A very interesting topic Averroes, there's a lot to talk about the success but let me start with a few articles that appeared in respected media recently.
Promise in Pakistan
What's behind one of the world's most surprising economic success stories?
In part, September 11.
By Ron Moreau -Newsweek International
March 27, 2006 issue - In the late 1990s Lahore-based businessman Iqbal Ahmed was depressed. Pakistan was isolated internationally and in the grip of a deep recession, and his modest, liquefied-petroleum-gas operation didn't seem to be going anywhere. "I used to get up and say, 'What the hell, it's another day'," he recalls. "Now I can't wait for the day to begin. I see a very bright future."
Ahmed has good reason to be optimistic. Two years ago he signed a deal with Houston's Hanover Energy Co. that has helped transform his LPG extraction plant into the largest and most efficient in Pakistan, with revenues last year of $130 million. Backed by several international investors, Ahmed has bid some $400 million to buy a controlling interest in Southern Sui Gas, one of two state-owned gas production and distribution companies that are being privatized. And he recently signed a memorandum of understanding with Excelerate Energy of Houston to import liquefied natural gas into Pakistan in supertankers. "We're enjoying a sea change in economic conditions and opportunities," says Ahmed, 60. "Pakistan is open for business."
The proof is in the numbers. Last year the country's GDP growth rate hit 8.4 percent, the world's second highest behind China, following two years of solid 6 percent growth. This year the economy is predicted to expand by nearly 7 percent. After years of instability, with the government and military trying to distract people from their economic woes by waging jihad in Kashmir and railing against neighboring India, a true middle class is now developing. Economic reforms have given the government money to invest in health and education, and foreign investors are eying Pakistan for the first time. In many ways the country has become the world's most surprising economic success story.
It's a heady turnaround for a nation that, in the late 1990s, was practically a failed state with near-zero GDP growth. Because of its headlong pursuit of nuclear weapons, Pakistan had become the world's most sanctioned nation after Libya. International aid had dried up. The government was forced to borrow at exorbitant short-term rates, burdening the country with a crushing $38 billion debt. "We were in a real soup when [Gen. Pervez] Musharraf took over," says Ziauddin (he uses only one name), the Islamabad editor of the Dawn newspaper.
One of Musharraf's first and smartest moves after his 1999 coup was to appoint Shaukat Aziz, a dapper and urbane international banker, as his economic czar, and to give him a free hand to revive the economy. But what really turned the country's fortunes around was September 11. "The 9/11 attack was the best thing that ever happened to Pakistan," says Lahore-based businessman Salmaan Taseer. The United States and Europe immediately lifted all sanctions; Washington gave Pakistan $600 million outright to meet urgent debt payments, and forgave another $1.5 billion in debt. Working with Aziz, America and other creditor nations also rescheduled Pakistan's heavy debt over a manageable 30 to 35 years. In 2004, the United States pledged $3 billion in economic and military assistance over the next five years, in addition to $100 million for education reform. The EU pitched in, lifting quota restrictions on Pakistan's main export, textiles.
At the same time, Aziz, who is now prime minister, began enacting a series of common-sense economic reforms. They focused on boosting fiscal discipline, government transparency and accountability. He quickly cut the budget deficit from 8 percent to 4 percent by slashing spending, and lowered interest rates. Since 2002, he has increased tax revenues by 20 percent. He also instituted a sweeping privatization program that has won kudos from both domestic and foreign investors. State-owned companies in numerous industriesââ¬âbanking, cement, fertilizer, utilitiesââ¬âhave been sold off, as has a chunk of the state's inefficient telecom giant, PTCL.
The newly privatized and cash-flush banks have been on a lending spree, extending loans to capital-starved domestic businessmen and to the Pakistani middle class, which until 2002 had little access to consumer credit. People have snapped up credit cards, and are buying cars and other big-ticket products with easy-credit bank loans. "This is the best government we've had in the past 30 years," says prominent Lahore businessman Syed Babar Ali, who heads some of the country's biggest joint-venture companies, including Coca-Cola and Nestlé.
http://msnbc.msn.com/id/11902379/site/newsweek/
