05 June 2007
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Your Highness Prince Karim Aga Khan,
The Honourable Vice President of Afghanistan, Mr. Massoud,
Your Highness Prince Amyn Aga Khan,
Ladies and gentlemen,
What a pleasure it is to be in Kabul this afternoon and meet such an august gathering with diverse backgrounds to talk about the role of the private sector in reinventing an economy and share with you some of the experiences of Pakistan.
Before I get into the subject itself, allow me to deliver some formal remarks because this is a great occasion to address the intelligentsia of Afghanistan.
May I start with recognising, appreciating and thanking the personal role played by His Highness the Aga Khan in arranging this event and making our visit possible.
The last several hours I spent with President Karzai discussing our bilateral relations and how Pakistan and Afghanistan can contribute towards peace, progress and prosperity in the entire region.
Your Highness, it is well known that the Aga Khan Development Network has done pioneering work in the social and economic uplift of many countries, including Afghanistan. Your involvement in this country is not new and dates back to several decades.
The initiative to call this Conference is a laudable effort which Pakistan fully supports, and the objectives of creating the appropriate legal and fiscal framework, regulatory conditions and stable institutions which will encourage the growth of private initiative and facilitate the development of public-private partnerships in Afghanistan is a welcome beginning.
Pakistan and Afghanistan, Ladies and Gentlemen, are bound by a common fate, history, culture and traditions. We are also connected through ethnic, tribal, family and linguistic ties. The people of Pakistan stood shoulder to shoulder with their Afghan brothers and sisters in their struggle for liberation from the Soviet occupation. For more than twenty-five years we were very proud to provide a home to over three million Afghan refugees who still live in Pakistan.
Today, there is a convergence between the strategic interest of Pakistan and Afghanistan. In the geo-political context we together provide the bridge to Central Asia and the shortest access for this land-locked region to the warm waters of the Arabian Sea. Together, we can provide multiple corridors of cooperation in the fields of energy, transport, communications and trade.
Pakistan and Afghanistan also face common challenges. Most importantly, we are jointly confronting terrorism and extremism; it is in our collective interest to overcome this menace. Our partnership in the international campaign against terror is of the highest importance for our security, as well as for international peace and stability.
Ladies and Gentlemen, for these reasons, peace, progress and prosperity in Afghanistan are in the strategic national interest of Pakistan. Our Government has therefore made several efforts over the years to help and support our Afghan neighbours. We have been in the forefront to assist in the implementation of the Bonn process and the Government of President Karzai.
Pakistan facilitated the smooth and orderly comeback of the Presidential elections in Afghanistan.
Recently we have concluded the third meeting of the bilateral jirga commission, which we are confident will make a major contribution towards strengthening bilateral relations and promoting peace, security and cooperation on both sides of our borders.
We have pledged over $300 million of assistance towards reconstruction projects in Afghanistan, covering the fields of communication, education, health and several others. Many projects such as the Torkham-Jalalabad Highway have been completed and I was very privileged some months ago to jointly open it with President Karzai. We have also offered funding and expertise for construction of a railway link from Chaman in Pakistan to Kandahar in Afghanistan. Other projects in the
pipeline include construction of a hundred and fifty bed hospital called Jinnah Hospital in Kabul, and the Nishtar Kidney Centre in Jalalabad, as well as several projects in the education and communication fields. Pakistan has also provided unrestricted trade access to Afghanistan through our ports and transportation infrastructure.
At the same time, we have promoted our bilateral trade which has now increased to the unprecedented level of $1.3 billion; 5 or 6 years ago it was between $25 to $50 million – so we have moved a large distance and of course we will cover even more ground in the years ahead.
We are keen to promote more trade and would welcome increasing exports of Afghan goods to Pakistan. We would also encourage the private sectors of the two countries to invest and engage in joint ventures.
To help ensure peace and security in Afghanistan and assist in the campaign against terrorism, Pakistan has deployed over 90,000 troops on its border with Afghanistan. We have also set up nearly a thousand border posts, apart from other measures, to prevent the movement of undesirable elements from one side to the other in either direction. Due to our efforts, there have been vital achievements in this area. We will remain committed to working with our partners in Afghanistan,
as well the US and NATO forces towards promoting security and stability in Afghanistan.
Ladies and Gentlemen, we all recognise the direct link between security and development. They are two sides of the same coin. It is therefore essential for us to ensure an environment of peace and security in Afghanistan in order to facilitate development in the country. However, there needs to be a comprehensive and holistic approach to the issue of ensuring security. We cannot rely exclusively on the use of force. The military option must be combined with the political process, as well as economic development. There must be an engagement with all stakeholders, internal and external, visible and invisible. People must be given a sense of hope in the future. They should be able to see light at the end of the tunnel and ultimately we must win the hearts and minds of our respective peoples.
May I say that being a regular visitor to Afghanistan, I notice already coming through that there is a tremendous upsurge in the development efforts taking place here. Just driving from Kabul airport to here and back, I noticed a lot of change and I am very encouraged at the pace of development in your country.
Ladies and Gentlemen, on several occasions during the past year I have publicly called for an international, Marshall Plan-type assistance programme for Afghanistan. This must be a comprehensive plan to promote development through reconstruction and development and rehabilitation, capacity building, employment generation and skills training. A lot of this is happening, but clearly more needs to be done.
To begin with, it is incumbent upon all parties of the Bonn process and the London meeting which launched the Afghanistan Compact to honour their individual and collective commitments to the Afghan people. Tangible progress must be made towards implementation of the interim Afghanistan National Development Strategy over the next five years. An effective strategy also needs to be implemented to eradicate the multiple challenges that have been created due to increased cultivation of poppy in the country.
The drug menace is a regional and global challenge, not just an Afghan problem. Therefore, we all have a stake in finding a solution to this issue. On the basis of our own experience, I urge the international community to help with crop substitution and poppy eradication programmes to eliminate this growing scourge. Not only is the drug trade eroding our societies all over the world, but it is providing the funds for terrorism to spread its tentacles.
Ladies and Gentlemen, in the globalised world of today, characterised by greater openness and stronger linkages between national economies, there are immense opportunities for growth and development. Recent history shows that countries which have the will and ability to reform themselves are embarked on the high road of progress and prosperity.
Our own experience in Pakistan is a case in point. Through comprehensive and multi-sectoral reforms, Pakistan has, in the last eight years, gone through a process of national renewal. We are now one of the faster growing economies in South Asia, sustaining a growth rate of over 7 percent per year for the last five years. The rate of investment, both domestic and foreign, is the highest ever in the nation’s history. This year we have touched investment levels of 23 percent of our GDP,
which is much higher than we have ever had in our history.
Pakistan has been recognised as one of the leading reforming nations in the world and we have been included in a list published by a world-renowned investment bank as part of the “next eleven” – the eleven countries which will be the fastest growing, high potential countries in the developing world.
We have learnt numerous lessons from our recent development experience which can be applied with equal force to any developing country striving to achieve political stability and economic advancement.
In the first place, national security, viable representative institutions and the rule of law are essential prerequisites for an enabling environment for development. It is encouraging that President Karzai and the Afghan Parliament are playing a vital role in the political evolution of the country.
Secondly, social reforms are essential to weld the people into a cohesive entity. It is only through shared and equitable development that vertical divisions based on social inequities and horizontal cleavages along ethic, tribal and linguistic lines can be overcome. The single most important element in the development strategy should be human development, with a particular focus on education and health. Broad-based social sector development encompassing all segments of society
and all regions of the country is the bedrock upon which the edifice of national unity is built.
Ladies and Gentlemen, thirdly, let me briefly dwell upon Pakistan’s economic reforms – which have laid the basis for robust and sustainable growth – and the lessons it holds for other developing nations, like Afghanistan.
Our economic reforms are underpinned by the philosophy of liberalisation, deregulation and
1. We are committed to a market-based economy with the private sector leading the process of investment and growth and the Government playing the role of enabler, facilitator and regulator.
2. We are developing regulatory mechanisms that are aligned to global norms and practices.
3. We are building better governance through institutional strengthening of the public sector. We feel that the Government has an important but changed role to play in the new governance paradigm.
It is in these areas of structural reform, be it trade, financial sector, regulatory mechanisms or public sector capacity building, that we can provide technical assistance and share our best practices with Afghanistan.
Ladies and Gentlemen, let me digress for a second and share with you some of our experiences in Pakistan which I think you will find useful.
First of all, when we embarked on a plan to rebuild and reinvent Pakistan, we looked at the Government and we said that the Government structure has to change. I will illustrate what we did through an example. I’ll talk about the “famous” Ministry of Telecommunications in Pakistan, which ran the phone system, made policy and was the regulator, along with being the sole provider of telephone services.
One of the first things we decided, Ladies and Gentlemen, was to change the paradigm as to how Government functions. Ministries were only expected to be policy makers. Their role was to make policy. Regulators, independent regulatory authorities were created which would regulate a particular industry, in this case telephony. And third, all commercial activity would be in the private sector. We agreed early on that it is not the business of Government to be in business. So
Governments should not be in business. Let the private sector take charge.
When we talked about privatising our state-owned telephone company, issues were raised that we were changing a State monopoly into a private monopoly. Issues were raised about national security, that if the phone companies were run by private entrepreneurs, local or foreign were never differentiated, this could be a major security risk. To make a long story short, we consulted the best brains in the world, came up with a reform agenda for telecommunications in Pakistan. The World Bank helped too. Mr Patel is here so I’ll acknowledge that. And we then took the decision to move ahead on the telecoms reform.
We gave out a few licences for cellular phones, we sold and privatised the State telephone company and many more stakeholders were brought in.
As a result, what do we see several years later as we reflect on the reform? We have attracted about $7 billion of direct and indirect investment in the telephone sector because of the reforms: seven billion dollars, direct and indirect equity. The biggest names in the world are in Pakistan. We auctioned two new licences. We got $291 million for each in an auction held in a room like this in one of the hotels in Islamabad. So it was very transparent and we said anybody could come and
participate. The latest entrant into Pakistan is China Mobile, the largest telecommunications company in the world in terms of numbers of subscribers. And our tele-density which before reform was 4 percent, today has passed 40 percent. We are adding 1.5 million new phone consumers a month. I have been wrong consistently, Ladies and Gentlemen. I predicted a year ago that this rate would reduce with how many more phones one would sell in a country of 160 million people, but lo’ and behold, I have been proven wrong. We are selling 1.5 million phones a month and, the jobs it has created is unbelievable because there are new cell sites, new companies, new staff and new technologies. So, this is an example of successful reform which brought in investment, which improved service and above all reduced tariffs. Because of competition, the State monopoly (and inefficiency which comes with it) was removed. So today, if you don’t like service from one company you go to the next, and if you don’t like their service you go to somebody else. That’s the new paradigm for activities which have happened and, for those of you who want to see this for yourself, please come to Pakistan and enjoy the benefits of what we’ve done.
Next point I’d like to make is on the value for reform. Pakistan’s success, apart from stronger macro economic performance, is a benefit we are getting from what I call the reform dividend. Because we reformed so broadly, so deeply, the reform dividend is now carrying our growth forward. And reforms cover every sector, in some we did well, in some we still have more work to do. But I won’t go into too many details, except to say that there is no option for any Government, any policy maker, to make progress without reform.
Now, if you have to today, you can leapfrog, you don’t have to go or follow the path which many people took in the past. You can jump the curve and go straight into what I call digital thinking. The digital age, which is that people can leapfrog, jump one or two generations of techniques and activity and get the best. And so, for example, in cellular telephones you can skip analogue and go straight to GSM or GSM Plus, as well as benefit from so many other new techniques and new technologies that are coming up. That’s what we’ve done, and I think that’s the way to jump the curve and be ahead of the curve when we want to do so. So, we have clearly benefited from the reform dividend and, in all this activity, we did one or two main critical things which I think I would like to just leave with you as a thought.
We decided early on that there will be no rate card, no restriction on anybody investing in Pakistan.
What do I mean by a rate card? You go to some countries, I apologise if that’s true here, and you get a list. If you want to invest in this industry, you can invest 30 percent, and in this other industry 50 percent, and this you can’t touch, and this you have to have this much local partnership, etc. This is yesterday’s thinking, Ladies and Gentlemen. Today’s thinking is that you open up. If you really believe in deregulation, you open up. Nobody can put a hotel like this in their briefcase and take it to Europe. This will always remain as an asset in Afghanistan. But the ownership can change, and that’s the concept that any developing country cannot leverage its true potential without importing foreign savings.
Foreign savings can come in two ways, equity and debt. If you take equity, you will pay back if the investment makes money. If you take debt, you will have to pay back irrespective of whether the project produces or not. Decide for yourself which is better. I think the better solution will be a combination of both, but certainly equity has a lot of advantages. And what is the advantage of foreign investment? Not just money, you get management, you get expertise, you get the latest
techniques in the world, depending on who is coming. So rate cards don’t help anymore, either you believe in open investment from everywhere, or you don’t, and my humble suggestion would be that this ought to be the way.
The other area which you may want to focus on is your diaspora. Afghanistan has a lot of people overseas who are well-off, who are making good money. You can bring in the emotional investments. If you look at China, study China as a model, the single most important factor, apart from reforms, which propelled the growth of the Chinese economy initially was the Chinese diaspora. They pumped in billions of dollars and look where China is today. Then others came in too and these are the sort of techniques, ideas, policies which can help a country leapfrog. I think Afghanistan is well poised to leapfrog so long as you jump the curve, and jumping the curve means support from everybody in the Government, civil society, Parliament, private sector, foreign and local investors, to seek out those opportunities which will then get you where you want to go.
Now, Ladies and Gentlemen, as I come to the end of my remarks today, let me say that Afghanistan, in our view, is faced with the twin challenge of reconstruction and reform. Creating an enabling environment for development in Afghanistan will require generous and sustained support from the international community, particularly the developed countries. To ensure economic growth, employment generation, human development and building your infrastructure, the world community must help Afghanistan to greater market access, investment flows and transfer of technology. Market access is critical, that will allow you to attract businesses, investments to Afghanistan which can enter the United States and Europe with no tariffs and will make your products more competitive.
Pakistan has been advocating the proposal of creating Reconstruction Opportunity Zones, or ROZs, especially in areas of Afghanistan and Pakistan where there is higher incidence of poverty and a sense of deprivation. And this is now being negotiated and discussed with the US authorities and we hope that we will reach a conclusion fairly soon. This could open up new opportunities for both Pakistan and Afghanistan, link them even further, and create a tremendous new business
opportunity and a new business paradigm for both countries.
In conclusion then, Ladies and Gentlemen, let me say that the relations between Afghanistan and Pakistan are rooted in common faith, history, geography, culture and traditions. Our relationship is also embedded in commonality of strategic and economic interests.
We are therefore fully committed to helping our Afghan brethren achieve the objectives of political stability, social cohesion and economic development. We feel that a stable and prosperous Afghanistan can play a pivotal role in the regional economy and help leverage its potential by opening multiple corridors of cooperation in vital sectors such as energy, trade, tourism and transportation.
We look forward to enhanced cooperation between our two countries to open new avenues of peace, progress and prosperity for people inhabiting this region and to contribute to peace and security in the world at large.
Let me conclude by expressing my gratitude to President Karzai, the Afghan Government and His Highness the Aga Khan for inviting me to participate in this Conference. I wish all of you a very successful stay here. I know this is the concluding session, so I hope that whatever you have discussed, agreed and deliberated upon can be actioned, can be implemented, and if there is anything the Government of Pakistan, the private sector in Pakistan and the people of Pakistan can contribute to your efforts, you know you can count on us.
Pakistan and Afghanistan have a shared sense of destiny. Let’s work together to achieve our true
Thank you very much, Ladies and Gentlemen.
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