|
General Pervez Musharraf |
||||||
General Pervez Musharraf, Pakistan’s head of state, spoke to Euromoney’s Jules Stewart about the move from economic stabilization to growth, privatization, the elimination of corruption and Pakistan’s regional policies
Are you confident that Pakistan will be able to conclude a medium-term loan facility with the IMF?
We feel confident we will for many reasons. We have met the targets on the reforms and restructuring that we promised the IMF. The best evidence is that last year we reduced our fiscal deficit by more than 1%, which is better than the target we had originally set. This is a major achievement under the circumstances. As we have shown a lot of economic and fiscal discipline I feel there is no reason why the IMF should not agree to grant us a PRTF.
You are now moving from a period of stability to one of growth. Can the reforms put in place since you came into office support growth?
I am confident that we are on track on our entire reform package. We may not be achieving as much as we had aimed at the outset but certainly the reforms are going forward. I think the target we had set were over-ambitious in many ways. On the stabilization front, first of all we have stabilized the economy. We have checked the fiscal deficit, we have maintained an inflation rate under 5% and we have also increased our revenue generation. On the reform side, our plan was to start with economic reform, then move on to governance and alleviation of poverty, and lastly tackle political restructuring.
We had to control our debt servicing and we are doing well in that area. Debt servicing as a percentage of annual revenue has been reduced from 73% to 61%. Exports have risen by about 20% in two years. In the last fiscal year we achieved an all-time record for Pakistan by crossing the $9 billion level. Exports totalled $9.2 billion, although the aim was to reach $10 billion, so my disappointment is that we didn’t make the target. Remittances from abroad showed a marked increase from less than $800 million to more than $1 billion. Again I’m not fully satisfied with that but an increase of around 25% is a good showing. When we speak of revenue generation, in the past six years from 1993-94 to 1998-99 revenue grew from PRs200 billion [$3.1 billion] to PRs300 billion.
In the past two years revenue grew by another PRs200 billion, so in this period we have achieved the same as in the past six years. But more important, whereas previous revenue increases came from higher taxes, we have achieved it this time by broadening the revenue base.
Through our tax reforms and the documentation of the economy we hope to generate higher revenues. We are also looking for a big increase in GDP growth. We didn’t perform well last year primarily because of the drought, but in the current fiscal year we will certainly increase growth to around 4% and touch 5% in 2002-03. Out development plans, which are concentrating mainly on IT, agricultur and the energy sector, are moving along well. We have been receiving a strong level of investment in IT and energy, and in agriculture there are a number of projects related to water resource generation. Therefore, the economic revival package is doing well, and we can say the same for governance where we have initiated a lot of reforms on corporate and government functioning.
As for poverty alleviation, we have taken a number of measures that include development projects to generate more than 1 million jobs. Political restructuring is the fourth area – we aim to devolve power to local government and we have already held elections for mayors and deputy mayors.
The perception is that the privatization programme has been dragging its heels. Is this a fair criticism?
We haven’t yet sold off any major assets but we expect in the next few months to achieve some significant progress in this field. The state of affairs was that the assets to be privatized were in such bad shape that they needed to be improved to fetch a better price. Our international credibility as a government was so low that there were no buyers out there. We had to improve our international standing, and in the past months we have a much better position with international financial institutions and the economy has stabilised. My government’s credibility is also far better as is the state of these assets. Another requirement is transparency. We don’t want to repeat the mistake of the past decade, when assets have been privatized and most came under litigation for lack of transparency. We are ensuring total above-board bids. Nothing is going on under the table, so I think things will start moving now.
Most people would agree that corruption may have been eliminated at the top, but how do you attack it on the middle and lower levels where most people deal with the bureaucracy?
I agree that this remains a problem. But the main corruption that involved millions and indeed billions of rupees was at the top political and bureaucratic level, with the connivance of the financial institutions. That has been totally eliminated and I am pleased to say that the siphoning of billions of rupees has been stopped. Now we’re talking perhaps of hundreds of thousands on the lower levels. I think it’s a state of mind and has a lot to do with economic conditions and poverty. With economic revival and a degree of motivation, corruption at this echelon will be eliminated. I think that the example being set at the top should trickle downwards, but it will take some time.
There is concern about the continuity of the reforms set in place. To put it in its simplest form, are you going to stay on after October 2002 when you expected to stand down?
The shortest answer is that yes, I will stay on.
Does this mean you will serve a full five-year presidential term?
That has not yet been decided as yet, but I will certainly stay on beyond October 2002. We have to ensure continuity and sustainability because we cannot allow the reforms and restructuring we are doing to be disrupted. Any inefficiency, incompetence or retrogressive action will not be allowed.
Are you comfortable in a political role?
I don’t have a political role as such. My role concerns governance in that I am governing the country. There will be an elected government after 2002 and I won’t have a political role. But I certainly would like to oversee and retain a degree of control over whatever is happening in the country.
Investors inevitably draw comparisons between Pakistan and India. In your view what makes Pakistan a more attractive place for investment?
Pakistan is smaller in population but 140 million people ranks us sixth or seventh in the world. Compared with India we may be smaller but we are a more consumer-orientated society. On governance, I am certain we can perform much better. Our reforms will ensure a more investor-friendly climate and hence we’ll be able to attract more investors.
Do investors need to be concerned about the Supreme Court’s ruling on introducing Islamic banking?
People have expressed concern, but I wish to state that international investors must not be deterred at all. There will be no changes in our rules and regulations or implementation of procedures and their investments will be fully protected under international norms.
On a broader scale, are you concerned about Islamic fundamentalism taking root in society or in the armed forces?
That may be the outside perception, but my personal conviction is that Pakistan is a very moderate country and religious extremists are in a tiny minority. They do create a nuisance but the vast majority of our people are moderate in their views. I personally feel that religious extremism is directly related to poverty and illiteracy. Therefore we need to push ahead with economic growth and education, which will strike at the roots of religious extremism and fanaticism. There is certainly no religious extremism in the armed forces, which are manned by moderates even in the lower ranks. Religious fanaticism will not be tolerated in our army.
Why do you continue to recognize the Taliban regime? Doesn’t this place a strain our your relations with the US and Europe?
One thing is the international perception, but I’d like people abroad to put themselves in our shoes. We share a long border with Afghanistan and have India on our eastern border where there is tension. We cannot afford to allow our western border to be destabilized as well. Therefore one has to see the ground realities. If you look at the demographic pattern, there are 70% Pathans in Afghanistan and they reside all along the border with Pakistan. We have Pathans in Baluchistan and the North West Frontier Province. So there’s a degree of demographic affinity and we certainly cannot alienate the Pathans of Afghanistan. Whether or not we like the Taliban we have to engage with them.
We certainly are not supportive of their brand of religious intolerance and their treatment of women and backwardness. National interests take precedence over international concerns.
Do you see any possibility of a negotiated settlement of the Kashmir conflict?
Unfortunately one cannot clap with only one hand. I went to the July Summit in Agra with an open mind to reach an agreement. We formulated a mutual agreement that unfortunately was scuttled. As far as the future is concerned, I would certainly like to have an agreement as Kashmir is the main issue that has bedevilled relations between Pakistan and India. A solution in accordance with the wishes of the Kashmiri people will improve relations between our two countries. Unfortunately this statement of mine is not acceptable to the Indians. They are not being at all realistic and the latest outbursts from Delhi do not contribute to an improvement to whatever we achieved at Agra.
Is it realistic to expect India to cede territory?
This has been a disputed territory from partition in 1947. They will first of all have to accept this as an issue, but if they don’t even accept it as a dispute I am afraid we cannot move forward. Once there is an acceptance of Kashmir being the main dispute that has touched off three wars between our two countries we can talk of solutions.
