that plagued Pakistan, and his expertise made him one of few who could do the job.
He accepted and served as Finance Minister for several years, then became Prime Minister in 2004. Although ultimately Musharraf was in charge, the main domestic and economic policies were designed and implemented by Aziz, and so he was the architect of the reforms that took place.  He left office in November 2007, and is now on a global  speaking tour, for which he has declined remuneration.
Aziz noted that the primary Pakistan issues that concern American leaders, both in the public and private sector, remain terrorism, nuclear proliferation, democracy, and the impact of the global financial crisis.  
Aziz made several points on terrorism.  He felt that the US press has been adversarial in its approach to Pakistan, and there has been little or no recognition of the high price Pakistan has paid for the Afghan war.  He stated that the Taliban were not given safe haven in Pakistan, but pointedly remarked that the real problem was the Afghan perception of being occupied by US forces.  In my view this is a mixed bag;  the occupation is viewed more favorably among the non-Pashtuns, but certainly the Afghan Pashtun population remains the heart of the Taliban and anti-US movement.  Aziz felt that the only way to really end this struggle would be replacing US forces with UN forces in Afghanistan.  
Aziz also put forth the argument that terrorism is linked to political and economic grievances.   This is certainly the case in Kashmir and Palestine, but less so with the transnational Jihadis and Al-Qaeda movement, which is not linked to any particular defined political cause, and is the source of much of the mayhem in the Muslim world and in Pakistan.  
Aziz’s major accomplishment must certainly be considered the economic turnaround.  Pakistan has averaged 7% growth for the last five years, and living standards have risen sharply.  Annual motorcycle sales have gone from 100,000 to 900,000, and there are now many families of modest means with motorized transport.  The telecom and cell phone revolution also has been phenomenal.  Cell phones per capita in Pakistan are much higher than in India. Exports have doubled, and Pakistan has finally said goodbye to the IMF.  The latest World Bank data shows Pakistani GDP per head (at purchasing power parity) to be 2400 dollars, versus 2100 in India and 1300 in Bangladesh.  Pakistan also has much lower income inequality than India. The net result has been a plunge in extreme poverty from 35% of the population in 2000 to 25% now, meaning that more 15 million Pakistanis have been lifted out of that desperate state.
Aziz did this through a broad program of economic reform.  The most important elements were independence for the State Bank, privatizing and reforming the banking sector, reducing tariffs, privatizing large chunks of the industrial economy, and changing the tax base to income and sales taxes primarily. Aziz was somewhat exasperated that the reforms were so poorly understood by the Pakistani press, which has tended to be dismissive of all this. But financial  literacy in Pakistan is rather poor, and only recently have there been financial television and newspapers starting up.
We did discuss the issue of electricity.  The reason there has been such a crunch is that demand growth over the last few years was projected at only 8%, but turned out to run at 15%.  In the 1990’s Pakistan contracted with private power producers to provide generating capacity, but they were guaranteed payment regardless of demand. When there was little demand growth due to the moribund economy, Pakistan was forced to pay these providers while they were idle, so there was a hesitancy this time to invest in capacity too aggressively.  Aziz did say that two gigawattts of new capacity was under construction, and a nuclear reactor will be on line in 1-2 years. Ultimately, Pakistan needs to harness its hydroelectric potential but that was not possible, as Aziz said they could not get consensus on Kalabagh Dam.  In my view, only a PPP-ANP government could build Kalabagh Dam, and hopefully this new government will make the rational choice.
We then moved onto the topic of education.  Aziz noted that out of 160 million Pakistanis, 100 million are under the age of 25.  This is both a challenge and an opportunity, and although this creates a favorable demographic profile for the next 25 years, it will depend on educating this mass of people.  Aziz spoke about the importance of vocational training and the need for strong private participation in both education and healthcare.  He put forth the idea that the government should provide a basic level of education to those who cannot afford private schooling, or access NGOs.  He also noted that education, except for curriculum, is in provincial hands.
Although Aziz is correct on one level, I was disappointed that more was not done in the last eight years, especially given the rapid rise in the tax base. As a percent of GDP, education is still under-funded, and enrollment and literacy rates are much lower in Pakistan than in India or Vietnam, two other poor nations with large populations.  While the Federal government cannot force the provinces to provide education, it could have allocated more funds, especially for primary education.
Aziz was also particularly pleased with the earthquake relief efforts.  He pointed out that no one died from hunger or epidemics, and everyone who needed medical care got it.  The rebuilding efforts in Kashmir have been very successful.
Aziz stated that the wave of inflation that has been affecting Pakistan is driven by rising global commodity prices, particularly oil.  This is certainly true, but I think that the State Bank has been too loose with monetary policy, and even now with inflation at 12%, real interest rates remain negative. High oil import bills have also driven the trade and current account deficit much higher, although Aziz noted that direct investment and remittances have been covering those costs.  He did not think that devaluing the rupee was called for, and would likely stoke inflation.
Finally, Aziz made a genuine plea that we all give the next government a chance to work.  He sees the electoral process and the outcome as healthy, and he felt that the PPP and PML-N forming a coalition would be a positive precedent.  He felt that Pakistan was a much different place now than 10 years ago, and the people and the press are much more politically conscious.  Overall he was politically optimistic.
Aziz himself seems to have no further political ambitions.  He had not taken a day off in the last eight years, and clearly appeared to be a man happy to have that burden lifted. He should be pleased with what he has achieved, and lifting 15 million out of poverty is a huge advance. He has set a high bar for what a Prime Minister should do, and hopefully the next one will meet that standard. For now, Aziz plans to finish his speaking tour, then write a book about his time in office.  I look forward to reading it.

 

PREVIOUSLY

Deflating Japan

Bush’s Axis of Evil

Speaking to Non-Muslims

If Arafat Were Jinnah

The Shape of Things to Come

South Asia Expert Calls for Negotiations on Kashmir

Kashmir After the Cold War

Kashmir Quagmire: How It Started

Kashmir: Where We’ve Been

Make Way for the Euro

Will there Be a Muslim Palestine?

Careful, Careful

Our Growing Community

Pakistan’s Golden Opportunity

Musharraf’s Reform Plans

Pakistan’s Afghan Dilemma

Humanity on the Move

Strategies of America, Pakistan and Benazir

Winners and Losers

America’s Strategy Defang the Fundamentalists

The Noose Tightens

Pakistan in America

Musharraf’s Moment

A Sad Day for America, A Sad Day for Islam

Repeal the Blasphemy Law

Bush’s Stem Cell Compromise

The Depressing Stock Market

An Evening on Human Development

“Benazir” Takes Over in Indonesia

Race Riots in Britain

Global Warming or Just Hot Air?

Milosevic on Trial

Russia’s Collapse

Economic Recovery in Pakistan?

President Khatami’s Re-election

Lifting Sanctions on Pakistan

Israel’s Moral Burden

A Break in the Logjam?

The Second American Century

Pakistan’s Constitution

Dr. Lodhi in Los Angeles

Literacy: The Road Forward

Why Yusuf Can't Read

Literacy: The Glass is Half Full

Blowing Up Buddha

A Truth and Reconciliation Commission for Pakistan

Did You See the Moon?

Cornrows, Ali Khan, and Culture

Will the Children Go To Harvard?

Muslim Political Progress

Information Technology Gets A Boost

Sand and Oil

On Lieberman

Pakistan Builds A Tank

Kashmir in the Nuclear Age

Full Speed Ahead on Privatization

A Muslim France?

Too Much Food

Watching the Election Why Are We Hollywood’s Villains?

A Tyrant Falls

Taliban Victorious

The Walking Whale of Pakistan
The Joy of Air Travel?

The Amazing American Economy
Arafat and Jerusalem

Names For The Children

Population: Too Many or Too Few?

It Does Matter

Aziz Goes For Growth

The Military Government's First Budget

L'Affaire Salam

End Sanctions on Iraq

Third World Democracy

Light Weapons Trade on the Rise

Iran Reforms

Back to the Future

The Saudis and OPEC Mature

How Can We Help Pakistan Develop?

Report Card on Musharraf

IMF Vs Pakistan

A Candid Discussion on Foreign Policy Issues

A Sad Tale of Missed Opportunities

Cold War In Kashmir

Whither Afghanistan?

National Security and Literacy

Pakistan Votes

The People Win

What is an Islamist?

Selling the Crown Jewels

Still Not Government

One Year After the Taliban

Benazir's Folly

Iraq and Oil

Saddam and Iraq - I

Saddam and Iraq - 2

Muslim Democracy

Zakat and Capitalism

Zakat and Capitalism - 2

The Economy Picks Up

The American Military: Power without Limit?

Good Foreign Policy is Good Anti-Terrorism Policy

The Arrest of Khalid Shaikh Mohammad

Bush Takes a Gamble

Bush Attacks

Besieging Baghdad

Darkness in Saddam's Bunker

Piccadilly It Aint Qissa Khani Is Still Qissa Kahani

Ed Asner and Afghanistan's Progress

Bush Delivers a Roadmap

Liberation or Imperialism

The Roadmap

Economic Rebound

Musharraf in Los Angeles

Economic Growth will lead to Democracy

Trapped by Myths and Fantasies

The Surge in Karachi Stocks

Bush's Busted Budget

America's Broken Healthcare

Time to Buy Stocks?

Islam, the State, and Human Rights

30 Years after the Oil Shock

The Future of Oil Wealth

Pakistan, India and Human Development

Pakistan's Eid Present

Iraq, Democracy and Islam

The End of Saddam Hussein

Three Wins for Pakistan

The Islamabad Declaration

Kerry's Big Wins

Repeal Hudood and Blasphemy

Bush's Growing Vulnerability

What Has Aziz Done?

Bits and Pieces

The Growth of India

Chaos in Iraq

Bush Caves in to Sharon

Abuse at Abu Ghraib

Too Harsh, Musharraf

The BJP Loses

What Do the Jihadis Want?

The Pak Economy: Bigger than We Think

Is America Richer than Europe?

Prime Minister Aziz

Unbundling WAPDA

Musharraf's Uniform

Chess Game in Kashmir

Three States, Three Debates

What's Wrong with the Democrats?

Can Elections Bring Peace to Iraq?

Elections in Iraq

Can Generals Yield to Democrats?

IMF Give Pakistan an “A”

Improve Higher Education in Pakistan

A Framework for Reconciliation

Iraq’s Elections By

Privatizing Power

Bullish in Karachi

Palestinians Should Abandon Suicide Bombings

The F-16’s

Bush’s Social Security Plan

Growth and Investment

Patronage Versus Policy

Aziz, the PML, and 2007

Are We Running out of Oil?

Purchasing Power

Economic Progress

Social Progress

PTCL and the Privatization Roller-coaster

Bombing in Britain

The Ummah is Not a Tribe

Is the US Oppressing the Muslims?

Is Iraq Dissolving?

Sharon Retreats

Pakistan and Israel

The Earthquake

The Other Earthquakes

The Battle for the Supreme Court

Pakistan’s Physician Exports

Beginning of the End in Palestine

Intelligent Design and Other Religious Beliefs

Shifting Populations in South Asia

Sharon’s Stroke

Building Dams

Hamas in Charge

Free Elections in 2007

Muslim Perspectives on Zionism

Iraq Falls Apart

Big Successes in Privatization

Iran’s Nuclear Ambitions

Global Warming

Dennis Ross on the Middle East

What Makes an Islamic State?

The Iraq War

Strong Growth, Falling Poverty

Buffett and His Billions

Why Peace Is Elusive in the Middle East

How Poor is Poor?

How Poor is Poor?
Pakistan’s Growth Moment

Declare a Palestinian State

The London Bomb Plot

Who Won the Lebanon War?

Iran, Israel, and the Bomb

The Pope’s Speech

Democrats Win!

The Republicans Lick Their Wounds

Finally, Some Enlightened Moderation

The Error in the War on Terror

Economic Challenges for Pakistan

Reshaping the Middle East - Part 1

Reshaping the Middle East - Part Two

The Surge to Defeat

Whither Palestinians?

Pakistan and Afghanistan

Blind to the Future?

Musharraf Goes Too Far

Letter from Lahore

Can Musharraf Escape His Own Trap?

Will Healthcare Swallow the Economy?

Israel’s Surprise Offer

The Economy Surges Again

Al Gore Should Run

Pakistan’s Arms Industry

Any Exit from Iraq?

Deal, No Deal, or Many Deals

Nawaz Comes and Goes

Will Musharraf Wriggle Through?

Can We Stop Global Warming?

Bush’s Sputtering “War on Terror” Loses Again

Mental Health at Guantanamo Bay

What a Mess!

Will Musharraf’s Errors Prove Fatal?

How About Some Good News?

Anyone but Nawaz

China, India, and Pakistan: Whose Citizens Live Best?

Electing the Next President

Benazir’s Tragedy

Pakistan Election

Democracy and Pakistan

False Hopes in Palestine

Editor: Akhtar M. Faruqui
© 2004 pakistanlink.com . All Rights Reserved.