To those Pakistanis, at home and abroad, who had thought that military rule would provided an immediate panacea for all the ills caused by successive civilian governments, the economic agenda unveiled last week by General Pervez Musharraf might have come as a disappointment. The immediate increase in the cost of living due to the 10% hike in the price of gas and the 15 % General Sales Tax must have been enough to jolt them out of their euphoria and bring them down to the realization that the General had but a swagger stick, not a magic wand.

He has himself pointed out, presenting his economic plan, that the roots of the economic rot had spread much wider and deeper than he had thought on taking charge of the country two months back.

It would indeed take several years to really set things right by reversing now the process of neglect and stagnation that had continued for over a decade to reach the current state of near bankruptcy.

Economy is, indeed, such a complex and sensitive field of human activity that it does not admit of quick fixes. One wrong decision could turn out to be disastrous for the entire nation. A good example of this is the nationalization of key industries by the late Z. A. Bhutto. His spellbinding rhetoric and manipulation of national frustration over the East Pakistan debacle and against the ‘filthy rich’ of the country had led the people to believe that it would ensure social justice and a faster pace of development. It turned out to be a huge counter-productive project whose ill-effects continue to haunt the nation to this day.

Many at this point of time were expecting that General Musharraf would announce land reforms to put an end to feudalism -the basic cause of numerous social, economic and political evils torturing the nation. No doubt, the society is be cleansed of this canker. But, tampering with it at this stage, when the economy is highly sensitive and brittle and dependent largely on agriculture could have caused havoc.

Imposition of the agricultural tax from June next year may, one hopes, will mark the beginning of the end of the feudal spirit ‘the-nose-in-the-air’, and ‘above-the-law’ attitude of the feudal aristocracy. It is this feudal spirit which has, most unfortunately, permeated all sectors of the society wielding power or pelf. General Zia’s inherent modesty had sent this evil to hibernate. The prince of Lahore and the princess of Larkana revived, embraced and glorified it.

Feudalism need must go, but only after arrangements are on the ground for a workable alternative so that agricultural lands do not fall fallow for want of qualified managerial manpower and other requisites.

The cautious, step-by-step approach in the economic package is to be viewed in this perspective. Then, there are other constraints forcing the hands of the policy makers. We shall come to those presently. But, let us first mention quickly that the economic agenda is not the product of a single mind or of a small group, as used to be the case in major decisions taken by Nawaz Sharif and his kitchen cabinet. His feudal spirit, like that of his predecessor, did not admit of his consulting his cabinet or the parliament even when required under the rules.

The economic agenda, as pointed out by Finance Minister Shaukat Aziz, was prepared by the Economic Advisory Board, following lengthy and in-depth deliberations with over 200 professionals, eminent businessmen, industrialists, social workers and experienced civil servants. It is therefore the product of the democratic norm of debate and discussion and reflects the cumulative intellect of a large group of well-qualified persons.

Now about the constraints. The biggest constraint is the state of the economy itself. Pakistan is in a dire economic strait that admits of no adventurous folly. With a foreign debt of $38.8 billion, of which $6.2 billion is short term, the economy is highly vulnerable to the risk of default and its attendant repercussions on both public and private trade, commerce and industry. Foreign exchange reserves have hardly been over $1.6 billion for the past five years. The country has to spend 56 per cent of its budget on debt servicing. GDP growth rate had been continuously declining over the past several years till it touched the all time low of 3.1 percent last year. Tax collection also registered a decrease from 12.4 % to 10.3 % of GDP in the past fiscal year.

Another significant constraint on the country’s policy makers comes from the rules of the game as dictated by economic globalization regime. The adverse effects of this new system on the brittle economies of low-income countries like Pakistan were discussed in these columns two weeks back while analyzing the collapse of the WTO meeting in Seattle.

Globalization has led to the opening up of the markets of the Third World countries to the flow of goods and services of the developed economies without any arrangement for ensuring a similar flow in the other direction. No wonder you see even McDonalds and Pizza Huts in cities of Pakistan. The system has, in effect, caused the net transfer of wealth from the poor to the rich countries.

The integration of national economies into a global economy was effected without a similar integration of political units into a world state with all citizens enjoying the same rights. This mismatch between the world’s political and economic organization places the leaders of Third Wold countries, particularly of low-income countries like Pakistan, in an unenviable position.

According to one estimate, WTO represents and protects the interests of the top of the heap of rich corporations and individuals of the world. The last decade saw an increase of wealth by 70 %to 80 % in the richest 20 countries as against 2% decline in the 20 poorest countries of the world.

The developing countries have to accept economic dispensations imposed from abroad irrespective of their own commitments to their own people. That points out the significance of the role of IMF, World Bank, and WTO -the policemen of global economic system- in the economies of many low-income states. That also explains the priority given in the Gen. Musharraf’s economic agenda to the 15% General Sales Tax and the 10% tax on gas repeatedly advised (demanded) by the IMF. There should now be no obstacle in the resumption of IMF support and release of the delayed installment of $280 million.

The chief objective of the economic agenda is to lead the economy out of the debt trap. The above mentioned taxes and the agricultural tax are calculated to enhance government revenue, while the expenditure on defense has been reduced by Rs. 7 billion. To really make a difference, the defense budget will have to be cut further while applying the axe heavily to civil estimates.

To enhance revenues, no new tax need be imposed. As it is, there is a surfeit of taxes (over a hundred) in the country. Many of them could be dispensed with while tuning up the tax collection machinery. Both carrot and stick will have to be used to promote a tax payment culture in the country.

The government will have also to deal boldly with smuggling and black market which was worth $2.5 billion last year and which has crippled the country’s industry and created huge losses in custom revenue.

Herculean efforts are required to put the economy back on the rails. The General’s speech carries mainly the agenda and guidelines for the revival of the economy. Continued public support to the regime will depend on whether the military leadership can fulfill its own agenda. People are interested more in palpable achievements than in declarations of pious intentions.

The Chief Executive would be well advised to address the nation only when some achievement of national significance has been made. His Finance Minister may keep the people informed of the plans and the stages of implementation. He should also serve as the cushion for absorbing the blows of public criticism. There wont be any shortage of these considering the expected jump in the cost of living following the imposition of the GST and the increase in the cost of gas. For a people accustomed to living beyond means, all measures to tighten the belt for promoting a tax payment culture will taste bitter. Public and private media will have to be taken into confidence before any such measure is announced so that they help generate an appropriate public opinion. A military regime, without a martial law to enforce its will, has no other option.