Pakistan Now: Darkest Before Dawn?

[Riaz Haq]

Pakistan is experiencing one of the darkest periods of its history. Political instability is eroding confidence in the nation's future. Declining economic growth and high inflation are hurting the people of all strata of society, particularly the poor whose numbers are rapidly rising. Is there any hope left for the country? Is it a case of the "darkest before dawn"? How do investors see it? 

Ex PM Imran Khan (R) with President Erdogan

Writing in the Time magazine immediately after the recent arrest of former Prime Minister Imran Khan, American investor, author and commentator Zachary Karabell who has invested in Pakistani startups sees rare hope for Pakistan. He sees Pakistan where Turkey was back in 2001-2003, "when a series of elections brought Recep Erdogan to power even as he was repeatedly disqualified by a military that was determined to retain control". Here's an excerpt of his article titled "The Contrarian Case for Pakistan" published in the current issue of Time Magazine: 

"To some degree, this is an argument of “well, it’s not as bad as they say.” But it’s also a way of highlighting that Pakistan today may be a case of darkest before the dawn. With elections schedule for the fall, and with Imran Khan the most likely victor of said elections unless is his arrest leads to his disqualification as a candidate, Pakistan is in a very similar position to where Turkey was in 2001-2003, when a series of elections brought Recep Erdogan to power even as he was repeatedly disqualified by a military that was determined to retain control. Imran Khan has many of the same strengths and weaknesses of Erdogan, who after championing Turkish democracy and economic reform, then turned into the very type of corrupt autocrat that he had once fought against. But he nonetheless unleashed massive economic potential in Turkey and has left its 80 million people materially better off over the past 20 years, even as hyperinflation and Erdogan’s recent economic ineptitude is now eroding that. Should Imran Khan return to the head the government, he may well usher in a similar period in Pakistan, even as he has his own authoritarian and demagogic tendencies". 

Here are some of the key points Karabell makes in his opinion piece:

1. Pakistan has a real and dynamic private sphere that is not only seeing a start-up and new business ecosystem that has attracted hundreds of millions of dollars a year for the past few years but operates freely in a way that would be inconceivable in many other countries. Compare it to Egypt, for example, which receives far less negative attention and more foreign money yet is almost entirely dominated by a military dictatorship. Or Algeria. And then there are countries which barely function at all, dominating a whole swath of Sub-Saharan Africa but also dot central Asia (Tajikistan anyone?).

2. Pakistan is the fifth most populous country in the world with 230 million souls, a median age of barely 22 and two-thirds of the population under the age of 30. That means unlike most of the world, it has a favorable demographic future.

2. Unlike, say, Nigeria, where the ethnic divisions and decades of corruption mean that it well-nigh impossible to treat the country as one unified market for goods and services, Pakistan is one common market even with its various tribal divisions.

Pakistan Population Youngest Among Major Asian Nations. Source: Nik...

Karabell concludes with the following: 

Pakistan is on a cusp. We should honor the fact that whichever way the consensus believes it will go, the country is also poised to breakout on the upside. Which path will only be clear in retrospect, but we should pay more attention to the potential of things going right along with the legitimate focus on all that is going wrong.

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[Riaz Haq]

The Special Investment Facilitation Council’s Role in Pakistan’s Economic Resurgence


https://thediplomat.com/2023/08/the-special-investment-facilitation...

The SIFC’s mandate is far-reaching, extending from agriculture and energy to telecommunications and infrastructure. Its “single window” approach to cooperation with GCC countries signals a proactive stance toward attracting FDI. Notably, the SIFC holds the authority to summon regulatory bodies and government representatives when bureaucratic bottlenecks hinder investment operations. Moreover, the council can recommend regulatory relaxations or exemptions, ensuring they align with existing legal provisions. This flexibility could expedite investment procedures, enhancing Pakistan’s appeal to potential investors.

The inclusion of military officers in the SIFC’s apex and implementation committees sparks concerns about potential overreach and diminishing civilian oversight. While an “institutionalized” army role in economic decision-making can offer stability, it also poses challenges to democratic governance. The delicate interplay between civilian and military spheres demands meticulous management to prevent undue military influence over crucial economic policies.

While the military’s involvement in the SIFC might alleviate immediate investor concerns, it is not a panacea for Pakistan’s economic challenges. The council’s focus on Gulf investments and its goal of achieving high FDI targets could offer short-term relief, but sustained economic stability demands comprehensive policy reforms. A closer look at India’s 1990s reforms provides valuable lessons in addressing deep-rooted economic issues and driving long-term growth.

The Special Investment Facilitation Council’s establishment signifies Pakistan’s commitment to economic resurgence and foreign investment attraction. However, as the nation treads this uncharted territory, it must strike a delicate balance between ensuring policy predictability and safeguarding democratic governance. While the military’s involvement can potentially bolster investor confidence, the long-term stability of Pakistan’s economy hinges on holistic policy reforms that address structural challenges. The SIFC can serve as a stepping stone toward economic growth, but the ultimate key lies in Pakistan’s ability to cultivate a business-friendly environment, foster sustainable growth, and uphold democratic principles in its pursuit of prosperity.

[Riaz Haq]

Pakistan’s army is back in charge of politics

https://www.economist.com/asia/2023/08/10/pakistans-army-is-back-in...

The jailing of Imran Khan heralds a period of tighter military control


Fifty miles—and five years—separate Imran Khan’s greatest political triumph and the nadir, for now, of his political career. At one end is Parliament House in Islamabad, where the assembly that elected him prime minister of Pakistan in 2018 wrapped up its term on August 9th, with power due to be handed to a caretaker administration. At the other is the district jail in Attock in Punjab province, where Mr Khan began a three-year prison term for “corrupt practices” on August 5th.


Mr Khan denies wrongdoing and has unsuccessfully appealed the conviction. He says the charges are politically motivated, which the government denies. The conviction, which comes with a five-year ban from politics, is the culmination of a campaign by Pakistan’s powerful army to remove Mr Khan and his party, Pakistan Tehreek-e-Insaf (pti), from the political fray. It also heralds a period of more active involvement in politics by the generals.

The case has exposed a taste for cash and bling that is at odds with Mr Khan’s idea of himself as a pious anti-corruption crusader. Yet the nature of the conviction, for violating electoral laws that are rarely enforced, hints at the former prime minister’s true crime: challenging Pakistan’s army. Like many Pakistani politicians before him, Mr Khan started out as a general’s favourite. Yet the army eventually tired of his political grandstanding and his mismanagement of Pakistan’s faltering economy. In April 2022 he was removed from office in a vote of no confidence.


Unlike some of his predecessors, Mr Khan refused to go quietly, attacking the generals in a series of rallies across the country and claiming that they tried to assassinate him last November. After he was briefly arrested in early May, his supporters smashed up military installations. The army, unused to and enraged by such displays of defiance, dismantled his party and rounded up his supporters. Eventually, Mr Khan was nabbed for good.

Mr Khan’s forced exit from politics heralds more ambitious plans. Assisted by the outgoing prime minister, Shehbaz Sharif, and a pliant parliament, the army has rearranged Pakistan’s hybrid system decisively in its favour. Among the scores of laws tweaked or introduced before parliament’s lights were switched off, several granted sweeping new powers to the armed forces and intelligence agencies, alarming civil-rights groups. The incoming caretaker government has been given the power to negotiate with the imf and sign foreign investment deals. It may also stick around for longer than the 90 days prescribed by the constitution. The day Mr Khan was arrested the government ratified a new census which could require a fresh demarcation of electoral constituencies. The outgoing law minister says this could delay elections by at least five months. The caretakers will in effect report to the army until then.

[Riaz Haq]

Pakistan’s army is back in charge of politics

https://www.economist.com/asia/2023/08/10/pakistans-army-is-back-in...

The jailing of Imran Khan heralds a period of tighter military control


Mr Sharif’s indulgence of the army is explained by the state of the economy. He secured a $3bn imf emergency agreement last month to ward off the possibility of default. But the price is steep: higher energy tariffs, high interest rates and a market exchange rate, none of which is popular with voters. The later the election, the more time Mr Sharif and his allies will have to put distance between themselves and unpopular decisions.

Yet Mr Sharif may be tempting fate. Nine months into the job, newly victorious in his battle with Mr Khan and his supporters, General Asim Munir, who heads the armed forces, is growing assertive. He is spearheading a new economic council and is busy touting Pakistan’s investment potential to Gulf states that have grown tired of doling out cash to Pakistan. More than their money, he may be eyeing their political support. “We are probably moving towards a new political order, a controlled democracy where civil liberties are curtailed in the name of economic development,” says Ahmed Bilal Mehboob, president of the Pakistan Institute of Legislative Development and Transparency. In perennially chaotic Pakistan, order can seem attractive to an ambitious general.

[Riaz Haq]

SIFC to continue working for fast-track foreign investment: PM

https://www.pakistantoday.com.pk/2023/08/16/sifc-to-continue-workin...

Lauds vision of Saudi leadership, saying KSA can always count on Pakistan as trusted partner
Says looking forward to working with UAE on advancing cooperation in various fields
ISLAMABAD: Caretaker Prime Minister Anwaarul Haq Kakar on Wednesday said that the recently-instituted Special Investment Facilitation Council (SIFC) would continue to work as before to lay the foundations to fast-track foreign investments, particularly from Saudi Arabia.

The prime minister, in a meeting with Saudi Ambassador Nawaf bin Saeed Ahmad Al-Malkiy, who called on him, highlighted energy, infrastructure, agriculture, IT and manpower as potential sectors of cooperation.

The Saudi ambassador congratulated the prime minister on assuming office and conveyed the best wishes and greetings on behalf of the Custodian of Two Holy Mosques, as well as Crown Prince Mohammed Bin Salman, and the people of Saudi Arabia.

The prime minister said that Pakistan and Saudi Arabia enjoyed historic and deep-rooted ties.

He thanked the Saudi government for its consistent support for Pakistan’s economic stability and development.

He particularly mentioned the large number of Pakistanis working in Saudi Arabia and requested the Saudi side to continue to extend all possible facilitation to them.

Prime Minister Kakar lauded the vision of the Saudi leadership and said that Saudi Arabia could always count on Pakistan as its trusted and reliable partner.

Ambassador Nawaf reiterated that Saudi Arabia and Pakistan were bound together in a fraternal relationship, which was characterized by mutual trust and understanding, and close cooperation on all bilateral and regional issues of common interest.

Looking forward to advancing trade, investment ties with UAE

Meanwhile, Caretaker Prime Minister Anwaar-ul-Haq Kakar on Wednesday said that he looked forward to working with the United Arab Emirates (UAE) on advancing bilateral cooperation in various fields, especially trade, investment and energy.

The prime minister, in a meeting with the UAE Ambassador Hamad Obaid Ibrahim Salem Al-Zaabi, who called on him here, expressed gratitude for the UAE’s support for Pakistan’s economic and financial stability.

The ambassador conveyed the greetings of the UAE leadership to the prime minister on his assumption of office.

Prime Minister Kakar thanked the UAE government for the warm congratulatory messages and said that Pakistan and UAE enjoyed historic and deep-rooted fraternal ties.

He also wished the UAE success in hosting the COP28 Summit later this year.

The prime minister also emphasized the important role played by the Pakistani diaspora in the UAE and sought the UAE government’s continued support to them.

[Riaz Haq]

Pakistan's interim PM says Saudi Arabia to invest $25 bln over next five years


https://www.reuters.com/world/asia-pacific/pakistans-interim-pm-say...

By Gibran Naiyyar Peshimam


ISLAMABAD, Sept 4 (Reuters) - Saudi Arabia will invest up to $25 billion in Pakistan over the next two to five years in various sectors, Pakistan's caretaker Prime Minister Anwaar-ul-Haq Kakar said on Monday, adding his government would also revive a stalled privatisation process.

The South Asian nation is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme, approved by the International Monetary Fund (IMF) in July, averted a sovereign debt default.

Kakar, speaking to journalists at his official residence, said Saudi Arabia's investment would come in the mining, agriculture and information technology sectors, and was a part of a push to increase foreign direct investment in Pakistan.

There was no immediate response to a Reuters request to the Saudi Arabian government for comment on Kakar's remarks.

If confirmed, a series of investments worth $25 billion would be the biggest ever by the kingdom in Pakistan.

A longtime ally of Riyadh, Pakistan is dealing with a balance of payments crisis and requires billions of dollars in foreign exchange to finance its trade deficit and repay its international debts in the current financial year.

Kakar did not specify projects Riyadh was looking at for investment, but last month Barrick Gold Corp (ABX.TO) said it was open to bringing in Saudi Arabia's wealth fund as one of its partners in Pakistan's Reko Diq gold and copper mine.

Pakistan's untapped mineral deposits are conservatively valued at about $6 trillion, said Kakar, whose government is meant to be an interim set up to oversee national elections scheduled for November but are expected to be delayed by months.

Barrick considers the Reko Diq mine one of the world's largest underdeveloped copper-gold areas and it owns a 50% stake, with the remaining 50% owned by the governments of Pakistan and the province of Balochistan.

Kakar also said his government would push to complete two privatisation deals, probably for state-run power sector entities, in the next six months, and would also look to privatise another government owned enterprise outside the energy sector.

Pakistan's state owned enterprises have long been an area of concern with bleeding financials adding to financial stress. Recently Pakistan added struggling state-run Pakistan International Airlines to the privatisation list again.

The privatisation process has largely stalled in the country with selling of state assets a politically sensitive issue that many elected governments have shied away from.

Reporting by Gibran Peshimam; Additional reporting by Aziz El Yaakoubi in Riyadh; Editing by William Maclean

[Riaz Haq]

SIFC focuses on 5 sectors for investment - Business - DAWN.COM

https://www.dawn.com/news/1774316

KARACHI: In continuation of its efforts to improve the country’s business climate, the Special Investment Facilitation Council (SIFC) has asked Karachi’s business community to exploit huge investment potential in agriculture, livestock, information technology, mining and energy sectors.

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Special Investment Facilitation Council

Interaction with Business Community by Special Investment Facilitation Council (SIFC)

As part of outreach strategy, SIFC arranged an interaction with Business Community of Karachi on 5 September 2023.
SIFC’s Team led by Dr Jehanzeb Khan made detailed presentations encompassing various aspects of SIFC Initiative. Pakistan's latent potential and investment opportunities in the key sectors of Agri/ Livestock, IT, Mining/ Minerals and Energy were highlighted along with ongoing efforts to improve business climate in the country.
Business Community was taken on board to attract investments in Pakistan and be part of valuable projects. SIFC ensured to extend its facilitative role in realising such endeavours by domestic investors.
At the end, an interactive session provided Business Community with the opportunity to share their investment-related feedback and suggestions. Business Community also displayed keen interest in asking questions related to various investment opportunities and investment environment in general.


https://twitter.com/PTVNewsOfficial/status/1699042739479019660?s=20