Pakistan’s fortunes have turned around over the past five years. From international pariah to a member of the American-led coalition in the war on terror; from bankrupt state to a thriving economy. Much of this success can be attributed to Shaukat Aziz. A former investment banker, Aziz was Pakistan’s minister of finance until August 2004, when he was appointed prime minister. He spoke in Islamabad to Adrian Murdoch about the ways in which Pakistan has changed, what more needs to be done and why the country’s stability is vital to the rest of the region and the world

GLOBAL AGENDA What do you see as Pakistan’s role in the war on terror?

Shaukat Aziz The world has gone through a lot of change in the last several years; since 9/11 we have focused on the flow and rise of terrorism. Every society has a small minority of people who think differently to the rest of that society. No part of the world is immune from this thinking. In Pakistan’s case, we are a peaceful country, and we want security within the country so that we can develop and grow.

After 9/11 the world focused on Afghanistan and the war against terror. Pakistan joined the coalition fighting against terrorism because we believe in peace, moderation, tolerance, and we are doing this for our own national interest. Pakistan has had a sobering influence in the region, in fighting such elements. We believe that a moderate Islamic country like ours can play a stabilizing role as an anchor for peace and tranquillity in this part of the world. We have an important role as time goes ahead.

Some people within Pakistan are indeed sympathetic to terrorism, but the government has spent a lot of effort, time and energy to resolve this situation. Our security position today is much better than it was several years ago. All the hotels in Pakistan are full, all flights to Pakistan are full, there is a lot of traffic from all over the world. Although some countries may have travel advisories warning people not to come here, the fact is that foreigners roam around here freely.

The reason is that the economy of Pakistan has shown a major turnaround, there is a lot of opportunity, and everyone wants to be part of it. The world has a responsibility to understand the root causes of terrorism and why people behave in a certain way. This usually emanates from a sense of deprivation, and this feeling in any form – be it a lack of income, a shortage of jobs or civil liberties, a lack of justice – all this causes people to turn to extremist behaviour. Better education, a growing economy, a sense of justice, all have a positive effect.

Remember, though, that terrorism is not an exclusive preserve of this region. This feeling of neglect has to be fought everywhere. It is not a case of Islam versus the west. Pakistan is determined to play its part as a responsible country and we will never allow our country to be used for terrorism and those who indulge in it. We will deal with them sternly.

GA To what extent has the Pakistani response to this effort been shaped by domestic considerations?

SA Whatever we decide is based on our national interest. No country can say that it is supporting terrorism. We live in a civilized world. Whether any particular individuals are subject to these threats is secondary. The primary thing is that people have a right to live safely, to go about their lives and to build a better future for themselves and their children. Anything that gets in the way needs to be dealt with.

GA From the perspective of a front-line Muslim nuclear state what should be the world’s response to rogue nuclear states?

SA I take exception to the phrase “front-line Muslim state”. We are an Islamic state, but it has nothing to do with nuclear power. We do have a nuclear capability, and it is part of our credible defence as a deterrent. It is a guarantee of peace in this part of the world. We believe that our nuclear programme is in responsible hands. We are against any proliferation, in any form whatsoever.

GA What do you think Pakistan’s role should be in assisting the peace process in Palestine?

SA If Pakistan helps Palestine settle its issues and find peace, the people of Pakistan will welcome it. But it is premature to comment more. Let’s see how events develop.

GA What are you pushing for in terms of a settlement of the Kashmir issue?

SA Pakistan desires peace with all countries, including its neighbours. If you look in the region, we have good relations with all of our neighbours, with India too. In the last year or so we have made very good progress, and since president Pervez Musharraf met former Indian prime minister Atal Behari Vajpayee, there has been an improvement in bilateral relations. We want all issues to be settled peacefully, we want progress in all areas of cooperation, but progress on various issues like trade and people-to-people contact has to be tackled together with progress on the issue of Kashmir. We want the issue to be settled along the lines of the aspirations of the Kashmiri people, and any settlement will require the agreement of India, Pakistan and the Kashmiris. Their rights and aspirations have to be recognized, respected and responded to.

GA The role of the military in domestic politics in Pakistan continues to raise international concern. Do you see it as a hindrance?

SA Pakistan needs no lessons in democracy from anyone. Every country has to evolve its own governance structure. Pakistan has a structure that has evolved under our constitution and has resulted in a very vibrant and functioning democracy. Our parliament is independent and acts in the provinces at the local and provincial level. Pakistan is one of the few countries [in the region] with a completely free press, both electronic and print. We encourage people to express their views, and this leads to a very healthy environment and promotes democratic process. We are doing what is good for Pakistan and we are not defensive or apologetic about it.

GA In your maiden speech as prime minister, you claimed that Pakistan had broken the begging bowl. What did you mean by that?

SA A few weeks ago we informed the International Monetary Fund that we will no longer be in a programme with them, we would no longer need any funding from them because we are in a self-reliant mode. Our macroeconomic indicators are strong. The programme was good in getting us to where we are, and it succeeded because we had full ownership and it was home-grown. We need to look ahead now. We are currently accessing global capital markets. Our rating has been improved further to B+ by Standard & Poor’s. We are in a growth mode which is high – some 6% to 7% a year. This year we expect GDP growth to be similar. A middle class is emerging, the fiscal deficit is controlled tightly, external accounts look comfortable, revenue collections, imports and exports all show that growth is taking place, and investment, both domestic and foreign, is vibrant.

GA Good governance was the other key message from the speech. How can you get that to trickle right down?

SA If you have good structural reform, transparency and clear policies you have good governance. That is the hallmark of our government. This has to transcend all levels of government: federal, provincial and local. Compared with even a couple of years ago people tell me that we have faster decision-making processes and more rapid transparent policies, and there are no sweetheart deals in Pakistan any more. You have to compete for them. We recently gave away two licences for cellular phones and we ran an open auction with a prequalification process. From that we got $291 million for each licence. The point is that the process was transparent and shown live on television. Obviously a lot remains to do. Rome was not built in a day. The key is consistency and continuity of policy.

GA How are you tackling Pakistan’s poverty rates?

SA Poverty levels in Pakistan are gradually declining. At the moment we are in the midst of conducting a comprehensive income survey which, I am confident, will show a significant reduction. You simply cannot have poverty increasing if you are posting annual GDP growth of 6% to 7%. Per capita income last year was up to $650; purchasing power parity is over $2,200, and with strong growth both in urban and rural areas we expect poverty to decline. It takes a while for poverty to disappear, no country has that luxury, but we think that when the results come out, you will see that the poverty trend is downwards and income is up.

GA Where do you see the necessary growth in employment coming from?

SA Because of heavy investment, private sector growth and growth in the economy in general we see increased employment opportunities for our people. Government spending for development projects is higher than ever before. What Pakistan does have is a bit of a skills gap. A lot of our most skilled people are overseas, so we are now training people in vocational skills – we are training them to be engineers, construction workers, IT specialists and so on. The government has come up with a cash programme to impart these skills to the people and that will then help create jobs.

GA What are your priorities for 2005?

SA To continue Pakistan on this high growth path; to ensure that the reforms we have initiated continue – we are in second generation reforms now – so that the full benefits are realized; and, third, to ensure that continuity and consistency of policies are maintained. All this will give us good governance which should be accompanied by transparency and a bias for action. The result will be more jobs, higher incomes, more growth and more prosperity. When people come here after many years they are surprised at the electricity in the air, the vibrancy. The Pakistan of today and tomorrow is not the same as the Pakistan of yesterday.

Shaukat Aziz
Prime Minister of Pakistan
Gordon College, Rawalpindi; MBA from the Institute of Business Administration, University of Karachi
1969 Credit officer in Citibank, Karachi
1975 Various overseas positions with Citibank including head of corporate and investment banking for the Asia Pacific Region; head of corporate and investment banking for central and eastern Europe, Middle East and Africa; global head, private banking for Citigroup; a board member of Citibank subsidiaries and of several non-profit organizations
1992 Executive vice-president of Citibank, head of Citibank’s global private division
1999 Appointed finance minister by the government of Pakistan. He is also chairman of the Economic Coordination Committee of the Cabinet; chairman of the Executive Committee of the National Economic Council; and chairman of the Cabinet Committee on Privatization
2002 Becomes senator
2004 Appointed prime minister of Pakistan