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REFORMING PAKISTAN: CHALLENGES, STRATEGIES AND PROSPECTS ISHRAT HUSAIN The popular image of Pakistan portrayed in the international media is that of a dangerous place to visit, a nuclear state caught up in domestic political and social turmoil, fighting externally on its borders with Afghanistan and India, crowded by religious extremists and fundamentalists, ruled by a military dictator and embroiled in a judicial crisis. Private International market in nuclear proliferation is also believed to have emanated from this country. In contrast to this image shown on the TV channels and depicted by the print media all over the world the international financial markets gave a thumping vote of confidence to Pakistan’s sovereign Eurobond issue just two weeks ago. The bond was oversubscribed seven times ($ 3.5 billion vs $ 500 million) at fine margins of 202 basis points over 10 year US Treasury bonds. The response of this paper was broad based - one third investor demand originated from the US, one third from Europe and one third from Asia & Middle East. The other Pakistani bonds in markets have traded as low as 148 basis points almost identical to investment grade sovereigns. Foreign Direct and Foreign Portfolio investment have so far recorded a 68 percent increase compared to last year amounting to $ 6 billion or 4 percent of GDP. In 2000-2001 Foreign Investment flows were US $ 322 million only. China Mobile – one of the largest telecom has just acquired one of the local companies for over US $ 400 million. Temasek through its financial holding company has recently acquired a large integrated financial services institution for about US $ 370 million. Other international companies in telecom, banking, oil and gas, construction and real estate sectors are either acquiring, planning or locating their investment in Pakistan. There is no doubt that Pakistan’s decision to participate in the war against terror has created a lot of serious difficulties and problems for us. The powerful elements sympathetic to Al-Qaeda and Taliban have reacted violently to the actions taken by the Pakistani forces on Afghan-Pak border. They have hit back with vengeance and triggered suicide bombings at several places. However, their activities are limited to the belt around the Tribal Areas with an odd bombing incident in Islamabad, Karachi or Peshawar. Those who have physically visited Pakistan come back with an entirely different picture than the fear and apprehension they had at the beginning of their journey. Invited Lecture delivered at the Institute of South Asian Studies, Singapore on June 4, 2007 1
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The question that arises is: if the political and security situation was so bad as portrayed by the international media how could the country achieve a sustained average growth rate of 7 percent a year for over last four years. This is the same period in which the perception of Pakistan has taken a deep dive. No country perceived to be so fragile, strife ridden, politically
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