Pakistan country brief - February 2009
System of government
Australia and Pakistan enjoy friendly and growing relations underpinned by our shared interests in combating terrorism, enhancing agricultural and trade ties, expanding development cooperation and encouraging stronger people-to-people links. Australia established diplomatic relations with Pakistan after partition and has had a resident mission in the country since 1948. Australia is committed to assist Pakistan over the long haul, including in its fight against extremism. Australia is a foundation member of the Friends of Democratic Pakistan.
Political overview
The Islamic Republic of Pakistan is made up of four provinces - Sindh (capital, Karachi), Punjab (Lahore), North-West Frontier (Peshawar) and Baluchistan (Quetta). In addition, the Federal Government administers seven areas (‘agencies’) on the border with Afghanistan. These are known as the Federally Administered Tribal Areas (FATA). Pakistan also administers approximately one-third of the area of the former princely state of Jammu and Kashmir. Islamabad is a special ‘Federal Capital Territory’.
Pakistan has a federal system of government which at the centre has a bicameral legislature. Members of the 342-seat National Assembly, the lower house, are elected from single-member electorates distributed between the provinces on a population basis, with a number of seats reserved for women and religious minorities. Members of the Senate, the upper house, are elected indirectly by an electoral college formed by the members of the National Assembly, the four provincial assemblies, the FATA and the federal capital. The four provinces have equal representation in the Senate.
All four provinces have their own elected provincial assemblies and each provincial government is headed by a chief minister who presides over the provincial cabinet. Provincial governors are appointed by the president. Local or district governments are headed by elected nazims.
The Prime Minister is elected by the National Assembly. The Prime Minister heads the Cabinet and the President chairs the National Security Council, which comprises military chiefs and cabinet members. The President can also dismiss the Prime Minister, the Cabinet and Parliament.
Pakistan held National Assembly and provincial parliamentary elections on 18 February 2008. The next National Assembly election is due in October 2012. The Pakistan People’s Party (PPP) and the Pakistan Muslim League (Nawaz) (PML-N) – the two parties which won the most seats in the February 2008 National Assembly election – led a coalition Government until late August 2008, when the PML-N left the coalition.
A presidential election was held on 6 September 2008, which resulted in the election of Asif Ali Zardari as President. The next presidential poll is due to take place in September 2013. Yusuf Raza Gilani, a member of the PPP, is the Prime Minister and Head of Government.
An election for one-half of the seats in the Senate was held on 4 March 2009. The next Senate election (for one-half of the seats in the chamber) is due in March 2012.
The main political organisations in Pakistan are: PPP; PML-N; Pakistan Muslim League (Quaid-i-Azam) or PML-Q; Muttahida Majlis-i-Amal (MMA, which comprises six religious parties, including Jamaat-i-Islami and Jamiat-i-Ulema-i-Islami); Muttahida Qaumi Movement (MGM); National Alliance (comprising several small parties led by the Millat Party); Awami National Party (ANP); and Tehrik-i-Insaf (TI); Jiye Sindh Qaumi Mahaz.
Economic overview
Pakistan’s economy has suffered from political instability, civil unrest and the threat of terrorist violence. In the four years to 2006-07 Pakistan achieved an average annual growth rate of 7 per cent, thus making it one of the fastest growing economies in the world. Pakistan’s economic situation deteriorated rapidly in 2008 and was a potential source of near-term unrest: inflation peaked above 30 per cent; commodity price increases made subsidies on fuel, food and fertiliser even more expensive; there were crippling electricity shortages; the current account, fiscal account and trade deficits all increased; capital inflows dropped and failed to cover capital outflows; and foreign reserves have dropped by 40 per cent. Pakistan has made some progress since then in stabilising foreign currency reserves and its exchange rate, reducing subsidies on food and fuel and taking the first steps in implementing a social safety net (the Benazir Income Support Scheme). However, challenges still remain.
In November 2008, the International Monetary Fund (IMF) approved a US$7.6 billion loan to Pakistan to help it stabilise its economy while expanding its social safety net to protect the poor. On 7 August 2009, as part of its second formal review of Pakistan’s stand-by arrangement, the IMF approved an additional US$3.2 billion loan to Pakistan in response to the global economic crisis. The IMF loan has been extended until 2010; previously, support from the Fund was due to expire in September 2010. Total IMF support to Pakistan now stands at US$11.3 billion. According to the Fund, the loan aims to assist the Government in meeting its fiscal targets, and is intended as a temporary bridge until fiscal reforms begin to generate an increase in domestic tax revenue. Pakistan also receives economic assistance from a number of other organisations, including the Asian Development Bank and World Bank.
Pakistan also faces significant development challenges. Adult literacy is approximately 50 per cent, and is much lower in the tribal regions (where female literacy is as low as 3 per cent) and life expectancy is about 65 years. Approximately 70 per cent of the population live below US$2 a day; the maternal mortality rate is 320 deaths per 100,000 live births; and the infant mortality rate is 73 deaths per 1,000 live births.
Although generating only 20 per cent of GDP, agriculture employs about 45 percent of Pakistan's labour force. Pakistan is one of the world's largest producers of cotton. Other important crops include grain, sugar cane, pulses, oil seeds, tobacco, fruit and vegetables.
Industry, which contributes approximately a quarter of Pakistan's GDP, is concentrated around the Karachi-Hyderabad region and Lahore. Pakistan processes much of its own agriculture output and also produces cement, fertiliser, steel and chemicals.
Pakistan produces two-thirds of its own energy needs, principally in the form of gas from the east of the country, hydro-electricity from dams at Tarbela and Mangla, and some low-quality coal. However, energy shortages remain a constraint on expanding manufacturing in the country. Pakistan is reliant on oil imports.
Pakistan’s merchandise exports stood at US$18.1 billion and imports at US$28.8 billion in 2007, resulting in a trade deficit of US$10.6 billion in that year. Pakistan’s major exports in 2007-08 were cotton fabrics (10.5 per cent of total), bedwear (9.9 per cent), knitwear (9.8 per cent) and rice (9.8 percent). Pakistan’s major imports in 2007-08 were minerals and fuel lubricants (30.8 per cent of total); machinery and transport equipment (24 per cent); chemicals (15.5 per cent) and manufactured goods (9.5 per cent). Pakistan’s leading markets in 2007-08 were the United States (19.5 per cent of total), United Arab Emirates (19.9 per cent), Afghanistan (6 per cent), United Kingdom (6 per cent) and Gernmany (4.3 per cent). In August 2009, Pakistan and China agreed to explore all possible avenues leading to increased investment opportunities in energy as well as business sectors.
Bilateral relationship
Australia and Pakistan have a long-standing relationship. Australia established diplomatic relations with Pakistan after partition and has had a resident mission in the country since 1948. In late September 2001, in recognition of Pakistan’s key role in the global fight against terrorism, Australia re-established bilateral defence relations suspended following Pakistan’s May 1998 nuclear tests. Today, our relations continue to grow, spanning economic ties, defence, development and people-to-people linkages.
Australia’s Foreign Minister, the Hon Stephen Smith MP, visited Pakistan in February 2009 – the first visit by an Australian Foreign Minister in over a decade – to enhance bilateral relations and urge decisive action by Pakistan against terrorism and against extremists crossing the border into Afghanistan. Mr Smith met with President Zardari and Prime Minister Gilani, as well as a number of senior ministers in the Pakistani government, including Foreign Minister Qureshi.
The Australian Government has intensified its engagement with Pakistan over the past 18 months in the areas of security and stability, fostering economic reform and development, building capacity and improving democratic governance. The Government has doubled its development assistance to Pakistan to total $120 million over the next two years (2009-11). For further information, see AusAID’s website.
In response to Pakistan’s acute, complex and urgent security challenges, Australia has provided defence and law enforcement training to Pakistan and has contributed $23 million in humanitarian assistance since August 2008.
Through Australia's foundation membership of the Friends of Democratic Pakistan and participation in the Afghanistan-Pakistan Support Group, Australia is working with Pakistan, and the international community, to ensure the best possible coordinated effort is made to support Pakistan.
The Friends of Democratic Pakistan seeks to help Pakistan address its security, development, energy and institution building challenges. The Friends of Democratic first met on the margins of the United Nations General Assembly in September 2008. The original partners were: Australia, Pakistan, United States, United Kingdom, Canada, United Arab Emirates, Saudi Arabia, France, Germany, Italy, Turkey, China, Japan, European Union and the United Nations. Members appointed since the inaugural meeting include: Sweden, Norway, Denmark, Spain, Netherlands, Republic of Korea, Iran, European Commission, World Bank, Asian Development Bank and Islamic Development Bank.
The appointment of Australia’s Special Envoy for Afghanistan and Pakistan, Mr Ric Smith by the Prime Minister in March 2009, is a demonstration of the Government’s commitment to coordinated and effective regional and international diplomacy.
People-to-people links between Australia and Pakistan are expanding. There is a growing Pakistani community in Australia of approximately 17,000 Pakistan-born people and, in 2007, there were close to 5,000 Pakistani students studying in Australia. Under the Australia-Pakistan Scholarship Program, 500 scholarships are available to Pakistani students from 2005-2010 to facilitate postgraduate studies in Australia.
Bilateral economic and trade relationship
Australia and Pakistan are working together to explore avenues to expand trade and investment, particularly through agribusiness and agricultural science linkages. Bilateral trade and investment is currently modest but increasing; total two-way trade in 2007 was $578 million. Over the last five years, Australia’s exports to Pakistan have averaged $450 million. Australian suppliers have a niche in commodities, food and services. Future opportunities for Australian businesses are in building and construction, mining, health and information and communications technology. A number of Australian companies are active in Pakistan, including BHP Billiton, Clough Limited and the Snowy Mountains Engineering Corporation.
Updated September 2009