Pakistan’s geopolitical and economic role in South Asia has shifted over the course of the past decade. World Policy Journal spoke with Shaukat Aziz, who served as prime minister of Pakistan from 2004 to 2007, about the country’s economic development and the evolution of its relationships with other major powers in the region. From Banking to the Thorny World of Politics, Aziz’s account of his time with the government of Pakistan, was published in May.
WORLD POLICY JOURNAL: You left a decades-long career in investment banking to become Pakistan’s finance and eventually prime minister. How much overlap was there in the skill set required to make the shift from the private sector to public service?
SHAUKAT AZIZ: Well, the DNA of the private sector and the government are very different, but the basic principles of hard work, integrity, and being innovative are required in every position one undertakes, whether it’s private sector or public sector. So if you have those basic qualities, then you can adapt very easily.
Obviously, the culture in every government is different, and it’s certainly very different from the private sector. In the background that I came from, the major driver was meritocracy. When you’re running a government, you look at merit, but you also keep national interests supreme. And the risks and opportunities facing any government are very different than the risks and opportunities facing a private organization. Basically, if you have good managerial skills and leadership skills, you’ll need them in both places. How you adapt to the changing environment–that depends on personal traits and experiences.
WPJ: During your time as prime minister, Pakistan’s GDP growth rate reached a record high of 8.4 percent. Since then it has fallen and is only recently beginning to rise again, coming in this year at 4.7 percent. What kinds of policies do you think the country can pursue to continue this upward trend?
SA: Well, when we went in, the economy was in dire straits. We went through a process of structural reform–after we got the house in order, and we knew what the various factors impacting the economy were, and where and how they were functioning, we then pursued a reform agenda to create more growth, improve governance, and create opportunities for the whole country. Liberalize, deregulate, and privatize–these were the three words which described the philosophy behind our programs, and that, frankly, was received well because we unleashed the forces of the marketplace. We encouraged small entrepreneurs, medium-sized entrepreneurs, and large companies including multinationals, we reduced red tape and fought corruption to the maximum extent we could, and that made a difference. The image of Pakistan gradually improved as a place where investment was welcome and you could make good money, and where the government was a professional government. And then as time passed, we attracted more and more local, regional, and overseas investment in every field, and by deregulating the economy, we unleashed the power of the private sector to bring in innovation, and encourage private enterprise.
And so a lot of things that were done by the government were then given to private companies, for example the telephone sector–we deregulated mobile phones, and sold the main phone company, which people always said is a national asset. It is a national asset, but you don’t have to own it. It’s now a publicly listed company, and the major shareholder is the UAE telephone company, because they have the resources. There’s no harm in doing this if you have a good strong regulator who’s looking at the overall industry. You don’t have to own a business to make sure that it’s run in the national interest. One after the other we privatized a lot of major parts of the government. It was done in a transparent way, it was done in a cost-effective way for everybody, and it did not really eliminate jobs–it created more jobs. So the telephone company–the service improved, and connectivity improved, and when that happened, thousands of jobs were created. And that then touched every sector of the economy.
WPJ: One of the things you’re vocal about throughout the book is the role of economic development in everything from poverty alleviation to combating radicalization. Can economic growth on its own be a panacea?
SA: Economic growth is one aspect of the overall equation. It is not the end-all. Economic growth is good because it creates jobs, it creates investment, it creates opportunity. But at the same time you need security and law and order. You need a legal system that provides justice to all, and people must recognize that the environment is such that their rights will be protected. So just because your economy is good doesn’t mean that it is a panacea for all problems. It is a key factor, but governance is important. Security is important. The social sector is important. Health, education, helping the aged–all those parts of the work are important, and your government’s ability to be transparent, not belaboring anybody but opening themselves up to review, by Parliament, by people, by the press–all these factors help improve the enabling environment for growth, and that’s what then gets you going.
You also need good diplomacy. You need friendly countries to be supporting you, and you need investment and aid coming in from all over the world. For peace with your neighbors, you require diplomacy. So the country has a role very different than running a company. It’s much more multifaceted, it’s much more complex, but it’s much more interesting. And fulfilling. Every day, when I used to finish work, I used to think, have I made a difference? Have I tried to improve from where we were to where we are going? And when the answer is yes, you feel great. The psychological rewards of being in government are the highest you can imagine. The financial rewards, of course, are not much, but you don’t do it to get rich, you do it to serve your country.
WPJ: You’ve been optimistic about the future of the China-Pakistan relationship, citing the One Belt, One Road initiative and the China-Pakistan Economic Corridor as examples of economic diplomacy from which both countries can benefit. Do you think partnerships like these are part of a trend toward greater regional integration, or do they exist more in isolation on a country-by-country basis?
SA: I think the growing trend in the world is towards global integration. We’re talking about travel, trade, investment. These are things which build linkages and interdependencies. When you create linkages and interdependencies, you create a better atmosphere for peace, because your neighbor’s success relates to your success. Your region’s success relates to your success. The world’s success relates to your success.
For example, Pakistan is a big producer of textiles, and if Europe and the U.S. don’t buy our textiles, that whole industry, and the farmers who produce the cotton, and the laborers who are working in the factory, and the tailors who are making all the shirts that people wear and what have you–these are creating thousands and thousands of jobs in many developing countries including Pakistan. And the world is linked. When somebody is dependent on us to buy a product, or we are dependent on them, that creates those linkages, and creates a feeling of collective success.
So you should have good management, good leadership, good reforms, good governance, and then you’ll get the maximum potential out of your country. Once you do that, and growth is there, then people will do better. Their lives will change. In our time the person who was riding a bicycle to work was dreaming of getting a motorcycle. The person who was taking a motorcycle to work was dreaming of getting a small car. We had a big factory from Japan producing Suzuki cars–that was the first car many people bought after riding a motorbike for so many years. So your quality of life keeps improving. Housing, sanitation, water, electricity, all these are elements of a better lifestyle–at the end of the day, the acid test is, are your people better off today than they were yesterday? And connectivity, particularly through cellphones, has created a revolution in the world, not just any country. It brings in efficiency, it brings in better access to information that allows you to make intelligent decisions–the whole world is at your doorstep if you have a device wherein you can go onto the web and explore any type of information you want. So the digital highway is also a key driver for growth, not just physical highways and buildings.
WPJ: I wanted to return to the subject of infrastructure for a minute, because one of the things that’s been most talked about with partnerships like the China-Pakistan Economic Corridor is their potential as avenues for development. How does this compare to the more traditional paths set by multilateral institutions, like the World Bank or IMF?
SA: I believe the China-Pakistan Economic Corridor is a game-changer for Pakistan and the world, and has taken the China-Pakistan relationship to a new level. It is welcomed by the people of Pakistan and the people of China, and the governments of the two countries, because it is a win-win for both. Once you develop a road or highway, it opens up totally new territory, which then allows you to build new factories, new townships, new housing, new industrial estates all around these corridors. People have this notion that, oh, you’ll get a lot of goods from China–of course, we’d love to get goods from China, because they are quality and they are cheaper. But at the same time, China is a big importer of raw materials. So if we have raw materials to sell, that itself is a big market, with no restrictions, and Pakistan will produce goods that are in demand there–and there are quite a few–which will open up markets for our products too. The countries in the region will benefit tremendously from the One Belt, One Road initiative, which is getting a tremendous boost from president Xi of China, and the government of Pakistan on our side is doing whatever it takes to leverage this opportunity and take it to its full potential.
Now, in terms of the IMF and World Bank–you can’t lump them together. The IMF is like the doctor of the economy, and if you manage your economy right, you don’t have programs with them. One of the achievements of Pakistan in my tenure was completing the IMF programs and no longer depending on them for finances. In fact, one of my happiest days as prime minister was to announce to our parliament that we had repaid all IMF debt, and as such regained economic sovereignty. In the long run, countries have to stand on their own feet. There’s no harm in borrowing, but money from the IMF comes with a lot of conditions and a lot of micromanagement, which no sovereign country can afford in the long run.
The World Bank, ADB, AIIB–these are development banks, and they are different in the sense that they give loans for viable development projects, from dams, canals, electricity generation, to healthcare, education, et cetera–as do many donor countries, like the United States, like the European Union, like Britain, like Japan, like China. All these countries are big lenders to Pakistan bilaterally. So we deal with these institutions and with the individual countries directly. There is no harm in borrowing if you know that you’re doing it within your ability to pay, within your limits, and it is used effectively and productively, in a way that increases value added to the economy and is not used for consumption. So that’s what we did, and that’s why we grew as fast as we did, and why our reform agenda had credibility all over the world, particularly with other financial institutions and with investors.
WPJ: As far as other regional powers that feature prominently in the book, you also examine Pakistan’s relationship with India and the fact that both countries have yet to reach an agreement on Kashmir. How have negotiations moved forward from where they stood during your time as prime minister?
SA: Well, actually, during our time, we made a lot of progress on bilateral relations with India. I think it’s very important for countries to realize that they have to learn to live in peace with each other, and treat each other with respect–whether you are large, small, or somewhere in between, every country has the right to decide its own policies. The issue of Kashmir is a very important issue for Pakistan–there are United Nations resolutions which laid out a framework of how this dispute should be settled, by a plebiscite in Kashmir, where each Kashmiri could decide which way they wanted to go. But the U.N. resolutions–still, today, after decades have passed–have not been implemented. Hence this issue remains a sore point in the relationship, where Pakistan wants the U.N. resolutions to be implemented, and India does not wish to do so. So that’s the stalemate. That has affected the overall relationship between the two countries. The atmospherics, while they could be better, did improve substantially when General Musharraf was president and Mr. Vajpayee was prime minister–they made a lot of progress. But because Mr. Vajpayee did not win the next election, the agreements we had could not be implemented.
This can still be revived. The model of settling the Kashmir issue that had been worked on, which was based on the Northern Ireland formula, was agreed to by both sides. And we got help from many friendly countries, particularly Great Britain, in trying to find an amicable settlement and moving forward. But since that couldn’t be implemented, unfinished tasks have been left on the table. India is a much bigger country than Pakistan, but Pakistan has enough resources to protect itself. So we have to live together, but learn to respect each other, and work on the issues–increase trade, increase interactions between the two countries, travel, et cetera, and try to rise above the various taboos we may have about each other, and then work on core issues like Kashmir. After all, there’s enough poverty on both sides of the border. In India and Pakistan, a lot of the resources that we are required to spend on security issues can be diverted to helping the people.
But I think both countries have to really reflect on what can be done to solve issues like Kashmir. No country will accept being bullied by any other country these days, and we need to understand each other, need to have a genuine desire to live in peace, and allow the two countries to grow and develop as they deem appropriate for their own requirements, without interference in the internal affairs of each other. That’s the way we should proceed.
WPJ: Do you think the political will to resolve the question exists currently?
SA: I think the political will is always there–you need the right atmospherics, and you need the right key to the door to start the dialogue again, and each country has to assess its situation. From Pakistan’s side, the political will is there to have a peaceful environment in South Asia, an environment where each country is treated with respect, and where issues are settled through negotiations and dialogue.
WPJ: What do you believe are the biggest challenges Pakistan faces moving forward? What should its priorities be?
SA: I think the biggest challenges are extremism and terrorism, because of what has happened in the world. I’ve always said that terrorism is a hearts and minds issue. It is not just a security issue, so if you deal with it just through police and intelligence capabilities, you may identify people who are involved, but there’ll be many more whose minds you will not get into. How do we get into their minds? We have to give people opportunity, we have to give them a feeling of justice, a feeling that the world cares and their governments care and their leaders care. We have to avoid conflict and armed intervention in any part of the world, and in fact use those resources, to promote jobs, to create a better lifestyle, to promote equity, justice, human rights. These are things that people appreciate, because they feel motivated, then, to work harder. So my view is that terrorism has to be looked at holistically. You have to go into the roots of the problem, not only symptoms. I do realize this is a very complex issue, and that there are a lot of nuances, but we have to think creatively in order to win the hearts and minds of people. That requires good security, but it also requires good opportunities. If you give people opportunity and they’re busy in that and their lives are improving, the probability of terrorism will decrease and decrease, and gradually we can address it completely.
This interview has been edited and condensed for clarity.
Visit the Talking Policy archive page for more World Policy interviews!
[Photo courtesy of Kimberlee Hewitt]