>> next, a review of the recent elections in pakistan. and, a house hearing on the domestic use of drums. after that, a hearing on u.s. efforts to eradicate malaria worldwide. on friday, the atlantic council hosted a panel discussion, looking at the recent pakistan elections. it marks the first transfer of power since the country's independence in 1947. we will hear from the former pakistani investor to the u.s. and a former pakistani u.s. secretary. this is just under two hours. >> good morning, everyone. i am the director of the south asia center at the atlantic council. on behalf of my colleagues and

our president, i would like to welcome all of you. we waited roughly a week to talk about a very important event in south asia, the elections in pakistan. we will be focusing on pakistan for the next few weeks, because there is so much happening this year in the region that affects inistan and what happens pakistan affects the region. i wanted to let you know that on monday afternoon, we will be having another session on packet 10, looking at economics and development and how the u.s. aid sees the changing circumstances and pakistan as opportunities to move things forward. then, on the third of june we will be hosting a well-known indian member of parliament, who in his prior existence of a diplomat and served in pakistan.

he will be talking about the search for regional stability with a view to what happens between india and pakistan postelection. this is a recurring theme. today we have three excellent persons who agreed to help us ,nderstand where we go particularly given the mountain of challenges that pakistan faces, internally and externally. let me quickly introduce them. then i will invite each one of them to speak briefly, then we will have a discussion and bring you into that. if all goes well, we will end at 1130. first of all, ambassador maleeha lodhi, joining us from pakistan via skype. she is well-known to washington audiences. she has served twice as ambassador at very critical

junctures in the u.s.-pakistan relationship. she has always been an active observer of the pakistan political and economic scene at home and participates in a number of indian-pakistan track to dialogues and regularly write on events in pakistan. , hiswe have the ambassador detailed biography is with you. it is important to note that he has been ambassador to china, and foreign secretary. he was foreign secretary under the government of general musharraf. he decided he would advise against taking the case to the un. there was a parting of ways. maybe he has a different explanation for it. that is the

public discourse on him. he has also been active in a number of dialogues, including the ones that our center is involved in. military to military dialogue. we are delighted he is in washington and will be with us. then we have our own senior fellow from the middle east center. he was director of the middle east and central asia department at the imf and has worked closely with pakistan, particularly the previous government, on a number of issues, advising them on specific issues when asked for advice. now he is working at the atlantic council. we thought it would be critical to take a look at the economic challenges facing pakistan and to get a seasoned person like him on board.

part, aust say, on my lot has been said about the elections. a lot of the conventional wisdom that this was a watershed election, that it will change ,verything, in my personal view it is very important, historic election. the turnout was of historic proportions, approaching the turnout of the 1970 elections, which was the last so-called free and fair and competitive election in pakistan. the end result of that election was not very good for pakistan. it lost half of the country. this time, things are different. there is perhaps an opportunity to build on this. some interesting things come to light immediately. will ben the center clearly and control of the same party. a longs not happened in time. it offers a great opportunity to work together.

an engine of economic growth for pakistan. the other is that the pakistan people's party folded very badly in the punjab. they are confined to being a party of sin. they managed to surprise everyone by taking a large number of seats. and father very good fight in the punjab. -- fought a very good fight in the punjab are. the new engines to pakistani politics is likely to have an an effect as we go forward. the shape of the new government is still being decided. relationships with neighbors are going to be on the agenda. we look forward to covering all of these. one interesting point that i

will leave you with is, despite all the talk of the islamic hesitation of pakistan, the islamic parties have not gone above the five percent mark. they are still hovering, 4.5, 4.8% of the total vote. that probably says something , the urbann parties class in pakistan and the opportunities that they have of establishing a proper policy in pakistan going forward. i am not win to take the place of our experts. let me go immediately to maleeha, since you are on the ground, how are things there and how do you read these results and after you have spoken we will invite the others to join us. thank you. >> i think you can see me. thank you, it is a great pleasure to have

joined you this morning. i can't see it, i presume you see me. >> yes. >> ok. i was in a slum about to cast my own vote -- islamabad to test my to see the managed cities. i can't tell you what excitement i felt, i was obviously in the female polling station. but you enter side-by-side, together. this is a very exciting election. the higher voter turnout testifies to that fact, people were galvanized and wanted to get to the polling station. they did that in many parts of .akistan

really showing that they were not going to be scared off from the polling station by the kind of reelection violence that we saw prior to election day. this is also been pakistan's bloodiest election from what happened before. on polling day, it was by and large peaceful. voters came out to vote for experienced hand, and the muslim league, and i think they put their faith in experience because they saw that the faced unprecedented challenges and i think they wanted to stick to the familiar and experience. i think they also voted for change. and for change as they reshaped the entire lyrical landscape.

we have to see how enduring that change will be. but they changed it by rejecting .ll of the incumbent parties wouldrmer ruling party crumble. 30s percent in the last election to half, 13%. that is the popular vote. actuallye's party was beaten in second place. , they haveseats their vision of stronghold in rule of sin. they were able to get the votes marginally morsi then the other party. also the critical sensitive the national party. they crumbled.

so did another faction of the muslim league, the rival faction. they saw the vote crumble some 23% in 2008. three percent in the selection. -- this election. i think most important, it unified in consolidating the muslim league vote which in previous elections had a way,grated or in distributed among several factions rather than one faction. the question that many people ask, was the result uprising? i think the answer to that is, yes and no. not pricing because the general expectation -- they were showing who would win. --ple expected the other his party to do better, but not to win. he surprised and lie in the scale of victory.

i was in touch with many members , even heart he -- party they did not expect such a clean toep. he is now close getting not just a majority, with the help of independence and many people who have the option, within three days of turning one or the other party. he could actually end up with a two thirds majority in pakistan national parliament. -- and this is based .n a landslide in punjab where he won 116 out of 148 seats. in the provincial legislature, he already has a two thirds majority. the question is, why was it so strong? there was clearly a wave in

favor of him in punjab. why was it so strong? what i said before, people knew who he was. i think his main message, i know how to set the economy right, i think with key. -- was key. his message was repeated throughout the election. i am the only one who knows how to deal with the economy. and he kept saying, you don't want untested hands right now. then of course you also had a they havewhere traditionally always had strong candidate. they had a bunch of very strong candidate. in pakistan, elections are as allabout candidates, politics is local here. if the election is as much about local strongmen or

candidates, as the parties that they belong to, the personality who heads that party. , why did thestion other party disappointed supporters? veryhad set themselves unrealistic targets or expectations. they were taking on an thing.hed which he had successfully activated and down the knives by by aarkable -- galvanized remarkable campaign. he was able to present himself as the only credible alternative to the previous ruling party. we also have to recognize that what he did was to bring and

the political process a whole bunch of people in pakistan who .ad previously shunned politics the educated middle class, women, and the youth vote. the youth vote did not entirely go to him. it also went to the opponent. it was quick in adapting his campaign strategy to appealing to young voters. his approach of saying, i have the experience, but also promising voters that he could take pakistan out of its economic challenge -- if there was one issue that dominated the election, it was the economy. in the fact that in the last five years, pakistanis have gone to unprecedented economic hardships. particularly the energy crisis and shortages and breakdowns and brownouts.

, asave managed to achieve you put it in your introduction, a critical milestone. we will see in the next 10 days in the handing over of power from one elected government to another elected government, something that we have never achieved. thatis not the first time they have completed their term, it is the second time. every time it is the people's party government that completes their term. , he did complete his term. he called elections in 1977. we never saw a priest will transfer of power. -- peaceful transfer of power. i can't tell you the buzz in terms of how pakistanis expect that they really have crossed a rubicon. a very important milestone. everybody feels good about themselves. here are the challenges. first is that we have seen a

sharp only regionalized outcome. .trength in punjab too oftenhat he is , means thats sharif will have to adopt an accommodative and sensible approach in handling pakistan's fundamental reality. he also has to contend with the senate, our upper house. the senate is still controlled by the former ruling party, the people's party. he will have to deal with the senate as he governs pakistan. i think the mandate he has received shows that the voters of pakistan want somebody to just on and get the country moving again and get on with

government. i think voters realize that the challenges are imposing, they are complex, and what they are saying is, ok, we are giving you the political means now to take the opposition, security and on economic challenges. but this is where we are. there is no shortcut to dealing with pakistan's complex but because sharif has this enormous majority, he has the assurance of stable governance and because he comes from the largest province, that also gives him the political confidence to take some of these positions on both the economy and security front. i think his earliest statements after his victory have been , whenuch along the lines

asked what are your priorities? he said the economy, the economy, and the economy. he also says that counterterrorism and dealing with militancy will be very important. it is the necessary condition to achieve the kind of economic revival that pakistan clearly needs. early moves which have been reciprocated by india, when he talked about wanting to continue on the process that he said he once started. was the architect of normalization with india in 1999. earlier than that. in the mid-1990's. he has also sent a strong signal to the united states that he wants to work with them, he has worked with the u.s. in the past. he knew the clinton very well.

-- bill clinton very well. he has made the state and that indicate we may be seeing a sharif who learned from the wants a different pakistan and a different world. there is a lot to do since he has not been in power at the level for almost 15-16 years. it is a long time. the world has changed and so has pakistan. when his position is, he has the political mandate. he's got the political strength. he does not have to be blackmailed by political groups within parliament. this is something he has talked about in many interviews before the election. he does not want the blackmailing power of other, smaller parties. he has got what he wished for. something i learned in the united states, be careful what you wish for. [laughter] i will end on that note.

>> thing to bring much. -- thank you very much. setting the scene. security, security, security may be another mantra. intois closely tied regional relationships. that is what we will pull together. i am going to request the shedsador to come and some light on some of the foreign-policy challenges that he thinks emerge after the election results. thank you very much. maleeha has presented a very good analysis and quite comprehensive analysis of these elections, which are very important milestones. ,he voter turnout, around 60%

that is quite encouraging in terms of eagles participation in politics and the excitement for these elections. she also emphasized that it was economy which people thought that sharif was the experienced hand and and his party was more -- in that in that given the advantage. like several other elections in the past and pakistan, these elections also present an opportunity. although our experience is such that we cannot be over optimistic, but the point is that this -- these elections and results offer a hope. i would begin by underscoring some of what i would say are the

silver linings and advantages. the first thing, perhaps it is for the first time that public perception of performance has found a place in voters choice. if one were to look at the ptp,us things by the pti, whatnlm was focusing on they have been able to a combo shouldn't job. inand able to accomplish punjab. in focusingcally the legacy, the sacrifices. this was for the first time that it was performance, which figured quite prominently in the voters choice. them for thenished performance and for corruption.

two prime ministers lost their .eats maleeha would know better, but the general impression is that pti went into the word bank of the punjab, not the word bank of pmln. will this pattern be repeated? will they pay more attention to the need to show performance, results? will they be sensitive to the needs like the last government was not? one of the glaring examples is the power shortages. they did nothing on that front. we have yet to see this.

this is in my view, the most positive aspect of the 2013 elections. pmln wonhe fact that y a comfortable margin will and maneuvering that has been the politic and is unavoidable when have you a situation of hung parliament this. is not a hung parliament. he would not be blackmailed by smaller parties in order to retain his majority. unless the center against the provepbses other than pajab and plmn will don't rule. he has to focus from the start

on addressing problems in the country which and this probably is the expectation as he said of the public that he is going to address the enormous problems in the economic field. if he fails to show results, the risk is that his party will also suffer the fate of psm p.t. next time and perhaps next time if he fails to show results it could be p.t.i. especially if p.t.i. is able to how results. his his personality and political culture resonates ith the conservative religious

constituents in pakistan. especially in the pa jab this. can be an advantage in dealing with the extremist groups and getting them away from violence especially in the pajab. but in dealing with these elements he must remain clear with regard of acceptance of the government tapped presence especially in the tribal areas. pajab, tremist in the those operating in the tribal areas will find the drying up of an important source of support for them in the shape f what usually is known as pajab. the next point that i would make is that these elections have taken place at a time when

army which has been an important part in pakistan has accumulated considerable sobering experience. and perhaps a reevaluation of military rule. there is a clearer sense that akistan's problems are quite intractable, complex and ought to be left to the -- perhaps look at devious corrupt but soft and accommodating ways of the politicians. that they cannot be addressed friendly through military he ciency which i think tried to do. on the other hand he has been chastised by his own experience

of the last 20 or 30 years. temptation ds the of power grab. pakistan's problems are enormous. they are obvious mountains of challenges as the topic suggest. but they are not impossible. but before i comment on them, i'll make one other observation. he must be very cautious gainst politics, against exass baiting sectarian in the ountry, ripping up religious sentiments, alienating p.p.p. nd p.l.m. in the sent.

politics will be counter productive. one can hope that instead of allowing this kind of nipulation which in pakistan we call the political make and break of alie yanses etc. is third time in power prime minister will be disposed to acting with prudence, credibility. thoughtfulness and will focus on agenda to refurbish his credentials as a man who can mend economy. the problems can be divided in four categories in my view. rst security, law and order, extremist violence, rebellion si and n and snunch

sectarian. e strength is that his willing tons negotiate with extremist give minimum a chance to restrain them. but as i said earlier he must remain firm on their accepting he presence of the army. and must be firm on these elements giving up violence even in the face of drone attacks which might continue support radically because this is a great challenge and he will have to work it out with the united states. if p.t.i. forms, it will have an interest in containing the

taliban violence for its own uccess so he can bank on that. the answer is politics not guns and bullets. he will have to deal with his who is in dversaries the fwrip of violence and also -- as regard the second major basket of problems as i look at t is disaffection and mistrust and institutional frictions.

the test will be handling of relations. p.t.i. government as i said may be amount to believe cooperation to ensure its own success but p.p.p. and m.q.m. will have no such compulsions. one negative factor from this election is that i find these two major parties that is have and p.l.m., they become proventionized in a manner of speaking. p.p.p. used to boast of support across the country. sent has will be ruling d is limited to its home province. as far as p.l.m.n. is concerned

its main support draws from ajab and has no strong showing . it is a very mixed situation. as for institutional tussles there ought to be no immediate isis unless one is precipitated by him himself. army, politic and also we have to -- we know that both in the army and in judiciary there will be a change of guard by the end of the year. the third problem is of course economy and he is going to focus than. there are no quick fixes as far as the economy is concerned. but the important thing is a

serious beginning has to be made. in energy there are system i can problems which i can dwell on but that can be better managed and then we have to come up with the credible projects, not the sham projects like the fraud project schemes launched by the psm p.p. which was a waist of time and resources. better team experience of mega project which is can generate employment. finally, the fourth area of problems is foreign relations. i think he has already made the right signals. desire to normalize with india and he made the statement we ill not allow incidents. this was an important signal to

india. the military sensitivities on the count of india i think are much exaggerated. they are not there. in fact it is a better place to work for improvement of relations with india than the earlier leaders. and to address issues with india which have so far eluded to progress. again, with the united states he has stated his willing tons work. he has also underscored the fact that his work with the united states earlier. there are issues relating to the question of use of drones in the area. there are difficult issues but i think they need to be worked out. there has to be some kind of coordination between united states and pakistan on this

count. i think he will have to resist temptation of playing any ambitious peacemaking role. pakistan in my view gains little by being very proactive there. it should do what it can but in step with kabul for reconciliation. taliban leadership has to be discouraged from turning pakistan territory into base. there will be challenges with regard to pakistan handling it's relationship with saudi arabia and israel at the same time. pakistan's history of politics -- hopefully this time

it will be less so. [applause] . >> thank you very much. i hope that you're incorrect in your assessment but speaking of folly or follow liss now we are waiting for a discussion of the issue that he has put front and center and that identified as critical to anything that happens in pakistan after these elections. so i'm going to question you come talk about the economic challenges. >> thank you very much for inviting me. it's great to be here. so basically it's the economy, it's the economy, it's the economy. s the campaign slogan of the p.l.m.n. but he borrowed from governor romney he could fix

it. that's a big issue. the economy is the top priority for the plmn. i think it's the top priorityty otcht country regardless of who won the election. what the plmn has inherited is an economy in poor shape relatively speaking with growth down to between 3% and 4% a year. inflation in double digits bleeding international reserves day by day, rising unemployment, etc. you can go on. there is a litany of economic problems. so the new government has ip herted an economy that is in pretty poor shape. the argument is that look they have experienced people on the team, experienced with the economics of the country and

very early on people put two and two together and said he would be the minister of finances. that is still up in the air as to whether he would be or not. he may well turn out to be the foreign minister. this issue is fog on. plmn and the campaign his economic team particularly identified the long term strukechurel issues and those are well known. there are long term strukechurel economic problems in the country. how to get investment going in the country which for the long run to raise potential growth rate is essential. there is a problem with infrastructure, infrastructure development is needed. education. you have to have people labor force with the right set of skills that is in demand by the private sector, in demand by

modern industry and so on. that is a problem. new industries, invasions moving away from the standard industries of textiles is another issue. but let me say that these are if you like i've characterized hem as long term structurele issues. they existed before the ppp and still exist so they have to be addressed. what are the immediate issue science i'd like to focus my comment this morning in the brief time i have on the immediate short term issue that is the new government on day one will have to start worrying about. and those are three essentially, one fiscal, the public finances, secondly, somewhat related and i'll bring out the relationship in a little while energy. everyone talks about energy.

the energy sick or the. and the third is external balances. the fact the cub tri is using reserves and people talk about imminent default not likely but people talk about this. let me talk about the first issue that has to be addressed. the fiscal problems have continued to grow in pakistan over the past few years. thund government the budget deficit this year was expected g.d.p. .7% of it was expected to be that last ear and the year before. the budget deficit is going to turn out to be around 9% of g.d.p. so virtually twice what

they predicted. bad enough that the fiscal deficit is so large, the worst still is how it's being financed. it's being financed by borrowing from the banks. what there is in the central bank law, the central bank itself cannot finances the government beyond a quarter. at the end of every quarter it has to have a zero balance. so what the central bank was innovative in doing was the central bank putches liquidity into the system and the banks go ahead and buy it, the government treasury bills. this if you like for an economist is a form of printing money. and therefore when you see inflation rising it's no surprise that inflation is rising. the fact that you're losing reserves, it no surprise. if you are printing money your

going to lose reserves and have inflation in the country. they have to get a handle oh on the public finances. how are they going to get a handle on the public financess? >> the structure of public finances is really bad. for example, government revenues are about 1% of g.d.p. this is roughly half if you like of its neighbors even in the region. they have very little revenues coming in. their expenditures aren't that high either. they are 9 percentage point higher but their revenues are the serious issue. on the revenue side what is going to happen? what do they need to do? basically everyone says taxes, tax reform, pay taxes, get the tax rates up. tax ref knews up. i think would have said with

this government there is going to be this sort of tussle going on with the new government. on the one hand there are people who understand this issue of taxes. and i think the problem is with a stable strong majority government -- the advantage of a stable strong majority government is that the v.a.t., the value added tax which was proposed by the people's party and could not push it through due to the opposition which threatened to leave the coalition if this tax was adopted. well, that's not an issue anymore. but even so at the unfortunately he also opposed he v.a.t. when he was in the senate. the other problem is that if your very probusiness and you

are very prothe private sector, you are very reluct tonight raise taxes on income taxes and corporate taxes. so the question i would ask is where are these revenues going to come from? they have to come from somewhere. they have to be raised and there will be measures taken i'm sure. but on the expenditure side there is another serious problem. the most serious problem on the expenditure side is not frivolous expenditures. the government doesn't spend that much money. 22% of g.d.p. is not a big number. the trouble is in fact the spending that goes on through subsidies and through financing state owned enterprise that is are going down the drain completely. here i think one can be optimistic that this government will try and take action on state owned enterprises.

ight now roughly 2% of g.d.p., $400 billion are the losses of state enterprises. they are by airlines and rail ways. there say whole list of them. i think the government can do something about state owned enterprise and they want to. they are not opposed to privatization and i think they may turn around and privatize these companies. they are for privatization and they are not constrained because the state owned enterprises have been used in the past five years by the overnment as a vehicle of pate troage and so they can come say you are not our people so we can fire you. the problem i think there will be the judiciary and that is a

serious constraint on the privatization. we'll see how they can handle that. so that's on basically on the fiscal side that they have to do something. energy reforms. everyone talks about energy and it true it a serious issue. let me just say people often say this is not a capacity problem. this say governance problem or this is a financial problem. there is a capacity problem. let me just tell you. the fact of the matter is that in storage capacity, not actually working capacity. in storage capacity in pakistan is 15,000 megawatts. that's in stored capacity. peak demand is 20,000. you've got a gap of 5,000 any way. certain amount of shedding has to take place even when you are operating at full capacity. there is a capacity problem that has to be addressed.

you can't just say it's governance. some fiscal capacity has to be restored. the biggest problem that creates why, in fact -- >> okay, why are you not producing 15,000 megawatts because that's what your installed capacity is and you are only producing 10. why is that? that then becomes governance and financial. these are the things why aren't you producing the level you could be producing. not at peak demand but at the level you could be producing. here we come to a very nice term i have found is circular debt. circular debt folks is all it is is arears. companies running arears with each other. arears is a bad word, you're defaulting in the arears, circular debt.

this year it will be 800 billion. that's close to 5% of g.d.p. that's because companies are not paying. government is not paying the companies. it goes on and on and on. ultimately this has to be address this issue of circular debt. there it is a financial issue. how do you address it? what the fwofment has done in the past i thought was a mistake which was basically take on the circular debt itself and convert it into a government debt. but the debt rises. debt is debt. it's there. then you don't do anything about the next year when it will rise again. then further more for economists it create a problem on the part of the company. if somebody is coming along and takes over the debt from you you'll do it again.

the focus in pakistan and among everyone you meet about the energy crisis has within the impact of load shedding on households. load she had thrg is no electricity for 12 hours or 16 hours in the summer when it's 120 degrees and so on. everyone focuses on that and i'm rightly i'm sure oing to solve the issue of energy and load sharing got him a few votes. that's a big problem for households. but let me tell you a bigger problem is the impact of the energy shortages on industry in the country. most of the big industries in pakistan are operating at around 50 to 60% capacity

because they cannot get the electricity to operate at full capacity. people say we must grow by investment and we must have investment and then we'll grow. in the long run true. you can't do it without investment. in the short run you can which is what i'm concerned w. you can get industry operating at full capacity and you will grow at 6%. with the same five years ago you were growing at 6 or 7%. this is a constraint. energy has created a constraint. so solving this issue of providing sufficient industry to industry and households too through changes in the governance system, through financial changes, through changes in the management of these companies, etc., will have to be the first orderss. f

this is, as i said, the fiscal capacity issue will take a while to do but why not try and get to your maximum capacity in the country? so you get an immediate jump in growth in that way and i think that would be something ha the plmn would love to see and i think they would go for it. is lly, my last point foreign exchange reserves at the bank of pakistan are down to $7 billion. they were $15 billion roughly two years ago. so there has been a significant bleeding of reserves in this period. why is this happening? when a country says that we're operating a flexible exchange rate. well in the limit a flexible exchange rate will make it

clear that you won't lose any reserves. you don't have to, let the exchange rate move. well there is a fear of a shopped evaluation. there has been in the country. if you let the exchange rate go free it will drop like a stone. we can't have that. that will push up inflation and be bad for the government. so the central bank has done some very innovate tive things to try and prop it up. one is of course you sell dollars. that's first. but they have other things they've done. they have done operated in the forward market with commercial banks. bought ht essentially and sold forward essentially building up reserves. it's borrowing. they've argued currency swaps with the people's bank of china

and turkey. a lot of innovate tive things keep the reserves at some level and not. the question is what will this government do? will it let the exchange rate move? it may have to and maybe doing t in the first few months of its when the first 100 days might be the answer. ght now 100 rup piss is at 97. 100 rup pi is the crossing point. that's the threshold. can they get past that barrier? well we'll have to see. one of the thanges will have to be discussed immediately will be an i.m.f. program and that's the question, the issue that

the government will have to deal with right away. what the i.m.f. said in april when the government delegation was here, the i.m.f. said yes we're open to an i.m.f. program. they said yes tpwheer favor of that but we'll deal with the new government, with the elected government. we can't have a deal with the care taker government. so they have a deal -- i'm expecting now that serious negotiations will take place. what will happen in those serious negotiations i can pretty much predict is all the things that were not done by pakistan during the previous program, tax reforms, energy reforms and so forth, even the exchange rate will become prior actions for a program. i think this government would be well advised to do those

things. get moving on those things. get those prior actions under way and then have a program. the program people are talking about is roughly $5 billion which if you add in other sources of financesing that are conditioned on an i.m.f. program which is another 5 that should give you some breathing room. and of course there is always other sources of financing. he has very good connections in saudi arabia so there may be additional financing coming from those countries who are really flush with money at the moment. these are the three areas i think in my view that the government has to address right away. it has to get a good handle on these short term issues before it can really move to the longer term structurele issues and i'm sure they will develop

they of vision 2020 now can vision 2025 whatever it is develop a long term plan and that's fine. but you've got to get from here to the long term and you have to these are the three areas in my view that are the top priorities for the government to address. and they have to address these issues before they get into building new motor ways or bullet trains. those are for the future. and if the government can get some of the actions on these three fronts, get them moving, i think -- i'd be pretty optimistic that you can turn the situation around in the short run with a view to then moving on to the long run issues. thank you. [applause]

>> if you can join me on the stage, we'll continue our iscussion. >> you talked about advantages of the new government, what appears to be a majority developing in the national assembly. in terms of institutional decision making, we still see a very strong world of politics and family business in pakistan. d even within the plmn there s a large number [inaudible]

what is it that gives you a sense of optimism there will be a change in the way the party will manage and decisions will be made? >> i think we have to turn up your volume. tri now. >> two points. first of all you are right. we have not seen the end.

but at the same time what we have seen in this election is the rejection of many. i can name two or three for example. we've seen the car family to which the foreign minister belong redirect examination wiped out in this election. we've seen the influential family who was the head of the national party rejected, wiped out. family o seen the rejected. so i think what we are seing is yes a continue wans of families but also the rejection of families that are regarded i guess by the and not having done anything for the local constituents. so a famous name is not

necessarily sufficient any more for elections success. second i think the way he's begun, i think he is acknowledging the e norty of the challenges. he's said in conversations i've .ad with him and publicly and that's a different approach that goes beyond personality and goes beyond a party. if we see him practice then then all the better. i think the third thing which is not quite related to the personality factor but it is important. there was an effort to deny p.t.i. the right to form the government.

and he said no, i will not be teverted by these sorts of things and they must have the right to form the government. he is signaling the fact this is a man who has learned from the past. he think the team that as will give us the signals. he is going to be the finances minister. he's already started work whoon he need to do in terms of getting some of the data from the finances ministry. so he hadn't been named yet but he's been asked by his party lead tore to start taking charge and get a grip on the numbers. the numbers -- i mean the

finances ministry numbers they have control over these numbers. what we've seen in the last several months is a spending spree by the previous government. and we've seen them do all sort of other things which unfold. i think it a question but think we're seeing him make a real effort. the fact he visited iran. these are efforts to signal that you are going to be dealing with the strength of numbers but who is prepared to go beyond the numbers to reach out to his political opponents and conduct governance in a different way than it has been conducted in the past. i'll end here because i think he will rely on the team he will constitute. if this team goes beyond what people regard as phony then you

see a man who is determined and serious to really resolve pakistan's problems. i think we are seeing some early signals but we have to wait a see what else happens. >> thank you very much. and since you do have to go at any point if you feel you want to jump in on the ensuing discussion, please do so. let me pick up on the point you raised about the numbers. >> one quick point on something that i think was said. that's not new for pakistan. we've had this situation in the past. i think what we have to recognize is the party does have representation but tezz a foothold in k.p. province.

not enough to form the government but they are forming a government with allies. i think his strong hold is pajab but that's not all the places they are. >> on the numbers, has the ministry been fudging numbers? >> i think what i'm saying to you is there are several sources of data in the country. to some extent it's not if they are fudging numbers then a lot of people are party to this including the institutional that watch it is numbers. i don't think they are fudging the numbers. bottom line deficit the 9%. that is a result of the spending spree that went on the

first half of this year including by the government as she said. the government continued to maintain right up until the end that they would wind-up with a deficit of 4.7 n. that sense you can say that they put out a set of numbers and stuck by them. the numbers were wrong. they internally knew that the numbers were wrong. and people like the planning commission very publicly said the numbers were wrong. the govep was sticking to the wrong numbers. the true numbers showed a much larger deficit. so i don't think there has been ny sort of misreporting in the inistry of finances is keeps producing new numbers that are at variance with fact. he's been sticking to an old

set of budget projections and trying to maintain that when the true numbers are quite different and they know that. >> thank you. you want to respond to the other comment this is israeli not that chopped up lines? the fact that p.p.p. has been reduced it's basically the worst phenomenon you had a party which had support all across pakistan. secondly, i think yes there are five six seats which the party has but it still depends on the lecktabbles not a bank. like prk pp used to have world bank and elsewhere.

not e example of i would ply to this issue of riege liization and the hope is these major party that is able to develop in case of p.p.p. gain its standing in other provinces and that world bank lso somehow increases in the accepted because he doesn't have any representation from his own parties. he has god allies but that's a different thing. so it was in that context that i was saying it is politics has this is not t --

the first time. >> let me add some numbers just for everyone's knowledge based on the data that i v. plmn is the second largest party there with nine seats. the other largest group is 21 which is others soifments a hodgepodge of different groups. in send they have four seats and pakistan muslim league functional has 7 so they have 11 seats there. they have a reasonable representation there according to the numbers that we have from the election commission. >> as i said there is still the politics depends on the lecktabbles. there is no concept of the world bank. >> go ahead. >> i raised the question

cause is a question many pakistan people are asking and that is the people's party is displaced as the country's second largest party, it has not displaced it in terms of eats because they still manage to get seats. but you know the question that is being asked is whether this will endure, whether it will become a party of the past rather than the future because the people's party has failed to adjust to a more organized pakistan. it is still a ruller based but over the years it has increasingingly looked more ruler. that means the past in pakistan, not the future. we don't have the answer to this question but this is an

interesting question of politics. it is a realignment of politics and that realignment means that first of all space has opened up for a new party. and space has also shrunk for the people's party, the en clrks, the muslim league, all the previous muslim league board of the other faction went entirely to his muslim league. and i think the people's party shrunk or gone somewhere. they didn't come out to vote or they decided to vote for p.t.i. that is an interesting question too. whether this was tactical voting by people's party voters. et's just defeat our

traditional opponent. so let's just go with this new challenger because we are directionless and the people's party had no one to campaign for them. they had this young man from an unloan location. he was forced into this whole game. and i guess voters didn't respond to that. they wanted somebody in pakistan who is with them. and it doesn't work. and that says something about dynasty. unless you earn it. i think that's the moral of the story. even politics of the kind we've een represent in pakistan, she earned her stripes because she was in it. here you can't throw a name at them anymore i think and they

say this is a name. i think people want something else. >> i'm going to open it up to the audience. i've got a number of names already. bear with me and i'll try to get as many as we can in the hort time we have. you had your hand up. >> thank you very much. could somebody give us a current break down of seats in the national assembly and how it sits and how do you see the relationship between president sadarry and new was, what is the future you see for him and the p.p.p. >> let me see if the numbers i have satisfy you and i assume you are talking about the three main parties? >> the national assembly the numbers i have and these may 124, final is plmn with

the people's party or the p.p.p. as its called 31. the p.t.i. with 27. so those are the numbers. >> the independents? >> the independents are 31 and a lot of them are flocking to the government party so that's going to give them the edge. on the presidential election and what the possibilities are aybe they can answer that. >> i would be getting in touch with my travel agent. >> i think there are a couple of statements which have been made, one before the elections he said if his party become it is ruling party at the center, he become it is prime minister he will take oath. if i'm not mistaken there was a statement by him that he should

complete his term in office. and that term i think is going to end in september. so i don't think there should be any ground for creating friction on this count. >> it is whether he can marshall the numbers to get re-elected aand the answer is no. there is no question. >> that's why a travel agent would be a good idea. >> let me go to the other questions if you don't mind so we can move along. >> i'm a member of the board and the executive committee here. i'd like to shift a little bit away from the election itself to what the results mean and particularly with respect to the bug bear india. two or three things came out of

is iscussion and this directed to whoever wants to pick up on it. t was mentioned that the strength he has puts him in a strong position to to a lot of things. secondly, others have mentioned the fact that there is a possible economic opening between pakistan and india. third the army was perhaps less i'd logically driven on the india case and perhaps more practically focused perhaps as well on internal problems inside pakistan which has been a shift we've seen coming for a while. what are the possibilities with india? we've seen this plethora of invitations and happy receptions and travel too. what are the possibilities with

india that you see, where could it go and what can we expect ut of all of that? >> india is a difficult question in the sense one nurure enthusiasm between yained and pakistan. it should be a normal relationship. there should not be hype in the negative sense which normally derails this relationship off and on. now in this there is member officials like the travel etc. all of those the question of trade. n these things i think a number of steps have already been taken and i do not see with his business background he

is going to reverse those things. probably they will be encouraged. one very important statement that i have seen from him is that he has said that we will not allow reputation. this is important. what is behind this thinking or this statement what is that thinking? will it mean that pakistan and india will be cooperating at certain level countering the extremist violence etc. or will it mean or does it only mean that it's a gesture of giving confidence to india that look we are not adventures we do not want to spoil our relationship with you. so this is something that has to be seen. it's -- when it comes to cooperation that's a difficult

issue. that's treacherous waters so to say. then comes the issues, bigger issues, handling them. now he has been saying in the past that we were moving on. then you have a history during the period of. how will that be hand snled i think there is not going to be any subtle difference in that area but there would be some movement in terms of at least trying to talk about these issues in a more serious manner and it's not only he that has agreed. so my take is that on trade and other matters, travel, etc., there would be further

fassation. there would be on trade. the question of transit is a difficult question that will not come about any time soon. on the other issues i think both the prime minister will at least try to talk about them even if they are not able to address them any time soon because we should remember india is going to get into the election phase which by next year they will have elections and to be able to do something dramatic just prior to the elections may not consider that helpful. a there will be certainly relationship between the two. >> thank you. my question is directed you. you eluded brieflye they might

ant si if in this instance the government tried to privatize some nationalized industries. i wonder if you could expand on that and explain to me how come the judiciary can interfere with the governance of a poblarly elected government in pakistan. and what constraints can we i'm a pakistan -- pakistan american. why not have checks and balances in pakistan? >> i'm not sure i can answer the larger question. on privatization if you like the chill that came from pakistan steel, the issue. what happened the question was how it was privatization done? was it done in a transparent

manner, was it fair. was it too cheap? now that case was brought to the supreme court and the supreme court in fact ruled on at but went further and said that the privatization that was occurring had to be reversed and the people that had been let go with golden hand shakes had to be reemployed. now if people can bring those nd of cases and i think this is something that the government will have to tackle because i know that his party is a party of the private business, private sector and to me there is no other way of solving if you like -- i cannot see a solution to pakistan international airlines. there is no solution.

i mean if for example -- i'll give you the example. this company? ll and bid have been made believe it or not. the problem has always been labor. in order to make them profitable you have to share labor and that has been the big issue. and it's always an issue in privatization. it's going to be a hard sell and hopefully this government will be able to persuade the judiciary it's doing it in a right way and has no corruption involved. i don't know. i'm hopeful. >> i think the role of the judiciary more generally but more specifically in terms of the question that was asked, irst of all, i think there

will be a honeymoon period with the judiciary walk-off the victory. the it will be difficult for the judiciary to behave in a way that would be inconsistent with the mandate he received. the second thing, i think we saw a great deal of judicial activism in the last few years. one reason was because there is space for the judiciary to fit. if you have effective governance, regarded as legitimate in terms of the actions that are taken -- they are transparent and legitimate -- it is hard for the judiciary. frankly, the judiciary will have no strong incentive.