PAKISTAN: POLITICAL ECONOMY AND POST-2000 DEVELOPMENTS----16

Pakistan’s export resilience was by no means assured. Indeed, the negative effects of the trade

imbalance would be much greater, without the inflow of remittances in Pakistan of

approximately four billion dollars annually in the mid-2000s. As opposed to exports, a quarter of

total imports were in petroleum products, one of the highest ratios in Asia. Edible oils also

feature high in quantity on the import list, reflecting expanding domestic demand and the

inability to generate domestic supply of this commodity. Pakistan is also the world’s third or

fourth largest importer of tea.

In the wider context, the state of business development in Pakistan is remained sub-optimal.

While after the period of1990, the emphasis on market forces had given more incentive to the

private sector, the post-nationalization disincentives came through from the 1970s that took time

to overcome. The ‘big business’ groups of the 1960s never really reemerged, and those that

had survived through a focus on cotton textiles did no longer take diversification business

strategy by establishing more sophisticated and value added industries. The post-1985 return

of private sector investment remained concentrated in lower value added segments of cotton

spinning and weaving, and increasingly turned to the even more commoditized investment in

sugar production. A heavy incursion of rent capitalism in the 1990s, leveraging off civilian

politics, left much of the credit portfolios of financial institutions in non-performing loans. Since

then, privatization of the extensive network of state owned enterprises, and especially

privatization of nationalized banks, has restored confidence in the private sector, and raised

levels of foreign direct investment (FDI). The volume of FDI is claimed to be nearing five billion

dollars in 2006-07, from levels only one-tenth of this a few years earlier. However, growth in the

infrastructure sector, especially the telecommunications parastatal, are responsible for this hike

rather than any decent investment rise in the export sector and globally competitive

manufacturing production. The development of the latter capabilities is the greatest challenge to

both Pakistani state and entrepreneur.

In addition, Pakistan as a zone of FDI flows did not receive the enough attention from

international investors compared to the South-east Asian miracle economies. This lack of

attention is also contrasted vividly with Pakistan’s own prominence in internationally critical geostrategic

conflicts; and this must rank as one of the great blind spots in the structure of

international investment. Perhaps in the ‘world system’ Pakistan “was indeed called, and then

chosen, by globalization, but for the latter’s strategic and geo-political imperatives, rather than

for its economic and wealth generating virtues.” (Ali, 2005)