International Development Conference
( Remarks by AmbassadorJehangir Karamat at Kennedy School of Government, Harvard University , April 9, 2005 )

It is a pleasure to be here and to be part of this very distinguished gathering. Thank you for inviting me.

In the globalized world of today trade, communications and knowledge are extremely important. Long term economic trends and potential possibilities are the drivers of political, economic, resource, security, education and domestic policies. The strategic environment of the future is likely to be shaped largely by economy driven shifts in alliances and linkages. Pakistan is, therefore, in the unenviable position of having to make up for lost time by working on basic issues as well as high technology centers of excellence at the same time, if it wants to be part of the whole international development scene. Conflict resolution, ethnic harmony, internal cohesion, infrastructure development, population control, a competent workforce, economic viability and political stability become important priorities.

We do not have to rehearse history here but I will flag a few aspects before I talk of the Pakistan of today and tomorrow in the context of international development.

During the cold war period of the late 50’s and 60’s Pakistan was a close ally of the US. Economic and military aid, remittances from abroad and the policies of an authoritarian regime led to rapid growth. Pakistan was considered a good case study for other developing countries. Then there were the policies of the late 60’s and 70’s that led us into the wars with India, a changed relationship with the US and the secession of the eastern province. This was followed by the decade of nationalization and then the decade of Islamicisation . The 90’s were a decade of democracy that was under pressure and had to cope with political instability, serious economic difficulties and the internal turmoil stemming from the blowback from Kashmir and Afghanistan. Now, in the first five years of the 21st century, we have had consistency and continuity in policies for the first time, as we try to become an interactive part of the globalized world and international development trends. And this brings me to the Pakistan of today and tomorrow.

A strategic reorientation of policies has enormous implications. To cope with the consequences of such a change you have to have a clear road map, easily identifiable milestones and realistic timelines for implementation. This is where Pakistan is today. We have revived and realigned our relationship with the US in the new strategic environment. We have changed policy for bilateral relations with our neighbors to the east and the west. We have decided to confront the forces of extremism and terror. We are focusing on economic prosperity and internal stability as the motivation for cohesion and harmony. And we are conforming to international regimes and norms as we move to change Pakistan from a ‘soft’ to a ‘hard’ state capable of resisting negative trends, coercive pressures and aggression in all forms.

It is in this context that we must view the transient events that are taking place. These seem to be monumental and get much international attention but this is Pakistan coming to terms with the legacies of the past. The instability in civil-military relations, the contradictions in political development, the uneven institutional development, the regional disparities, income gaps and rising aspirations—and all this is taking place with a total freedom of expression, and, during the tenure of the first elected government that may be heading towards a complete five year tenure. Add to this mix the ongoing war on terror and the need to cope with the consequences of strategic change and you might begin to understand why Pakistan needs strong central authority even as it moves towards democracy. The basis has to be laid for democracy to sustain itself under pressure. The most important factor for this is the economy and the development that it can generate to make Pakistan part of the international development scene.

The relationship with the US is most important for Pakistan. We are fortunate that today there is a convergence of interests and concerns. This relationship has, therefore, to be seen in the context of the new US policy towards South Asia and the totality of its many facets. There is the military dimension and the balance of power in South Asia. There is the political factor that emphasizes democracy and freedom. The economic scenario is built not just on aid but trade, investment, infrastructure development, growth and poverty alleviation. The social sector interests include health care, education reform, a moderate liberal and balanced society with special focus on rights, women empowerment and human resource development and the rule of law. It is within these broad areas that the US and Pakistan pursue interests and address concerns. This strategic and long term relationship has to be seen not just in the context of F-16’s and dollars but in terms of its many facets. For Pakistan far more important aspects are the international finance doors that this relationship opens and the overall benign influence that it has on all the policies especially foreign policy. Trade and the regimes that support it become very significant in bilateral relations.

The regional situation in terms of Pakistan’s ‘near abroad’ and the extra regional scene flows from US presence and policies as well as Pakistan’s own efforts. The Pakistan –Afghanistan relationship is vastly improved. There is cooperation in many areas—trade, transit, coastal arrangements, travel, business, infrastructure development, refugees, drugs, weapons proliferation, border security, intelligence and counter terrorism. The Pakistan-India relationship is also improved. There is dialogue and normalcy in inter state functions. The active conflict and hostility has receded though it has not disappeared. All three—India, Pakistan and Afghanistan see the economic potential in stability and cooperation not only in the region but beyond into Central Asia, Europe, the Middle East, South East Asia, the Far East, in the US and even South America. This is evident from the trends in foreign and economic policies. Investors see the potential and are moving in. Pakistan is interacting positively in pursuit of its interests---it promotes SAARC, it is in ECO, GCC, OIC, ASEAN, the Broader Middle East Initiative, the Islamic world and is working actively for greater Asian cooperation. Extremism, terrorism, proliferation and repressive government are not part of the world and regional scenario that Pakistan wants now and in the future. That is why Pakistan has done, and is doing, far more than most countries against these threats.

The dynamism within Pakistan is linked to the overall strategic environment. Pakistan has stated as policy that it is not in an arms race with any country. It wants defensive deterrence and if this means living with an imbalance then this is acceptable as long as the imbalance is manageable by its capabilities. Pakistan is, therefore very selective in its defense acquisitions and is in no way creating a threat scenario that might warrant a response. Pakistan wants democracy and has a road map that it is following. It does not want the achievements of the past five years to be lost and therefore has a policy tailored for its present and evolving environment. The greatest success has been in the economic field and the macroeconomic indicators are there together with the IMF and World Bank endorsement of its economic policies. Foreign exchange reserves are over 12 billion dollars, GDP growth has been impressive and is projected to be over 7.5% next year—if sustained over a period of time it should significantly improve per capita incomes. Exports have been growing at 13%. Fiscal deficit is less than 4% and inflation, now at 7%, is expected to stabilize at 5% in the future. Large scale manufacturing grew by 18% last year. Privatization has progressed well—over 87% of the banking sector is in private hands. Banking sector reforms have made money laundering and terrorist financing extremely difficult and hazardous. IFI confidence is growing—the international bonds floated have been oversubscribed and credit ratings have been upgraded. There has been considerable domestic investment in the textile sector. Foreign investment is growing—recent ventures by US, Chinese and Gulf States are examples. Deregulation continues to attract investment—the telecommunication sector is one example. Many incentives are on offer for direct foreign investment---Shell, Unilever and Nestle are doing extremely well as are many others like Pfizer, Abbot, Merck, Occidental Petroleum, Haliburton, Gillette, Proctor and Gamble, and Motorola. New mobile telephone companies are moving in and paying heavily for the opportunity. The stock markets and the real estate market offer opportunities. State owned enterprises are available for privatization—PTCL, KESC and power generation are going through this process.

With its eye on tomorrow Pakistan is moving quickly towards infrastructure development—communication networks, roads, ports, airline facilities, transportation---have all been, and are being, improved rapidly. Long term reforms in the social sector are underway in the form of Human Resource Development and education. The 145 million population, with a 75 million middle class, is not just a massive market but can be an excellent work force available to investors as many are finding out. Education reforms are focusing on over 27000 literacy centers with 7000 already established. Basic education is receiving inputs compatible with absorption capacity---curriculum revision, improved evaluation methods, teachers training, incentives for school attendance especially for girls, specific Madressah reforms are underway, vocational and skill training centers are being set up with private sector participation and there are community supported rural school programs. We are getting significant aid from USAID, loans by the Asian Development and World Banks and aid from UK, Japan and European Union. Pakistani-Americans are very active and our own corporate sector is participating fully in both education and health care. This is how Pakistan is preparing for tomorrow and this how it sees the long term resistance to the forces of extremism and terror.

There are many constraints. The thrust on so many fronts requires governance and management. Financial resources are not enough. There is poverty and unemployment and impatience at the slow trickle down of benefits from the improved macro economic situation. Non state actors with their own agendas can be disruptive. Political instability can take a heavy toll. New initiatives like local government have maturity periods. But the economic success has been a strong motivator. Micro finance schemes are doing wonders. We have over 40000 women in elected positions at various tiers. Pakistan is moving towards becoming a moderate, liberal, economically viable and democratic state capable of defending itself. In terms of international development Pakistan is a good example of the interdependence of national policies that are a part of national strategy. The orchestration of policies to bring about stability and economic prosperity is particularly significant. There is much that can be criticized and it is easier to dwell on the past because crystal ball gazing can be very difficult. I would urge you to focus on the present and the future and conclude your deliberations with new ideas and constructive suggestions and comments.