Why Pakistan Isn’t a Failed State

Business Economics

To Be Submitted: Miss Sayyeda Hameeda

Batool

By: Jigars Group

Sayyed Mubashir-Ul-Hassan
Muhammad Khuram Shahzad
Muhammad Ali Ikhlaq
Hafiz Najam Saqib
Usman Ghani
Qaisar Abbas

COMSATS Institute of Information Technology

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Acknowledgements

With the name of Allah the most merciful and kind full. First of all thanks to
Allah almighty for all his kindness. Allah made this work possible for us that we were
able to finish our work in time. We pray to Allah that Oh Allah please help us in our
life and please be kind to us, our institute and country.
After that we are thankful to our honorable teacher Madam Sayyeda Hameeda
Batool for her hard work that she does for us. Under her kind leadership ,we feel our
self very comfortable and we always see towards her whenever we feel any problem.
During this work her guidance made our work easier and better. During the
preparation of the report many things were happening inside the country, Mr.
President left his powers as chief in charge of Armed forces as suicide attacks were
making the work more difficult. Media was making noise on N.R.O and silence of
Mian Nawaz Sharif (PML-N) prevailed. But we continued our work. It is most
important to mention here that nothing can finish our love with our home, Pakistan.
So we thank Pakistan, while we are living on its land and we are using its resources
and enjoying the independence. (ALLAH HU AKBAR)
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Table of Contents

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Topic Page #
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Introduction to Assignment 4

Preamble 4

What is a failed state? 5

Islamic Republic of Pakistan 5

Economic Review of Pakistan 9

Why Afghanistan? 16

Economic review of Afghanistan 16

US Debts and deficit 17

Why Pakistan is not a failed state? 17

Why it was declared as failed? 20

Executive Summary 21

Best Wishes/References 23
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Introduction to Project:
The pages in your hands are a project of Business Economics of MBA first
semester and the hard work is done by Jigars group. We have tried to use a
rational approach instead of patriotism or extremism. Our topic is a commonly
asked question of the day. We all love Pakistan but we do not live in the fool’s
paradise that we are talking only what is best in Pakistan. Our effort was done
honestly and till the end we have tried to not insert our Personal emotions in the
discussion.
The topic can be discussed by many ways. For example the political
situation of Pakistan, the social system of Pakistan, the culture of Pakistan and so
many things are there to be discussed. But our work is concerned specially with
economic situation. Most of the discussion consists of economic debate. May be
you will find some data that looks against some country but we are only arguing
on the base of realities or what a common eye see.
“Pakistan is a fail state” is being a commonly spoken sentence today but
we do not accept it. Why? The answer of this why is our assignment. We are
putting some realities in front of you. And you will select the answer of Yes or NO.
Yes Pakistan is a fail state. Or No Pakistan is not a fail state. We are patriots but in
the discussion it is better to use and talk on the real reports instead of being
angry with any one else and not accepting the reality.

Preamble:
Lets start from an example to see the real face of Pakistan.
Four men, of different nationalities (Arabic, Englishman, Russian, Turkish)
landed at Karachi International airport. They come out and sit in a car and decide
a journey throughout Pakistan. There trip starts from Karachi. They visit some
important areas of Karachi then by Indus highway; from city to city they reach
Islamabad. They will surly find many beautiful cultures and different people. Now
from Islamabad they go to Gilgit by karakuram highway. They come back and go
to Muzzaffarabad and then by Muree road they come back to Islamabad. They
visit Rawalpindi and Texila then they go in sindh for Mohinjodaro, now they come
to Lahore the cultural hub of Punjab.
What the group finds.
 Peace loving peaceful nation
 Kind people
 Very beautiful cultures with full of colors and life
 All markets in working condition
 4 different seasons
 From deserts to Chikory (K- 2) all types of geographical area
 And many more
I am 100% sure that throughout the country the group will find no hurdle
in journey. No problem or tension of terrorism will they face. A person still (at the
time being now) can go any where in Pakistan except some areas of FATA and
some areas of Balochistan (only some Brahvi speaking area). He might find every
thing very well.
Now the same group decided to go to Kabul (Peshawar to Kabul or Quetta
to Kabul) and from Kabul to Qandhar. Can you believe what will happen? On all
the main roads of Afghanistan Taliban set there barriers and they check each and
every vehicle and it is common there. You cannot continue your journey there
without any vehicle of NATO army.
It is real that a Pakistani ambassador was kidnapped while he was going
from Peshawar to Kabul.
A report of Aljazeera after the day of Afghanistan election showed that how
Taliban stopped every vehicle and checked the people (thumb) that weather they
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had taken part in election or not and this was happening only 4 miles away from
Kabul city (capital city).
Why we are comparing Pakistan from Afghanistan. Basically our purpose is
to show you the real fail state and the difference between Pakistan and
Afghanistan. Now isn’t it to unbelievable that the situation in many areas of India
is not different from Afghanistan like the southern part of India where Tamil
movement for liberation is very powerful. In Kashmir Indian army behaves not
different than terrorists. So if you say that Pakistan is a fail state then you have to
declare India also (according to the definition of fail state India has more failure
options).
Actually it is commonly asked question. Is Pakistan a fail state? The topic
got fame when John carry said in an interview (while his campaign) that Pakistan
was a fail state. The Crisis States Research Centre declared Pakistan a fail state in
2005 and onward and in 2006 Pakistan and Afghanistan were almost equal (too
funny) in their failure. But that is why we are comparing Pakistan and Afghanistan.
Before going onwards let’s check what is a failed state?

What is a Failed State?

The term failed state is often used by political commentators and journalists to
describe a state perceived as having failed at some of the basic conditions and
responsibilities of a sovereign government. In order to make this definition more
precise, the following attributes, proposed by the Fund for Peace, are often used
to characterize a failed state:
 Loss of physical control of its territory, or of the monopoly on the
legitimate use of physical force therein,
 Erosion of legitimate authority to make collective decisions,
 An inability to provide reasonable public services, and
 An inability to interact with other states as a full member of the
international community
Common characteristics of a failing state include a central government so
weak or ineffective that it has
 Little practical control over much of its territory
 Non-provision of public services
 Widespread corruption and criminality
 Refugees and involuntary movement of populations
 And sharp economic decline.
Now after the definition of fail state lets take a brief introduction of Pakistan
before starting our debate.

Islamic Republic of Pakistan

Motto:”Unity, Discipline and Faith"
Pakistan is a country in South Asia. It occupies a crossroads between South
Asia, Central Asia and the Middle East.
The region forming modern Pakistan was at the heart of the ancient Indus
Valley Civilization and then later was the recipient of Vedic, Persian, Turco-
Mongol, Indo-Greek and Islamic cultures.

In addition to the Indian independence movement which demanded an

independent India, the Pakistan Movement (led by Muhammad Ali Jinnah of the
Muslim League), which also sought an independent India, sought an independent
state for the majority Muslim populations of the eastern and western regions of
British India. The British granted independence and also the creation of the
Muslim majority state of Pakistan that comprised the provinces of Sindh, North-
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West Frontier Province, West Punjab, Balochistan and East Bengal. With the
adoption of its constitution in 1956, Pakistan became an Islamic republic.
It is the sixth most populous country in the world and has the second
largest Muslim population in the world after Indonesia. It is the world's only
Muslim-majority nuclear state. Pakistan is a member of the Commonwealth of
Nations, Next Eleven economies and the D8.

Religions
Pakistan is the second-most populous Muslim-majority country and also
has the second-largest Shi'a population in the world. About 95% of the Pakistanis
are Muslim, of which nearly 75% are Sunni and 20% are Shi'a. The two groups of
Muslims usually coexist peacefully.
The religious breakdown of the country is as follows:
1. Islam 173,000,000 (96%)
2. Hinduism 3,200,000 (1.85%)
3. Christianity 2,800,000 (1.6%)
4. Sikhs around 20,000 (0.001%)
5. The remaining are Parsis, Ahmadis, Buddhists, Jews, Bahá'ís, and Animists
(mainly the Kalasha of Chitral

Military
The armed forces of Pakistan are an all-volunteer force and are the sixth
largest in the world. The three main services are the Army, Navy and the Air
Force, supported by a number of paramilitary forces, which carry out internal
security roles and border patrols. The National Command Authority is responsible
development control of all strategic nuclear forces and organizations.
The Pakistan military first saw combat in the First Kashmir War, gaining
control of what is now Azad Kashmir. India imposed wars over Pakistan in 1965
and in 1971. During the Soviet-Afghan war, Pakistan shot down several intruding
pro-Soviet Afghan aircraft and provided covert support to the Afghan mujahideen
through the Inter-Services Intelligence agency. In 1999, Pakistan was involved in
the Kargil conflict with India.
The Pakistani armed forces were the largest contributor to United Nations
peacekeeping efforts, with more than 10,000 personnel deployed in 2007 and are
currently the largest contributor. In the past, Pakistani personnel have
volunteered to serve alongside Arab forces in conflicts with Israel.
Pakistan's military employs armaments that include atomic weapons,
mobile vehicle ballistic missile systems laser communication systems, armored
cars and tanks, and multi-role fighter/bomber jets.

Geography and climate

Pakistan covers 340,403 square miles (881,640 km2), approximately
equaling the combined land areas of France and the United Kingdom. Apart from
the 1,046-kilometre (650 mi) Arabian Sea coastline, Pakistan's land borders total
6,774 kilometers—2,430 kilometers (1,509 mi) with Afghanistan to the northwest,
523 kilometers (325 mi) with China to the northeast, 2,912 kilometers (1,809 mi)
with India to the east and 909 kilometers (565 mi) with Iran to the southwest.
The northern and western highlands of Pakistan contain the towering
Karakoram and Pamir mountain ranges, which incorporate some of the world's
highest peaks, including K2 (28,250 ft; 8,611 m) and Nanga Parbat (26,660 ft;
8,126 m). The Balochistan Plateau lies to the west, and the Thar Desert and an
expanse of alluvial plains, the Punjab and Sindh, lie to the east. The 1,000-mile-
long (1,609-km) Indus River and its tributaries flow through the country from the
Kashmir region to the Arabian Sea.
 7

Pakistan has four seasons: a cool, dry winter from December through
February; a hot, dry spring from March through May; the summer rainy season, or
southwest monsoon period, from June through September; and the retreating
monsoon period of October and November.

Flora and fauna

The national animal of Pakistan is the Markhor and the national bird is the
Chukar, also known as Chakhoor in Urdu. The wide variety of landscapes and
climates in Pakistan allows for a wide variety of wild animals and birds. The
forests range from coniferous alpine and subalpine trees such as spruce, pine,
and deodar cedar in the northern mountains to deciduous trees such as the
mulberry-type Shisham in the Sulaiman range in the south. The western hills have
juniper and tamarisk as well as coarse grasses and scrub plants. Along the
southern coast are mangrove forests, which form much of the coastal wetlands.
In the south, there are crocodiles in the murky waters at the mouth of the
Indus River whilst on the banks of the river; there are boars, deer, porcupines, and
small rodents. In the sandy scrublands of central Pakistan are found jackals,
hyenas, wild cats, panthers, and leopards while the clear blue skies abound with
hawks, falcons, and eagles. In the southwestern deserts are rare Asiatic cheetahs.
In the northern mountains are a variety of endangered animals including Marco
Polo sheep, Urial sheep, Markhor and Ibex goats, black and brown Himalayan
bears, and the rare Snow Leopard. During August 2006, Pakistan donated an
orphaned snow leopard cub called Leo to USA. Another rare species is the blind
Indus River Dolphin of which there are believed to be about 1,100 remaining,
protected at the Indus River Dolphin Reserve in Sindh.

Economy
Despite being a very poor country in 1947, Pakistan's economic growth
rate was better than the global average during the subsequent four decades, but
imprudent policies led to a slowdown in the late 1990s.Recently, wide-ranging
economic reforms have resulted in a stronger economic outlook and accelerated
growth especially in the manufacturing and financial services sectors. Since the
1990s, there has been great improvement in the foreign exchange position and
rapid growth in hard currency reserves. The 2005 estimate of foreign debt was
close to US$40 billion. However, this has decreased in recent years with
assistance from the International Monetary Fund and significant debt-relief from
the United States. Pakistan's gross domestic product, as measured by purchasing
power parity, is estimated to be US$475.4 billion while its per capita income
stands at $2,942. GDP growth was steady during the mid 2000s at a rate of 7%;
however, slowed down during the Economic crisis of 2008 to 4.7%.Pakistan's GDP
is US$167 billions, which makes it the 48th-largest economy in the world or 27th
largest by purchasing power adjusted exchange rates. Today, Pakistan is
regarded as to having the second largest economy in South Asia.
Some important industries of Pakistan are telecommunications, real estate,
energy, apparel and textiles (accounting for nearly 60% of exports), food
processing, chemicals manufacture, and the iron and steel industries. Pakistan's
exports in 2008 amounted to $20.62 billion (USD). Pakistan is a rapidly developing
country.

Society and culture

Pakistani society is largely hierarchical, with high regard for traditional
Islamic values, although urban families have grown into a nuclear family system
because of the socio-economic constraints imposed by the traditional joint family
 8

system. Increasing globalization has resulted in ranking 46th on the A.T.

Kearney/FP Globalization Index.
The variety of Pakistani music ranges from diverse provincial folk music
and traditional styles such as Qawwali and Ghazal Gayaki to modern forms fusing
traditional and western music, such as the synchronization of Qawwali and
western music by the world renowned Nusrat Fateh Ali Khan. In addition Pakistan
is home to many famous folk singers such as the Abida Parveen, Mansoor Malangi
and Pathanay Khan. State-owned Pakistan Television Corporation (PTV) and
Pakistan Broadcasting Corporation were the dominant media outlets, but there
are now numerous private television channels.
The architecture of the areas now constituting Pakistan can be designated
to four distinct periods—pre-Islamic, Islamic, colonial and post-colonial. With the
beginning of the Indus civilization around the middle of the 3rd millennium B.C.,
an advanced urban culture developed for the first time in the region, with large
structural facilities, some of which survive to this day. Mohenjo Daro, Harappa and
Kot Diji belong to the pre-Islamic era settlements. The rise of Buddhism and the
Persian and Greek influence led to the development of the Greco-Buddhist style,
starting from the 1st century CE. The high point of this era was reached with the
culmination of the Gandhara style. An example of Buddhist architecture is the
ruins of the Buddhist monastery Takht-i-Bahi in the northwest province. The
arrival of Islam in today's Pakistan meant a sudden end of Buddhist architecture.
However, a smooth transition to predominantly pictureless Islamic architecture
occurred. The most important of the few completely discovered buildings of
Persian style is the tomb of the Shah Rukn-i-Alam in Multan. During the Mughal
era design elements of Islamic-Persian architecture were fused with and often
produced playful forms of the Mugal art. Lahore, occasional residence of Mughal
rulers, exhibits a multiplicity of important buildings from the empire, among them
the Badshahi mosque, the fortress of Lahore with the famous Alamgiri Gate, the
colourful, still strongly Persian seeming Wazir Khan Mosque as well as numerous
other mosques and mausoleums. Post-colonial national identity is expressed in
modern structures like the Faisal Mosque, the Minar-e-Pakistan and the Mazar-e-
Quaid.

Languages and Literature

The literature of Pakistan covers the literatures of languages spread
throughout the country, namely Urdu, Sindhi, Punjabi, Pushto, Baluchi as well as
English in recent times and in the past often Persian as well. Prior to the 19th
century, the literature mainly consisted of lyric poetry and religious, mystical and
popular materials. During the colonial age the native literary figures, under the
influence of the western literature of realism, took up increasingly different topics
and telling forms. Today, short stories enjoy a special popularity. The national
poet of Pakistan, Allama Muhammad Iqbal, suggested the creation of a separate
homeland for the Muslims of India. However, Iqbal had also written the Tarana-e-
Hind which stated the belief of a strong united India. His book The Reconstruction
of Religious Thought in Islam is a major work of modern Islamic philosophy. The
most well known representative of the contemporary Urdu literature of Pakistan is
Faiz Ahmed Faiz. Sufi poetry Shah Abdul Latif, Bulleh Shah and Khawaja Farid are
also very popular in Pakistan. Mirza Kalich Beg has been termed the father of
modern Sindhi prose.

Tourism
Despite having an image problem, hyped particularly in the West, and
once alleged as one of the most dangerous countries in the world by the British
magazine "The Economist", tourism is still a growing industry in Pakistan because
of its diverse cultures, peoples and landscapes. The variety of attractions ranges
from the ruins of ancient civilizations such as Mohenjo-daro, Harappa and Taxila,
to the Himalayan hill-stations, that attracts those interested in field and winter
 9

sports. Pakistan also has several mountain peaks of height over 7,000 meters
(22,970 ft), which attract adventurers and mountaineers from around the world,
especially to K2. [130] Starting in April to September, domestic and international
tourists visit these areas helping tourism become a source of income for the local
people. Majority of the tourists are from other Asian countries.
In Blochistan there are many Caves for cavers and tourists to visit specially
the Juniper Shaft Cave, the Murghagull Gharra cave, Mughall saa cave, and
naturally decorated cave, Pakistan is member country to UIS (Union of
International Speleology).
The northern parts of Pakistan are the site of several historical fortresses,
towers and other architecture. Including the Hunza and Chitral valleys, the latter
being home to the Kalash, a small pre-Islamic Animist community. Punjab is also
the site of Alexander's battle on the Jhelum River. The historic city of Lahore is
considered Pakistan's cultural centre and has many examples of Mughal
architecture such as the Badshahi Masjid, Shalimar Gardens, Tomb of Jahangir
and the Lahore Fort. The Pakistan Tourism Development Corporation (PTDC) also
helps promote tourism in the country. However, tourism is still limited because of
the lack of proper infrastructure and the worsening security situation in the
country. The recent militancy in Pakistan's scenic sites, including Swat and NWFP,
has given a massive blow to the tourism industry. Much of the trouble is also
being blamed on: the frail travel network, tourism regulatory framework, low
prioritization of the tourism industry by the government, low effectiveness of
marketing and a constricted tourism perception. Furthermore 500,000 tourists
have visited Pakistan before global economic recession.

Sports
The official and national sport of Pakistan is field hockey, although cricket
is more popular. The national cricket team has won the Cricket World Cup once (in
1992), were runners-up once (in 1999), and co-hosted the games twice (in 1987
and 1996). Pakistan were runners-up in the inaugural 2007 ICC World Twenty20
held in South Africa and are the champions of 2009 ICC World Twenty20 held in
England. Squash is another sport that Pakistanis have excelled in, with successful
world-class squash players such as Jahangir Khan and Jansher Khan winning the
World Open several times during their careers.
At an international level, Pakistan has competed many times at the
Summer Olympics in field hockey, boxing, athletics, swimming, and shooting.
Pakistan's medal tally remains at 10 medals (3 gold, 3 silver and 4 bronze) while
at the Commonwealth Games and Asian Games it stands at 61 medals and 182
medals respectively. Hockey is the sport in which Pakistan has been most
successful at the Olympics, with three gold medals in (1960, 1968, and 1984).
Pakistan has also won the Hockey World Cup a record four times (1971, 1978,
1982, 1994). The Motor sport Association of Pakistan is a member of the
Fédération Internationale de l'Automobile. In Caving adventure sports Pakistan is
member country to UIS (Union of International Speleology) The Freedom Rally is a
yearly off-road race, which takes place during the Independence celebrations.
Pakistan also qualified for the Golf World Cup for the first time in 2009.

Now when we know much more about Pakistan then let’s take a look of
Pakistan’s economic situation, which is helpful to us, as we have mentioned
earlier in introduction.

Economic Situation of Pakistan

Wars change the world economic stability. And Pakistan at the time being
now is facing a war against terrorism but how much the war has disturbed its
economy. First check it and then compare it with America, which is another
country, involved in the war. War is not at the American land, it is Pakistan but
 10

when you will compare both you will find that Pakistan is better then America
which is facing war in its own territory but not loosing its economic stability.

Review of Economic Situation

(July-March 2008-09)
We will not go in-detail but we are going to present some charts and graphs which
shows the picture in better way.

Agriculture
Kharif crops sugarcane and maize fell short of the target and depicted
negative growth of 18.5 percent and 7.5 percent in 2008-09. However, other two
major crops cotton and rice have registered positive growth of 7.3 percent and
13.5 percent, respectively. The combined weight of sugarcane and maize in
overall agriculture is 6.2 percent while that of cotton and rice is 13.0 percent.
The Rabi season started with estimated water shortages of 31.6 percent,
however, widespread rainfall during December 2008 to February 2009 in most
parts of the country has positive impact on the outlook for the Rabi crop. Wheat
with its 12.7 percent weight in overall agriculture is estimated to post 7.8 percent
growth over the last year. The area under cultivation of wheat crop has surpassed
the target of 8.6 million hectares by 5 percent. The provincial governments and
PASSCO has made arrangements for highest ever quantum of procurement at 6.5
million tons of wheat, which is far higher than 3.9 million tons procured last year.

Manufacturing Sector
Large-scale manufacturing depicted negative growth of 5.73% during July-
February 2008-09 as against 5.27% positive growth in the comparable period of
last year.
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Services Sector
Services sector has exhibited resilience to fluctuations in the economic
activity. The FDI inflows in the telecommunications, financial businesses and
personal services have reached a level of saturation in the first nine months (July-
March) of the current fiscal year. There are enough anecdotal evidence that
financial sector is set to provide substantial growth. Similarly, improved prospects
in transportation & storage sub-sectors on the back of relatively better production
in major crops, strong contribution by finance and insurance sector and
augmented administrative and defense related spending will provide support to
adequate level of growth in the services sector.

Inflation
As inflationary pressures across the globe continue to dissipate, sparking
deflationary concerns in even some countries like Thailand and India, which
shared pain of galloping inflation with Pakistan, a few months ago, Pakistan still
faces high double-digit inflation. Although all the price indices like the CPI
including core inflation, WPI and SPI show a downward trend in recent months, the
decline has been subject to stiff downward rigidity. The month on month increase
in food and nonfood inflation in the months of February and March has been
especially disappointing. The role of sugar and wheat has to play its role in
inflationary environment in Pakistan which could play crucial role in determination
of inflation in the final quarter of this fiscal year (April-June 2009). The dirty work
of extra-market forces kept fruits of falling inflation away from Pakistan’s
consumers.
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Regional Comparisons of Inflation

A regional comparison of inflation in Table-5 reveals rigidity of inflation in
Pakistan in comparison to other regional players. Barring Iran, all the countries
listed in Table-5 have shown notable deceleration in their inflation rates from July
2008 to March 2009. India, which measures its inflation by the weekly measured
WPI, is at historic lows whereas Thailand has seen deflation during March 2009
from a high of 9.2 percent in July 2008. Other countries like Philippines, Vietnam,
and Sri Lanka witnessed substantial deceleration in inflation since December
2008.
 13

Monetary Policy
The SBP has kept its tight monetary policy stance in the period July 01,
2008-April 20, and 2009. The policy rate was adjusted upward in November 2008
to shave-off some aggregate demand from the economy and kept constant in
January 2009. However, noticing visible signs of demand compression enabled the
SBP to reduce 100 basis points on April 20, 2009. During July 01, 2008-April 18,
2009, money supply (M2) expanded by 1.6 percent against the target of
expansion of 8.0 percent for the year and last year expansion of 8.1 percent in
the comparable period of last year. The reserve money witnessed contraction of
2.2 percent in this period as against expansion of 10.3 percent in the comparable
period of last year.
 14

Fiscal Policy
The government has decided in the economic stabilization program to
adhere to the fiscal deficit target reverently and during the first nine months (July-
March) the fiscal deficit hovered around 3.1 percent of the projected GDP for
2008-09, which is consistent with annual fiscal deficit target of 4.3 percent. The
fiscal improvement in the first nine months (July-March 2008-09) has largely
based on reduction of oil subsidies and a cut in development spending. All
meaningful efforts to expand revenues particularly by broadening the tax base
will only work in the medium-term
Tax Revenue collected by the Federal Board of Revenue (FBR) stood at Rs-
813.6 billion (net) during the first nine months (July-March) of the current fiscal
year (2008-09) as compared to Rs. 679.9 billion in July-March, 2007-08 — posting
a healthy increase of 19.7%. Direct taxes, which accounts for 37.6 percent of total
tax collection of the FBR have registered a growth of 18.9%. Indirect taxes, on the
other hand, exhibited a growth of 20.2 percent. Within indirect taxes, sales tax,
which accounts for roughly 63.6 percent of indirect taxes and 40.1 percent of total
taxes, grew by 24.3 percent (Rs. 321.5 billion). The custom duty collection is up
by 3.4 percent and the collection of federal excise duty (FED) has recorded a note
worthy increase of 30.4 percent (collected Rs. 80.6 10 Review of Economic
Situation Jul‐March 2008‐09 billion) during the period under review [See Table-7].
The collection of import related taxes grew by 4.6 percent whereas; taxes on
domestic production grew by 28.1 percent. Given these developments, the tax
revenue target of Rs.1250 billion seems Herculean task without corrective
measures being taken in the last quarter.
 15

External Sector
The external sector has shown definite sign of improvement. The current
and trade account balance has improved but there is some slippages on account
of current transfers. However, buoyancy in remittances is more than offset by
substantial declining trend in inflows through exchange companies. There is a
substantial decline of around $2 billion in services trade deficit during the first
nine months of the current fiscal year because of tapering off in the demand
pressures on the one hand and lower freight and insurance payments on the
other. However, the income account deficit widened by almost half a billion dollar
mainly owing to lower income receipts while payments remained more or less
stagnant around $4 billion. The financial account witnessed slackening of capital
inflows by staggering $2.5 billion mainly on account of lower FDI inflows, higher
portfolio outflows, lower disbursements of loan and higher amortization payments.
The worsening of external account in the period of July-October 2008-09 is
compensated by substantial improvement in the external account in the period
November-March 2008-09. The hemorrhage to the foreign exchange reserves
have been arrested in the later period and around $3 billion are added to the SBP
reserves in spite of $500 million Eurobond payment in February 2009.
Notwithstanding, improvement in the external sector outlook remains hostage to
expected inflows in the last quarter.
 16

Why Afghanistan?
All this economical report of Pakistan shows how the country is surviving in
the time of global financial crises against terrorism. Now it is too funny but
important to see the economic situation of Afghanistan which is another failed
state in the area. Pakistan is at No. 9 and Afghanistan at No. 7 so according to
report not for from each other. Why Afghanistan, because the world uses the term
Af-pak. Most of the people (because of Jewish media) in the world think that
Pakistan and Afghanistan are not different from each other’s. And their economic
situation is same. Another reason is, we want to show that how a real fail state
suffers in the world. That is why here is a paragraph about Afghanistan economic
situation.

The Economic situation of Afghanistan

As of 2002, Afghanistan does not have a viable economic system. The
traditional economy, which was based mainly on subsistence agriculture and
animal husbandry and which usually provided enough food for the Afghan
population plus a surplus for trade, was essentially destroyed beginning in 1979
with the Soviet invasion and war, which lasted until 1989. The economy suffered
further during the civil unrest of the first half of the 1990s and then recovered in
some regions during Taliban rule from 1995 to 2001. The U.S.-led invasion of
2001–2002 damaged much of what was left of the economy and infrastructure,
and the World Bank concluded that Afghanistan had become the poorest nation in
the world. The situation was made worse by a drought that began in 1999 and
limited crop production and livestock herding. It is also important to note that
statistics regarding the Afghanistan economy for the last twenty or so years are
untrustworthy.
The traditional economy is based on a mix of farming (Drugs, wheat,
barley, corn, and fruits are the main crops) and herding (mainly sheep and goats
 17

and also cattle, camels, donkeys, and horses). Farming and herding are limited by
the rough terrain and dry climate, and agriculture typically requires irrigation.
Farming and herding are done mainly to support the family. Village-level
weaving, blacksmithing, goldsmith and cottage industries such as carpet weaving
support these major subsistence activities. From 1979 on, millions of Afghans fled
to Pakistan and other nations, and remittances they sent to relatives back home
provided another source of revenue.
The ten-year war with the Soviets destroyed many roads and irrigation
systems and government programs and services, rendered land useless because
of land mines, and caused several million to flee. The civil war following the Soviet
withdrawal caused additional damage, and it was not until the Taliban took
control and eventually ruled 90 percent of the nation that the economy began to
recover. Especially in the south and east, farming and herding improved to a
limited extent, trade with Pakistan increased, and natural resources such as
timber, precious stones, and marble and granite were harvested and traded.
Opium farming also expanded rapidly, and Afghanistan became the largest
supplier of illicit opium until the Taliban banned opium production in July 2000.
Opium production continued, however, in the north, where it was an important
source of income for the Northern Alliance, the major rival of the Taliban. The
drought that began in 1999 and continued into 2002 undid the agricultural and
herding gains and made a significant portion of the population dependent on
international aid for food, shelter, and health care.
The year 2002 marked the beginning of a large-scale international effort to
rebuild the Afghanistan economy and infrastructure through billions of dollars of
financial, material, and managerial support. The first major event was the Tokyo
Conference on 21–22 January, convened to address the problems of Afghanistan's
devastated economy.

After seeing the Afghanistan’s economic situation, let’s have a look on “a

successful country’s debt and deficit” and it is USA, a country whose presidential
candidate said, “Pakistan a failed state”.

US Debt and Deficit

Logically, the deficit is equal to annual increase in the debt. However,

there is certain spending (supplemental appropriations and the surplus tax
receipts in the Social Security program) that add to the debt but are excluded
from the deficit. During 2008 the budget deficit was $455 billion but the national
debt increased by $1 trillion, the first time it has done so in a single year. The
total debt has increased over $500 billion each year since FY 2003, considering
both budgeted and non-budgeted spending.

Roughly estimated debt of USA is 57 trillion dollars, biggest in the history

of mankind, and going upward. Again if we check the effects of war against
terrorism on US and then compare it with Pakistan, you will find Pakistan in more
relax able position. America is facing economic crises. 2% of its budget is being
spent on bail out. It has world biggest defense budget seven times more than its
closest competitor, china. No one says that it is a fail state according to its deficit.
No one ever spoke about its own atomic and hydrogen bombs (we will discuss it
later) but the question is “Pakistan a failed state”????

Now let us discuss all the reasons one by one that why Pakistan is not a
failed state. And why media is discussing this topic again and again.

Why Pakistan is not a failed state?

 18

First we think so that the right way is to check the criteria of a failed state
(given above) and then put the Pakistan against this.
Major Reasons
1. Does Pakistan have no control over its territory? Let us see with an
example,
According to Washington post October 28, Afghanistan should learn a
lesson from Pakistan. But we think so there is a mistake. Afghanistan
government is nothing without America. Pakistan faced a little challenge in
swat, but how they recover their area only in one month. In Afghanistan,
America is trying to its best, but it is still in vein. (Report of Aljazeera,
given above) so if America wants stability in Afghanistan then it should
learn a lesson from Pakistan how to control Taliban or any other terrorist.
BBC said that Pakistani army recovered 90% of Waziristan in only 2 weeks.
These were only two areas where Pakistan was facing little problem. At the
time being now Pakistan has its full control over its all-geographical area. It
is better than India where Tamil area is considered dangerous for every
outsider.
2. Is Pakistani government is not eligible for taking a decision.
Pakistan has a democratically selected government, having the world
highest number of women legislature members. There are two major
political parties. And government is fully free for its collective decisions.
Government is doing its works with full authority. They are making new
rules and regulations. Latest examples are the rental power projects,
acceptance of carry logger bill. Now very soon president will change the
army chief, the old one has finished his job time and going to be retire.
Pakistani government is a real powerful government. Pakistani government
can do what it wants to do. They can make collective decisions without any
guidance of external factor.
3. Does the government is not providing the public services?
The government of Pakistan is famous for its subsidies. The government
often bears loss to itself for the public service. For example, the latest free
judiciary is a danger for government also but government is still helping
judiciary towards it independence. What about latest rental power
projects? So it looks like foolish when some one says that Pakistani
government is not doing any thing for public services. The Punjab and
N.W.F provinces have recently made the increments to the pay of police?
Why?
4. Does the Pakistan not act as a full member of international community?
It will be a white lie if someone says so. Pakistan is one of the world most
famous countries according to its importance in international community.
It is considered as the country, which is leader of all Muslim country. It is
the founder of OIC. It is the biggest contributor of UN peace force with
more then 10000 men. It helped the world to get rid of Russian rule in
1980’s and now facing the war against terrorism, which is (in real) the war
of whole world. It is the full member of UN and all its tributaries, OIC,
Common Wealth, SAARC any many more international organizations.

These were the basic criteria rules for a failed state and Pakistan is surely not.
Now take another view, which says a country having sharp economic decline is
also a failed state. This term is often spoken be TV. Commentators. We accept
that Pakistan’s economic situation is not as good as it should be. But it is still not
so bad to be declared as a fail state.
Economic Factors
 Pakistan’s external debts are only $38800 million compare to US
having $13773000 million external debts. In the list of External debts,
Pakistan is at number 52. (Not too bad)
 19

 By October 2007, Pakistan raised back its Foreign Reserves to a

handsome $16.4 billion. Exceptional policies kept Pakistan's trade deficit
controlled at $13 billion, exports boomed to $18 billion, revenue
generation increased to become $13 billion and attracted foreign
investment of $8.4 billion.
 Recently IMF has granted 6 billion and US has announced 1.5 billion
US dollars per year for Pakistan, which will surely change the economic
situation. Will you give your money to a person who is not, in the condition
of returning it with profit? No. They gave us money because they were
sure that we could give them back. Ah! What a fail state??
 In Pakistan 3 stock markets are working, and the 100 stock indexes
reaches at 13000 points occasionally and 10000 points normally, which in
a failed state, can never be considered.
 Pakistan has a very good economic system instead of Afghanistan
where no economic system is visible.
 Our workers remittance in year 2008 is 450 million US$. Isn’t it a
good sign of success? Our manpower is the best and we have the best
minds of the world.
 If we talk only about wheat, we produced 23 million tons of wheat
last time. Pakistan is still one of the world most milk, wheat, meat, rice,
cotton, potato and onion producing countries.
 Pakistani government collected 813 billion rupees of tax in the last
fiscal year. What a failed state having enough tax. Can a government
without powers can collect this tax.
 Inflation is a global issue of the day. It is not only Pakistan’s
problem. But Pakistan has still better condition then Iran, a neighbor
country, which was not declared a fail state. The new democratic
government has tried to control the situation. That is why they have
controlled it at one point.
 Pakistan’s leather and cotton products are famous all over the
world. So textile and sports goods are the main exports. Adidas, Slazenger
are two types of international brands. Other exports include leather
products, food items (fruits, rice etc.) weapons (guns and tanks etc.)
medical equipment and many more.
 Overall, Pakistan is the world 27th largest economy in term of
purchasing power and 48th in terms of dollars with almost $185 billion of
GDP.
 In the year 2009 foreign investment was $4 billion, which can be
considered best at the time of uncertainty and war.
 Total power generation capacity of the country is near about 18000
MW. It will be better very soon. Many projects are under construction,
which will make the country more colorful. Pakistan is very large country
but almost its every village enjoys electricity compare to its neighbors,
which do not provide light in villages (India, Afghanistan and Sri Lanka
etc.) That is why its consumption is large.
 Pakistan owns the world biggest coal reserves, gas reserves and
good oil reserves. Precious stones of Pakistan are famous for there colors
and they are another good export of Pakistan. Pakistan has world most
beautiful places “as a Swiss tourist exclaimed” to visit. So it is another
source of income.
 The World Bank (WB) and International Finance Corporation’s
flagship report ‘Ease of Doing Business 2010’ ranked Pakistan 85 among
181 countries around the globe. Pakistan comes highest in South Asia but
also ranks higher than China, Russia and India, which is at 133.

Instead of all above economical things we still have some more, which prove us
the best not the worse or fail, these are our characteristics.
 20

Non-Economic Characteristics

 Pakistan has one of the world best armed forces with best arms and
professional approach. We can defend ourselves very well, and we have
proved it at many times.
 We are the 7th atomic power of the world and our missile technology is
better then most of our neighbors.
 Our media is free from any pressure. And the government even cannot
consider pressurizing it. The European media even cannot consider of such
liberation, which our media has.
 We have every type of geographical land and season in side the country.
 We have the best cultures of the world. The people of Pakistan love music,
and Pakistan has produced many international singers.
 There are almost 140 universities, more than 40 medical colleges,
hundreds of graduation institutes and thousands of school. They are
producing thousands of doctors, engineers, scholars etc. every year. Dr.
Abdulsalam (one of the Pakistani scholar) won the Nobel Prize.
 Pakistan has elected democratic government with highest number of
women legislatures in the world.
 Our crime rate is very low then “successful nations like America and
Russia”. They teach us the lesson of human rights but we think they
should learn from us that how to stop crimes in the country. For example,
the ratio of rape, in the developed nations is very high like US on the top.
 Pakistan ruled over the squash court for a long time. Pakistan has world #5
cricket team. Pakistani boy “Aisam-Ul_Haq Qureshi” has recently defeated
Roger Federer (world #1) player in doubles of tennis. Pakistan also has
highly ranked in many other games like hockey, boxing, snooker etc.
 Pakistan owes very big damns, world second largest irrigation system,
three large rivers and still there is space to improve its canals and rivers.
 There are 12 international air ports and estimated 139 airfields in the
country. Many international and national airlines are currently operating in
the country.
 Pakistan has very good network of roads and railways. Including many
Motorways, shahrah-e-Resham (Islamabad to Beijing), Karakoram highway,
Indus highway and many more.
We can write more and more about the country but the time and space do not
allow us to do so. After the study of above line, only a fool can say that it is a fail
state. Now at the end we would like to give some reasons why it was declared a
fail state.

Why it was declared a failed state

There are many reasons, which we can find easily. If you go to Europe and
America, you will find that their media creates hatred for Muslims and especially
for Pakistan. The case of Denmark is not far from us. The parents in most of the
European countries allow their children to join any religion except Islam. (What a
good effort to highlight Islam) They say that they are civilized but they are still
like animals. It is not our anger but it is truth. See the list of countries where rape
is done. See the list of countries where murder rate is high. See the list of
countries where people leave their old parents for there happiness. Western
media highlights our cases but closes its eyes from its own area. Actually this was
the time of media war and we were loosing before our media entered at the
stage. We know that they have nothing but some industrial progress but still they
are not happy from us. There own condition is worse. When a society or country
fails? In fact, when human rights are forgotten and all the people hate each other,
the brotherhood of a nation ends. The crime rate goes high and the system fails.
Their own system is not going successful. Then why are they making noise
against us?
 21

This is the time of great game. The war against terror or war for oil is on its
way and we are the biggest affectee of it. The western powers do not like our
atom bomb. So their media is making noise of our failure. So that the world can
allow them to enter in the country and high jack our assets, but with their full
efforts they are still not successful, and they will not be in coming future.
Another reason is that we are considered as the power of region but the
west likes India and they want that India should be the leader of area. They want
to see us as a failed state so that Indian’s can dominate the region. Indian factor
in western media is very powerful and you cannot close your eyes from this.
Not a problem with what the literacy level is in the country, the people
would hate Islam because Jews own most of the international media, Famous for
their extremism. It is not the problem of economies but it is a reality that Jews are
the enemies of Islam. Again it is not anger but you can study the history of Israel
and the wars between Hammas and Israel. Pakistan and Islam are like mother and
son. Failure of Pakistan will be considered as the failure of Islam (see the history
how Pakistan came into being) so their best efforts are here to make this country
fail.
Unluckily our neighbor India also wants to see us as a failed state. This is
their biggest wish from the day of their independence, now such comments are to
make themselves happy and nothing else.
Another major cause is, when you declare a country, a fail state the people
really think that it is a fail state. This makes the situation even worse because the
investors do not like to invest their money in a failed state. Then the country gets
eventually failed. The example is the list of 2009 in which Afghanistan is at a
better point than Pakistan. They know that they need investments there so
declare it a good state so the investors can come.

With Best Wishes

At the end we wish Pakistan a happy and developed country. O God, save
our Pakistan from the enemies. Please help us in taking the country at good
position. No one is with us in the world except Allah; our all prayers are for the
well being of Pakistan. May Allah bless this Nation (Ameen)
 22

Executive Summery:
The debate we are listening everywhere in the international media is
“Pakistan is not a fail State”. The topic got fame during the election of presidency
in US when Mc Cain said that it is a fail state. The article we have made starts
with the introduction to assignment and continue with many headings. Let’s check
them one by one.

Introduction to Assignment:
In the introduction, we have explained that it is an economics article that is
why we are using economic approach. It is common mistake that while talking on
the Title (fail state) people become angry and talk about patriotism and not about
realities.
Preamble:
This session explains the independence we are enjoying inside the country.
The situation in Afghanistan (which is a real fail state) is bad. Al Jazeera says that
American army holds only capital or Qandhar a major city. All other country is in
the control of war lards and Taliban. And in India it is even worse (which is
considered as a successful country), where you are not allowed to explore the
country.
What is a fail State:
According to Fund for Peace (United Nations) the fail state has no or
minimum control over it territory. The fail state’s management can’t make
collective decision. The government does not provide public services and has no
role in the world as full member of international community. It is also said that the
country with sharp economic decline is also a fail state.
Islamic Republic of Pakistan:
Now there is a brief introduction to Pakistan. Here you can find the details
of geographical position and importance of country, the religions and religious
independence inside the country, the country’s climate and flora and fauna. The
session also gives an introduction to Armed Forces. Sports, languages, literature,
culture and tourism activities are the beauty of country. The session also explains
the economic strength of country.
Economic Review of Pakistan:
This is the very important part of the report. It gives the brief description of
the economic situation of Pakistan. The country cultivated (in million) 23.3 tons of
wheat, 52.1 tons of sugarcane, 12.1 tons of cotton, 6.5 tons of rice and 3.33 tons
of maize in 2008-2009. You can imagine the telecommunication industry’s growth
in the last years. Core inflation was 17.8 points. And our neighbor Iran had 25.4 in
the last year. Exchange rate fluctuations were great in the last year but now this
is stable. Country has almost $12 billion foreign assets. KSE has normally reaches
at 10000 points. Net tax collections during the last fiscal year were 813 billion Rs.
during the worse days of war against terrorism foreign investment in the country
is $3800 million; our workers remittance was $5658.1 million.
Why Afghanistan:
Why we are comparing Afghanistan with Pakistan. Because of Af-Pak term
of obama and the list of failed states in which Pakistan and Afghanistan are at 9th
and 7th positions. Another reason is to show the world a real fail state.
Economic Situation of Afghanistan:
It is difficult to find any economic report from the country because there is
no economic system in the country since many years. The opium cultivation, drug
 23

dealing and cattle rearing are the common sources of income. There isn’t any
carpeted road inside the country.

U.S Debt and Deficit:

As the heading declares, the successful country “USA” has $57 trillion
debt, which is highest in the history of mankind. The budget deficit is increasing
day by day with the ratio of $500 billion per year. The country is facing great
recession during the war. Is the Pakistan also facing the problem at the same
level while the war is inside the country?
Why Pakistan is not a Fail State:
It consists of three sub titles.
Major Reasons:
Here we have put the country in the criteria of fail state. Pakistan is the full
member of international community and has a very great importance in the
Islamic world. It is the founder of many international organizations and the
greatest contributor in the UN peace force with 10000 men. The country has an
elected government, which is powerful in decision-making process. The whole
country is in the control of government. And what about subsidies, which the
government provides of public? The government is fully committed for public
services.
Economic Factors:
The country is at 52nd position in the list of country’s having largest
external debts with $38800 million. How can you say it a fail state when its
foreign reserves are $12 billion, even there workers remittance is $5658.1 million,
net foreign investment is $3800 million and tax collection is Rs. 813 billion. All
international banks are happily agreed to lend the money. The World Bank (WB)
and International Finance Corporation’s flagship report ‘Ease of Doing Business
2010’ ranked Pakistan 85 among 181 countries around the globe. Pakistan comes
highest in South Asia but also ranks higher than China, Russia and India, which is
at 133. The country has biggest coal reserves in the world and many other
reserves are waiting to be used like oil and gas, precious stones, iron etc. Pakistan
possesses many multinational companies like Adidas, Slazenger and nestle. The
agricultural production is marvelous. 24 million tons of wheat is an example of
that.
Non-Economic Factors:
The world 7th atomic power, having the best armed forces is Pakistan.
Every thing of country is beautiful, from the shores of Arabian Sea to the heights
of Chikory. We have every type of geographical land and very colorful cultures.
We love peace and games and Pakistan has made many international players. Mr.
Isam-ul-Haq is the latest example who defeated Roger Feeder in the doubles.
There are lot of motorways and carpeted roads inside the country and thousands
of schools and colleges. 140 universities are in progress and the country has
highest number of women legislature in the world.
Why We Were Declared a Fail State?
Our enemies want to see our country as a fail state. No investor likes to
invest in a fail state. It is a media war and international media is in the hands of
Jews. They hate Pakistan and the history has proved it. Now when Pakistani media
is getting more and more power there media has less importance in side the
country. Their mission is “Make a noise as we have done the same before in Iraq.
Then attack the fail state to control the Muslim bomb”. Oh Allah, Please save the
Pakistan from its enemies.
 24

Format And Designs:

Hafiz Najam Ul Saqib 042

Qaisar Abbas 175

Ideas Forwarded by:

Sayyed Mubashir-Ul-Hassan 136

Usman Ghani 157

Research and Search:

Muhammad Khurram Shahzad 177

Ali Ikhlaq

Reference:

 Government of Pakistan
 State Bank of Pakistan
 Federal Board of Revenue
 Wikipedia, the Free Encyclopedia
 Council on Foreign Relations, America
 Daily Times
 Google Links