Going nuclear came at a cost for Pakistan

[vish]

I was reading your post with utmost attention until i came to the bottom paragraph where you stated that pakistan's economy is in a crisis which made me believe that you watch too many bollywood movies related to pakistan. Before i carry on with my argument on it, i would strongly advice you to go and have check about pakistan's economic position. Heck any indian member here would tell you what was pakistan's economy back then when we tested the nuclear weapons and what it is now.
True we are facing some tough challenges, but that is due to the disturbance in afghainstan, we have suffered from them in the past and we are suffering now. Electricity yes it has become one of the major issue but not because we cant produce it or because the higher percentage of the GDP is going for defence but because of the mis-management of the government who just couldnt figure it out the exact energy requirement of the country. And also w.r.t that i would also recommend you to read another thread about pakistan going for an indeginous nuclear capability, you will realize that we are not left behind the way you think or have a misconception.

As far as gap is concerned i dont know what are you referring too. If you mean the economy, well pakistan economy like i said before isnt doing bad either infact it has achieved a higher growth rate then india, not to mention india is a much bigger country and has much more resources at her disposal then we do. Education sector yes india is ahead then us no doubt in that and we do need to focus on it.
As for your friend saying that pakistan isnt a threat anymore, maybe so and pakistan does not desire to be a threat however again i would suggest you to read the official statements by the top brass of the IA. Even your cold start doctrine is based on pakistan, i dont need to say anything more.

Bottom line is that pakistan can afford to spend on her defence requirement because our economy can sustain it, however we do not need to match india bullet by bullet and that is where the principle of maintaining a minimum detterence level comes in and that is exactly what we are doing at the moment and will continue to do so in the future.

Firstly, I do not watch Bollywood movies to enrich my knowledge of the Pakistani economy. Further, I do not know any Bollywood movie which focuses on the Pakistani economy.

My knowledge of Pakistani economy is drawn from the Dawn (mostly its editorials; Cowasjee and Irfan Husain being my favorites) and this forum. From what I have read in both these places, a significant part of Pakistan’s foreign exchange is earned through remittances and aid. Surely, this isn’t a very welcoming news. If you’re going to provide me with growth rates, well I must bring it to your notice that growth rates do not necessarily translate into growing prosperity. You have to keep in mind microeconomic parameters as well. Further, the recent currency turmoil speaks volumes about investor confidence in the Pakistani economy. A recent post by Neo (Pakistan Economy thread) suggests that Pakistani export businesses are not competitive enough. The textile industry, your country’s leading foreign exchange earner, is, according to Dawn, much dependent on US quotas. This is further complicated by the current US economic slowdown. I just checked Dawn, inflation has hit 17.21%. As far as disturbances from Afghanistan are concerned, I need further clarification as to what you’re referring to. With regard to electricity, I’m well aware of Pakistan’s nuclear power efforts. But the immediate shortage of 4000 MW cannot be overlooked. Also, augmenting power capacity is a lengthy an costly process. However, since you live in Pakistan, may be you are more right than me. Further, the private sector may be exhibiting robust performance; however, the worsening law and order situation is potentially very dangerous. Mind you the most important factor, when it comes to FDI, is security and political stability.

The “gap” that I’m talking about relates to our countries’ geopolitical standing. The world sees Pakistan as a state on the brink of collapse. And believe me, in the world, especially the business world, perceptions matter more than reality. However, I do believe that Pakistan’s failure with democracy and its rise as the backyard of Islamic terrorism (in the world’s eyes) is a grave danger to Pakistan; based on this the world’s perception that Pakistan is a state on the brink of collapse is not entirely untrue.

According to me, most of our defense chiefs’ statements are directed toward China and DRDO. With regard to Cold Start, it was no doubt developed keeping in mind Pakistan, the threat assessment of the Indian Army is not the same as it was then.

Your last paragraph is exactly where you and I agree. If Pakistan believes it can sustain it, well then there is nothing wrong in weapons purchases. It’s just that me and plenty of your countrymen, really educated and pragmatic ones at that, believe that given Pakistan’s nuclear capacity, its defense expenditure is “high.” That is all my entire post is about.

I’m sorry if my post is overly long.

 

[IceCold]

Firstly, I do not watch Bollywood movies to enrich my knowledge of the Pakistani economy. Further, I do not know any Bollywood movie which focuses on the Pakistani economy.

My knowledge of Pakistani economy is drawn from the Dawn (mostly its editorials; Cowasjee and Irfan Husain being my favorites) and this forum. From what I have read in both these places, a significant part of Pakistan’s foreign exchange is earned through remittances and aid. Surely, this isn’t a very welcoming news. If you’re going to provide me with growth rates, well I must bring it to your notice that growth rates do not necessarily translate into growing prosperity. You have to keep in mind microeconomic parameters as well. Further, the recent currency turmoil speaks volumes about investor confidence in the Pakistani economy. A recent post by Neo (Pakistan Economy thread) suggests that Pakistani export businesses are not competitive enough. The textile industry, your country’s leading foreign exchange earner, is, according to Dawn, much dependent on US quotas. This is further complicated by the current US economic slowdown. I just checked Dawn, inflation has hit 17.21%. As far as disturbances from Afghanistan are concerned, I need further clarification as to what you’re referring to. With regard to electricity, I’m well aware of Pakistan’s nuclear power efforts. But the immediate shortage of 4000 MW cannot be overlooked. Also, augmenting power capacity is a lengthy an costly process. However, since you live in Pakistan, may be you are more right than me. Further, the private sector may be exhibiting robust performance; however, the worsening law and order situation is potentially very dangerous. Mind you the most important factor, when it comes to FDI, is security and political stability.

The “gap” that I’m talking about relates to our countries’ geopolitical standing. The world sees Pakistan as a state on the brink of collapse. And believe me, in the world, especially the business world, perceptions matter more than reality. However, I do believe that Pakistan’s failure with democracy and its rise as the backyard of Islamic terrorism (in the world’s eyes) is a grave danger to Pakistan; based on this the world’s perception that Pakistan is a state on the brink of collapse is not entirely untrue.

According to me, most of our defense chiefs’ statements are directed toward China and DRDO. With regard to Cold Start, it was no doubt developed keeping in mind Pakistan, the threat assessment of the Indian Army is not the same as it was then.

Your last paragraph is exactly where you and I agree. If Pakistan believes it can sustain it, well then there is nothing wrong in weapons purchases. It’s just that me and plenty of your countrymen, really educated and pragmatic ones at that, believe that given Pakistan’s nuclear capacity, its defense expenditure is “high.” That is all my entire post is about.

I’m sorry if my post is overly long.

I would like to highlight a few things in your post, one of them is that where did you get this image that pakistan is on the brink of collapse? I would ask you to provide me with actual data on this and not your personal opinion.

Secondly you wanted me add more on afghanistan situation, well allow me then, the very problem that we faced was the migration of hundreds of thousands of illegal immigrants that were a huge load on the pakistan economy and still are, moreover they started to protay them selves as pakistani pathan thus raising an ethinic similarity concept between the pashtuns of pakistan and afghanistan inturn creating an atmosphere of destabilization for pakistan. Last but certainly not the least was the terrorism that these people are involved in within pakistan.

The rest of your post i would certainly reply too later on.

 

[AgNoStiC MuSliM]

Vish,

The recent economic problems have more to do with bad policy, planning, an upsurge in violence the last year, and instability and a lack of trust in a new democratic government. The problems have been exacerbated with the surge in world commodity and food prices, hoarding and smuggling.

Pakistan's defense expenditure was approximately the same the five years prior as well, when the economy was doing exceptionally well - the latest setbacks have their roots in a variety of issues.

 

[vish]

I would like to highlight a few things in your post, one of them is that where did you get this image that pakistan is on the brink of collapse? I would ask you to provide me with actual data on this and not your personal opinion.

Secondly you wanted me add more on afghanistan situation, well allow me then, the very problem that we faced was the migration of hundreds of thousands of illegal immigrants that were a huge load on the pakistan economy and still are, moreover they started to protay them selves as pakistani pathan thus raising an ethinic similarity concept between the pashtuns of pakistan and afghanistan inturn creating an atmosphere of destabilization for pakistan. Last but certainly not the least was the terrorism that these people are involved in within pakistan.

The rest of your post i would certainly reply too later on.

What I’ve said is that the world “sees” Pakistan as a state on the brink of collapse. This is what the world’s perception is. If you are looking for links, well I’m sorry I don’t have any which say that Pakistan is a state n the brink of collapse. However, an analogy is drawn in many articles. Primarily I’ll quote Dawn, for it is my window to Pakistan. Also, BB’s assassination and the regular suicide bombings and attacks have fostered this “perception.” What’s not helping is a genuine lack of good news on the economy and political front.

Further, if you believe that this is my personal opinion, I guess you’ll have to correct me then. Further, this is how most of the world sees Pakistan. And this needs no proof; courtesy the whole multitude of articles questioning Pakistan. Because honestly, and I’m not trying to put your country down, the bad news outnumbers the good by a wide margin.

Here are some of the links:
DAWN - Irfan Hussain; May 26, 2007
DAWN - Irfan Hussain; April 28, 2007

With regard to your Afghanistan viewpoint, frankly I agree with you, but not entirely. The terrorism factor that you are referring to is a direct descendent of the ISI-CIA Mujahideen. These “armed men” who were initially fighting wars outside Pakistan have now been forced to fight a war inside Pakistan due to the tough measures adopted in the wake of US led WoT. Earlier they would operate with the military; now they operate against the military. This is what is causing all the violence that you see. As far as the refugee crisis is concerned, that I agree.

 

[vish]

Vish,

The recent economic problems have more to do with bad policy, planning, an upsurge in violence the last year, and instability and a lack of trust in a new democratic government. The problems have been exacerbated with the surge in world commodity and food prices, hoarding and smuggling.

Pakistan's defense expenditure was approximately the same the five years prior as well, when the economy was doing exceptionally well - the latest setbacks have their roots in a variety of issues.

Well AM, I thoroughly agree with you. However, I do feel that the time for Pakistan to rethink its priority is now. Such high levels of defense spending were okay then, I doubt if they are so now.

The current situation and Pakistan in general, needs a more long term situation. And factors that you have mentioned (up surging violence and lack of trust in the democratic government) scare investors away.

All I’m saying is that defense expenditure is high, especially when looked at in light of the current economic scenario; lowering it will help, especially if Pakistan is a nuclear state and does have a sort of parity. I’m not saying that this defense expenditure is crippling the economy.

 

[AgNoStiC MuSliM]

All I’m saying is that defense expenditure is high, especially when looked at in light of the current economic scenario; lowering it will help,

In an ideal world I would agree with you. However we live in a very dangerous neighborhood, and barring a comprehensive peace with India, defense expenditure is not going to be lowered - and shouldn't.

 

[Neo]

Vish,

Nobody understands the dynamics of Pakistan's economy, not even Irfan Hussain who btw is agreat journalist. Its true that all paramateres are currently down and there's a logic explanation for all thats happening in Pakistan today, but media has the old habit of exaggerating the facts.

Remember 2005/06? Despite all negativity predicted by media Pakistan managed to record 8.6% growth and received more than $6.5 billion in FDI the following year and even current FY will end with growth figs around 6.2-6.5%, higher than 90% of the world!!

Lets analyse a few thigs:

Situation is worrisome, skyroketting fuel prices, inflation and trade dificit are three major problems the government is facing. They are all connected to eachother, fuel import has exceeded $11 billion mark and its causing power shortage which again is hurting our industry and exports. Gap in production and demand for locally manufactured good, specially consumer items (including food) is pushing the inflation and the rupee is in free fall.
Assasination of Benazir didn't do us good either, we lost almost $3 billion in revenues and damages. And ofcourse there's the new elected government, we're too focused on stabalising the politics at the cost of economy.

There's severe water shortage, decline in wheat, cotton, rice, sugercane and lentle crops is a direct result.

WoT has brought instablity into Pakistan and the region, rewards and compensations are peanuts compared to what other allies like Turkey are getting from US and Nato and even that seems to be too much for the anti-Pakistan lobby in Washnington.

Despite all these factors the economy is growing, not due WoT rewards as some claim but due actual growth in manufaturing, services and exports. The projected growth will not be achieved, the results however remaine positive.

What is the government doing to stabalise the economy?

Fighting monetary instablity and power shortage crisis are our first priority. The former ia to be solved with 4-6 weeks as $3 billion is expected to flow in.
$3.5 billion is expected to flow into the country on very short term which will stabalise rupee.

Some of the inflows that are expected include $2.1 billion from multilateral banks, $500 million from friendly countries, $200 million from earthquake relief, $100 million from Britain, $700 million from MCB Bank's stake sale to a Malaysian bank, $100 million investment by Barclays Bank and the rest through private sector GDRs (global depository receipts) and other regular sources.

Power shortage will reach 3000MW by the end of 2008, immediate solutions are sought to import 1000MW electricity from Iran and another 1.500MW from Tajikistan. Sugar Mills have come up with interm solution to produce and sell extra 2000-2200MW to WAPDA, Government is already looking into it.
About 1000MW projects will be completed by yearend so power shortage will be solved within 18 months.

KSE is a reflection of Pakistan's economic potential. Even the critics don't deny the metaforphose KSE's gone thru past several years. IMF, ADB and US Media recently published praising articles about the potential Pakistan has, calling it a cash magnet.
So even if there's misperception on political and monetary instablity in Pakistan, its all short lived. Pakistanis a lucrative market, only second after Vietnam when it comes to returns.

Considering the fact the global economy is facing resession we're able to grow more than 6% and thats what counts and shows our strength. FY 2008/09 will see higher growth, higher remittance, exports and FDI, 6-7% projected growth will be sustained.

One last remark on your claim that Forex is made of Remittance and USaid, I have to correct you there. Remittance yes, some of FDI yes, but no USaid is used to build up Forex. Most of it is meant for debt repayments and budgetary relief and to finance imports, rest goes to development projects and defence purchases.

 

[vish]

In an ideal world I would agree with you. However we live in a very dangerous neighborhood, and barring a comprehensive peace with India, defense expenditure is not going to be lowered - and shouldn't.

Well, I guess that settles the argument.

 

[pkpatriotic]

As far as the Hood bhai concern, I know him well including and his few others doubting -Thomas, they are just loquacious (talkative) and always against each of positive attempt.

We are a responsible nation having nuclear Power, secured nuclears arms with fool-proof security system.
We respects all nations.

Our safe & sound Nuclear power make us confident, secure our sovereignty, and assured the balance of regional peace & security.

 

[vish]

Vish,

Nobody understands the dynamics of Pakistan's economy, not even Irfan Hussain who btw is agreat journalist. Its true that all paramateres are currently down and there's a logic explanation for all thats happening in Pakistan today, but media has the old habit of exaggerating the facts.

Remember 2005/06? Despite all negativity predicted by media Pakistan managed to record 8.6% growth and received more than $6.5 billion in FDI the following year and even current FY will end with growth figs around 6.2-6.5%, higher than 90% of the world!!

Lets analyse a few thigs:

Situation is worrisome, skyroketting fuel prices, inflation and trade dificit are three major problems the government is facing. They are all connected to eachother, fuel import has exceeded $11 billion mark and its causing power shortage which again is hurting our industry and exports. Gap in production and demand for locally manufactured good, specially consumer items (including food) is pushing the inflation and the rupee is in free fall.
Assasination of Benazir didn't do us good either, we lost almost $3 billion in revenues and damages. And ofcourse there's the new elected government, we're too focused on stabalising the politics at the cost of economy.

There's severe water shortage, decline in wheat, cotton, rice, sugercane and lentle crops is a direct result.

WoT has brought instablity into Pakistan and the region, rewards and compensations are peanuts compared to what other allies like Turkey are getting from US and Nato and even that seems to be too much for the anti-Pakistan lobby in Washnington.

Despite all these factors the economy is growing, not due WoT rewards as some claim but due actual growth in manufaturing, services and exports. The projected growth will not be achieved, the results however remaine positive.

What is the government doing to stabalise the economy?

Fighting monetary instablity and power shortage crisis are our first priority. The former ia to be solved with 4-6 weeks as $3 billion is expected to flow in.
$3.5 billion is expected to flow into the country on very short term which will stabalise rupee.

Some of the inflows that are expected include $2.1 billion from multilateral banks, $500 million from friendly countries, $200 million from earthquake relief, $100 million from Britain, $700 million from MCB Bank's stake sale to a Malaysian bank, $100 million investment by Barclays Bank and the rest through private sector GDRs (global depository receipts) and other regular sources.

Power shortage will reach 3000MW by the end of 2008, immediate solutions are sought to import 1000MW electricity from Iran and another 1.500MW from Tajikistan. Sugar Mills have come up with interm solution to produce and sell extra 2000-2200MW to WAPDA, Government is already looking into it.
About 1000MW projects will be completed by yearend so power shortage will be solved within 18 months.

KSE is a reflection of Pakistan's economic potential. Even the critics don't deny the metaforphose KSE's gone thru past several years. IMF, ADB and US Media recently published praising articles about the potential Pakistan has, calling it a cash magnet.
So even if there's misperception on political and monetary instablity in Pakistan, its all short lived. Pakistanis a lucrative market, only second after Vietnam when it comes to returns.

Considering the fact the global economy is facing resession we're able to grow more than 6% and thats what counts and shows our strength. FY 2008/09 will see higher growth, higher remittance, exports and FDI, 6-7% projected growth will be sustained.

One last remark on your claim that Forex is made of Remittance and USaid, I have to correct you there. Remittance yes, some of FDI yes, but no USaid is used to build up Forex. Most of it is meant for debt repayments and budgetary relief and to finance imports, rest goes to development projects and defence purchases.

Ok, I agree to some of your arguments. Economic growth of Pakistan in 2003–2006 has been impressive. FDI has been good. But now the situation is remarkably different.

The things that you’ve mentioned in your second and third paragraph, I wholeheartedly agree. However, a successful economy is possible only in a politically stable country. Economy and politics go hand in hand. But are your leaders neglecting the economy? Yes. Personally, I don’t think the previous government has done much for the economy as well, except for bringing in pseudo-stability. With regard to the water shortage, lack of foresight is to be blamed I guess. I just hope immediate measures are taken. With regard to US aid, it is significant nevertheless.

With regard to instability due to WoT, I believe this instability is much better than the stability you are referring to. Please don’t tell me that you support the Taliban rule in Afghanistan. Sooner or later, regardless of the WoT, the Taliban in Afghanistan would have made inroads into Pakistan. Though I despise the violence that your country is going through, I nevertheless believe it was bound to come sooner or later. I just hope the moderates win. Again, I must suggest that this is my perception that there is a struggle between the moderates and the extremists in Pakistan. I may be wrong.

The economic results do remain positive, but the “perception” and microeconomic trends are grim. Again, these conclusions are drawn from your posts in the Pakistan Economy thread.

The monetary dollar inflows that you are suggesting are going to stabilize the PKR. But again, I read your post in the Pakistan Economy thread (Dollars to start pouring in soon: Pacts with donors) and the abovementioned facts. From what I see, and correct me if I’m wrong, a major chunk of the money is coming through multilateral banks and other countries as donations to thwart the capital flight. Please bear in mind, I do not wish to offend you and your countrymen or undermine Pakistan’s economy when I say the above statement.

With regard to the power shortage, the measures that you have mentioned will take time to implement. Importing electricity from Iran or Tajikistan will entail setting up of infrastructure and price negotiations, unless of course these measures are already in place. The interim solution, as suggested by the sugar mills, and the plans to increase capacity are welcome news, however.

Further, never equate the stock exchange with the economy. This is a lesson I’ve learned from the movements of the BSE Sensex. The rise of the stock market is due to speculation and is more often than not based on market emotion. FIIs are short-term capital investments and do not take time to fly. They go as easily as they come. With regard to returns, I’m confused whether you’re talking about stock market returns or something else. Further, I do not doubt the Pakistani economy; its growth is impressive. My concern is that the microeconomic parameters and the law and order situation are worrisome. And add to this deadly cocktail an all-time high inflation, political instability, Islamic fundamentalism and the negative perception, and you get what I’m saying.

With regard to your claim on foreign exchange, if not for US Aid, Pakistan would have to retort to its own foreign exchange reserves to finance debt repayments, imports, development projects, defence purchases and for budgetary relief. So indirectly, they do contribute to Pakistan’s foreign exchange. Now this is my understanding, please correct me if I’m wrong.