A laudable initiative by Yusuf H Shirazi

The News
Thursday, February 11, 2010
Yusuf H Shirazi

The “Aman ki Asha” initiative of the Jang Group and the Times of India group is indeed laudable. It is a step in the right direction. The people of India and Pakistan have long aspired for peace. However, the realisation of this ‘Asha’ is not possible without the two governments sharing. Peace, and thus the welfare for the people of the subcontinent, lies in political, economic and social harmony between the two countries.

Whichever way one may wish to interpret the history of the two countries’ independence, in the present situation it is only political, economic and social harmony which can bring peace between the two countries.

While India has been a democracy since gaining its independence from the British, Pakistan has witnessed dictatorship for half its existence. Pakistan has thus been vacillating between dictatorships and political governments. The founding fathers, first Jinnah and then Liaquat Ali Khan, died soon after the creation of Pakistan. Hence, tragically, they could not oversee the promulgation of a constitution nor develop the three pillars of government – executive, legislative and judiciary. The result was that the political, social and economic development of Pakistan has been topsy-turvy.

On the other hand, India has developed into the largest democracy of the world. While the Indian constitution remained intact, Pakistan’s constitutions were abrogated time and again. Unfortunately, the judiciary too endorsed their abrogation, under the infamous “law of necessity.” By abrogating the constitution in the Maulvi Tamizuddin case, Chief Justice Munir set a dangerous precedent. This allowed his successors to also justify martial law under the nonsensical “law of necessity.” The course of this country may well have been different but for Justice Munir succumbing to political pressures. India went on developing politically, economically and socially. Pakistan meanwhile struggled through a variety of civilian and army rules.

India started with a better economic framework in terms of industry, agriculture and services. Pakistan, however, inherited just one textile mill – Delhi Textile Mill Lyallpur (now Faisalabad) – and continued to be basically an agrarian economy. India had an engineering industry, among others, and was exporting steel even in those days. India continued with Nehru’s philosophy of localising of investment, production and export as a means of GDP growth and employment. Pakistan, on the other hand, had a weaker political and socio-economic structure. While Pakistan followed the developed world’s dictum of liberalisation, privatisation and deregulation, India continued to protect its economy through trade barriers. Pakistan thus became the victim of globalisation, which was the developed world’s mechanism for development.

The economies of India and Pakistan can benefit from each another. Trade with India may be in the interest of Pakistan, because India is a market of more than one billion people as against Pakistan’s 170 million. So Pakistan will have to harmonise its economy with India’s, and vice versa: otherwise, Pakistan will be the loser.

India’s rupee-dollar parity, for example, is Rs45 against Pakistan’s Rs85. In India, sales tax is five to seven percent, and only in a few states is it as high as 12 percent. The sales tax in Pakistan is 15 to 18 percent. Corporate tax in India is less than 20 percent, as against 35 percent in Pakistan. This is not to mention the presumptive tax at about six percent, whether the income is liable to tax or not. In India, there is no such tax at all. The socio-physical infrastructure cost in India is two-thirds that in Pakistan.

India does not rely on foreign loans and credits – it does not borrow from the IMF, whereas Pakistan is subject to the IMF’s strict and severe conditionalities, sometimes at the cost of fulfilment of socio-economic objectives. India also relies on large-scale industries as against Pakistan’s focus on small- and medium-sized enterprises. India’s exports per month are equal to Pakistan’s annual exports. Indian foreign exchange reserves are close to $300 billion, as against Pakistan’s $15 billion, which have been recently inflated due to Pakistan’s IMF loan arrangement.

As for the dismantling of all imports and export barriers between the two countries, India does not permit import of products that are locally available. Industrial policies need to be dovetailed with local priorities, so that employment, technology transfers are generated and foreign exchange is saved. India follows this religiously. The reverse is the case in Pakistan. As in India, the Malaysian experience shows that as long as a country has sufficient reserves, an industrial policy can be formulated that simultaneously promotes export-based industries, nurtures import substitution industry and protects strategic industries. Industry and especially hi-tech manufacturing industry can be nurtured and promoted to become globally competitive.

There is revenue shortfall and unemployment in Pakistan. Further, actual inflation is above 15 per cent, much higher than in India. The remedy lies in industry, manufacturing, in particular. In India, the basic industry is now one of the top tax generators for the government. The Indians did it by focusing on manufacturing and value-addition, and not packaging or assembly as in Pakistan.

Inconsistent economic policies in Pakistan have discouraged investment, production, export and employment. The Pakistan policies need to be catered to harmonise local aspirations. The remedy, as evident in India’s success, lies in industry. A balance must be struck irrespective of external pressures. Reliance on these policies would be in the larger national interest and the socio-politico-economic sovereignty of Pakistan.

All this is a prerequisite to “Aman ki Asha.” Without this any such endeavour would be a pipedream, a desire unfulfilled. If Pakistan becomes the architect of its own policies rather than have them imposed on it by the developed world, the peace initiative will indeed lead to not only political harmony but also socio-economic harmony between Pakistan and India. For we surely have inherited the same or similar culture.

Soon after the creation of Pakistan, Jinnah was asked, if Hindustan is attacked, what would Pakistan do? Jinnah was quiet for a moment, and then said, Pakistan will support Hindustan. Why, he was asked. Jinnah said, “Blood is thicker than water.”

The writer is the founder/chairman of the Atlas Group of companies. Email: yhs@ atlas.com.pk