US
Army Chief of Staff Gen. Peter Shoomaker meet PM Jamali in Islamabad
on Mar 29
Officials,
Analysts Discussing Post-Musharraf Pakistan
By
Ovais Subhani
KARACHI:
In three years, Pakistan President Pervez Musharraf has breathed
life into one of Asia's sickest economies. Stock prices are at
record highs. Western aid is pouring in and the country has shed
its pariah status. But he may also be Pakistan's biggest political
risk.
If
something happens to Musharraf, while government officials say
there would be a smooth transition, big business, analysts and
the man in the teeming streets of the business city of Karachi
say political and economic progress could roll back.
Most
vulnerable is the success story of the Karachi Stock Exchange's
key index, which has risen five-fold since Musharraf joined the
US-led war on terror after the September 11, 2001, attacks on
Washington and New York.
"Much
depends on Musharraf and in that sense he also becomes the biggest
economic and financial risk," said Arshad Arif, head of research
at Merrill Lynch affiliate KASB Securities.
The
benchmark KSE 100-share index hit a record high of 5,153.85 points
on Monday, its market capitalization topping $23 billion, the
exchange said. In September 2001 the index languished at 1,100.
Foreign
investors' exposure to Pakistan stocks is negligible, but they
were big buyers of a $500 million sovereign bond issue last month,
its first since sanctions in 1998, at a tight spread of 370 basis
points over US Treasuries.
Musharraf's
pragmatism on foreign policy and national security issues has
helped lift Pakistan from near-pariah status to key ally of the
United States while boosting Western aid and foreign currency
remittances from Pakistanis abroad.
Pakistan
was pushed to near bankruptcy when international funding lines
were snapped in 1998 after it matched India's nuclear weapons
tests. A bloodless military coup that sprung Musharraf to power
in 1999 also provoked Western indignation.
But
now Pakistan sits atop a record $12.65 billion in foreign exchange
reserves. Economic growth in the fiscal year to June is likely
to beat government estimates, galloping along at a rate of 5.5
percent to 5.8 percent according to the central bank.
Relations
with India, with whom Pakistan fought a bloody border conflict
in 1999, are on the mend.
But
after the attempts on Musharraf's life in December, top government
officials concede the president remains a target of Islamic militants
bent on removing a man they see as a traitor to Islam for joining
the US-led war on terror. Stock
brokers shudder at the thought.
"The
market can go up by another 10 percent in a few months. But if
Musharraf goes, all the gains of the last three years can be wiped
out in a matter of a few days," said Shuja Rizvi, head of
sales at Capital One Securities.
Economic
growth has been funded by easy credit, a result of lower borrowing
by the government that shaved interest rates on bank loans to
as low as six percent from a high of 18 percent just three years
ago.
KASB's
Arif said continuation of Musharraf and his economic team, led
by the Finance Minister Shaukat Aziz, was vital for maintaining
the momentum on the political and economic fronts.
Many
foreign businessmen and Western diplomats fear Pakistan could
lapse into chaos and instability if Musharraf died without a clear
system for succession, but top government officials rule out a
drastic change if militants achieve their target.
"I
cannot downplay the negative impact such an event can have, but
the fact is that nothing will change on the policy front,"
said a senior finance ministry official.
"People
who think current policies are dependent on an individual have
no knowledge of how the power circles in Islamabad work,"
he said.
Nasim
Zehra, a political analyst in Islamabad, said Musharraf's policies
had broad support in the military establishment that has ruled
Pakistan for more than half of its existence since independence
in 1947.
"It
seems a lot depends on the individual. But if he goes, I don't
see things collapsing. The architects of the current system will
be able to work it out," she said.
Analysts
say political forces opposed to Musharraf's policies, mainly Islamic
parties which also disagree with his attempts to clear Islamic
militants from border areas, do not have enough popular support
to challenge the military.
Kaiser
Bengali, an economist who heads the independent Social Policy
Development Center in Karachi, said Musharraf would have already
worked out a contingency plan. "If
he goes, another army general will replace him," he said.
Many
analysts insist Pakistan's economic recovery, which is expected
to boost GDP 5.3 percent in the current fiscal year, is in its
early stages and needs a stable environment to withstand shocks.
"There
is already a change of perception and attitudes among investors,"
said ABN Amro Bank chief economist, Sakib Sherani. "If the
current economic and political scenario stays for another year
or two the risk perception will itself start to ease." -
Reuters
