08
May

Our Economy's External Sector

Published in Hilal English May 2017

Written By: Dr. Farrukh Saleem

How do we keep a pulse on the economy? How does one evaluate the real health of an economy? Broadly speaking, an economy can be divided up into the internal sector and the external sector. Economic indicators are then used to ascertain or judge the current or future health of the economy. Here’s a review of our economy’s external sector based on exports, foreign direct investment, foreign exchange remittances and external debt.

 

ourecoextr.jpgExports: Pakistan’s exports as a percent of our GDP are at a 25-year low. In 1992, our exports stood at 17 percent of our GDP while the same now stand at 7 percent; what a steep fall! In dollar terms, our exports have come down from $25 billion just five years ago to a current figure of around $20 billion; a steep fall of around 20 percent in just five years. Amazingly, Bangladesh’s exports over the same five – year period have grown from $24 billion to $35 billion – a 45 percent jump.

ourecoextr1.jpgIn 1991, Pakistan’s share in world exports stood at 0.18 percent which has since come down to 0.14 percent. In 2004, Pakistan’s trade balance as a percent of our GDP stood at [plus] 1 percent of GDP; the current trade balance is [minus] 7 percent of GDP. As far as the trade balance is concerned, the year 1985 was even worse but the deterioration over the past thirteen years is a serious matter.


Foreign Direct Investment (FDI): In 2007, Pakistan attracted $5.59 billion FDI. The current figure on FDI is around a billion dollars – 80 percent drop in ten years. In 1996, our share in world FDI stood at 0.26 percent which has since come down to a paltry 0.12 percent of world FDI – 55 percent drop.

 

ourecoextr4.jpgImagine; in 1960, we were 1.5 percent of world population and now we are 2.56 percent of world population while our share in world exports is shrinking and our share in world FDI is also on its way down. To be certain, we are missing the boat.


Imagine; five years ago our labor force numbered 61 million which now numbers nearly 70 million but our exports have gone down from $25 billion to $20 billion over the same period. Aren’t we missing the boat?


Remittances: Pakistani workers sending back their hard-earned dollars back to Pakistan have been and continue to be the backbone of our external sector. A year ago, Pakistanis sent back a colossal $20 billion back to Pakistan and that covered around 40 percent of our import bill. Of the $20 billion roughly 65 percent comes from five countries: Saudi Arabia, the UAE, Kuwait, Qatar and Oman.


Foreign workers from all over the world working in Saudi Arabia, the United Arab Emirates, Kuwait, Qatar and Oman have been remitting back a wholesome $100 billion a year to their home countries. No more (courtesy of the oil price crash).


For Pakistan, Saudi Arabia is the source of 30 percent of our workers’ remittances and Saudi Arabia’s budgetary deficit has now ballooned to $100 billion. Saudi Binladin Group, the construction giant, has already laid-off 50,000 of its 200,000 workforce. For Pakistan, remittances from Saudi Arabia, the U.S. and the UK are down 6.2 percent, 6.9 percent and 8.5 percent, respectively.

 

ourecoextr2.jpgExternal Debt: This is the portion of our national debt that has been “borrowed from foreign lenders including commercial banks, governments or international financial institutions. These loans, including interest, must be paid in the currency in which the loan was made.”


Over the past three years, additional loans to the amount of $25 billion from foreign lenders have been taken. Of the $25 billion, an amount of roughly $12 billion went back towards the payment of previous loans. Net foreign borrowing thus amounted to $13 billion (in addition to domestic borrowings of over Rs. 3 trillion).


The economy seems headed into a ‘debt trap’ whereby we must borrow more just to pay back what has been borrowed in the past. In 2016, state-backed Chinese banks rescued us by lending $900 million. In the first three months of 2017, we borrowed an additional $300 million from the Chinese (Pakistan’s trade deficit with China has doubled over the past few years).


Pakistan is now seeking an additional $600 million from the Asian Development Bank (ADB) in the name of Public Sector Enterprises Reforms Tranche-II and III. Pakistan is now seeking an additional loan of $100 million from the French Development Agency (AFD). Pakistan is also seeking an additional loan of $750 million on commercial terms from China for Pakistan to pay back a $750 million, 10-year Eurobond that was floated back in 2007 (and is maturing this year).


In 1971, our total debt (external plus internal) stood at Rs. 30 billion. In a matter of 46 years our public debt has moved from Rs. 30 billion to Rs. 22,000 billion.


In 2008, the per capita debt – debt owed by each man, woman and child in the country – stood at Rs. 40,000. The same has since gone up to Rs. 115,000.


The truth is that our exports have now become uncompetitive in the world market because input costs in Pakistan – electricity and natural gas – are now the highest in the region. Additionally, the cost of doing business in Pakistan is now the highest in the region and our rupee has become grossly overvalued. Our return back to another IMF rescue is inevitable. Pending things for elections is not leadership but expediency.


Lo and behold, we refuse to accept that our external sector is in deep trouble. As a consequence of the refusal, there’s no policy to turn things around; one must first recognize that there’s a problem for problem solving to begin.

 

The writer is an eminent analyst who regularly contributes for national and international print and electronic media.

Twitter: @SaleemFarrukh

 
13
May

Gwadar The Race to the Swift

Published in Hilal English May 2014

Written By: Brig Rashid Wali Janjua

The providence has been munificent in bestowal of its bounties upon Pakistan and Gwadar is one such treasure that lies unclaimed due to desultory planning and the lack of right focus. It is a natural deep sea water port that can outshine all such regional ports like Dubai, Salala, and Bandar Abbas due to its strategic and geographical location. It has the potential to usher in a revolution in the fields of international trade, commerce, and oil refining with the promise to alter the economic fate of the entire country. The question that begs an answer is as to who then is impeding the country's inevitable march towards prosperity. What is the economic and strategic cost of this egregious failure to develop the port and associated network of roads? What are pitfalls that lie ahead of the much vaunted second phase of the project and what are the implications of letting the competitor ports like Chabahar get ahead in the development race? An attempt shall be made to answer some of the above questions in this discourse. Before proceeding ahead it is worth highlighting that nature has endowed Gwadar with certain topographical advantages that beat all other rival regional ports hands down notwithstanding their sedulous development efforts. The only way a nation strapped for cash and beset with daunting economic challenges can propitiate the gods of prosperity is by offering a libation of progress. The past inaction begotten out of poor planning, flawed agreements, vested interests and a lack of will needs to be remembered if the past mistakes are to be avoided. A brief background of the past development efforts is apposite in order to understand the possible caveats to future development endeavours.

The significance of Gwadar as a deep sea port was well recognized by the government of Pakistan as far back as 1964 but the first serious initiative to develop it as a deep water port was taken in 1993. The project was launched in right earnest after a painful delay of eight years in 2002 and was completed by a Chinese firm in 2005 at a total cost of $248 million out of which $50 million was contributed by Pakistan. The present miniport has three berths with a handling capacity for 50,000 ton ships and 25,000 ton containers. It was further planned to enhance the capacity of the port for 100,000 ton bulk carriers and 200,000 ton oil tankers along with nine additional berths in the second phase.

The phase two's development, however, has been a saga of procrastination and wrong selection of the developer that kept the port undeveloped till now. The contract instead of being awarded to the Chinese, who had developed the phase one of the port quite proficiently ,was awarded to PSA Gwadar Private Limited, a subsidiary of Port Singapore Authority with National Logistics Cell and AKD group as shareholders. The agreement signed in 2007 between the government of Pakistan and the PSA Gwader Private for management and operation of the port for 40 years came in for a lot of criticism due to the unwarranted concessions given to the private entity. The failure of the PSA Gwadar Private Limited to spend even 5% of the originally promised $500 million and its inability to attract even a single commercial ship to the port since 2007 prompted the government of Pakistan to press for a revocation of the agreement.

The development and operation of the port is now being handed-over to the Chinese. Care, however, should be taken to ensure that the new agreement does not repeat the flaws of the previous one in order to guard the best interests of the country. The Chinese involvement in the deal bodes well for the project due to the strategic and commercial interests of the China that wants an outlet towards the Indian Ocean and the Middle Eastern oil routes from its South-Western region. While its South-western Xinjiang province is 4500 km from Eastern Coast, Chinese ports, it is only 2500km away from Gwadar. In addition to above the ships travelling to the Chinese East Coast have to travel an additional distance of 10,000 km from the Persian Gulf as compared to those travelling to Gwadar. 60 % of China's oil comes from the Gulf travelling 16,000 kilometres in a few months to Shanghai. Gwadar reduces the distance to just 5000 kilometres with fewer risks. The sea traffic of China from the East Coast to Persian gulf would save up to 20 days in travel-time and $500 per 20 ton container after an operational Gwadar port gets linked with China. Gwadar affords another incomparable advantage to the sea traffic plying towards the Straits of Hormuz and the Persian Gulf as it provides the shortest distance from the high seas to a natural deep port without running the gauntlet of traffic management in the narrow straits.

Gwadar port has the promise to address Pakistan's strategic vulnerability due to availability of only two closely located ports vis à vis any naval blockade in times of conflict. Besides ministering to the domestic trade needs of the country, it has the potential to service the Central Asian trade markets, Afghanistan and the littoral countries of the Indian Ocean as a hub port. There is an ideal symbiosis of the strategic and geographical advantages conferred upon Gwadar due to its location near the mouth of the oil rich Persian Gulf and the landlocked, Central Asian countries. A network of roads linking it on the Makran coast with the Pakistani hinterland, Afghanistan, Central Asia and China would metamorphose this small city into a bustling trade and commerce centre rivalling any developed coastal metropolis of the world.

A brief mention about the trade potential of the port is in order. The sea trade contributes around 36% of the national GDP of Pakistan and is likely to reach 80 million tons by the year 2015. Considering the fact that it would further grow in future while the two ports i.e Karachi and Port Qasim are reaching their optimum development potential, the bulk trade would be handled by Gwadar. According to some UN estimates, the sea borne containerized trade of the world is likely to double by the year 2015. Combined with this exponential rise in sea trade, the tremendous potential of Central Asian trade ($20-30 billion annually), Gwadar is ideally poised to tap this trade bonanza. The trans-shipment potential of Gwadar alone makes it the top development priority of the country. It is worth highlighting that for majority of the countries of the world the seaborne commercial activities contribute at an average of 20% of the respective national GDP. Gwadar's true potential would be realized when in addition to port operations, it develops as a regional oil refining and ship repair hub. The oil pipelines from Iran and Turkmenistan, in addition to the ease of transportation of the seaborne crude oil towards the port make it one of the most promising locales as an oil refining hub. The transit fees from these oil conduits and the trans-shipment operation revenues alone would take Pakistan few notches up the national revenue ladder.

All of the above developments, however, are hamstrung by several caveats. These include a secure environment, a network of communications’ arteries, a lucrative tax concessions' regime for commerce and an astute port development agreement without compromising on the vital national interests. Generally the well developed sea ports all over the world contribute at an average of 10% of GDP towards national economy. The wastage of the eight years from 2007 to 2014 due to lack of development efforts by developers, therefore, has already cost Pakistan a loss of $160bn, a phenomenal sum considering the perennial debt dependence of our frail economy. A national commission, including eminent jurists, bureaucrats and engineering experts, needs to be set up to identify the reasons leading towards the loss of eight years and also to apportion blame wherever necessary.

The petty urban rivalries and vested interests that viewed the Gwadar development project through the prism of their petty interests and zero sum game need to be identified in order to avoid their baleful machinations in future. The failure of the private developers to achieve desired results needs to be examined critically in the context of their grouses vis à vis the government. The failure of the government to ensure law and order, acquisition of land for development and provision of energy grid needs to be evaluated in order to ensure that the new development initiative also does not meet the same fate as the previous one. The security of the areas straddling the putative “Pak-China Economic Corridor” should be made a national priority. If the enabling investment and security environment is not provided, neither the port nor the allied communication infrastructure can be developed despite the sincerity of our Chinese developers.

While conceding maximum tax concessions to the developers, the mistakes committed while entering into agreement with PSA Gwadar Private in 2007 need to be avoided. Some of the erstwhile mistakes are reportedly being repeated in the new agreement with the COPHC China, the company charged with the development of Phase Two's nine berths including 4 container berths, one bulk cargo terminal having a capacity to handle 100,000 DWT ships and two oil terminals to handle 200,000 DWT ships. The mistakes committed in the erstwhile flawed port development agreement with PSA Gwadar Private Ltd need to be avoided in the interest of timely completion of this vital national project. These concessions that bartered away the rights of Pakistan's Gwadar Port Authority to a foreign entity included the right to levy tolls, determine rules and impose tariffs without approval of the federal government. Only a paltry 9% of the gross revenue from the “Terminal Services” was to be shared with the Gwadar's Port Authority that was saddled with the difficult responsibilities of dredging of the channel and the turning basin. Hefty exemptions like tax holidays for 20 years, and right to ownership of the existing land of the port including the future reclaimed land were such carte blanches that hamstrung the federal government's ability to balance the national interests with that of the foreign port developer. While munificence is the key for providing tax and tariff concessions to make Gwadar a free trade port capable of attracting maximum investment guarding of genuine national interests is also an imperative.

The conflation of strategic and economic interests of the country in the development of this vital port makes the oversight of the whole project at the highest level, a top national priority. The several elements germane to the port operation and development of the urban infrastructure need to be holistically viewed from the development perspective and resources allocated accordingly. The development of road and rail network linking Gwadar with Central Asia, Afghanistan, and Pakistan's main trade centres should be accorded the same urgency and importance as the port operations. A special wing under National Highways Authority (NHA) needs to be raised with a professional head answerable directly to the Prime Minister for timely progress of the project. The construction arms associated with armed forces like NLC and Frontier Works Organization (FWO) should be relieved from urban centred projects and the bulk of their assets employed in development of communication network linking Gwadar with China, Afghanistan and Central Asia. A Joint Cantonment of Army, Air Force and Navy can act as a veritable “security anchor” to reassure the port developers and entrepreneurs. The development of the “Joint Cantonment” should be accorded top priority in order to underscore the seriousness of the country towards the Gwadar Port project.

The development of Gwadar is a veritable “Race to the Swift” that needs to be won in this competitive age when ports like Chabahar are vying to outpace Gwadar as a regional hub port; conversely a Dunkirk like fate awaits our national development endeavour. India has committed $100 million to upgrading facilities at the port after spending $100m on building a 220 km road linking Chabahar with Kandhar and Herat. A linking of Chabahar with Central Asia will give India a trade route towards a resource and energy rich region bypassing Pakistan. It is in the interest of Pakistan to expedite the development of Gwadar Port as well as the communication network linking it with the national hinterland, Afghanistan/Central Asia and China. While giving generous incentives to Chinese developers for maximizing their cooperation, care should be taken to assuage the concerns of the rival ports and countries that have a reason to feel threatened by the new port. The likely Indian and US concerns vis à vis Chinese presence in the Indian Ocean and the possible military use of the port need to be addressed through a constructive engagement with these countries and offering of commercial incentives. The credo of such a diplomatic initiative should be, “let a thousand flowers bloom”. The development of Gwadar is an idea whose time has come and one that can alter the destiny of the country. Let no land centric predilection of a continental mindset obtrude constraints upon the project that has the promise to singlehandedly usher the country in the next tier of the developed nations. The development of communication infrastructure, facilitative tax incentives and improvement of security environment are the essential pre-conditions that need to be met at priority without which the idea of Gwadar as an engine of economic growth will remain a pipe dream.

10
June

Balancing Power in the Region: Options for Pakistan

Written By: Dr. Rasul Bakhsh Rais

Given the hard cash India has at its disposal and the Indian religious, nationalist right defining the Indian regional ambitions, Delhi has become a favourite defence customer in many capitals for advanced weaponry in every department of the armed forces. What options Pakistan has to balance the Indian military power?

In an anarchic world, power is the major currency for a state to prevent war by deterring the designs of an aggressive adversary. This is as old a principle as the emergence of the nation state, first in Europe and then in every part of the world after the demise of colonialism. How relevant is this old principle in the world that is fast integrating economically and generating webs of interdependencies? What is the balance of power today between Pakistan and India and why the power structure and the underlying issues that define it, are different from other regions? What are the options for Pakistan for dealing with the issues of power asymmetry? These are the questions that I attempt to address.

First, the idea of balancing power with power has not lost relevance to the modern world. It will remain valid and the primary principle of national security as long as the world system continues to be dominated by the sovereign states that often unilaterally define national objectives and select the means to achieve them. However, the power structure at the global level has changed several times with rise, fall and emergence of new powers and new centers of power. How many great powers and what the relationship between them from one end of hostility to the other end of amity, and their global policies and choice of allies, friends and strategic partners had left a deep mark on the policies of many regional players. Second, the issues that dominate the global politics have kept changing and will keep changing, leaving good impact on the choices that many nations make. For instance, we see great change from ideological issues dominating the cold war era to economic cooperation issues and new threats – terrorism, subnational conflicts and interventions by proxies. Finally, the relative value of the elements of national power has also changed. These changes have taken place within the structural context of the world system that continues to be shaped by power dynamics. The change is only the objectives, means, template of major players and issues that define our age.

While India allocated U.S. dollars 46 billion for its defence, Pakistan could not squeeze out more than 6 billion. In recent years, just increase in Indian defence spending in a single year has been more than total defence budget of Pakistan.

The positive changes that have taken place in other regions – Europe and East Asia – have yet to take place in South Asia. Contrary to economic integration and cooperation these regions which have entirely transformed old-fashioned nationalism and historical rivalries, the troubled legacies of the partition of the British Indian Empire, suspicion, distrust and latent hostility – a kind of cold war – remains the defining feature of power relations in South Asia. Another difference is more obvious and important. While the great powers of yesterdays have trimmed their ambitions regarding dominating the neighbours and have given up geopolitical designs on others, India that occupies the central position in the South Asian geopolitical order, lives by those ambitions. That makes the geopolitical system of the region increasingly shaped by fears, insecurity and nuclear arms race between Pakistan and India. The history of relationship – wars, intervention and destabilizing strategy – have never assured Pakistan of India’s intentions, often conveyed through peace rhetorics.

No amount of good intentions, no matter how best they are articulated and by whom, can assure any pragmatic leader and those possessed with the responsibility of national defence. It is old wisdom to say, intentions can change overnight, as we have seen they have throughout the history. States don’t take such risks of believing in words. Rather they look at the military power of the other – if and when the relationship happens to be adversarial – and think of their own appropriate responses. Never has Pakistan’s national security planners been oblivious to this fact. Balancing India that is manifold stronger than Pakistan, has not been either an easy choice or without tremendous difficulties or costs. In doing so, Pakistan has pursued several strategies beginning with the defence alliances with the Western world, notably with the United States to development of nuclear weapons.

In asymmetrical equations like with one between Pakistan and India or between Israel and the vast Arab lands, nuclear self-sufficiency and reliance on more advanced technological means provide some of the answers to the security dilemma. Since the East Pakistan tragedy in 1971, Pakistan pursued the nuclear option as the best guarantee to its national security. The idea is not to wage wars but to deter probable Indian aggression, somewhat compensate for the conventional gap and psychologically reassure the population of peace and security against the more powerful neighbour. Pakistan’s approach has been eclectic towards national security against the Indian threat, as the country has continuously rethought and recalibrated its responses to India’s growing military might – both conventional as well as nuclear. But that has not been without serious challenges, deficiencies and some serious questions about sustainability. This brings us to the major issue of imbalance in material resources, economies, numbers and the weapons systems at both ends. The question that has occupied the defence planners in Pakistan is how to counterbalance the Indian threat, and which means in a given situation will appropriate to do so. This also prompts some of the national and foreign defence analysts to raise the question of Pakistan’s capacity to sustain its strategy of countering the Indian threat. The gap in defence outlays, size of the economies, rate of growth and other elements of national endowment are quite obvious, and quite distressing for Pakistan. While India allocated U.S. dollars 46 billion for its defence, Pakistan could not squeeze out more than 6 billion. In recent years, just increase in Indian defence spending in a single year has been more than total defence budget of Pakistan. Second, Indian economy in recent decades has increased at much higher rate than that of Pakistan and continues to do better. Finally, the volume of the Indian economy is at least six times greater than that of Pakistan. Given the hard cash India has at its disposal and the Indian religious, nationalist right defining the Indian regional ambitions, Delhi has become a favourite defence customer in many capitals for advanced weaponry in every department of the armed forces. What options Pakistan has to balance the Indian military power? While maintaining a robust, full-spectrum nuclear deterrence, Pakistan must pursue a flexible response strategy. What would that mean in the sub-continental balance of power? An equally robust conventional, war-fighting capability is necessary to control the escalatory ladder in a hot-conflict situation. The choice of technologies, defence hardware, and forces structure are very important consideration for getting more out of less defence budget. The integration of tactical nuclear weapons doesn’t give me a comfortable feeling for obvious reasons of these being destabilizing and surely inviting similar use of weapons from India. There will always be a question of uncertainty of outcome – a stalemate, escalation, and mutually assured destruction? The real alternative is in conventional defence, if the nuclear deterrence fails to prevent a major war.

A broader national security framework needs to be formulated with essential components of national integration, political stability, amenable civil-military relations and a national framework for economic growth. Economic modernization through Chinese investments and successes in defeating extremism and ethnic militancy will create the right conditions for a solid base for national security.

Second, Pakistan is facing internal national security threats that India appears to have aided – some, at least in Balochistan and FATA, if not all. For national security and prosperity, Pakistan will have to defeat the internal enemy – the radical Islamists, sectarian and ethnic terrorists. National solidary, peace and stability will create the right conditions for the economy to grow. General Raheel Sharif is right in emphasizing that only “secure Pakistan can be a prosperous Pakistan”.

Third, Pakistan has rightly changed the course of policy toward Afghanistan, and Iran as well in the last couple of years. By not aligning with any power in the Middle East conflicts and by reassuring Afghanistan that “enemies of Afghanistan cannot be friends of Pakistan”, we have made a paradigm shift in our regional policy. Best of relationship with these two neighbours, often problematic, must provide the fresh security underlay for Pakistan. That will surely deny India opportunity to create and use bases from these countries to ignite troubles inside the country. Finally, a broader national security framework needs to be formulated with essential components of national integration, political stability, amenable civil-military relations and a national framework for economic growth. Economic modernization through Chinese investments and successes in defeating extremism and ethnic militancy will create the right conditions for a solid base for national security.

The writer is an eminent defence/political analyst who regularly contributes for print and electronic media. Presently he is on the faculty of LUMS. This email address is being protected from spambots. You need JavaScript enabled to view it.
12
June

5 Quotes, 6 Facts & 7 Myths

Written By: Dr. Farrukh Saleem

Arundhati Roy: “Now, we have a democratically elected totalitarian government.” Kuldip Nayar: “I see induction of religion in politics.”

Ambrose Evans-Pritchard (The Telegraph): “India's economic model has essentially failed. Talk of matching East Asia's growth rates has been exposed as wishful thinking. Superpower dreams are giving way to the same old reality of poverty, depleted ground water and graft.” Praveen Swami (The Hindu): “India's new language of killing,”

Subir Sinha (University of London): “Why India's new PM may bring disaster to India.” Fact 1: There are 1.2 billion humans in the world who live in extreme poverty. Of the 1.2 billion, 33 percent of the world's poor live in India. More than 850 million Indians earn $2 a day or less-that is 2 out of every 3 Indians.

Fact 2: In 1988, India's defence budget stood at Rs 168 billion. Last year's allocation stands at a colossal Rs 2.03 trillion – an increase of nearly 14 times. In dollar terms, the budget has gone up from $16.7 billion to $47.7 billion (in constant 2010). Fact 3: India is already the biggest buyer of arms in the world. Narendra Modi now wants to spend an additional $200 billion on stealth fighters, main battle tanks, backfire bombers, aircraft carriers, frigates and Scorpion submarines.

Fact 4: India has six neighbours: Bangladesh, Bhutan, Burma, China, Nepal and Pakistan. The Indian Army's Arjun main battle tanks are not for Bangladesh. The T-72, 2nd generation, 41.5 tons, main battle tanks are neither for China nor for Nepal. The T-90, 3rd generation, 47.5 ton, main battle tanks are neither for Bhutan nor for Burma. The on-the-ground reality is that most Indian arms are positioned to target Pakistan. Fact 5: In 2005, Narendra Modi, just when he was preparing to travel to New York, was refused the U.S. visa. The State Department invoked a law that makes foreign “officials responsible for severe violations of religious freedom ineligible for visas.” For the record, Narendra Modi is the only person on the face of the planet ever denied a visa to the U.S. under this provision. Fact 6: Bharatiya Sthalsena has a total of 13 corps of which at least 7 have their guns pointed at Pakistan (Sundarji Doctrine). Now some myths:

Myth 1: Pakistan's military eats up the largest chunk of the budget. Not true. The single largest allocation in Budget 2014-15 is the provincial share in federal revenue receipts. The second largest allocation in Budget 2014-15 went to servicing the national debt. The third largest allocation in Budget 2014-15 went to the Public Sector Development Programme (PSDP). Yes, the fourth largest government expenditure goes into defence. Myth 2: Pakistan ends up spending a very high percentage of her GDP on defence. Not true. There are at least four-dozen countries that spend a higher percentage of their GDP on defence. They include: India, Egypt, Sri Lanka, the United States, the United Kingdom, South Korea, France, Eritrea, Oman, Saudi Arabia, Israel, Jordan, Liberia, Brunei, Syria, Kuwait, Yemen, Angola, Singapore, Greece, Iran, Bahrain, Djibouti, Morocco, Chile, Lebanon, Russia, Colombia, Zimbabwe, Turkey, Georgia, Guinea-Bissau, Ethiopia, Namibia, Guinea, Turkmenistan, Kyrgyzstan, Algeria, Serbia and Montenegro, Armenia, Botswana, Ukraine, Uganda, Ecuador, Bulgaria, Lesotho and Sudan. Myth 3: Pakistan's defence budget has been increasing at an increasing rate. Not true. In 2001-02, Pakistan spent 4.6 percent of the GDP on defence. In 2012-13, twelve years later, Pakistan's defence spending had gone down to 2.3 percent of GDP. In Budget 2014-15, Pakistan's defence spending still hovers around 2.3 percent of GDP.

Myth 4: Pakistan's defence budget eats up a large percentage of the total outlay. Not true. In Budget 2014-15, a total of 16.27 percent of the total outlay was allocated for defence. What that means is that around 84 percent of all government expenditures are non-defence related. Myth 5: Pakistan Army consumes the bulk of the defence budget. Not true. In the 70s, Pakistan Army's share in the defence budget had shot up to 80 percent. In 2012-13, Pakistan Army's share in the defence budget stood at 48 percent. Myth 6: Commercial undertakings by Pakistan Armed Forces are a burden on Pakistan's economy. Not true. To begin with, commercial undertakings have literally nothing to do with active duty personnel – and everything to do with the welfare of retired soldiers. Defence Housing Societies are all self financing and popular both among investors and residents (because of superior management and security of title). Fauji Fertilizer, a public limited company, for instance, contributed a wholesome Rs. 91 billion to the tax kitty. Myth 7: Pakistan Army consumes a large chunk of Pakistan's budget. Not true. Pakistan Army's budget as a percentage of Pakistan's national budget now hovers around 8 percent.

The writer is an analyst who regularly contributes for national and international print and electronic media.

Tweeter: @SaleemFarrukh

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