As elections approach, the Musharraf Government is frantically beating the drums of its fictional economic miracle of the past half a dozen years. This is painfully reminiscent of similar media projection attempted by the erstwhile BJP Government with its "India Shining" propaganda before the marginalised masses sent it packing.

Given how our proponents of the American Capitalist model have successfully enriched the already wealthy at the cost of grinding poverty of the masses, a similar fate surely awaits this Government...that is, if free and fair polls like those of 1969-70 can be assured.

The purpose of this article is to confirm, with irrefutable facts and figures gleaned from the Government’s own sources, that our long-suffering masses have been had royally by the present dispensation. And, the best way to demolish the Government’s "Pakistan Shining" propaganda is to demonstrate that economic progress should mean broad-based welfare, not that of the elite, which is what the Government implies when it speaks of economic growth.

ACCORDING TO ITS SPIN-DOCTORS, INDICATORS OF GALLOPING ECONOMIC PROGRESS SINCE OCTOBER 1999 ARE THINGS LIKE:

1 GDP growth averaging 7 percent per annum over the past 3 years...please ignore the misery of the three years before that!

2 Per capita income doubling to USD 800, perching us precariously on the bottom rung of middle-income countries instead of rubbing shoulders with the poorest nations of Africa.

3 Foreign exchange reserves of USD 13 billion...up from less than half a billion in 1999...never mind the fact that it still represents barely 5 months of imports.

4 Flood of 9/11 motivated inward remittance (likely to hit USD 5.5 billion this year) and Foreign Direct Investment (perhaps as much as USD 3 billion) eager for a share in phenomenal returns available to risk capital in this country.

5 And, the KSE-100 index leaping tenfold from 1,200 to 12,000 propelling market capitalisation to over PKR 3.5 trillion.

BEFORE WE ANALYSE THE ABOVE-MENTIONED PERFORMANCE MEASURES, PLEASE NOTE THAT THE GOVERNMENT WISHES THAT YOU SHOULD IGNORE OTHER EMBARRASSING STATISTICS SUCH AS:

1 Official Consumer price inflation of 9 percent per annum ...100% higher than it was in October 1999.

2 The largest trade (USD 12 billion) and current account (USD 5.5 billion) deficits, both in absolute as well as relative terms, in 60 years history of the country.

3 Serious crime statistics reflecting 100% growth over the past 6 years...with suicide bombings, and citizen disappearances, a la Latin America, now commonplace.

4 Provincial disenchantment and disharmony, secessionary mayhem across Balochistan, and Taliban resurgency in NWFP...all grim reminders of a national fabric being torn asunder.

Surely, if the Government wishes to take credit for its so-called achievements, it must acknowledge that its own policies have also saddled the nation with the horrors summarised above. Now let us commence demolishing the icons of Government propaganda one by one.

That the country has enjoyed annual GDP growth averaging 7 percent per annum over the past three years is in fact a "white lie". For the uninitiated, some background first. There is a simple economic concept called the "Capital Input-Output Ratio". Put simply, it states that annual GDP growth cannot be greater than a third of the ratio of incremental capital formation to GDP. In other words, if our annual savings run around 10 percent of GDP (14 percent if we include inward remittances), then by the wildest stretch of imagination, our maximum GDP growth cannot exceed 4.7 percent per annum.

So, when this Government claimed that our GDP grew at 8.6 percent during 2004-05, it implied that during 2004-05, national savings (domestic plus inward remittances) allowed us to invest at a breathtaking rate of 25.8 percent of GDP...a whopping white lie! With perhaps the lowest saving rate in the world, Pakistan is simply not capable of achieving such high rates of investment. But, if you were to talk to the Government’s spin-doctors, they will likely tell you that because of our great efficiency in re-investment, Pakistan’s Capital Input-Output ratio is not 3:1 but closer to 2:1. In other words, we can achieve greater growth with less than 50 percent of the resources as compared to the rest of the world. How cute?

Now for some hard proof of number-juggling by this Government, whose economic managers, ironically enough, are wont to accuse their predecessors of manipulating figures.

THE FOLLOWING DATA IS GLEANED FROM THE FEDERAL BUREAU OF STATISTICS AND SBP INTERNET SITES (ALL FIGURES IN PKR BILLION): Fiscal Years2002-032003-042004-052005-06
GDP at current factor cost4,8235,5326,5487,450
7368451,0871,421
Less: Consumed in the year (depreciation)391428480580
NFCF (Net Fixed Capital Formation)345417607841
Maximum possible incremental GDP (1/3)115139202280
As percentage of GDP2.38%2.51%3.09%3.76%

So, dear reader, our paternalistic Government is guilty of outright lies. Our economy...even in these best years as claimed by the Government...has never grown at rates over 2-4 percent per annum. In fact, if we account for the 2.1 percent per annum annual growth in our population, in per capita terms, the economy has remained almost stagnant! How can it get away with such flimflam, you say? Well, because in its smugness it knows that in a nation where actual literacy is less than 5%, how many know the meaning of Input-Output ratios? The answer is Zero.

Let’s next examine this Government’s claim of having doubled per capita income to USD 800 over the past 6 years...a theme that both the PM and President breathlessly harp on. One can, of course, forgive the President’s naivete as they don’t teach the concept of compound interest at the Pakistan Military Academy in Kakul.

However, the PM, who rumor has it is a business school graduate, should know better...for a number to double in 6 six years signifies an annual compound growth of 12.25 percent. Alas, this kind of stellar growth has not even been achieved by China! Conclusion? Another white lie of course.

The real mechanism of the Government’s flummery was, however, quite mundane. First, it began by restating GDP for the benchmark year 1999-00 from USD 460 per capita to USD 650 per capita on the pretext that every country in the world periodically readjusts its accounting base year. Now, with this clever device out of the way, it simply applied its inflated annual growth rates of recent years (see above) and bingo...you have a per capita GDP of USD 800. Isn’t that clever? But, there is another hidden trickery here.

The USD 800 per capita is by itself an inflated number in another sense. It is derived by dividing our 2005-06 dollar GDP of USD 124 billion by a deflated population figure of 155 million. According to CIA World Facts (www.cia.gov), our actual population as of June 2006 was 166 million. Therefore, dividing USD 124 billion by 166 million yields a per capita income of USD 747 and not USD 800. So, we are still very much a basket case country in the happy company of the poorest nations in Africa.

Two serendipitous devices are keeping us afloat...ongoing inward remittances, debt relief and Aid from the West which desperately wants to prevent our slipping into an Afghanistan style chaos.

The story of our foreign exchange reserves is simplicity itself. Till mid-2001, our precarious foreign exchange position was legion. We still had the same 4 weeks of reserves that we had in October 1999. Then fortune smiled. 9/11 happened. The U.S. Government began its famous crackdown on currency flows. This was followed by persecution of Pakistani origin wealth in USA. The net result was that all dollar flows to USA that were wont to seek safe haven there began pouring homeward. From USD one billion or even less per annum, our annual remittances have today reached USD 5.5 billion per annum. In sum, over the past five years, this incremental inflow has exceeded USD 16 billion. Should it then be any surprise that our Foreign Exchange reserves are today USD 13 billion? The question is, how can this Government take credit for events engineered by Al-Quaida and President Bush?

However, the story doesn't end there. All these massive dollar inflows needed an outlet. In a country possessed of zero manpower skills, broken down infrastructure, high cost of doing business, obstructive bureaucracy, and political chaos, would you invest in productive assets with payback of 5-10 years? Of course not. Is it any wonder that real estate prices quadrupled and the stock market went up by a factor of 10? Today land prices in choice locations of KDA / Defense in Karachi and similar locations in Lahore and Islamabad are at par with Manhattan in New York. Why? Because there are no other options unless you wish to keep your money in banks at rates that yield negative returns of 4-5% per annum.

The country's entire industrial sector is today in shambles. Our exports of textiles, leather goods, and hand-knotted carpets…between them traditionally accounting for 80% of annual exports…are in steep decline. And what does the Government do? It waxes eloquent about our burgeoning growth in auto sector that produces overpriced shoddy products that will likely die a natural death given a whiff of international competition.

Countries do not develop by having international fast food chains mushrooming in every nook and cranny. Nor do they prosper by giving a cell phone to all and sundry. Economic growth is achieved by leveraging off national assets that provide a country with an internationally competitive edge. In our case it can only mean one thing...our abundant natural mineral resource, fertile land and abundant river waters. This is where we need to invest heavily...not in I.T., telecom, or even oil and gas. Do you know that we have 4 billion tons of test-proven coal reserves, but produce only 4 million tons per annum? Our coal power generation is barely 4% of total power production whereas in next door India it is 70%.

The economic reasons for a comprehensive Coal Policy makes eminent sense. In terms of energy content (calorific value), our sub-bituminous coal averages 9,000 BTUs per pound vs twice that for crude oil. With current crude prices averaging USD 440 per ton (USD 60 per barrel), we could be saving USD 220 dollars for every ton of indigenous coal production that replaces imported oil. But, lets not be even that ambitious in the short run. If we could simply replace import of 3 million tons of furnace oil with 6 million tons of local coal production, that alone would trim our current USD 7 billion annual oil import bill by 20%!

In terms of industrial economics and employment generation , the comparison is even starker as I discovered first hand while visiting Saeedullah Niazi, an old school friend, who mines coal in the salt range. Today, our private sector mines sub-bituminous coal in Quetta and Khewra (in the Salt Range) and sells it to brick kilns for PKR 3,000 per ton. Its current crude oil price equivalent is thus USD 100 per ton (or USD 14 per barrel of oil). Simple arithmetic tells us that even if the Government paid a 100% cash subsidy to producers for every ton of coal mined indigenously, it would save USD 240 dollars for each ton of furnace or crude oil thus replaced.

Huge coal reserves in Thar (Sindh) were discovered 25 years ago. However, no Government has since been able to muster the USD 3-4 billion infrastructure investment needed to bring this easy 10-12 million tons per annum production valued at over USD 2 billion per annum onstream. It is unlikely that this Government will do so either. Who wants the headache of adding PKR 120 billion to annual GDP?

Two years ago, when international oil prices began rocketing upwards, like many of its predecessors, this Government too momentarily awoke from its slumbers. It announced great plans about tripling our national output of coal in 2-3 years by the simple device of forcing large power users like power stations and cement factories to use coal instead of expensive imported furnace oil.

Of course, this announcement greatly militated against the interests of our industrial lobby. It immediately swung into action claiming that our indigenous coal had low BTU and high sulphur content, which would entail large investments in scrubbing towers...an outlay the industry was reluctant to undertake. Predictably, the Government knuckled under and instead of promoting local production of coal, it made import of coal duty free. So, instead of reducing the national import bill paid in hard currency, it did just the reverse. Thus, today we have over 80,000 tons of imported Australian coal sitting on the docks in Karachi at landed cost of USD 70 (PKR 4,200) per ton.

Will the Government take courage and introduce a Coal Policy anew? Absolutely not, because that would mean an explosion in real private sector investment, real job creation and public welfare on an unprecedented scale! It's much easier to juggle statistics for the same media effect. Get it?

And what do we tell the uprising coal miners? Keep drudging to eke out an existence with antiquated methods as did your forebears for the past 60 years, and please abandon all hope of any Government ever coming to your assistance in the interest of national economic development.