Pakistani elections encourage investors

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PESHAWAR, PAKISTAN -- Akbar Shah Afridi had no doubt about what will happen after Pakistan's votes are counted.

"There will be no violence. You foreigners will not have to worry any more about Pakistan." said the Pashtun bazaari, or market trader, from Pakistan's 'Osama Belt,' the country's lawless frontier with Afghanistan where Bin Laden and his Taliban allies roam with impunity. As he solemnly placed his ballot in a makeshift Peshawar polling station, Afridi assured me that "the King will be gone."

In Pakistan 'The King' is Pervez Musharraf, Washington's favorite strongman who seized power in October 1999. Nine years on, and after an election he was forced to hold, the King is not quite yet dethroned, but his crown has slipped humiliatingly. The February 18 election, a referendum on Musharraf's rule, left him and his backers in Washington in no doubt as to what Pakistanis thought of them.

Musharraf's Pakistan Muslim League (Q) government was routed, cast to a distant third behind the Pakistan People's Party led by Asif Ali Zardari, Benazir Bhutto's widower, and Pakistan Muslim League (N) of Nawaz Sharif, the former Prime Minister ousted by Musharraf.

Importantly too, for the West's War on Terror, Pakistanis also voted to reject Islamist extremism. High-profile casualties of this poll were the pro-Taliban Islamist parties which had held sway in the restive north-west near Afghanistan. Investors were encouraged; the stock market leapt 5% the first trading day after the poll to send it to a new record, while Pakistan's rupee enjoyed its biggest weekly gain in six years.

Islamabad now pulses with intrigue. Zardari and Nawaz have tentatively agreed a coalition, the PPP leading to reflect its bigger vote. Next week they'll decide who'll be Prime Minister and fill the cabinet slots. Though firmly backed by Washington, Musharraf's position is shaky. A two-thirds parliamentary majority is required for the impeachment proceedings against him that many Pakistanis seem to want. Zardari and Sharif don't quite have that, but could muster it with minority party support.

If he is impeached - he insists he won't resign - many believe he'll be killed if he's stays in the country. A London exile has been speculated for him, and California too. I asked of Musharraf's retirement plans last Saturday in a meeting before the poll, at his office in the garrison city of Rawalpindi outside the capital Islamabad. "Let's wait and see until after the election," he said, carefully.

But in voting out a military-backed regime, Pakistanis have also taken a step back to the future. Nawaz has been prime minister twice before, but both his corruption-plagued governments dissolved before completing full terms.

Benazir's husband Asif Ali Zardari - a wealthy industrialist known to many here as Mr Ten Per Cent - inherited her U.S-friendly moderate legacy, which pleases the Washington set. But he spent 11 years in prison, jailed by Nawaz on corruption charges. And after being exiled for some time, the presumed ministerial ranks of both men do not impress many observers with much evident capacity to govern this difficult country.

Still, Pakistanis are overjoyed they have voted - and been allowed to vote - to return to civilian rule. The US too is pleased. Washington bumbled policy here in its unstinting backing of Musharraf. In the absence of viable options, Washington now wants Zardari and Nawaz to work with its man Musharraf, who says he "cherishes' his relationship with President Bush. The day after the poll, the US urged against impeachment proceedings on Musharraf. It wants him to finish his presidential term, and for all to put aside ancient feuds in a wider national unity government.

But this is pregnant with problems. The vote was as much a rejection of Musharraf as perceived US puppet as it was of military-backed rule. Pakistanis clearly want Musharraf to go, and they hate US policy here too. Zardari has already been slammed for meeting with US ambassador Anne Patterson before he thrashed out a deal with his potential coalition partners, which may explain Zardari's observation that the war on terror "needs to be redefined."

And where is business in all this? As Islamabad convulses with change, foreign direct investment is down by 40% on a year ago, thanks to investors spooked by the seeming inability of the government to stem violence, extremism and instability. As the stock market's charge this week indicates, the so far peaceful transition of government-heartened investors who hope that maybe, just maybe, Pakistan has reached a milestone.

Nawaz's last government initiated a state privatization campaign that the Musharraf-led administration accelerated. Zardari's business background also suggests a pro-business administration. The outgoing government had forecast growth of 7.2% in 2007-08, though that's threatened by $100-a-barrel oil and a current account deficit 31% higher in the first half of this current fiscal year, says the central State Bank of Pakistan.

The new government, however its comprised, needs to do much to address the poor that the boom has bypassed but who carried the vote for change in the impoverished rural areas.

Was the overall election free and fair? No Pakistani election has ever been. Was it better than others? Marginally, but the bar is set very low in this country. Did it get the result that Pakistanis wanted? So far it seems to have, though with Pakistani politicians' fondness for making and breaking deals, and the military's for ousting governments it doesn't like, Pakistan isn't properly fixed just yet.