The Hindu Business Line : `Feel-good' in Pakistan too

The scene in Pakistan is different today, with the President, Gen Pervez Musharraf's dramatic U-turn on Afghanistan and other related issues. With Pakistanis living or working in the West feeling that it would be prudent to keep some savings at home, the country's forex reserves have climbed to the highest levels ever. This apart, there has been a spurt in construction activity, real estate prices are looking up and fundamentals are moving in the right direction.

in Karachi

IT cannot exactly be equated to the "feel-good" factor at home. But there is little doubt that the Pakistan economy has emerged from the morass it found itself sinking into in 1999 when, given the near empty forex coffers, the Nawaz Sharif government had frozen the external currency holdings of Pakistanis. And Kargil had happened soon after the Indian Prime Minister, Mr Atal Bihari Vajpayee's Lahore bus yatra.

Visiting the country in August 1999, this correspondent had found Pakistanis in a despondent mood, talking openly about the rank corruption in the government, the country's misadventure in Kargil and there being little hope in the dismal economic scenario.

Carjacking, kidnapping and other crimes in Karachi were at an all-time high, and rich Karachiites left their Mercs, BMWs and Toyotas at home, preferring to commute in smaller, dented cars to avoid the risk of having their vehicles taken away at gunpoint at a traffic signal.

That was precisely the reason the people had come out on the streets to celebrate the coup by an otherwise hated army.

Five years down the line, the scene is dramatically different, with the Pakistan President, Gen Pervez Musharraf's dramatic U-turn on Afghanistan and other related issues of religious extremism, including Pakistan-sponsored militancy in Kashmir.

Another positive fallout of 9/11, as Pakistanis never tire of pointing out , is that overseas Pakistanis, who were sending money home through the hawala route in order to get a better exchange rate, are now remitting money through regular banking channels.

With increasing Islam-phobia in the West, particularly in the US, Pakistanis living or working in these countries have, for the first time, felt that it would be prudent to keep some savings at home.

As Mr Akhtar Alavi, a director and General Manager in Adamjee Insurance Company, points out: "Home has never been sweeter or safer and those working or living overseas are seeing the wisdom in keeping a little nest at home."

The result is forex reserves climbing to a respectful $12 billion, the highest ever the country has seen, real estate prices going up, particularly in upmarket Karachi localities like the Defence sectors, Clifton, and the like, and a premium of Rs 25,000-1 lakh on cars. With the automobile dealers not able to match the demand for cars, the government is now going to allow the import of remodelled cars at much lower duty rates.

Commenting on the feel-good factor in the economy, Mr Wasim Mirza, the Karachi-based MD of Swiss Specialty Chemicals Pvt Ltd, says: "I'm not saying that its all rosy. We still have problems.

But some fundamentals are moving in the right direction. Unfortunately, the perception about our own country among us Pakistanis is so bad that we are not willing to accept that we are finally on the right path, because so many times in the past, we've been let down."

Despite such scepticism in some sectors, however, the perception of the country being on the right path has given people the confidence to go out and spend, feels Mr Mirza, adding: "Our business is growing; you go to a bank and it is operating; you don't have to queue up at a petrol station, there is no restaurant in town where you can get a place in the evening without reservation, the wedding season just went by, and look at what happened in Basant, where billions of rupees were spent in one night on kite-flying and other festivities. To me, this certainly does not look like a poor country's performance."

Another factor that has added to the "feel-good" in Pakistan is the successful conclusion of its $500 million euro bond issue, which was oversubscribed four times. There is a question mark here on why Pakistan should have offered such a high interest rate — 6.75 per cent — and comment that naturally at that rate there were bound to be takers.

But as Mr Mirza points out: "The monetary value and the benefits of it are all there in black and white. But to me, it is symbolically very important for us to be able to say that we have turned the corner. That we are there in the international market after a long time and that we are a part of the Big Boys' Club."

Asked if he would compare the "feel-good" here to India's feel-good factor, he says: "Of course, it is not as much here as it is in India. Your middle-class has done wonders, as has your IT industry. But, above all, the East Punjab farmers have done wonders... the infrastructure, the roads, the education, and so on. I was reading somewhere that they have created a class of farmers who are themselves seth sahib, and that educated people from the cities are going back to the villages to work for them. That is the revolution. I think quality education has done all this for India."

Mr Majyd Aziz, former president of SITE (Sindh Industrial Trading Estate), gives the credit for the positive vibes in the Pakistan economy to what he calls the "President's men", led by the Finance Minister, Mr Shaukat Aziz, a Citibank senior executive hand-picked by Gen Musharraf and brought to Pakistan from the US in 1999 to head the Finance Ministry.

"They are technocrats and not politicians and know where to lead the country from the economic point of view. Recently, we repaid $1 billion to the ADB; totally, we have retired debt of $2.5 billion this year. Construction activity has taken off, the government is offloading its stake in the oil and gas sector, and this was heavily oversubscribed; people have made a lot of money in the stock market and the KSE is close to breaching 5000 — its historic high. They are reducing duty on small cars, something long overdue, and allowing reconditioned cars to come in."

On the Indo-Pak front, too, improvement in ties and the smooth progress of peace talks has come as a shot in the arm to the business community, and trade and business delegations of all hues are headed for India, with their counterparts being welcomed here with great warmth and fanfare.

Every voice wondering about Indian goods swamping the Pakistan markets is countered by confident voices arguing that this would enable Pakistani businessmen to learn to compete, something they will have to do when the barrier regime is gone.

But, warns Mr Aziz, "We will somehow have to solve the Kashmir issue, where I see a lot of difficulty, because both the countries have made it a prestige issue. Without doing this, all your feel-good factor, your confidence-building measures and exchange of delegations — trade or cultural, we will still be going around in circles."

When pressed for his idea of a solution, he says that as a businessman, he has no idea of the intricacies or the discussions in back-room channels. "But what I do know is that people are getting killed, whether they are soldiers or civilians. The Americans call it collateral damage; I call it human damage. Let us think of their families."

Because of this problem, he adds, the two countries have behaved in the pettiest possible manner. "We had come to a stage when we could not move around, could not fly over each other's country, or even talk to each other. If I talked to an Indian, I could be accused of being a spy, traitor or an Indian agent. We have stooped so low that we have even started counting heads for giving visas. This mindset is to blame for our missing the bus and, however hard we might try, the opportunities lost can never be regained."

(Response can be sent to rasheeda@thehindu.co.in)