Nawaz Sharif coming out of the Cold?

Nawaz Sharif – Coming out of the Cold? By Syed Haider Raza Mehdi

An attempt at an objective review of Nawaz Sharif’s performance as his government completes more than half its term. Something like a mid-term report!

For a long time I’ve been a very strong critic of Prime Minister Nawaz Sharif’s governance and politics, and hopefully will continue to retain that right.

But in all fairness and trying to be objective they’ve navigated the 2.5 years much better than expected.  Fight against terrorism, general law and order, large scale infrastructure spending and foreign policy, the military “Operation Zarb e Azb” in FATA against the TTP and other terrorist groups,  the crackdown against urban militancy and terrorist financing in Karachi by the Pakistan Rangers and the apple of everybody’s eye, the game changing $47 billion Chinese investment in the China Pakistan Economic Corridor (CPEC).

Of course he couldn’t have done anything without the Pakistan Army and for that he also must get some credit.

Firstly by appointing a very competent, highly professional person in Gen. Raheel Sharif as the Army Chief and secondly by working closely together with him and not getting embroiled in unecessary conflict and power struggles with the Army.  An attempt to try former President Gen. Musharraf badly backfired and he eventually gave in. Latest reports indicate that Gen. Musharraf may be allowed to leave the country.

Gen. Raheel, the gruff, silent and highly professional soldiers went steadily ahead without disturbing Nawaz’s fragile democracy and upsetting the apple cart at the peak of Imran Khan’s 127 days of public agitation. Gen. Raheel deserves great credit as well.

What it has shown that the Pakistan Army has more than redeemed itself from all its past deeds of omission and or comission and clearly today the only institution which has stood between what seemed like an impossible situation facing the country and its slow turnaround today towards progress and we’ll being. Economic and social progress is only possible when there is peace.

To all those who continue to discredit the Army, it is now evident that the Pakistan Army, under the brilliant and professional leadership of Gen.Raheel Sharif, has shown how the institution can influence and effect change in a country where other institutions are fairly dysfunctional. The Pakistan Army has paid for a better Pakistan with the blood and sacrifices of its officers and men.  Only those who know what the Army has been through in their fight against terrorism and militancy can appreciate the immense toll it has taken on the institution. Here’s a powerful and moving article which opens a window to the type of sacrifice the Pakistan Army has given. The Martyrdom of Capt. Umair

So before they rant about the past and Martial Law regimes, let them now also look at our present.

And if somehow the Army can influence deep rooted political and administrative reforms without direct intervention, then we can look forward to a future with greater hope and confidence.

But back to Nawaz Sharif.

Despite the ongoing controversy over several seriously misdirected priorities such as the Qatar LNG project, the two metro bus projects in Lahore and Rawalpindi, and the Lahore Orange train, the Karachi Green line being an exception, one has to accept that these projects have added to urban transportation infrastructure and gas supply. True, whether we like it or not.

Personally, in my opinion, these funds could certainly have been better spent on poverty alleviation, health care, education, job creation, vocational skill building, micro finance funding, rural farm to market roads and many other more pressing and urgent priorities.

But what’s done is done, and these projects did add jobs and money into the economy.

Coal powered power projects and LNG import will also create jobs, put money in the economy and provide fuel and power. Albeit at much higher costs.

Macro economic indicators in Pakistan are looking good. Current account deficit down to 4% of GDP in 2015, from a high of nearly 9% in 2012. Due to low oil prices windfall and some prudent economic planning, our foreign exchange reserves today stand at $23 Billion, the highest ever in Pakistan’s history. A rising middle class of about 40 Million with annual consumer spending growing at 10%, twice that of Asia. The $47 billion CPEC has all the hallmarks of being a game changer. Annual GDP growth is projected at 4.5% in 2016. The documented economy has grown to $270 billion and if the undocumented portion is added mushrooms to over $400 billion with a per capita income of nearly $2200!

Perhaps one area where Finance Minister Ishaq Dar faltered was getting funds at very high rates in the international sukuk and bond market. He could have done better.  However our total public debt though still quite high and worrisome is still better than many developed countries at 62% of GDP. External public debt is 22% of GDP. Over 80% of external public debt is Long term, low interest multilateral or bilateral debt. Only 20% is from the Paris club.

So most of our macro environment indicators are positive and one must give credit to PM Nawaz Sharif, for this.  

One area which will come to haunt him is the $22 Billion Qatar LNG 16 year contract. This contract reeks of corruption, incompetence and a very short term approach. Pakistan, in my opinion and that of most energy experts ( I’m not one)  could have gotten the same pricing perhaps slightly higher on short term and or spot based LNG  contracts rather than sign a long term contract with LNG prices linked to the Brent crude oil rate. In this case at 13.7% of Brent crude and take a huge gamble that low oil prices will remain low for the forseeable future or the next 15 years. 

Pakistan is the ONLY country this year to have signed a long term LNG contract. Even Japan, the world’s largest LNG importer chose to buy LNG on spot prices and not sign long term contracts. Thailand another huge LNG importer also decided not to renew a long term LNG contract with the same country Qatar, with whom we signed contract.  

The reason these countries have not gone for long term contracts is because LNG prices are expected to remain low for a very long time, unlike oil, which will rise. Furthermore, LNG is in major over supply and progressively losing demand due to switching to coal based and nuclear based power generation. 

All this has serious financial consequences. According to Muddassir Iqbal, an acknowledged Pakistani Energy expert, Pakistan’s long term pricing contract linked to Brent crude oil means that just in the last 30 days our price has increased 31% from $ 4.03 / MMBTU to $5.35 / MMBTU because of increase in Brent crude from 30$ to 40$ today. His detailed analysis can be accessed at The LNG contract controversy.

According to Forbes …”LNG Spot prices in Asia have dropped from just over $20 per million British thermal units (MMBtu) in February 2014 to $4.95/MMBtu for delivery this March…….And today we are paying even more than the prevailing spot price. 

This decision will come to haunt PM Nawaz Sharif,  Finance Minister Ishaq Dar and  Energy Minister Shahid Khaqan Abassi and unfortunately the people of Pakistan who will eventually pay the heavy for this decision. 

However its only saving grace is on the demand side to ensure continous supply of LNG gas to industry, homes and transportation.

Foreign Policy has been sane and prudent.  While it’s a great honour for Pakistan Army Chief, Gen Raheel Sharif, his family, Pakistan Army and Pakistan to be offered the (ceremonial) post of Commander in Chief of the 34 nation Saudi sponsored coalition against terrorism, accepting it would be poor decision. One. It’s a toothless role. History is full of such examples of Coalition Commanders with no powers with their subordinate commanders taking orders only from their own country.

Secondly. It’s a partisan coalition and seen by Iran as anti-Shia and anti-Iran. If Saudi Arabia can swing the addition of Iran, Iraq, Syria and Lebanon then it will acquire much greater power.  This however will not happen because Iran and Saudi support opposing camps in the Syrian conflict.   Saudi Arabia supports 5 of the 6 major groups fighting Assad.  Jubhat Al Nusra ( Al Qaeda in Syria) Jaish Al Islam, Jaish Al Fatah,  Ahrar Al Sham (also funded by UAE, Qatar and Kuwait) all being splinter groups of Al Qaeda espousing the same theological and political philosophy of Militant Jihadism and Islamism and the secular Free Syrian Army. The 6th being DAESH.

Iran on the other hand supports President Basher Al Assad, along with Russia and the Lebanese Hezbollah. They are fighting the 5 groups supported by Saudi Arabia as well as DAESH. So a very remote possibility of all countries coming to the same table to fight Daesh.

So far Pakistan has navigated this well by staying out of Syria and officially stating that the legal government in Syria is that of President Assad. By not joining the Saudi lead coalition against Yemen. And by moving cautiously on joining the second Saudi lead 34 Nation coalition against terrorism. And by giving assurances to Iran that Pakistan will not join any military alliance against them.

So Prime Minister Nawaz Sharif, Pakistan Army Chief, Gen. Raheel Sharif and Pakistan must continue to walk this tightrope and not be seen as taking sides.

It’s a difficult one for Pakistan and the Prime Minister.  Despite his close personal ties with the ruling Al Saud family, his known right wing conservatism and natural bias towards Saudi Arabia, Nawaz Sharif has done a good job in walking this tight rope, so far.

He’s managed, it seems, to have placated ruffled Saudi feathers, a country which has helped Pakistan many times with generous financial support. It appears from his recent trip to Saudi Arabia that much damage has been controlled resulting from the hiccup of Pakistan’s refusing to join the Saudi lead Coalition against Yemen. And at the same time, Nawaz Sharif has also reached out to Iran as evidenced by the visit of the Iranian President to Pakistan, later this month.

The reality of Iran being a neighbor and potentially a great trading partner post the nuclear sanctions, a country which at one time, along with China, was one of the few countries which supported our Kashmir Cause in the UN, even after the Revolution. The real schism with Iran started when both countries found themselves in opposite camps during the Afghan Civil War following the Russian withdrawal in 1989.

So it is unlikely that Gen. Raheel and or Pakistan will accept the appointment to head the 34 Nation Saudi coalition!

Finally there’s this recent, overt and very visible distancing by Nawaz Sharif from his traditional conservative right wing position.

Whether it’s a political ploy, a temporary Machiavellian adjustment or long time in coming, brilliant statesmanship, whatever it be, it has earned him the grudging support of many not positively inclined towards him earlier.

This was manifested in three recent actions of his government. First the Women’s protection bill passed by the Punjab Provincial assembly. While it is a provincial bill but would never have been tabled and passed without his assent.

Secondly inviting Sharmeen Chinoy to the PM house for the screening of her Oscar winning documentary on women rights.

And finally doing the unthinkable. Allowing the execution of Mumtaz Qadri the person who killed Late Governor Salman Taseer because Mumtaz believed Governor Salman had committed blasphemy by calling into question the Law of Blasphemy in the Pakistan Penal Code.

Qadri’s execution was a brave action, many predicting widespread violence if he was executed. Nothing happened. All Pakistani Media, at the Government’s advice, blacked out reports of the thousands that turned up for the executed murderer’s funeral, thus diluting the widespread and anticipated negative effects of the funeral. So some serious spine!

Whether he’s doing these things on his own or under advice from Gen. Raheel or as some say his daughter, Maryam Nawaz, the actions are very symbolic and positive.  If he’s listening to Gen. Raheel then it’s again good news that not only does he actively listen to wise counsel, he also acts on it!

 If it’s his daughter Maryam Nawaz, then clearly Maryam deserves much more credit than she currently gets. If Nawaz Sharif is doing this on his own then we perhaps are seeing a transformation in the thinking of this man, perhaps not conceived or expected.  So are we to see some more unexpected rabbits from his Prime Ministerial hat?

Clearly the Prime Minister has the 2018 elections in his cross hairs and hence does not want to do anything to upset the situation and put elections at risk, knowing that he’s peaking at the right time.

5000 MW of power are expected to be added to the National Grid by end 2017 early 2018. CPEC should be in full swing. The TAPI oil pipeline as well. Perhaps even the Iran Pakistan pipeline. Maybe an Afghan Taliban peace accord. Controversial as it may be and questionable, the Qatar LNG contract will ensure no “negative political optics” as the political pundits say, of long lines  queuing for gas and the people and industry up in arms because of furl shortages.  

So if he’s lucky he’s going to go into 2018 election year on a huge high.  Despite the charges of misgovernance, political gerrymandering and corruption!

What he didn’t do well?

Moving forward on the National Action plan against terrorism.  Whilst the army lead portion of the NAP as in Operation Zarb e Azb in FATA and the Rangers operations in Karachi, have been very successful, very little seems to have been done on the civilian front, despite the high sounding rhetoric from Interior Minister Ch. Nisar Ali Khan. The National Counter Terrorism Authority (NACTA) is still seen as another toothless agency, paying lip service to the National Action Plan. A more appropriate move forward is to transform NACTA into a USA type National Homeland security structure, under a military officer, seasoned and experienced in Counter Terrorism with access to intelligence and agencies from both the civilian and military establishments. 

The Prime Minister must finally not be afraid of shadows and whisperings of military dominance and have faith in the military and law enforcement infrastructure under him.  Abdul Aziz of the Red mosque, though now slightly chastened still has strong support from his government, including his interior minister, Ch. Nisar, otherwise a sensible person. While it is understandable that the issue is volatile and there is fear that it may blow up like it did in 2007 when President Musharraf launched the operations against Abdul Aziz and his late brother, times have changed.  

Today there is overwhelming support for actions against militants and terrorists like Abdul Aziz, who took up arms against the State and caused the martyrdom of 14 military officers and troops.  Like Operation Zarb e Azb in FATA, delayed because of a fear of blow back, but very successful when Gen. Raheel Sharif took this bold action, similar bold action needs to be taken now under the National Action plan to destroy the sources of terrorist support and thought in urban centers such as southern Punjab and Islamabad.  The Prime Minister needs to take action sooner than later and must understand that the Army and the Nation are fully behind him in this resolve.

Relationships with India. An area of weakness and questionable because of the perception that his personal business interests with leading Indian houses drive his desire for better ties. Also one area where his working relationship with Gen. Raheel Sharif and the army was in question. Also whilst the so called Pakistani “establishment” are quite willing to turn a new leaf in improving ties with India, Prime Minister Modi of India, sweeping into power on a huge wave of ultra conservative right Hindu nationalism is unwilling to do so.

Expanding the tax base to increase government revenues and promoting exports.  Here he is clearly limited by his fear of offending his business and trader constituency and the tax amnesty scheme further shows their inability to address this serious issue. On exports. The absence of an Export Credit Agency (ECA) or an EXIMP bank, though there is talk that its being set up, is essential to extend export trade financing and insurance to exporters, using receivables as collateral vs the traditional use of property, inventory etc as collateral by banks.  The latter significantly limits the credit available to Exporters and hence limits their ability to finance exports.

Very poor and shoddy performance in impacting the lives of the common man. Health care and education in shambles. The police, other than KPK, behaves like a private militia especially in Punjab and Sind. 

Governing with an autocratic style and showing complete indifference to democratic institutions. His record of attending the parliament and Senate abysmally and embarrassingly low.

An unwillingness to institute electoral and governance reform and create empowered Local bodies.

Unable to shed charges and repeated allegations of non-transparent expenditure of public funds on grandiose schemes. Appointment of cronies and close family members to public sector institutions. Serious allegations of conflict of interest in furthering personal business interests using his position as Prime Minister. A governance style very close to what appears to be serious misuse and abuse of power. One big glaring example of this misuse is the LNG contract with Qatar!

And finally an inability or lack of desire to conduct objective, across the board and transparent accountability of all those suspected and or charged with gross corruption and abuse of power.

What can go against him?

Accountability in Punjab and the Center. A much more aggressive intrusion by the Army in matters of corruption and misgovernance. Supreme Court rulings against him and Ishaq Dar on charges of corruption. The Model Town massacre in Punjab. Corruption charges against his close political and business cronies. Urban violence by the ultra-conservative right, especially his former constituency of Kashmiri jihadists. If he can navigate these successfully, especially the Kashmiri Jihadists, he rides a high horse into election year.

What can earn him a place in history?

Active, visible and uncompromising action against terrorists and militants in southern Punjab and other urban centers such as Lahore, Bahawalpur, Multan, Islamabad, Rawalpindi.

Deep rooted Electoral and governance reforms. Restructuring country into more provinces and a local bodies governance structure with full financial and administrative powers. Complete revamp of the judiciary and law enforcement institutions. Transparency in governance, and in the judicious use of public funds.

Merit and transparency in making public sector appointments, with competency and integrity being the two factors. This is a big area where the Prime Minister can make huge economic impact by doing away with nepotism in public appointments in three areas. Bureaucracy.  Police and the Governance of the 200 odd public sector state owned business enterprises. A simple solution with deep impact would be to establish completely independent executive boards with independent professional technocrats heading these enterprises and free of political and bureaucratic control and influence and interference .If so done, the vast majority will become financially viable and fetch greater value if also tabled for privatization. PIA privatization is again a good step, though initially mishandled but nevertheless a good step.

Across the board Accountability and eliminating corruption. Eliminate his own misuse of power to further personal business interests. 

Prime Minister Nawaz Sharif governs in interesting times, as the Chinese say!