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Since its creation in 1947, Pakistan has struggled to find a clear identity and role as a Muslim dominated country and in the world. Politics in Pakistan has been characterized by chronic stability. The country’s rivalry with India has gone nuclear over the Kashmir. However, since the September 11 attacks, the role of Pakistan has relatively shifted by supporting America’s antiterrorism activities inside the country. Economically, the country achieved respectable rates during the 1980s although mass population has since then slid further into poverty. This report provides a brief analysis on Pakistan. The report will provide a political overview of the country and its economic environment.
Pakistan is a country located in southern Asia, between India on the east and China o the north and Iran and Afghanistan on the west. It has a total area of 796, 095 sq km with an estimated population of 187,342,721 as at July, 2011. It has a federal type of government with its capital at Islamabad.
Pakistan’s Foreign Policy
Pakistan has been a major participant in global efforts to curb terrorism especially initiated after the September 11 attacks in 2001. Pakistan’s strategic importance especially to the U.S. culminated the country into combating terrorism and ensures a peaceful and stable post Taliban country. However, Pakistan has not always been relevant to global politics and its strategic importance has been varying over time thus varying its foreign policy options available to the policy makers. Pakistan has however recognized that it is not advisable to stay in isolation especially with the present interdependent and complex global politics. Pakistan has a policy of collaborating with other countries in order to cope with global issues like environment, population, energy, human migrations, drugs, poverty and terrorism (Pildat).
Pakistan pursues a pro-active policy that does not have the ambition and capacity to assume the role of a regional power. The policy however facilitates mobilization of international support and resources for its domestic socio-economic development helping it regulate the inputs from external to internal environment. This has the ability to strengthen security and territorial integrity: and these are the principle concerns of Pakistan’s foreign policy. Recent major focus of Pakistan’s foreign policy has been about security against territorial integrity and national independence. The country highlights sovereign equality of states, mutuality of interest and non-interference in other countries domestic affairs as its fundamental foreign policy features. The country believes that it has to work within norms of international bodies and supports their restructuring to bring them in line with international system. The country thus maintains active part in UN charter and other international and regional organizations. Other policy goals for the country include opposition to apartheid, peaceful resolution of interstate disputes, arms control, promotion of peace and stability through international and regional cooperation (Pildat). Through the years, Pakistan has had different foreign policy phases major of which can be said to be that of a transformationalist view.
Natural Resources and Business Policy
Pakistn is situated in a region of bulk natural energy resources and is well endowed with natural resources. Despite a presence of vast natural resources, the country has not fully exploited it resource. Recent years have seen the economy grow with renewed vigor with a growth rate of 6.4% in 2006 while GDP grew at 6.6 during 2001-2006. The pro-Musharraf government undertook structural and fiscal reform that appeared promising and in turn attracted the World Bank, IMF, Asian development bank and other reputable financial institutions that endorsed the reforms (Pakistan Country Profile (2010)).
The relationship between the government and business is hinged mainly on 4 issues: macroeconomic and political stability, human resource development, corruption and economic liberalization. The government has moved with pace to privatize state entities and remove a number of qualitative and quantitative import restrictions. The state has reduced its involvement in the financial and productive sectors of the economy and increased competition to provide opportunities for foreign involvement through joint ventures. Human resource development has also been critical to the literacy levels in the country being at 50%. For example inadequate human resource development prevented Pakistan into entering with India the lucrative software development sector. Corruption has characterized the political and economic life and the issue need be addressed to allow the country’s businesses compete for contracts in a transparent manner (Pakistan Country Profile (2007), p.11).
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Pakistan has been governed by brutal and largely incompetent military regimes mixed with some seasons of civilian rule. Pakistan is a mixed economy with the public sector dominating major sectors of the economy especially now with a free market under WTO. The economy of Pakistan has been heavily affected by political instability while direct foreign investment in the country has been reducing because it has been seen to be reluctant to deal with terrorism activities happening right inside in the country. Many foreign companies are known to be reluctant to invest in a country with weak policies and this has affected the country as it recorded the lowest economic growth rates in the 1990s. Majority of its citizens have not fully enjoyed the benefits of globalization due to its low literacy levels although the country’s markets are liberalized (CSS forum, 2009).
G-Zero is a world without a clearly defined superpower and it has topped the geopolitical scale for a better part of 2011. Pakistan is the number 8 global geopolitical risk on Eurasia list and a report by the Eurasia describes Pakistan as experiencing a ‘near perfect storm’ of risks. The U.S. realized that to make any progress in Afghanistan, then they have to get broad support from Pakistan. According to Bremmmer, Eurasia’s Group president, there is going to happen a sea-change in the governance of Pakistan. Further the report shows that the first risks associated with Pakistan are that it will become less governable and become more unstable. Other risks will include risks with the country’s economy, stability at its borders and growth risks in the country’s military. The report shows that further social and economical dislocation and conflicts in mainland Pakistan would lead the military thinking that urban unrest and terrorism are underminiing national unity. Although an example of the 1999 coup is not likely, but the army may likely intervene to set up a technocratic government which will struggle to reverse years of weak governance. The president will try to fight the army and risk incapacitating power struggle (Eurasia group).
The 2008 Financial Crisis
The 2008 financial crisis affected Pakistan like many other nations in the world. The crisis started to worsen in the early months of 2008 and inflation accelerated from 7% and peaked at 25%. Share prices at the Karachi Stock Exchange collapsed a whopping 60% by April 2008 while aggregate market capitalization shrank to about 20% of GDP by the end of 2008. Despite all this, the economic crisis did not result into panic selling, the banking sector did a series of measures that were successful in keeping the reserve situation from collapsing and this saw the rupee remain strong against US the dollar (p.3-4). Thus it will be prudential to charge the Pakistan economy, after the 2008 financial crisis, from the prism of protectionism, state domination of the economy and regulation. The country’s policy makers embraced a market liberalized economy and the ‘Washington Consensus’ adopted in the 1990s. The World Bank placed Pakistan above many emerging Asian economies in dealing with the crisis. The country had a strong banking sector and its reforms helped withstand the 2008 crisis well. There was a rise of finance and easy money that had a profound effect on the consequences of Pakistan’s economy and its ethos; exceed the impact of balance of payments. This meant that the high inflation was no cause of alarm despite the country being ruled by pursuit of quick returns, an attracting glitter against infrastructure bottlenecks and a short-term investment decisions. In this regard, Pakistan was considered different from other countries (Haque, p.30-31).
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Therefore, the economic crisis was seen as having a silver lining. Several indications pointed to the fact that stabilization measures were working; fiscal deficit has been reduced, inflation came down and the trade balance was greatly improved. But it should be noted that if the country is to embark on a path of long-term growth, then domestic savings and investments rates can be augmented from the current low levels. Economists saw the 2008 crisis as an opportunity to address the economic overvaluation of the exchange rate recommending that the exchange rate should be devalued in the years after the crisis to help eliminate trade imbalances (Haque, p.32).
Pakistan is sovereign Islamic state in south Asia born out of the Indian sub-continent in 1947. Pakistan is a country that has suffered greatly from the consequences of September 11 attacks both politically and concerning its security. But the attacks also resulted to the country receiving large direct foreign investments because of its strategic location and its general economic appeal. The country has been dominated by military rule and there have been border tensions with India over the Kashmir province. The country is impoverished and underdeveloped the situation especially stemming from decades of internal political disputes resulting to low direct foreign investments. The government needs to invest more in education, healthcare and reduce dependence on foreign donors to fully realize its potential.
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