The ironies of the past week in Pakistan are a telling example of the country’s two-faced future. On one hand, an assembly of US and Pakistani businessmen gathered in Dubai to discuss prospects for future investments in the south Asian country and their audience heard impressive accounts of opportunities.
For example, the Karachi stock market’s impressive surge this year by well over 20 per cent and the resolve of Prime Minister Nawaz Sharif’s government to begin tackling tough issues, notably stubborn electricity shortages, literally came as music to the ears of many in attendance.
Some of Sharif’s most important cabinet colleagues, notably the ministers of finance and power offered reassuring messages to the audience. After five years of rampant corruption, incompetence and a crisis of governance under the Pakistan People’s Party led by President Asif Ali Zardari and his handpicked prime ministers, Pakistan can now turn the corner, but only if it chooses to do so.
However, events of the past week threatened to overshadow the message from the Dubai event. Ahead of the conference, the killing of nine foreign tourists at the base camp of the Nanga Parbat peak in northern Pakistan was a powerful reminder of the unfinished challenge of dealing with militancy. Equally vital were indications of the Sharif government seeking to tighten the screws around former president General Pervez Musharraf.
For the moment, the mechanism of the treason trial remains unclear, but if Musharraf is eventually incarcerated for his past crimes, it may satisfy many among Pakistan’s pro-democracy activists who yearn for the day when a former military ruler is put on trial.
Ground reality
While these political events may be significant, equally so is the future of Pakistan’s battered economy. In sharp contrast to the pro-business message at the Dubai gathering by none other than Finance Minister Ishaq Dar, basically concluding that Pakistan remains open for business, the reality remains significantly different.
Just in the past month, Dar has announced the country’s new budget for the financial year which begins tomorrow. In sharp contrast to Sharif’s business-friendly credentials, the budget is armed with some of the most controversial twists in memory. Dar has chosen to significantly raise the income tax rates for some of Pakistan’s richest businessmen and he has allowed the country’s notoriously corrupt tax officials to have first-hand access to details of bank accounts across the country.
These are significantly controversial steps. Ironically, while the businessmen are being taken to task, the politically influential landowners, including many who are members of parliament, are exempted from paying income tax.
The first impression from this controversial step is that Pakistan will likely face a further brain drain in the coming times as some of its best qualified key executives seek opportunities outside the country.
That outcome will be a sad reflection on the failure of the new government and that too a business-friendly one, to grasp the outcome of a key policy choice in the early days of its tenure.
Black economy
Additionally, the decision to allow the tax authorities to probe bank accounts of Pakistanis overlooks the powerful reality of the country’s already large cash economy commonly known as the black economy.
By choosing to take this singular step, Dar will only end up discouraging Pakistanis from placing their money in banks in one of the world’s worst performing countries in terms of savings.
This measure also creates the danger of embroiling the new government in further controversy as some experts are already questioning it on legal and constitutional grounds. If indeed there are court battles which lie ahead, a key element of the budget could very well backfire.
While there are many dissenting voices that have emerged in response to the budget, Dar so far does not appear to be in listening mode. That is hardly behaviour expected from a minister in a democratic country. Similarly, there is a need to think through exactly how Musharraf’s prosecution will translate to consolidating Pakistan’s future.
To Sharif’s credit, he still has time to set the pace for corrective action as he begins a historic third tenure as Pakistan’s prime minister. The unanswered question is if he is willing to concede the mistakes of his government and prove that Pakistan will indeed become a much sought after destination for investors, following the message from Dubai in the past week.
Farhan Bokhari is a Pakistan-based commentator who writes on political and economic matters.
