As a nation, Pakistan is a mere 60 years old, but as a civilization, it is an astonishing 4,500 years old. One of the world’s earliest civilizations, the Indus Valley culture once thrived where a large part of Pakistan stands today. Since then, the country’s journey toward nation building has been long and arduous, marked by milestones like the freedom struggle, independence from British rule, separation from India, government formation, and alternating civilian and military rule. Unfortunately, though, the country is yet to reach some sort of constancy. Geographically, Pakistan lies at the meeting point of South Asia, Central Asia, and South West Asia. Bordered by Iran, Afghanistan, China, and India, it has an area of 340,403 square miles. Though a very poor nation at birth, Pakistan clocked above-average growth in the initial years of its formation. However, a tumultuous political climate stymied development in the 1990s. Nevertheless, the beginning of this century saw economic growth back on track despite a military rule.

History

From invasion to division

Pakistan is a part of the Indian subcontinent, the Southeast Asian peninsula that, for the greater part, is comprised of Pakistan, India, and Sri Lanka. The nation’s history more or less mirrors the history of the subcontinent. After the Indus Valley Civilization, which flourished largely in Pakistan and some parts of today’s India, ended around 1700 BC, the subcontinent saw its next big milestone in history during AD 700-1800 when many Muslim invaders raided and overtook the region. Prominent among these were Mohammed of Ghazni, Qutubuddin Aibak, and the Mughal emperors. In fact, this long period of Muslim rule forms the basis of Pakistan’s culture and identity today.

The division of India and Pakistan dislocated millions of people. Muslim refugees moved to Pakistan from India and numerous Hindus and Sikhs moved to India from Pakistan. One issue that has been festering between India and Pakistan since partition is the territory of Kashmir. During the independence of Pakistan and India, Kashmir had a largely Muslim population but a Hindu king who ruled under British protection. The king decided to remain with India during partition. However, Pakistan has been claiming its right over Kashmir on the grounds that 85% of the region’s population is Muslim. There have been three wars between India and Pakistan over this issue. The dispute regarding the area remains a barrier to friendly relations between the two countries.

Democracy elusive

In Pakistan, the military has always been in a very powerful position. In its 60 years of independence, the country has been under military rule for almost 27 years. In the six decades since independence, Pakistan has seen a spate of coups, as well as assassinations of politicians and military rulers. The country declared itself a Republic in 1956 with Major General Iskander Mirza as the President. Thereafter, military rule continued for 15-16 years. Another major event in Pakistan’s history was the separation of East Pakistan. In 1971, the people of East Pakistan rose against political, economic, and social suppression by West Pakistan. As a result, West Pakistan launched an offensive against East Pakistani rebel forces. The conflict ended with the surrender of Pakistani forces in East Pakistan and the formation of a separate state known as Bangladesh.

Pakistan had its first civilian rule under Zulfikar Ali Bhutto in 1971. Bhutto implemented many reforms, including the nationalization of insurance companies, privately owned banks, schools, and colleges. Land reforms benefited land owners and farmers. Since the democratic government took away all powers of decision-making from the armed forces, there was widespread resentment. Eventually, Bhutto was overthrown in a coup by General Zia Ul Haq in 1977. Pakistan got its first woman prime minister — Benazir Bhutto — when the next civilian government came to power in 1988. The 90s saw power alternating between Benazir Bhutto and another political leader Nawaz Shariff. There were numerous allegations of corruption and misappropriation against the democratic government. Economic growth slowed down during the decade.

In 1999, General Pervez Musharraf overthrew the civilian government in a bloodless coup and assumed power as the Chief Executive of the country. Despite the military rule, major reconstruction put the country back on the development track. In 2001, Pakistan became one of the U.S.’ chief allies in the superpower’s fight against the Taliban. Due to this move, the country incurred the wrath of fundamentalists. Over the past few years, there have been many assassination attempts on Musharraf and numerous terrorist attacks all over the country, including the pre-election assassination of Benazir Bhutto this year.

Today, Pakistan is at a crossroads. After ruling the country for nine years, Musharraf has finally succumbed to both international and domestic pressure. In November 2007, he gave up his uniform and control over the army, appointed himself civilian president, and declared parliamentary elections. The elections were held in February 2008. Unfortunately, there was no clear majority for any party, resulting in the formation of a coalition government. This is seen by many as a positive step toward a new era of democracy and peace in Pakistan.

Culture

A melting pot of cultures

The country’s cultural identity has been largely shaped by its various rulers. Nearly 97% of Pakistan’s population is Muslim. Hindus, Parsis, or Buddhists, and Christians make up the remaining 3%. About 40% of the population lives in urban areas. While urban areas reflect considerable western influence, the rural areas remain conservative and traditional.

Pakistan’s major ethnic groups are the Punjabis, Sindhis, Pushtuns, Balochs, and Muhajirs. A variety of dialects like Punjabi, Sindhi, Pushtu, Baloch, Hindko, Brahui, Saraiki (Punjabi variant) are spoken other than Urdu, the national language. In addition to these ethnic groups, tribal settlements are found along the Khyber Pass and in the valleys of Hunza, Swat, Shardu, and Kaghan. These settlements have their own unique traditions and cultures.

There is no caste system in the country. Social classification is generally based on an individual’s income. All Muslim festivals like Ramadan, Eid-I-Milad-un-Nabi, Shab-I-Barat and major festivals of other communities like Diwali and Holi (Hindu) and Navroz (Parsi) are celebrated in Pakistan. The country’s cuisine is dominated by a vast array of spices. Pakistani men have a distinctive attire called the Sherwani and the women love to wear Salwar Kurtas and Ghagras. The intricate henna (a natural dye) patterns they make on their hands and legs are typical of Pakistani culture.

Economy

Moving ahead slowly but steadily

In the initial years of its formation, the country was bogged down by the massive displacement of people. Pakistan was completely ill-equipped to handle the situation. To make matters worse, the economy was largely dependent on agriculture, which could not provide employment on a large scale. However, the country soon got back on its feet to post decent economic growth decade after decade. Its average growth rate was 6.8% in the 60s, 4.5% in the 70s, 6.5% in the 80s, and 4.8% in the 90s. Growth picked up momentum in the 21st Century, and today Pakistan is the third fastest growing economy in Asia after China and India.

As of 2006, the country’s Gross Domestic Product (GDP) was $128.8 billion. Agriculture contributed 20.5% of the GDP, industry 26.7%, and services the lion’s share of 52.9%. The Pakistani economy’s average growth in the period 2003-2007 has been an impressive 7.5%. Domestic demand has largely driven this broad-based growth. Moving ahead, the major speed bumps in the country’s growth path are likely to be high inflation, which was around 17.2% in April 2008, and a significant tightening in the monetary policy.

On the agricultural front, the nation’s main exports are raw cotton, cotton yarn, cotton cloth, and rice. Agriculture is mainly rain-fed and output varies greatly year-on-year because of inadequate irrigation facilities. The fertile basin along the river Indus has a lot of potential for robust cultivation. The only hurdle is lack of irrigation facilities. However, the good news is that in 2007, irrigation facilities improved, expanding output 5%. The economy’s reliance on the agricultural sector has been decreasing gradually, though the land under cultivation has been going up.

The manufacturing sector contributes a quarter of the GDP. The largest industries are apparel manufacturing and cotton textile production. Textile exports, which typically account for 60% of total exports, dropped to 3.3% in 2007 from an impressive 14.9% in 2006. Quality issues, lack of diversification, and production inefficiencies led to the slowdown.

Other major industries revolve around construction materials, paper products, food processing, fertilizer, sugar, electric goods, shipbuilding, and beverages. The Government of Pakistan is taking steps to encourage privatization of public sector industries through the Privatization Committee it formed in 1990. Though slow, the committee has privatized as many as 143 public sector enterprises, including seven banks, one major telecommunication corporation, one major power utility, 12 energy sector units, five newspapers, five hotels, one advertising agency, and about 100 industrial units.

The services sector, which has been the chief contributor to GDP in recent years, is comprised of construction, trade, transportation and communications, as well as other services. This sector expanded 8% in 2007. The main sub-sectors, financial services and telecommunications, have been witnessing substantial growth and flow of Foreign Direct Investment (FDI). The telecommunications segment, which was largely a regulated and monopolized market until some time back, has turned into a more competitive and liberalized sector. Further, there has been a sea change in the financial system of the country. The problem of inadequate supervisory standards and governance, which plagued the system for a long time, has been corrected through a series of government-backed reforms.

The total FDI inflow into the country stood at $5.1 billion in 2007, reflecting an increase of 45.6% year-on-year. FDI has largely been flowing into sectors such as telecommunications, financial services, oil and gas, tobacco, and cigarettes. Sectors like manufacturing attract hardly any FDI.

The U.S. is the largest trading partner of Pakistan. Others are Japan, the UK, India, China, Germany, Persian Gulf states, and Iran. The country has a trade deficit, which means its imports exceed its exports.

Stock markets in the country mirror the progress of the economy as a whole. The Karachi Stock Exchange (KSE)’s 100-share index is the national benchmark. The country’s stock markets underwent a drastic transformation after reforms to achieve macro-economic stability were introduced. On the back of these reforms, the KSE-100 has surged. The country’s equity markets attracted inflows of around $1 billion in 2006. To make the stock exchanges more competitive and to ensure better corporate governance, the government is mulling demutualization. Political instability has largely kept investors out of the stock markets. If the situation improves, as is expected after the recent Parliamentary elections, the stock markets are bound to pick up steam.

Quite a bit to be done

The progress on the economic front notwithstanding, Pakistan has many challenges on the social development front. It is ranked 136 among 177 countries on the Human Development Index. The country’s population is 159 million and annual growth rate 2.1%. Poverty remains a serious concern. As much as 47.8% of the population is still under the poverty line. A literacy rate of just about 50% and a wide literacy gender gap, especially in the rural areas, convey that social development in Pakistan is far behind countries with comparable per capita incomes. However, there has been some significant progress in terms of an increase in life expectancy (59 years in 1990 to 64.9 years in 2005), a decrease in infant immortality, and an improvement in health and education services.

Marching ahead, but problems aplenty

Fueled by strong domestic demand, the economy is chugging along nicely on the growth track. Inflation and the possibility of a slowdown in exports, however, remain a concern. Nevertheless, improved agricultural output could ease supply-side constraints and bring down food prices. Non-food inflation could be tackled through a tighter monetary policy. Skyrocketing crude oil prices are another big challenge. Further, FDI inflow is mostly concentrated in only some sectors of the economy. Therefore, the government needs to take steps to make the manufacturing sector more efficient. It can bring in better technology and processes to attract FDI. Exports remain sector dependent and, therefore, there’s a drastic need for diversification. The slowdown in the U.S. economy could prove to be a significant challenge as the superpower is Pakistan’s main trading partner and chief ally on the foreign relations front.

After the recent parliamentary elections, the country is on the threshold of democracy and peace. The new government should concentrate on bringing about all-round development in the country. Poverty alleviation, literacy promotion, and provision of accessible health care, drinking water, and sanitation facilities should be given high priority. Improvements on the social development front, a stable political environment as well steady economic growth should see Pakistan emerge a force to reckon with in Asia.