Pakistan. Country Profile 2003

Transcription

1 Country Profile 2003 Pakistan This Country Profile is a reference work, analysing the country s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit s Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where its latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London The Economist Intelligence Unit 15 Regent St London SW1Y 4LR United Kingdom Tel: (44.20) Fax: (44.20) london@eiu.com Website: New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) Fax: (1.212) dantecantu@eiu.com Hong Kong The Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) Fax: (852) hongkong@eiu.com Electronic delivery This publication can be viewed by subscribing online at Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright 2003 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN Symbols for tables n/a means not available; means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

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4 The Economist Intelligence Unit Limited Country Profile 2003

5 Pakistan 1 Contents 3 Regional overview 3 Membership of organisations 4 Basic data 5 Politics 5 Political background 7 Recent political developments 10 Constitution, institutions and administration 11 Political forces 13 International relations and defence 17 Resources and infrastructure 17 Population 18 Education 18 Health 19 Natural resources and the environment 19 Transport, communications and the Internet 20 Energy provision 21 The economy 21 Economic structure 22 Economic policy 24 Economic performance 25 Regional trends 26 Economic sectors 26 Agriculture 27 Mining and semi-processing 27 Manufacturing 28 Construction 29 Financial services 30 Other services 31 The external sector 31 Trade in goods 32 Invisibles and the current account 33 Capital flows and foreign debt 34 Foreign reserves and the exchange rate 36 Appendices 36 Sources of information 37 Reference tables 37 Population 37 Labour force 38 Transport infrastructure 38 Energy supplies 39 Federal and provincial government budget 39 Money supply 39 Interest ratesa 39 Gross domestic product The Economist Intelligence Unit Limited Country Profile 2003

6 2 Pakistan 40 Gross domestic product by sectora 40 Gross domestic product by expenditure, current pricesa 41 Gross domestic product by expenditure, constant prices 41 Consumer price inflation 41 Agriculture: basic data 42 Agricultural production 42 Non-fuel minerals production 43 Manufacturing production 43 Karachi Stock Exchange statistics 43 Exports by value 44 Exports by volume 44 Imports by value 45 Imports by volume 45 Main trading partners 46 Balance of payments, IMF seriesa 46 Balance of payments, national series 47 External debt, World Bank seriesa 47 Foreign reserves 47 Exchange rates Country Profile The Economist Intelligence Unit Limited 2003

7 Pakistan 3 Regional overview Membership of organisations The South Asian Association for Regional Co-operation The South Asian Association for Regional Co-operation (SAARC), which comprises India, Pakistan, Sri Lanka, Bangladesh, Nepal, the Maldives and Bhutan, was established in 1985 at a meeting in Bangladesh. SAARC s aims include promoting welfare, accelerating economic growth, eradicating poverty and improving relations between member states. Summit meetings are intended to be held annually and are complemented by technical committees, meetings of foreign ministers and a standing committee, which comprises the foreign secretaries (civil servants) of each country. An under-resourced secretariat, established in 1987 and based in Kathmandu and led by the secretary-general, Q Rahim, co-ordinates SAARC s activities. In the early years agreements were made to establish a food security reserve (an agreement that has never been implemented), to establish a meteorological centre, to combat terrorism and to create various cultural exchanges between member states. Along with micro-level issues, SAARC has also proposed to create a South Asian Free-Trade Area (SAFTA). SAFTA, seen as a replacement for the South Asian Preferential Trading Arrangement, which was agreed in 1995 and which had, by 1996, identified more than 2,000 products as eligible for preferential treatment. The SAFTA was initially to be put in place by the ambitious target date of After the 1997 SAARC summit, an eminent persons group was constituted to plot the way forward for the association. The group argued that closer economic ties were the key to the future, and proposed that a free-trade area should be in place by 2008 (2010 for the least developed member states), a customs union by 2015 and an economic union by However, political factors weigh against even this prolonged timetable. India s refusal to participate in the SAARC summit of 1999, in protest at the military coup in Pakistan, led to the cancellation of summits in 1999 and 2000, although a summit did take place in early The 2002 summit was overshadowed by a meeting between the leaders of India and Pakistan. Tensions between India and Pakistan, its two largest members, have continually hampered SAARC s progress on wider issues, although it has been relatively effective in providing a forum for meetings of non-governmental organisations and professional groupings. There is pressure on SAARC from the smaller countries for the association to deal with bilateral issues: much of this pressure stems from the problematic relationship between India and Pakistan. There is a growing feeling that this problem prevents multilateral progress, thus leading to a growing emphasis on bilateral trading relationships. India has signed bilateral free-trade agreements, effectively bypassing SAARC, with Sri Lanka (2000) and Nepal (1996). Bhutan and India also have a free-trade agreement. Much of SAARC s work is also likely to be superseded by World Trade Organisation (WTO) regulations. The next summit meeting is scheduled to take place in January The Economist Intelligence Unit Limited Country Profile 2003

8 4 Pakistan Basic data Land area Population Main towns 796,095 sq km 149m (June 2003 official estimate) Population in millions, June 2003 Karachi 10.1 Lahore 5.6 Faisalabad 2.3 Climate Weather in Karachi Languages Measures Subtropical, cold in highlands Hottest month, June, C (average daily minimum and maximum); coldest month, January, C; driest month, October, 1 mm average monthly rainfall; wettest month, July, 81 mm average rainfall English is the official language; Urdu is the national language Imperial system, changing to metric. Local measures include: 1 seer = kg; 1 maund = 40 seers = kg Numbers are still commonly expressed in crores and lakhs: 1 crore=10m, written 1,00,00,000; 1 lakh=100,000, written 1,00,000, although in 1978 the international system of millions, billions etc was introduced Currency Time Fiscal year Public holidays Rupee (Rp)=100 paisa. Average exchange rate in 2002: PRs59.72:US$1. Exchange rate on September 19th 2003: PRs57.87:US$1 Six hours ahead of GMT in the summer; four hours ahead of GMT in the winter July 1st-June 30th August 14th (Independence Day), November 9th (Allama Iqbal Day), November 25th-26th (end of Ramadan; Eid Ul Fitr a ), December 25th (birth of Quaid-i-Azam and Christmas Day), February 1st-2nd 2004 (Eid Ul Azha a ), March 23rd (Pakistan Day), March 2nd (Ashura a ), May 1st (May Day), May 4th-5th (Eid-i-Milad-un- Nabi a ) a These holidays are dependent on the Islamic lunar calendar and may vary slightly from the dates listed. Country Profile The Economist Intelligence Unit Limited 2003

9 Pakistan 5 Politics The army returned to power on October 12th 1999, when the chief of army staff, General Pervez Musharraf, overthrew the civilian government of Nawaz Sharif, which had been elected in February General Musharraf did not impose martial law, but suspended parliament and the constitution, appointed himself chief executive, established a military-dominated National Security Council as the supreme decision-making body and established a mostly civilian cabinet of technocrats. In September 2001 he sided with the US against the Taliban, which governed most of Afghanistan, and Osama bin Laden s al- Qaida and was rewarded with significant international debt-rescheduling, loans and debt-swaps to revive the ailing economy. In April 2002 he held a highly dubious referendum to get himself elected as president for five years. In June 2002 General Musharraf proposed sweeping constitutional amendments which gave the military a political role with himself as an allpowerful president. In October of that year he held general elections which were marred by allegations of pre-election rigging against the main opposition parties. The elections returned pro-musharraf parties and groups to power. However, the national parliament has been deadlocked for a year and there is still no agreement between General Musharraf and the elected assembly on power-sharing between the civilians and the army. Political background The idea of a separate homeland for the Indian sub-continent s Muslims was first enunciated in 1930 by a poet, Muhammad Iqbal, and formally adopted by the All India Muslim League, led by Muhammad Ali Jinnah, on March 23rd Pakistan gained independence on August 14th 1947 when British India was partitioned. West Pakistan (now Pakistan) and East Pakistan (now Bangladesh) were separated by 1,600 km of Indian territory. Pakistan today comprises the four provinces of Punjab, Sindh, North West Frontier Province (NWFP) and Baluchistan, as well as the Federally Administered Tribal Areas and the Federal Capital Area (FCA) of Islamabad. Pakistan split in 1971 Following a succession of civilian and military governments, the first general election for a national assembly was held in December An overwhelming majority of seats in the east was won by Mujibur Rehman s Awami League (AL), while Zulfikar Ali Bhutto s Pakistan People s Party (PPP) took a substantial majority in the west. Confronted by the reluctance of Mr Bhutto and the army (led by West Pakistan) to countenance a Bengali-dominated government, in March 1971 the AL launched a campaign of civil disobedience, immobilising the east. A brutal military crackdown, in which hundreds of thousands of Bengalis were killed, came to an abrupt end in December that year when the Indian army intervened and Bangladesh was declared an independent state. Mr Bhutto became president and chief martial law administrator of a truncated Pakistan and, following the passage of a new constitution in April 1973, its prime minister. Although the PPP easily won the election of March The Economist Intelligence Unit Limited Country Profile 2003

10 6 Pakistan 1977, strong-arm tactics employed against the opposition at local level sparked widespread protests. On July 5th 1977 General Muhammad Zia ul-haq, the chief of army staff, removed Mr Bhutto and declared martial law. Mr Bhutto was put on trial for alleged complicity in the murder of a political opponent, convicted and hanged on April 4th General Zia s increasingly harsh rule was characterised by an Islamisation programme ostensibly designed to fulfil the original purpose of Pakistan but aimed in reality at extending his own rule by generating popular support. Political opposition centred around the Movement for the Restoration of Democracy (MRD), of which the most important component was the PPP, now led by Benazir Bhutto, the former prime minister s daughter, who returned from exile in April General Zia died in a plane crash probably the result of sabotage on August 17th 1988 and, in accordance with the constitution, was succeeded as head of state by the chairman of the Senate, Ghulam Ishaq Khan, a former civil servant. Ms Bhutto s PPP became the largest party in the National Assembly at the November 1988 election. It formed a government after reaching an understanding with the Muttahida Qaumi Movement (MQM), which represents Urdu speakers from India (mohajirs) who settled in urban areas of Sindh province at partition. Ms Bhutto s administration seemed doomed from the outset, however. Rivalry for control of Sindh, the PPP s traditional heartland, rapidly soured relations with the MQM; the Islami Jamhoori Ittehad (IJI), a multiparty alliance dominated by the Pakistan Muslim League (PML), which had come a close second in the federal polls and won control of the Punjab assembly, the key provincial parliament, proved implacable in opposition; and the establishment the all-powerful army high command and senior civil servants increasingly resented a government it considered not only weak and corrupt but also unfit to handle sensitive defence and foreign policy issues. Mr Khan sacked Ms Bhutto 20 months into her five-year term and installed a biased caretaker administration to ensure positive results in elections within 90 days. Nawaz Sharif first took power in 1990 The October 1990 general election was duly won by the PML-led IJI, and Nawaz Sharif, an industrialist and former chief minister of Punjab, became prime minister. Despite enjoying a two-thirds majority in the National Assembly, effective control of all four provincial parliaments and the backing of the military and the president, the essentially artificial nature of the IJI hastily cobbled together by the Inter-Services Intelligence (ISI) agency after General Zia s death to meet the challenge posed by Ms Bhutto and a resurgent PPP soon became apparent. Initially supportive parties, including the fundamentalist Jamaat-i-Islami and the MQM, were alienated. Relations between Mr Sharif and Mr Khan degenerated into a no-holds-barred battle for political supremacy. In April 1993 the head of state dismissed the prime minister and installed another caretaker regime, which included members of the PPP. Although Mr Sharif was reinstated six weeks later by the Supreme Court, which ruled that Mr Khan had exceeded his powers, the power struggle persisted. It was brought to an end on July 15th when the army chief, General Abdul Waheed, forced both men to resign. Country Profile The Economist Intelligence Unit Limited 2003

11 Pakistan 7 An election in October 1993, overseen by an interim government headed by a former World Bank vice-president, Moeen Qureshi, returned the PPP as the largest party in the National Assembly, followed by Mr Sharif s faction of the PML, the PML (N). Owing to the support of a breakaway faction of the PML, Ms Bhutto was able to form a coalition government both at the centre and, crucially, in Punjab. However, the PPP-led administration failed to address widely held grievances, including declining living standards and mounting lawlessness and terrorism, as well as rampant high-level corruption. Yet it was Ms Bhutto s increasingly brazen manipulation of the democratic process to sustain and prolong her rule, not least the extrajudicial killing of hundreds of MQM militants, that tipped the balance against her. The army high command urged Farooq Leghari (who had been deputy leader of the PPP for years before his elevation to the presidency) to oust her, which he did in November Recent political developments The Sharif government The depth of popular disaffection with the PPP, coupled with the interim government s hostility towards Ms Bhutto, propelled Mr Sharif s PML (N) to an overwhelming victory in federal and provincial parliamentary elections in February However, Mr Sharif s attempts again to hog all powers embroiled him in a series of disputes with the chief justice, Sajjad Ali Shah, the president, Mr Leghari, and the army chief, General Jehangir Karamat, and led to the ousting of all three in due course. Mr Sharif also lost important electoral allies (such as the MQM), angered regional parties with his perceived bias in favour of Punjabi interests, and clashed repeatedly with increasingly vocal opposition parties not least over Islamisation policies that alienated both religious extremists and liberals. Unable to address the country s chronic economic and law and order problems, the government was perceived as ever more corrupt, autocratic and reckless. Important recent events May 1998 Pakistan explodes six nuclear devices after India conducts five nuclear tests. A state of emergency is declared and several countries, including the US and Japan, impose economic sanctions. October 1998 Remarks made by the chief of army staff, General Jehangir Karamat, that there is a need to balance executive power and improve efficiency of government by institutionalising a National Security Council in which the armed forces are also represented, provoke the prime minister, Mr Sharif, to remove him and appoint General Pervez Musharraf as the new army chief. February 1999 The Indian prime minister, Atal Behari Vajpayee, arrives in Pakistan aboard a bus overland from India to sign the Lahore Declaration which commits both countries to trying to resolve their differences through peaceful bilateral means. The Economist Intelligence Unit Limited Country Profile 2003

12 8 Pakistan April 1999 Ms Bhutto is convicted in absentia of corruption by the Lahore High Court and sentenced to seven years imprisonment. She decides to remain out of Pakistan. May 1999 Pakistani-backed rebels and Pakistani regular soldiers capture strategic hills in the Kargil sector along the border in Indian-administered Kashmir. July 1999 With Pakistan facing international isolation and the threat of all-out war with India over the Kashmir incursions, Mr Sharif bows to American pressure and orders Pakistani forces to withdraw from the recently seized positions, transforming, in the eyes of many of his compatriots, an initial military victory into a diplomatic defeat. October 1999 Following differences between Mr Sharif and General Musharraf over responsibility for the Kargil misadventure, the government is overthrown in a bloodless military coup after Mr Sharif tries unsuccessfully to fire General Musharraf, who installs himself as Pakistan s chief executive and suspends the constitution. April 2000 Mr Sharif is convicted of terrorism and hijacking by a special court, and is sentenced to life imprisonment. In December, he and his family are exiled to Saudi Arabia for a period of at least ten years. July 2001 Talks between India and Pakistan in Agra (India) collapse over disagreement on the issue of Kashmir and crossborder terrorism. September 2001 General Musharraf supports the US in the aftermath of the September 11th terrorist attacks, earning resentment from Islamist hardliners but improving his international standing. June 2002 General Musharraf proposes sweeping constitutional amendments to enshrine the role of the military in politics and make himself an all-powerful president. The main parties reject the proposals. July 2002 General Musharraf bans Mr Sharif and Ms Bhutto from contesting the general elections. The law is challenged in the supreme court. The supreme court upholds the newly imposed condition that all those who wish to contest the general elections must have degrees. October 2002 General Musharraf issues a Legal Framework Order (LFO) and holds a general election, which Mr Sharif and Ms Bhutto are not allowed to contest. International observers allege that the poll is marred by pre-election rigging. The Muttahida Majlis Amal (MMA) alliance of Islamic parties win an unprecedented 63 seats. Country Profile The Economist Intelligence Unit Limited 2003

13 Pakistan 9 November 2002 The pro-government PML (Quaid-i-Azam) or PML (Q), smaller parties and defectors from the main parties form a government with a slim majority. Zafarullah Jamali becomes prime minister. June 2003 General Musharraf is invited to the US by George W Bush, the president. Pakistan is promised US$3bn in economic and military assistance over the next five years. September 2003 The MMA threatens to hold street demonstrations in protest at General Musharraf s failure to give up his military role. Differences with General Karamat s successor, General Musharraf, erupted into all but open hostility after Mr Sharif bowed to international pressure in July 1999 and prevailed on Pakistan army-backed Islamic militants who in April had seized strategic positions in Indian Kashmir provoking the most serious military conflict between the two countries since their 1971 war to withdraw. General Musharraf was infuriated by Mr Sharif s claims that the government had not been sufficiently consulted in advance about the campaign, and by the prime minister s subsequent efforts to encourage senior officers to challenge his authority. General Musharraf overthrew Mr Sharif in 1999 On October 12th 1999, shortly after state-run television announced that General Musharraf who was returning from a visit to Sri Lanka had been sacked, Mr Sharif was himself deposed and arrested by generals loyal to General Musharraf. He was subsequently convicted of terrorism and hijacking arising from ultimately unsuccessful attempts made to prevent the army chief s flight from Sri Lanka landing in Pakistan and sentenced to life imprisonment. General Musharraf, who said that he had been compelled to act to prevent any further destabilisation of the military, suspended parliament and the constitution, named himself Pakistan s chief executive, and established a National Security Council dominated by serving generals as the country s supreme decision-making body. The new administration s objectives, which General Musharraf said would have to be attained before true democracy could be restored, included the revival of the economy; the restoration of law and order; a purge of corrupt politicians and officials; preventing the exploitation of religion for sectarian or political ends; the depoliticisation of state institutions; the rebuilding of national confidence; the strengthening of the federation; and the devolution of powers to grassroots bodies. General Musharraf subsequently appointed himself an all-powerful president and banned Ms Bhutto and Mr Sharif from contesting the general election in October Senior judges took a fresh oath of office under a provisional constitutional order legitimising the military takeover. On June 20th 2001 he amended the provisional constitution order, dissolved the national and provincial assemblies (parliaments) and was sworn in as president by the chief justice of Pakistan for a five-year term. In September 2001 he took the critical decision to side with the US against the Taliban and al-qaida and was rewarded with significant international debt- The Economist Intelligence Unit Limited Country Profile 2003

14 10 Pakistan rescheduling, loans and debt swaps to revive the ailing economy. In April he held a highly dubious referendum to get himself elected as president for five years. In June 2002 he proposed sweeping constitutional amendments to enshrine the army in politics with himself as an all-powerful president. In July 2002 he passed laws banning former prime ministers Ms Bhutto and Mr Sharif from contesting elections. General Musharraf held general and provincial elections on October 10th 2002 in accordance with a Supreme Court order. However, the elections were marred by credible allegations of pre-election rigging. In November he appointed Zafarullah Jamali to head a government comprising all of the pro-musharraf groups and parties in parliament. Since then parliament has been deadlocked the strong opposition parties insist that General Musharraf cannot be both army chief and president. But General Mushararaf has refused to say when he will step down as army chief and has also refused to go to parliament to get himself elected as a constitutionally legitimate president. The MMA opposition is now threatening to hold street protests. Constitution, institutions and administration The 1973 constitution, framed by Mr Bhutto s PPP government, provided for a federal democratic structure. Still in force prior to General Musharraf s October 1999 coup, it had undergone major amendments, often to legitimise the authoritarianism of successive administrations. The most sweeping changes, announced in March 1985 by General Zia s martial law regime, formalised the concentration of power in the hands of the president, who assumed the right to dissolve the National Assembly and appoint the prime minister, the three chiefs of the armed forces, provincial governors and key judicial figures. These provisions held for many years, not least because they allowed the army to impose its will indirectly through the president, thus avoiding the need for a full-blooded military intervention in politics. However, soon after becoming prime minister in February 1997, Mr Sharif used his two-thirds majority in parliament to eliminate many of the executive powers of the president, including the power to sack governments. Tension between the executive and judiciary is high Tensions between the executive and the judiciary have been commonplace in recent years, largely owing to attempts by civilian governments to assert their supremacy. A protracted power struggle in 1997 between Mr Sharif and the chief justice whom he inherited, Sajjad Ali Shah, that began as a dispute over who had the right to appoint senior judges, led to Mr Shah s dismissal in December of that year (and the resignation of Mr Leghari as president) and to the passage of constitutional measures curtailing the powers of the chief justice. General Musharraf s administration carried out 29 amendments to the constitution unilaterally through a Legal Framework Order (LFO) issued on October 10th 2002, the day of the general election. The Supreme Court has taken the view that the LFO cannot be challenged through the courts and that only parliament has the power to amend or get rid of it altogether. However, neither the government nor the opposition have the two-thirds voting strength Country Profile The Economist Intelligence Unit Limited 2003

15 Pakistan 11 in parliament to amend the constitution either to make these changes stick or to reject them. Both sides have spent nearly a year in negotiation. Three main disagreements remain: whether the president has the right to dismiss parliament; the time frame within which General Musharraf will quit as army chief; and whether General Musharraf should be elected as president through the LFO or by a vote in the parliamentary electoral college. By September 2003 the talks had broken down and the opposition was preparing to launch street demonstrations. Political forces The military The PML The PPP The army remains Pakistan s ultimate political arbiter. It has run the country for as many years as civilian governments and was the driving force behind the premature removal of the last four elected administrations Ms Bhutto s in 1990 and 1996, and Mr Sharif s in 1993 and 1999 all of which paid the price for seeking to consolidate their power at the military s expense. General Musharraf has ruled out the possibility of a political comeback by either Mr Sharif or Ms Bhutto. In August 2001 his regime held non-party local polls to elect officials (nazims) who would represent a new breed of civilian politicians untainted by the excesses of their predecessors and inclined to support the army s political agenda. General Musharraf has, by and large, succeeded in achieving this goal. Under the new system, a nazim answers to a district co-ordination officer (DCO), who is appointed by the provincial governor who is, in turn, appointed by General Musharraf. However, tensions have emerged over the distribution of power and funds between the nazim and the provincial members of parliament. The latter claim that their powers of patronage have been curtailed, thereby undermining their clout in their constituencies. The Pakistan Muslim League (PML) was long regarded as the party closest to the powerful establishment of generals and senior bureaucrats. Mr Sharif, for example, was groomed as a politician by General Zia, and his first governing coalition was originally contrived by military intelligence as a counterweight to the PPP. After two disappointing and curtailed stints in government in a decade, the PML is now widely perceived as incompetent and corrupt. With Mr Sharif in exile, it has split into two factions, one of which, the pro-military PML (Quaid-i-Azam) or PML (Q) dominates the current government. In September 2003, four smaller anti-sharif factions of the PML were persuaded to join the PML (Q). The PML (N) remains loyal to Mr Sharif. The only other national party, the Pakistan People s Party (PPP), was likewise discredited after having failed to deliver during its two recent periods in office, and won just 18 of the 217 seats in the federal parliament in the February 1997 election. The party is in effect leaderless because of Ms Bhutto s reluctance to return to Pakistan her husband has been imprisoned in Pakistan for seven years, and she would be arrested if she returned. Despite this her party performed well in the October 2002 elections, winning 87 seats. However, the PPP now has only 71 seats as the government has lured several PPP parliamentarians to join the government. The Economist Intelligence Unit Limited Country Profile 2003

16 12 Pakistan The MMA The MQM In an unprecedented move, Pakistan s six main religious parties formed a united front to contest the 2002 elections. This grouping, the Muttahida Majlis Amal (MMA) largely comprises the Jamaat-i-Islami and the Jamiat-i-Ulema-i- Islami, both of which have historically drawn support from the tribal and conservative areas of the North West Frontier Province (NWFP). The MMA won over 60 seats in the national assembly in the general election to become the second-largest opposition party in the country and it also took control of the NWFP and Baluchistan, the latter in alliance with the PML (Q). The government s moves to undermine the PPP and the PML (N) had created a vacuum which the MMA filled and it successfully exploited widespread anti- US sentiment, particularly in NWFP. Until the 2002 elections, the religious parties had never obtained more than 5% of the total vote in the country. In 2002, this rose to nearly 11%. The Muttahida Qaumi Movement (MQM) is the third-largest political party, although its support base is largely confined to Urdu-speakers in the main cities of Sindh, particularly Karachi and Hyderabad. Its militancy and reputation as an unreliable ally have frequently prevented it from capitalising on its potential as a power-broker, although it is currently a partner in the pro-musharraf government in Sindh. Main political figures General Pervez Musharraf As the driving force behind the campaign by Pakistan-based Muslim militants in Indian Kashmir in mid-1999, the chief of army staff was perceived as an Islamic hardliner prior to his overthrow of the government led by the Pakistan Muslim League (PML) in October of that year. The self-designated chief executive turned president has sought to cultivate a populist and pragmatic image as a pro-western reformer keen to rid the country of self-serving politicians and revive the economy. Moves to make himself an all-powerful president, to give the army a formal role in politics, to stop Ms Bhutto and Mr Sharif from returning to Pakistan and to clamp down on religious extremism have pitted him against powerful political forces in Pakistan. Nawaz Sharif and Benazir Bhutto Now in exile, both former prime ministers are still popular even though elements of their parties have deserted them and joined General Musharraf. If General Musharraf steps down and Pakistan reverts to genuine civilian rule, both leaders would probably return to Pakistan and resume their domination of politics. Altaf Hussain The exiled leader of the Muttahida Qaumi Movement (MQM) first welcomed the military takeover but then boycotted the local elections after accusing the army of being biased against him. He subsequently decided to participate in the 2002 general and provincial elections, and his party is now part of the pro-government coalition which governs Sindh province. Court cases against him filed by the governments of Ms Bhutto and Mr Sharif still stand and there is no chance that he will return to Pakistan soon. Country Profile The Economist Intelligence Unit Limited 2003

17 Pakistan 13 Zafarullah Khan Jamali Handpicked by General Musharraf, the prime minister is a weak leader with no large personal or political following. He has spent his time canvassing support for General Musharraf s political and economic policies but remains vulnerable and General Musharraf may decide to appoint a more dynamic prime minister. Maulana Fazlur Rehman and Qazi Hussain Ahmad The two main leaders of the six-party religious alliance, Muttahida Majlis Amal (MMA), have acquired national status since their group formed Islamic governments in the North West Frontier and Baluchistan provinces. Mr Rehman is a pragmatic politician while Mr Hussain is an ideologue. Both would like to see the back of General Musharraf. Parliamentary elections (no. of seats) Pakistan People s Party 44 a Pakistan Muslim League (N) 106 b Muttahida Qaumi Movement Muttahida Majlis Amal Pakistan Muslim League (Q) Others Total a People s Democratic Alliance (PDA) coalition, led by the PPP. b Islami Jamhoori Ittehad (IJI) (Islamic Democratic Alliance) coalition, led by the Pakistan Muslim League and the Jamaat-i-Islami Pakistan (JIP). Source: Economist Intelligence Unit. International relations and defence Relations with India have improved The chances of war with India have recently diminished: tense relations with India since the traumatic and bloody partition of 1947 have led to three fullscale wars, several lesser skirmishes, a vigorous arms race and, most recently, a continuing stand-off along the international border and line of control (LoC) in Kashmir, sparking fears of a possible nuclear war. Following India s detonation of an atomic device in 1974, Pakistan launched its own nuclear programme. In May 1998, after the newly elected government in India led by the Bharatiya Janata Party (BJP) tested nuclear devices, Pakistan did the same, prompting several countries, including the US and Japan, to impose economic sanctions on both nations. The signing of the Lahore Declaration by Mr Sharif and the Indian president, Atal Behari Vajpayee, in February 1999 seemed to be a positive step towards the normalising of relations, but any perceived gains were quickly erased by the undeclared war in Kargil, and India refused to have anything to do with General Musharraf after the coup. Talks between Mr Vajpayee and General Musharraf in Agra in July 2001 highlighted disagreements over Kashmir and broke down. In November 2001 India accused Pakistan of infiltrating Islamic militants into Kashmir, moved its army to the border and threatened to go to war if the infiltration continued. The US persuaded General Musharraf to reduce The Economist Intelligence Unit Limited Country Profile 2003

18 14 Pakistan crossborder infiltration, but relations between the two neighbours remained tense. India held elections, which militants tried but failed to disrupt, in Kashmir in October Clashes between militants and India s security forces have continued unabated. Following a conciliatory speech by Mr Vajpayee in April 2003, both countries have exchanged ambassadors and restored a bus service between Lahore and Delhi. Unofficial parliamentary delegations from both sides have also tried to improve the relationship but air and rail links are still suspended and a date for peace talks has not been set. China is a close friend Relations with Afghanistan are tentative US relations with Pakistan are back on track Friendship with China, born out of a shared antipathy towards India and the former Soviet Union, has been one of the most consistent features of Pakistan s foreign policy. Officials of the US Central Intelligence Agency believe that China has supplied Islamabad with nuclear technology and parts, as well as M-11 ballistic missiles capable of delivering nuclear weapons. However, during the Kargil dispute, China voiced little support for Pakistan, a reticence that may have reflected the challenge to its authority posed by Chinese Islamic insurgents. However, following tensions with the new US administration, the US attempt to embrace India as a strategic ally against China and the proposed US National Missile Defense programme, China has suddenly begun to renew its strategic interests in Pakistan. A plan to develop a deep-water port near the mouth of the Persian Gulf at Gwadar has been unveiled. The Chinese have committed US$1bn to its development over the next few years, causing much concern in the US. Once completed, it will enable the Chinese navy to dock at a friendly port in a key strategic area. Pakistan was the most active external sponsor of the Afghan guerrillas during their war against the Soviet army and Kabul s Moscow-backed government, but has not enjoyed consistently good relations with any mujahideen group since the defeat of the communists in April In 1994 it actively backed the formation of the Taliban, the ultra-orthodox Sunni Muslim militia group that by 1998 had seized most of Afghanistan. However, Pakistan s attempt to gain strategic depth with the installation of an ally in Kabul caused it problems, particularly with the US and Iran. At first, the imposition of sanctions on the Taliban regime by the UN forced Pakistan to be more circumspect in its relationship with the Afghan government. Then, following the al-qaida attacks on September 11th 2001, Pakistan sided with the US in its war against the Taliban in Afghanistan. It is trying to build a relationship with the new Afghan government installed by the US and led by Hamid Karzai but its past support for the Taliban counts against it. Mr Karzai has alleged that Taliban remnants have taken refuge on Pakistan s side of the tribal borderlands, from where they launch attacks on US and Afghan forces in Afghanistan. Recent governments have sought to ingratiate themselves with the US in a bid to secure a resumption of military and economic assistance, cut off in 1990 after Pakistan was suspected of having attained a nuclear weapons capability. Partly because the collapse of the already fragile economy after the May 1998 nuclear tests threatened a possible sale of nuclear technology to rogue states, the administration of the then US president, Bill Clinton, persuaded the US Congress to allow it to waive sanctions temporarily in the interests of national Country Profile The Economist Intelligence Unit Limited 2003

19 Pakistan 15 security. In July 1999, facing almost worldwide censure for its organisation of the incursion into Indian-administered Kashmir, Pakistan was compelled to negotiate the details of its withdrawal from Kargil with the help of the US. Although the US expressed regret following the military takeover in October that year and urged General Musharraf to restore civilian rule as soon as possible, it opted to engage the new regime so that strategic concerns nuclear and missile proliferation, regional instability and Islamic terrorism could be addressed. After the September 11th terrorist attacks on the US, Pakistan s support for US military action against the Taliban in Afghanistan led to the lifting of all US sanctions in October and November 2001, allowing the US to support multilateral lending to Pakistan. In addition, the US rescheduled US$2.3bn in Pakistani debt, gave up to US$1bn in soft loans and grants and also nudged the IMF and World Bank to extend assistance of over US$2bn for poverty alleviation and growth over the following three years. In June 2003 the US president, George W Bush, promised Pakistan US$3bn in economic and military assistance over the next five years, largely owing to Pakistan s help in the war on terror. Scores of suspected al-qaida activists have been handed over to US authorities since September 11th and the Federal Bureau of Investigation (FBI) has been given a relatively free hand to investigate and track down terrorists in Pakistan. Military forces in the region, 2002/03 Pakistan India China Army Personnel 550,000 1,100,000 1,600,000 Main battle tanks 2,337+ 3,898 7,010 Navy Personnel 25,000 53, ,000 Frigates Submarines Air force Personnel 45, , ,000 Combat aircraft ,900 Source: International Institute for Strategic Studies, The Military Balance 2002/03. Security risk in Pakistan Armed conflict Tension between India and Pakistan was high in 2000 and 2001 and the two countries stood on the brink of war, though US intervention has since led to an improvement in relations. An improvement in relations is hindered by domestic pressure on both sides to resist giving concessions to the other. Peace talks have floundered over the relative importance of Kashmir in relations between India and Pakistan. India has in the past argued that the Kashmir dispute is one of several issues that need to be resolved, while Pakistan has insisted that the talks must focus on Kashmir, which it has argued is central to the poor relationship. However, the positions have reversed in 2003: Pakistan says it is ready to hold an unconditional dialogue on all issues with India, while India is insisting that Pakistan should end crossborder terrorism before any dialogue on any issue can be held. The Economist Intelligence Unit Limited Country Profile 2003

20 16 Pakistan Terrorism Pakistan has been subject to several ethnic and religious conflicts that have erupted into violence. Sporadic bombings continue to occur nation-wide, primarily on trains, buses and in marketplaces. Responsibility for these bombings is rarely, if ever, claimed by any group, and they are often blamed on the Indian intelligence service, the Research and Analysis Wing (RAW). Extremist Muslim Shia and Sunni groups have killed members of rival sects, including senior business people. The government has attempted to crack down on some of these militant groups, which are believed to receive external assistance the Shia groups from Iran and the Sunni groups from private sources in Saudi Arabia. The expansion of these groups can be linked to the growing prevalence of madrassas (Islamic schools). As successive governments have failed to improve the educational system, sect-based Islamic schools have filled the void, some of which have taught an extreme outlook. The problem has been accentuated in recent times by the infiltration of al-qaida militants into the urban areas of Pakistan in the aftermath of the US war in Afghanistan. There were numerous high-profile terrorist attacks in 2002; most foreign embassies and multinationals pulled out personnel from Pakistan and embassies had to work with minimal staff. However, 2003 has been a much better year in this respect. There have been no attacks on foreigners and apart from two large bomb blasts in Baluchistan, which were blamed on sectarian elements, there have been no ethnic or al-qaida attacks. Civil unrest Opposition political parties have historically held large-scale rallies and called for strike action, and violence is commonplace during such demonstrations. The military government initially banned political rallies, although some were in the event allowed, and political parties generally did not seek to alienate themselves from the military in the run-up to the October 2002 elections by holding rallies or demonstrations. However, new laws, such as the condition that candidates for election must be graduates, and the banning of two previous prime ministers, Benazir Bhutto and Nawaz Sharif, and many of their allies, angered the mainstream parties. Nonetheless, the elections were not marred by undue violence. Nor, despite occasional threats by some political groups, have there been any significant antigovernment rallies or civil unrest in But these cannot be ruled out altogether in the near future if there is no compromise between the opposition and General Musharraf over a constitutional package to legitimise the latter s position as president. Violent crime Levels of crime are high in Pakistan. Car-jackings are commonplace, particularly in Karachi. Incidence of robbery and murder is increasing. The widespread availability of firearms has been reflected in an increase in armed robberies in urban areas. Tribal, rather than federal, laws apply in the tribal areas within the North West Frontier Province. Armed clashes between rival tribal groups are frequently reported from these areas, and have affected extractive industries in Baluchistan. Crimes against women, in particular, have shown an alarming rise in recent times, ranging from honour killings to gang-rapes in far-flung rural areas. There is, however, some belated effort by the government to take strict action in the most glaring cases, largely to avoid negative publicity in other countries. Country Profile The Economist Intelligence Unit Limited 2003

21 Pakistan 17 Drug smuggling Pakistan remains an important transit route for opium from Afghanistan. Many of the laboratories that process raw opium into heroin are thought to be either located in areas of Pakistan bordering Afghanistan or to be run by Pakistanis working within Afghanistan. One report has suggested that heroin exports provide about US$1.5bn to the Pakistan economy. Some senior officials within Pakistan s government and security apparatus have been linked to the export of drugs. The fall of the Taliban in Afghanistan has led to an increase in the areas given to opium cultivation in that country under the control of autonomous warlords. Resources and infrastructure Population The population growth rate is slowing It is officially estimated that the population of Pakistan reached 149m in June 2003, up from 131.5m in March 1998 when the last census was conducted. The census showed that Punjab s share of the total population had declined to 55.6% in 1998, from 56.2% in 1981 (the year of the previous headcount), Sindh s share edged up to 23% from 22.6%, that of the North West Frontier Province (NWFP) increased to 13.4% from 13.1%, and Baluchistan s slipped to 5% from 5.1%. The remainder of the population lived in the Federally Administered Tribal Areas (2.4%) and in Islamabad (0.6%). The population growth rate fell to an estimated 2.2% in 2000 from 2.4% in 1998 and 3.1% in , a trend that derives in part from the increased, if still modest, coverage of family planning programmes. Population according to age, 1998 a Years m % of total Total a Excludes Federally Administered Tribal Areas. Source: Census Organisation, Islamabad. Disturbing development trends persist The rural-urban drift is accelerating Although infant mortality (the number of deaths per 1,000 live births) fell from an average of 112 in the latter half of the 1980s to 83 in 2002/03, there is a large disparity between urban and rural areas. This ratio was 72.7:89.2, according to a 1997 survey. In 2000 the male/female ratio in the total population rose to 108:100, attributable partly to discrimination against females. The labour force grew at an annual average rate of 4.5% during but growth slowed to 2.2% in 2002/03. The official unemployment rate (a crude measure in most countries, but even more so in a country with a massive undocumented labour force) has risen continuously over the last decade, from 3.1% in 1989/90 to 7.8% in 2002/03. The average population density rose from 106 per sq km in 1981 to 176 per sq km in 2000, but this masks regional differences, ranging in 1998 from 353 per sq km in Punjab to just 19 in Baluchistan. Although the March 1998 census put the proportion of the population in the countryside at 67.5%, only slightly down The Economist Intelligence Unit Limited Country Profile 2003