Pakistan At A Vital Crossroad 2014 & Beyond

The foremost challenge to Pakistan remains extremist creed and violence and concomitantly socio-economic development. Addressing these twin challenges will require clear commitment and perseverance. 2014 is a year of transition around us, bringing expected changes in India and Afghanistan as well as in Iran-US relations. While all these trends are likely to have a profound impact on Pakistan, the situation in Afghanistan is poised to be a main source of trouble. For Pakistan, the lessons are apparent: after Afghanistan, the thirty-year conflict has hurt Pakistan more than any country. Playing favorites, However seductive or in response to regional rivalries, will only fuel the conflict, and such an activist policy can only hamper Pakistan should have confidence in the strength of the Islame-bad-Kabul relationship that is fused with shared history, deme-raphy and geography. We should also avoid posturing ourselves as guardians of Afghan Taliban leaders, who should be free to interact with Kabul or anyone else. While the Taliban leadership enjoys our hospitality, it should not abuse us by causing disruption externally or within Pakistan. If a stable Afghanistan is in our interest, we should make a concerted effort to promote that objective.

In the twelve months between the summers of 2013 and 2014, Iran, Pakistan, Afghanistan and India will have all seen fresh leadership teams take the helm in their respective capitals. The two new leaderships that are already in place - in Pakistan and Iran - have already made ending their isolation from their own neighbors an important priority. We will discover what ideas the remaining two regional leaderships will bring. Once the new regional leaderships are in place, the withdrawal of US troops from Afghanistan will quicken, and the war on terror is likely to draw to a close. As the superpower's regional presence shrinks, the new leaderships will be left largely to their own devices to see if they can come together and discover the road to a vision of shared prosperity and greater regional integration. Politics will invite economics into the regional driving seat in 2014, and the key to how this will work will lie in Pakistan. Will the government of Nawaz Sharif be able to overcome the challenges that lie in its way as it tries to normalize its relationship with its neighbors? If yes, then 2014 can be a game changing year for Pakistan's economy. If not then the year will be like any other.

In terms of 2014 and the years beyond it, we must also review systemic state dysfunctionality. This is a progressive political condition which need not end in state demise, but in dysfunctional state equilibrium - an even worse prognosis. Faiz Ahmad Faiz expressed this poignantly shortly before his passing when, in response to a question about how he saw the future of Pakistan, he said he feared it would remain more or less as it was. The proof of this condition is the vehement denial of its existence, accompanied by a determination to do nothing about it and to oppose any attempt by others to do something as evidenced by existing political immaturity. So what, then, are the possible solutions?

Double the tax base, drastically reduce the printing of money; climb ten places in the ratings of Transparency International, human resource development indices and human rights protec-tions; assert the writ of the government, prosecute massive and high profile corruption including tax evaders starting with the Parliament; assert elected civilian political supremacy; bring regional, political, religious and sectarian minorities and women into the political system; and ensure that defense, administration and debt-servicing do not consume more than half of the revenues collected.

It is important to inspire the incumbent leadership to develop the requisite seriousness and determination required to resolve these myriad problems? Can the business of state be run professionally and competently? These questions will dominate the next year.

It also remains to be seen if the Prime Minister will decide to make full use of his Cabinet, instead of a small clique for decision-making and policy formulation. Also, the present government's ability to put together a winning team, at multiple levels-from policy-making to implementation and communication will become starkly clear. Pakistan is in desperate need of a team of competent men and women, who can formulate policies, implement and communicate them effectively to the Pakistani public. Indeed one of the most serious problems that currently persist is that solutions are constantly espoused, but to little effect. This existing uncoordinated and cliquish approach to policy-making, policy-implementation and public communica-tion, cannot deliver the required results.

This year is also managing regional stability and security as the US begins its roll-back in Afghanistan; achieving IMF-agreed program goals to preempt inflation and worsening rupee depreci-ation; and managing energy supply growth effectively. Given particular sensitivities, favorable outcomes here need a convergence of policy views within the Pakistani state. To the observer, clarity on the firm policy needed - between political leadership and institutions, between the political parties, and between government and businesses - appears unformed.

The APC 'consensus' seems to have withered, showing little evident progress in the agreed dialogue process. Sharply different party positions exist on related matters, such as how to react to drone strikes, and with respect to the alleged shelter given to extremists. Regarding IMF undertakings, the government has withdrawn some committed fiscal actions in the face of protests by the business community, and rising government debt imperils inflation stability. Regarding energy, switches in policy such as the apparent decision to provincialize power distribution, and the return of circular debt, continue to impede prospects for early progress. Thus, the biggest challenge for Pakistan in 2014 is for the state to achieve clearer resolve and unity of purpose, and to stay the course without fer or favor.

The signs of an ailing economy are legion: stagnant exports, rising imports, dwindling foreign exchange reserves, a depreciating rupee, severely reduced FDIs, crippling energy shortages and galloping inflation. These factors have the combined effect of further stifling the trajectory of economic growth. The government must make a concerted effort to reverse these negative trends on a war footing, the country's social stability cannot be guaranteed. The IM bailout package is only a temporary Band-Aid measure that does not adequately address the structural roots of the Pakistani state's fiscal crisis. The only silver lining to the poor state of Pakistan's economy is overseas remittances that have crossed the USD 13 billion mark. Pakistan's fragile economy is extremely vulnerable to external shocks. A cut off in American aid, another oil shock and upheaval in the Middle East, leading to the expulsion of Pakistan workers from oil-rich countries, could just deliver a serious blow to the economy and ignite a social implosion.

Despite all these challenges, Pakistan remains one of the most resilient countries in the world. It is the 27th largest economy globally based on the purchased parity principle and has a large role to play in the geo-strategic dynamics of South/Southwest. and Central Asia.