Did Musharraf's Economic Performance Confer Legitimacy on His Rule?

Former President Musharraf's detractors argue that he lacked legitimacy because he came to power through a coup which removed a duly elected government in 1999.

Implicit in Musharraf's opponents' argument is the assumption that the electoral process is the only source of legitimacy for a ruler. It ignores the possibility that the will of the people can also be expressed in ways other than elections to confer legitimacy on a leader. It rejects the notion that a leader can earn legitimacy in the eyes of the people by delivering results to the people through good governance.

Public Opinion Surveys:

Such an expression of people's will can come in many forms, including results of frequent public opinion polls conducted by multiple professional pollsters in Pakistan and many other countries around the world. One such credible survey is done regularly by Pew Global Research.  It shows that the majority of the people believed the country was headed in the right direction in Musharraf years. It also shows that people's satisfaction with Pakistan's direction has been in rapid decline. It has sharply fallen to about 8% in 2013.
Source: Pew Research in Pakistan

Another survey conducted by Gallup Pakistan  in August 2013 shows that 59% of Pakistanis have a positive view of President Muaharraf (31%  say they hold a favorable opinion of him and another 28% say he was satisfactory). 34% have an unfavorable opinion of the former ruler.

Judiciary and Parliament Approval:

Musharraf's actions of 1999 were legitimized by Pakistan Supreme Court in Syed Zafar Ali Shah v. General Pervez Musharraf, Chief Executive of Pakistan (PLD 2000 SC 869). In addition to endorsing the coup, the Supreme Court granted extensive powers to the new Musharraf Government, empowering it to unilaterally amend the 1973 Constitution and enact new laws without the approval of Parliament.

Musharraf held parliamentary elections in 2002 and subsequently won a parliamentary vote to confirm him as President of Pakistan.

Good Governance Under Musharraf:

When Musharraf took over in 1999, Pakistan was essentially bankrupt with just a few hundred million dollars in reserves and a heavy debt load which it couldn't repay. Economic growth plummeted to between 3% and 4%, poverty rose to 33%, inflation was in double digits and the foreign debt mounted to nearly the entire GDP of Pakistan as the governments of Benazir Bhutto (PPP) and Nawaz Sharif (PML) played musical chairs. Before Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. In 1999 Pakistan’s total public debt as percentage of GDP was the highest in South Asia – 99.3 percent of its GDP and 629 percent of its revenue receipts, compared to Sri Lanka (91.1% & 528.3% respectively in 1998) and India (47.2% & 384.9% respectively in 1998). Internal Debt of Pakistan in 1999 was 45.6 per cent of GDP and 289.1 per cent of its revenue receipts, as compared to Sri Lanka (45.7% and 264.8% respectively in 1998) and India (44.0% and 358.4% respectively in 1998).





So what did Musharraf do to gain the trust of a very large number of Pakistanis who supported his rule after the 1999 coup? He undertook a number of economic and regulatory reforms to rejuvenate the country's economy. Deregulating telecommunications and liberalizing electronic media business, particularly television, immediately brought in significant first wave of domestic and foreign investment and created media and telecom boom in the country. Banking and financial services sector took off and rapidly grew and created lots of jobs. A construction boom followed which more than doubled per capita cement consumption and created millions of new jobs. Exports nearly tripled from about $7 billion in 1999-2000 to $22 billion in 2007-2008, adding millions of more jobs.





Pakistan Savings Rate as Percent of GDP (Source: World Bank)

Source: Credit Suisse and Cement Industry

Per Capita Cement Consumption in Pakistan Source: Credit Suisse and Cement Industry
Thanks to the dynamic economy under President Musharraf's rule, Pakistan created more jobs, graduated more people from schools and colleges, built a larger middle class and lifted more people out of poverty as percentage of its population than India in the last decade. And Pakistan has done so in spite of the huge challenges posed by the war in Afghanistan and a very violent insurgency at home.

The above summary is based on volumes of recently released reports and data on job creationeducationmiddle class sizepublic hygienepoverty and hunger over the last decade that offer new surprising insights into the lives of ordinary people in two South Asian countries. It adds to my previous post on this blog titled "India and Pakistan Contrasted in 2010".


The PPP government summed up General Musharraf's accomplishments well when it signed a 2008 Memorandum of Understanding with the International Monetary Fund which said:

"Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

Contrary to what Musharraf bashers dismiss as "aid-fueled " or "consumption-driven" economy in 2002-2007, the economic growth was actually driven by private savings and investments. Private domestic savings rate was over 18% of GDP in Musharraf but has slumped to just 7% in recent years. Pakistan attracted record foreign direct investment (FDI) in telecom, banking, manufacturing and other sectors of the economy. Annual FDI flow into Pakistan reached $5.4 billion in Year 2007-08. As to US aid during and after Musharraf's years in office, it has actually tripled in size from $700 million in 2007-8 to $2.1 billion since 2010. If aid alone were responsible for economic growth, then the GDP growth rate should have accelerated, not plummeted, after Musharraf left office.

Pakistan FDI as Percent of GDP (Source: World Bank)



In addition to the economic revival, Musharraf focused on social sector as well. Pakistan's HDI grew an average rate of 2.7% per year under President Musharraf from 2000 to 2007, and then its pace slowed to 0.7% per year in 2008 to 2012 under elected politicians, according to the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World”.



Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent.

Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.

Acceleration of HDI growth during Musharraf years was not an accident.  Not only did Musharraf's policies accelerate economic growth, helped create 13 million new jobs, cut poverty in half and halved the country's total debt burden in the period from 2000 to 2007, his government also ensured significant investment and focus on education and health care. The annual budget for higher education increased from only Rs 500 million in 2000 to Rs 28 billion in 2008, to lay the foundations of the development of a strong knowledge economy, according to former education minister Dr. Ata ur Rehman. Student enrollment in universities increased from 270,000 to 900,000 and the number of universities and degree awarding institutions increased from 57 in 2000 to 137 by 2008. In 2011, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including Pakistan Steel and PIA, both of which  continue to sustain huge losses due to patronage-based hiring.

So Why Didn't the Musharraf Miracle Last?

It takes a long time to build and very little time to destroy a beautiful, well-manicured garden with flourishing plants and flowers. A new incompetent, lazy and corrupt gardener can turn it into a disaster by failing to fertilize, water and prune. That's what happened in Pakistan in 2008. A healthy, well-run and growing economy was quickly turned to shambles in a very short time because of policy inaction and neglect. Here's how Pakistani economist Dr. Ashfaque H. Khan explained it in 2010: "What went wrong? Why one of the fastest growing economies in the Asian region until two years ago has been totally forgotten in the region? Firstly, the speed and dimension of exogenous price shocks (oil and food) were of extraordinary proportions. Secondly, the present government found itself totally ill-prepared and clueless in addressing the challenges arising out of the shocks. While rest of the world was taking corrective measures and adjusting to higher food and fuel prices, Pakistan lurched from one crisis to another."

Constitution Not Suicide Pact: 

To those who say nothing should trump the constitution of Pakistan, let me remind them that there is legal precedent to suggest  that there are things more important than the constitution. "The Constitution is not a suicide pact" is an oft-repeated phrase in American political and legal discourse. It refers to the belief that constitutional restrictions on governmental power must be balanced against the need for survival of the state and its people. It is frequently attributed to Abraham Lincoln who is said to have used it in answering charge that he violated the United States Constitution by suspending habeas corpus during the American Civil War. Others who have used it include Justice Robert H. Jackson (Terminiello v. Chicago, 1949) and Justice Arthur Goldberg (Kennedy v. Mendoza-Martinez, 1963).

Here's a video discussion on the subject:


Civil-military Stand-Off on Musharraf Trial; Musharraf Govt's Performance Record from WBT TV on Vimeo.

Related Links:

Haq's Musings

Musharraf Wants to Face Trial; Military Opposed to it

Saving Pakistan's Education

Political Patronage Trumps Public Policy in Pakistan

Dr. Ata-ur-Rehman Defends Pakistan's Higher Education Reforms

Twelve Years Since Musharraf's Coup

Musharraf's Legacy

Pakistan's Economic Performance 2008-2010

Role of Politics in Pakistan Economy

India and Pakistan Compared in 2011

Musharraf's Coup Revived Pakistan's Economy

What If Musharraf Had Said No?

Human Development in Musharraf Years


Comments

Riaz Haq said…
#Pakistan #cement industry continues growth. Per capita consumption to rise from 147kg in 2015 to 250kg in 2020.

http://tribune.com.pk/story/1122920/cement-industry-poised-continued-growth/

Pakistan’s cement industry will continue to grow over the next few years due to strong pricing power and contraction in supply and demand gap, a Topline Securities report said on Tuesday.

The capacity utilisation of Topline Cement Universe – a sample of cement companies listed on Pakistan Stock Exchange (PSX) – is likely to reach 96% in fiscal year 2018 from 78% in fiscal year 2015.

Gross margins of Topline Cement Universe will reach 47% by fiscal year 2020 (which were 34% in fiscal year 2015) while earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins will reach 46% by fiscal year 2020 (34% in fiscal year 2015).

Resultantly, Topline Cement Universe’s profitability is expected to grow at 4-year (fiscal year 2017 to fiscal year 2020) Cumulative Annual Growth Rate (CAGR) of 24%.

Pakistan’s cement industry has entered into a new paradigm. The turnaround in macroeconomic fundamentals, mega projects under the umbrella of China-Pakistan Economic Corridors (CPEC) and booming private sector spending are accelerating local cement demand.



“We believe economic recovery will continue to bolster domestic demand. Based on past trend, we have applied a factor of 2 times to our average real GDP growth forecast of 6% during fiscal year 2017 to fiscal year 2020 in order to arrive at average local cement growth forecast of 12% during the same period,” the report said.

This should take per capita cement consumption of Pakistan from 147kg in fiscal year 2015 to 250kg in fiscal year 2020.

Major capacity additions of 19 million ton (42% of current capacity) worth around Rs192 billion are in pipeline (from fiscal year 2017 to fiscal year 2020) in Pakistan. “Despite these additions, we see no price war risk as additional capacities will easily be absorbed due to buoyant cement demand.”

The government in budget for fiscal year 2016-2017 has changed the federal excise duty (FED) on cement bags from variable 5% of retail price to fixed Rs50 per kg while duty on imported coal is reduced from 6% to 5%. “Thanks to strong pricing power, we believe that, the net impact of Rs33 per bag will be gradually passed on,” the report added.

However some developments can change the present scenario including price competition, imported cement, higher than anticipated rise in gas tariff, delay in construction projects and change in economic policy

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