Paran Balakrishnan: Reforms across borders

MY WORD!

Who started the futile debate comparing Finance Minister Jaswant Singh with his illustrious predecessor Manmohan Singh?

Both men occupied office during different eras and the debate "" which is as pointless as it is silly "" can be argued endlessly. But both the Singhs have a formidable competitor who is masterminding economic reforms across the border "" Pakistan Finance Minister Shaukat Aziz.

Aziz "" the Citibanker turned finance minister "" is building an economic track record that looks more impressive with every passing month. In the last two years he has yanked Pakistan back from the brink and is rapidly turning it into a gilt-edged economic success story "" of course, with a bit of help from the Americans.

The result is that Pakistan has just revised its growth figures upwards "" that's the second revision in as many months "" and is now predicting 6 per cent growth for the fiscal 2004. (That's up from the original 5.3 per cent which was later revised to 5.8 per cent).

Step further into the future and the Government is optimistically predicting that by 2007-08 the Pakistan's GDP rates will be zooming along at around 8 per cent.

"Our medium-term growth projections have been set at 8 per cent as the country's major economic indications have over-performed," a senior government advisor said earlier this week to a Pakistan newspaper.

The effects of the glowing turnaround have been manifesting themselves on the Karachi Stock Exchange (KSE) which peaked earlier this week at 5,620. That's up from 4,000 points last August. And it's almost a stunning 3,000 points up from December 31, 2002 when the market ended the year at 2,661. The KSE has lost ground in the last two days but most analysts are still betting it will hit 6,000 in the not too distant future.

Meanwhile, Aziz is ploughing ahead with the raft of economic reforms that has helped to turn around the economy. He has signalled that he's ready to move ahead with the second generation of reforms. One early move "" he's opening the market to real estate mutual funds. If he goes ahead, he'll be in front of India which hasn't got around to such moves yet.

The international telecom companies, too, have been keeping their eye on Pakistan. On April 14 after a heated round of bidding, two more cellular licences were handed out to Norway's Telenor Mobile Communications and Syria-based Space Telecom. The bidding was fast and furious and seven other companies were finally forced to drop out.

Pakistan already has four mobile phone services. Both companies paid $291 million each for their licences. But they reckon it is worth it because Pakistan expects to add 2 million new customers annually. That may be small compared to India nearly 2 million monthly but it's very healthy by global standards.

In other ways too, Aziz has pushed Pakistan's economy down the road to reform. This week the country's Privatisation Commission has put Karachi's landmark Faletti's Hotel on the auction block and so far 32 investors have put in bids. Most of the country's banks have already been privatised and the one that remains, Habib Bank, is scheduled to go on the block soon.

Where does India come into the picture in all this rosy economic growth? Certainly, there has been a peace dividend and the KSE has climbed steeply ever since General Musharraf and Atal Bihari Vajpayee began laying the ground for negotiations once again.

But it's tough to assess how India's growth affects its bristly next-door neighbour or vice-versa. Both countries have moved into the economic fast track in recent years and so for that matter has Bangladesh (which also has an over 5 per cent growth rate). We don't trade with Pakistan so neither country benefits from each other's fast-paced growth.

Is that about to change? There are some hopeful signs. The Confederation of Indian Industry plans to open an office in Pakistan soon and many Indian industrialists have begun to look almost greedily across the border. Could we be on the brink of earth-shaking change? It would certainly do no harm to both countries "" only a world of good.