Some years ago I sat through a series of calls with the lawyers for Chinese groups looking at substantial investments here, in power, textiles, infrastructure and agriculture. The early questions were always the usual ones. Policy direction in the sector, repatriation of dividends, enforcement of an arbitral award, whether the tariff sat in primary legislation or in an SRO. But in every one of those conversations the question that mattered most was the same, and it was rarely the first to be asked. How long could a decision, once taken by the Government of Pakistan, be expected to stand?
I gave the answer a lawyer gives. It depends on the instrument, on whether there is a stability clause, on the enforcement position. On one of those calls the general counsel heard me out and then said he was not asking a legal question but a commercial one. What he wanted to know was whether the people signing on our side were the people deciding. I have thought about that a good deal since, because it gets at something our national conversation misses. We argue endlessly about growth rates. We hardly ever ask why growth here never accumulates.
Mulk mushkil halaat se guzar raha hai. We have all heard it in the same grave register since childhood. Yeh nazuk daur hai. It was said in 1958, in 1971, in 1977, in 1988, in 1999, in 2008, and it was said again last month. A sentence that has covered seventy years without a break is not describing a crisis. It is describing the ordinary weather. I am not an economist and this is not an economist’s column. It is the observation of somebody who has spent thirty-five years drafting agreements meant to bind, and watching a fair number come apart for reasons that had nothing to do with the drafting.
Begin with the concession. Pakistan has grown, and grown well, in periods when the armed forces held decisive influence over policy. Ayub’s decade averaged close to seven per cent and gave us Mangla, the launch of Tarbela, an industrial base and the Green Revolution. General Musharraf’s middle years touched eight per cent and gave us telecom deregulation, bank privatisation and a consumption boom that anyone practising commercial law then will remember, because for about four years the work simply poured in. Pretending those numbers were not real is not an argument. It is a refusal to look.
Policy direction in the sector, repatriation of dividends, enforcement of an arbitral award, whether the tariff sat in primary legislation or in an SRO, but in every one of those conversations the question that mattered most was the same, and it was rarely the first to be asked: How long could a decision, once taken by the Government of Pakistan, be expected to stand?
The trouble is what paid for those decades. The sixties ran on American assistance and PL-480 wheat, which at one point covered close to half the import bill. The eighties ran on Gulf remittances, which touched ten per cent of GDP, and on the money that came with the Afghan war. The two-thousands ran on coalition support funds, cheap global credit and the proceeds of selling things we already owned. Each boom was rented. None was built. And each ended the same way, in 1971, in the stabilisation of 1988, in the balance of payments emergency of 2008.
When the rent stopped the growth stopped, because in between we never built the boring machinery that turns a good decade into a good half century. A revenue service that collects rather than negotiates. A regulator whose orders mean something. Courts able to void a bad bargain without the case taking eleven years. Our growth was not fake. It was simply never banked.
Which brings me to Indonesia, and a story better known abroad than it is here. The comparison is obvious enough. Large, Muslim-majority, post-colonial, impossibly plural, governed for thirty-two years by a general. What is less understood is that Suharto’s Indonesia was no failure in growth terms. It grew between six and seven per cent a year for three decades, fed itself in rice by 1984, and brought poverty down from around forty per cent in the mid-seventies to eleven by 1996. The World Bank held it up as a model.
The doctrine underpinning it was dwifungsi, dual function: the armed forces existed both to defend the state and to guide its political and social life. In practice that meant legislative seats nobody had voted for, thirty-eight of five hundred as late as 1999. Serving officers running provinces and state enterprises. A territorial command shadowing the civil administration down to the village. Foundations holding commercial assets nobody could properly audit. None of it seemed to matter while the numbers were good. It mattered enormously in 1997, when output fell thirteen per cent in a single year and income per head in dollars went from 1,045 to 455. The growth had been real. The state capable of protecting it had never been built.
Then came the part worth studying. Suharto resigned in May 1998 and the army held every instrument required to simply take over. Instead the high command under General Wiranto, with officers including Susilo Bambang Yudhoyono and Agus Widjojo, produced its own reform programme, the New Paradigm. The formal tie to the ruling party was cut. Six thousand officers in civilian posts were told to resign their commissions, return to the barracks or retire. Unelected legislative seats went to none by constitutional amendment in 2002, and legislation in 2004 required the state to take over military businesses.
I would not oversell it. The reform was incomplete and parts of it are now being contested in Jakarta. But the default changed, and that is the part that travels. Indonesia grew 5.11 per cent last year, invests close to twenty-nine per cent of GDP, and crossed five thousand dollars of income per head. It has not needed an IMF programme since 2003. Hold that against our own two dozen. Five per cent compounding under rules that hold is worth far more than seven under rules that do not.
The obvious objection is that Jakarta has no India on its border. Then consider Seoul, which faces a nuclear-armed adversary across a fortified line, keeps conscription and some 450,000 men under arms, and spends between 2.3 and 2.6 per cent of GDP on defence. South Korea removed its politicised officers from senior command in 1993, and income per head went from 3,658 dollars in 1987 to about thirty-six thousand today. That record does not suggest a serious external threat is incompatible with civilian control of policy. If anything it suggests the reverse, since deterrence financed out of a narrow tax base has a shelf life.
The comparison I find hardest to look at is the nearest. Bangladesh was run by an army-backed caretaker administration in 2007 and 2008, after which the military stepped back. In August 2024 its army chief declined to take power during the collapse of a government, elections followed in February this year, and an elected administration sits in Dhaka today. Income per head there is around three thousand dollars against our 1,901. In 1971 that gap did not exist.
So what does this mean for us. Less than the reader may expect, and I want to be careful. Pakistan has never had a dwifungsi, and the constitutional developments of the last two years are matters of public record on which lawyers of good faith take opposite views. I have my own. This is not the column for them.
My point is narrower. That counsels were not asking who governs Pakistan. They were asking whether a decision, once taken, could be unmade later by somebody they could not identify in advance and could not take to court. It is the only question capital ever really asks. It does not price personalities, it prices reversibility, and it has priced ours at fourteen per cent of GDP, which is what we invest. Bangladesh, India and Vietnam sit at or near thirty. Below fifteen per cent the arithmetic caps growth at three or four, and last year we managed 3.7. We are getting precisely what our institutions are worth.
And it would be dishonest to lay that at one door. Our political parties have not produced a costed economic programme between them in thirty years. Our revenue administration is a bargaining counter rather than a system, and every practitioner reading this knows what I mean. Our regulators are staffed by capable people who nonetheless know who signs their extensions. Our business houses have preferred protection to competition in every decade I can remember. My own profession has been happier litigating the Constitution than defending its ordinary provisions. Everybody in that list, myself included, helped build the deficit.
The remedy, mercifully, is technical, and nobody need lose face over it. Rules that survive a change of government. Regulators whose orders are reversed only by a court. A tax base that does not need a foreign patron every seven years. Contract enforcement measured in months rather than in the lifetimes of the parties. None of this humbles anyone, and all of it raises the value of whatever each institution believes it is defending.
The officers who wrote the New Paradigm were neither sentimentalists nor liberals. Their reasoning was that three decades of dual function had left their army commercially entangled and publicly answerable for outcomes it could not fully control, and that an institution which arbitrates everything ends up carrying the blame for everything. They judged its standing safer in a country where it was not the answer to every question. Whether that reasoning has any application here is not for me to say.
What I will say is that the sentence we grew up with has stopped working as a diagnosis. It works as an alibi. Difficult times justify extraordinary arrangements, extraordinary arrangements produce difficult times, and round it goes. Until somebody decides that a seventy-year emergency is not an emergency at all, we will go on renting decades we never get to keep, and my grandchildren will hear that sentence in the same grave register.