Venezuela – the Petrostate — is in economic crisis. The inflation is so high that even a cup of coffee is as expensive as the monthly rent of a one bedroom apartment around a decade ago. Economists believe that the countries which rely heavily on their natural resources often are vulnerable to have the “Duch the disease” because the foreign capital starts pumping in the economy which increases the value of the local currency and imports skyrocket. All the labor and huge capital get sucked into the natural resource and other sectors, like agriculture and manufacturing, are deprived of any growth. Looking into the imports of Venezuela, it grew almost 500% between 2004 to 2008 and the GDP growth rate went down almost 350% during the same period. The crisis continued after Hugo Chavez’s death in 2013, and the new leader, Nicolas Maduro also has to face the hyperinflation, climbing hunger, disease, crime and death rates, and massive emigration from the country. According to the UNHCR report (November 2018), around 3 million people had emigrated from Venezuela to 1) Colombia (over one million), 2) Peru (over half a million), 3) Ecuador (over 220,000), 4) Argentina (130,000), 5) Chile (over 100,000) and 6) Brazil (85,000).
What brought Venezuela – a country which has the world’s largest oil reserves — to economic and political ruin? The experts believe that although the drop in oil prices is one factor of disaster, however, the main causes of economic melt-down were years of poor governance, political instability and economic mismanagement which had driven the country, which used to be one of Latin America’s most prosperous countries, to economic disaster.
So much for “oil producing countries always have great economies”.
Pakistan’s economic managers have a lot to learn from the economic disaster of Venezuela. After mismanaging the economy for the last 8 months, the government in Pakistan is now expecting that changing its economic team would bring some miracle and all the pledges of Khan and his team will be materialized. For the first 6-7 months, they hid their incompetence behind the political rhetoric that mismanagement of the last 10 years was the reason for the economic disaster. When the media stopped buying this reasoning then the government began to promise good news about 205 million tons (approximately 1.5B barrels) of off-shore oil reserves, which would – according to a boasting federal minister — turn the country from the rags to riches overnight. Experts argue that even if that large amount of oil is discovered it would take another 5-10 years before it will be available for the production and due to the highly sophisticated techniques to extract, the price may be much higher than it is expected. Another angle is the reaction of oil-producing countries around the region who would be losing their monopoly. The South China Sea region — which is the area that is home to a wealth of natural resources, fisheries, trade routes, and military bases – can be one example. The Ministry of Geological Resources and Mining of the People’s Republic of China estimates that the South China Sea contains 17.7 billion tons (approximately 130 billion barrels) of crude oil (compared to Kuwait which has some 13 billion tons of crude oil reserves), although, other sources claim that the reserves of oil in the South China Sea may only be about 1.1 billion tons. All of this is at stake in the increasingly frequent diplomatic standoffs among the countries like Philippines, Vietnam, Taiwan, Malaysia, and Brunei of the region. So it is yet to be seen how would the countries in the region and the US, Russia, and China respond if the huge reserves are found.
Once again, the Pakistani establishment’s new experiment — which they launch after every ten years — ended up in miserable failure. The Khan government, which was brought into power after highly engineered elections, failed to deliver in every sector of governance. The establishment, which usually manipulates from the background while civilian governments are in the office, this time had to come in front and confess that Foreign, Interior, Economic, even Education policies are now in their control. They even have to declare who is a patriot and who is enemy of the state, which journalist should be allowed to operate which one should watch out. The media reports suggest that even the new economic team of non-elected technocrats is nominated on the demand of the International Monetary Fund (IMF). Now, the IMF would negotiate with its own ex-employees who may not be reporting to the civilian government.
The opposition is now getting ready to make its move in the coming days. They have already sensed the vulnerabilities of Khan’s teams and also the panic among those who brought them in power. After the Eid-Alazha there may be more pressure from the opposition parties on the government. There are very significant chances to salvage their failed experiment, the establishment would try to create a new dispensation inside parliament by using the turncoats from the Khan’s Pakistan Tehreek-i-Insaf (PTI) and other opposition parties. Other opposition parties – especially the two large parties – have already broken away and so far it was proven that these parties have little or no impact after the turncoats left them, however, Khan’s party, which is full of turncoats and absconders — who have a history of changing political loyalties at the signal from the establishment – would easily change their loyalties again and join new groups.
Some commentators argue that the main reason for economic troubles in Venezuela was that the Venezuelan leadership was somewhat hostile towards the US and the US assisted the economic problems to punish them, while Pakistan is friendlier to the US and so the US would not want to destabilize Pakistan, the way it allegedly aggravated Venezuela’s problems and will be more helpful to assist Pakistan in resolving its economic problems. Although this the argument has some truth, especially if one adds the Nuclear State dimension in the equation, which Venezuela does not have. However, if one looks at the situation on the ground, the argument loses its subtlety to some extent. The US has already decided to leave Afghanistan and right now the US is trying to cut some kind of deal with the Taliban to pretend that it achieved victory in Afghanistan and justify its almost 20-year-long presence without facing any humiliation like it had to face in Vietnam war. However, the situation on the ground shows that the Taliban are trying to delay the talks while they are launching their attacks on security forces and on other soft targets until the US leaves Afghanistan. Once the US pulls out from Afghanistan, the country would fell into the bloody civil war because of the Taliban will try to take over the country but the Northern Alliance will not give up like in the late 90s, because now they are not only powerful but they will also have India, Russia, and Iran on their back. Afghanistan will be once again the proxy-war battlefield of the International players like Pakistan, India, Russia, Iran, and China. The US would be blaming Pakistan for its disastrous campaign in Afghanistan and it would put maximum pressure on Pakistan to punish it for its alleged role in their defeat in Afghanistan. The US could also pressure Pakistan to assist it in the campaign against Iran, which will further push Pakistan in a very difficult situation. If Pakistan would not deliver, the US would exert economic pressure on Pakistan. The incompetent Imran Khan’s PTI government is already floundering about its deteriorating economy and after virtually handing over its financial control to the IMF, by accepting their demand to nominate ex-employees of IMF as the Governor of State Bank and Finance Minister, more troubles are expected because the IMF conditions would further break the backs of common people. The opposition, which is already convinced that the elections of 2018 were flawed and the establishment heavily rigged the elections to bring their blue-eyed boys in power will exploit the public sentiments and common people’s misery. India, on the other hand, is increasing the heat on the Eastern borders, so to counter, Pakistan requires a large amount of military funding to deal with any other adventurism by Indians.
The above scenario can bring Pakistan to its worst nightmare and Pakistan can see the situation similar to Venezuela if not exactly the same. This all situation can be avoided if Pakistan would have better relations with its neighbors, especially with India. The establishment sabotaged all the efforts by the civilian governments to create Indian business stakes in Pakistan’s stability. However, what is done is done. Now the PTI government should try to create a political harmony instead of their hate campaign which is further deteriorating the internal stability of the country. Prime Minister Khan should stop humiliating the opposition leaders and their voters. Let the courts deal with their cases and decide their fates. However, if they cannot rise above their egos they must be removed from power because just to satisfy the ego of Prime Minister, the whole country and its 200 million people’s destinies cannot be put in danger.
In his interview in 1867, with St. Petersburgische ZeitungIt, the German aristocrat and statesman, Prime Minister of Prussia and first Chancellor of Germany, Otto Von Bismark described the politics as “an art of possible”. However, famous Canadian — and later US — economist, public official, the diplomat, and a leading proponent of 20th-century American liberalism, John Kenneth Galbraith disagreed. He wrote to President John F. Kennedy in 1962 that he believes that “politics is not the art of possible, it consists of choosing between the disastrous and unpalatable”. Now Khan has to prove that he can be unpalatable not a disaster.