The Other Threat To Pakistan.(Point of View)

Byline: Sumit Ganguly

FOR MUCH OF HIS TENURE, PAKISTAN'S PRESIDENT, GEN. PERVEZ MUSHARRAF, HAD TWO claims to fame: that he'd put the country on the path to moderation by marginalizing its Islamic radicals, and that his economic policies had helped spark dramatic economic growth (about 7 percent a year). Now the resurgence of the Taliban and its allies and a spate of suicide bombings have called the first claim into question. And while the recent accidental killing of Pakistani troops on the Afghan border, allegedly by coalition troops, have focused all attention on se-

curity matters, Musharraf's second supposed achievement is also unraveling: according to some Pakistani economists, the poverty rate recently hit 34 percent (up from 32 percent in 1999); the World Bank is now predicting a paltry 3.5 percent growth rate for the coming year, and the rupee is plummeting against the dollar.

What happened? The answer has less to do with Musharraf's declining power--he's now fighting for survival--than you might think. The country's economic boom never actually had much to do with the general's policies; like Tennessee Williams's Blanche DuBois, Pakistan has always depended on the kindness of strangers. In the wake of 9/11, renewed ties with Washington brought substantial aid. Even before the $10 billion in U.S. military and economic assistance started to flow in, Pakistan's Western allies wrote off billions of dollars of debt, which helped bring the economy back to life. About the same time, many expatriates who'd parked their wealth in foreign banks began investing in their homeland's stock market. Their new strategy wasn't irrational; after the attacks on the United States, many Muslims in the West, regardless of their political or ideological proclivities, started coming under considerable government scrutiny. Suddenly investing back home became much more attractive.

The new aid, investments and remittances significantly buoyed Pakistan's economy. Yet Musharraf's military regime never used the opportunity to address the country's endemic underlying problems. Tax receipts remained low due to the government's reluctance to crack down on powerful business players, investment in infrastructure lagged, agricultural productivity stagnated and social services were neglected. Adult literacy is still only about 49 percent, and the Human Development Report ranks Pakistan 136 out of 177 countries. Foreign investors, who'd been flooding the country's booming service sector to cater to its growing ranks of nouveau riche, took note of these persistent flaws, and even the emergence of a democratically elected government in the February 2008 elections did little to allay their concerns. The worsening security ...