REPORT

PAKISTAN ECONOMY

AYUB KHAN REGIME (1958-69)

SUBMITTED TO: SIR KHAWAJA HASHIM

SUMBITTED BY: MARIA ANWER (BB-11-01) MAIMOONA MALIK (BB-11-22) SANA IRUM (BB-11-23) NIDA JAVED (BB-11-32) SADAF AKRAM (BB-11-41) AASIA YASMEEN (BB-11-59) ZAHRA NASIR (BB-11-66)

DATE: 29-04-13

TABLE OF CONTENTS

AcknowledgementsExecutive Summary

1. Introduction1.1.Early history of Ayub Khan1.2.Military Career

2. Reforms Introduced During the Ayub Khan Regime2.1.Political Reforms

2.1.1. PRODA and EBDO2.1.2. The Press and Publications Ordinance2.1.3. 1959 Basic Democracies2.1.4. 1962 Constitution2.1.5. Criticism against Political Reforms

2.2.Agricultural Reforms2.2.1. Land Reforms2.2.2. Green Revolution2.2.3. Criticism against Agricultural Reforms

2.3.Economic Reforms2.3.1. Industrial Reforms2.3.2. Trade Reforms2.3.3. Criticism against Economic Reforms

2.4.Social Reforms2.4.1. Action against hoarding, black marketing and smuggling2.4.2. Fixation of the prices of essential foods2.4.3. New housing developments2.4.4. Reform of the Marriage and Divorce Laws2.4.5. Measures to control population2.4.6. Health Facilities2.4.7. Modernization of Islam2.4.8. Criticism against Social Reforms

2.5.Educational Reforms2.5.1. Reforms2.5.2. Criticism against Educational Reforms

2.6.A New Capital2.6.1. Development and purpose2.6.2. Criticism against a new capital

2.7.Relations of Pakistan with the External World During the Ayub Khan Regime2.7.1. Relations with India

2.7.1.1. Indus Water Treaty 19602.7.1.2. Indo-Pak War 1960 and the Tashkent Declaration

2.7.2. Relations with the USA2.7.3. Relations with China2.7.4. Relations with the Soviet Union2.7.5. Relations with Britain and the Commonwealth2.7.6. Ayub Khan’s Foreign Policy-Conclusion

3. Elections 19653.1.1. Background3.1.2. Results

4. Political Unrest4.1. Decade of Development4.2.The Downfall of Ayub Khan

5. Conclusions

6. Recommendations

References

ACKNOWLEDGEMENTS

We are extremely grateful to Mr. Farooq Naseem Bajwa., M. Ikram Rabbani, Mr. Nigel Kelly, Mr. Nigel Smith and Mr. S. Akbar Zaidi for their inspiring and extremely helpful works.

Our sincere appreciation to Sir Khawaja Hashim for his support and excellent guidance related to the topic of our report.

EXECUTIVE SUMMARY

In 1958, after a military coup, Ayub Khan became president; he was confirmed in office by a referendum (February, 1960). After resuming power, Ayub Khan inaugurated a system of what he called "Basic Democracies”, i.e. tiers of local government councils that also served as electoral colleges. Martial law was lifted in 1962, and a new constitution was introduced that year which gave the executive enormous powers.

During his regime, Ayub Khan launched a clear unfolding of certain trends and developments, which may be described as an ideological change in Pakistan. Under him there was economic change through industrialization, improved agriculture and modest land reforms. He also introduced reforms for the social and educational sector and took various steps for the foreign policy of Pakistan which was pro-Western at the beginning but more open to all the major powers later during his regime.

Ayub Khan returned to office in 1965, after defeating Mohtarma Fatimah Jinnah, sister of the founder of Pakistan. In the same year, he led the nation in a war with India, but the conflict was ended by the Tashkent Declaration of January 1966.

The year 1968-9 was celebrated as the “ Decade of Development” on the basis of the phenomenal economic growth rates and the Green Revolution in agriculture leading to crop yields at an all-time record.

While Pakistan’s economy was growing at a rate which was three times faster than that of India or any other country in South Asia, there were continuing economic, social and regional inequalities. The disadvantaged position of East Pakistan and limitation of civil liberties, accompanied by the political unrest provoked increasing discontent by the end of his regime. Early in 1969, Ayub Khan announced that he would not seek reelection in 1970, but unrest continued and in March he resigned power to a martial-law government headed by General Muhammad Yahya Khan.

INTRODUCTION

Early history of Ayub Khan

Muhammad Ayub Khan was born on 14 May 1907, in Khyber Pakhtunkhwa. He was educated at Aligarh College so that he would, in the words of his father, feel like a Muslim, and at Sandhurst College for training army officers. After being commissioned an army officer in 1928, he fought against the Japanese in Burma in World War II.

Military Career

In January 1951, Ayub Khan succeeded General Sir Douglas Gracey as commander in chief of the Pakistan Army, becoming the first Pakistani in that position. He was appointed by then-Prime Minister, Liaquat Ali Khan. Although Ayub Khan's military career was not particularly brilliant and although he had not previously held a combat

command, he was promoted over several senior officers with distinguished careers. Ayub Khan probably was selected because of his reputation as an able administrator, his presumed lack of political ambition, and his lack of powerful group backing. Coming from a humble family of an obscure Pakhtun tribe, Ayub Khan also lacked affiliation with major internal power blocks and was, therefore, acceptable to all elements.

Within a short time of his promotion, however, Ayub Khan had become a powerful political figure. Perhaps more than any other Pakistani, Ayub Khan was responsible for seeking and securing military and economic assistance from the United States and for aligning Pakistan with it in international affairs. As army commander in chief and for a time as minister of defense in 1954, Ayub Khan was empowered to veto virtually any government policy that he felt was inimical to the interests of the armed forces.

END OF THE DEMOCRATIC SYSTEM

By 1958, the government of Iskander Mirza was unpopular and the political situation was chaotic. Between 1955 and 1958, five different prime ministers tried unsuccessfully to establish a stable government. According to the Constitution, elections were to be held in 1958; politicians tried to win support by any means. To most Pakistanis and the rest of the world, the government seemed corrupt and inefficient. People were in despair as Pakistan faced bankruptcy and chaos. In East Pakistan, severe floods caused food shortages and great distress.

AYUB KHAN TAKING POWER

On 7 October 1958, martial law was declared by President Iskander Mirza. The constitution was abrogated and Laws (Continuance in Force) Order was passed. The jurisdiction of the courts was restored-but no one could question the Chief Martial Law Administrator or those working on his orders. This meant that the army was effectively running the government. General Muhammad Ayub Khan, Commander-in-Chief of the army, took the role of Chief Martial Law Administrator. On 27 October, he removed Iskander Mirza from office and exiled him to London. With Mirza’s removal, power was entirely in Ayub Khan’s hands and he took on the office of President as well. To his supporters, this event was known as the ‘Glorious Revolution’. Regarding the political situation at the time, Ayub Khan stated:

“Politicians have waged a ceaseless and bitter war against each other regardless of the ill effects on the country, just to whet their appetites and satisfy their base demands…no limit

to the depth of their baseness, chicanery, deceit, and degradation.”

AFTER TAKING POWER

After taking power, General Ayub Khan announced that he hoped that a period of military rule would settle Pakistan. Mohtarma Fatima Jinnah stated, in an interview with the Morning News, 29 October 1958:

‘”A new era has begun under General Ayub Khan and the armed forces have undertaken to root out the administrative

malaise and anti-social practices, to create a sense of confidence, security and stability and eventually to bring the

country back to normalcy. I hope and pray Allah may give them the wisdom and strength to achieve their objective.”

Once stability was restored and Pakistan was more settled, Ayub Khan said, “the government would provide a constitution that would ‘combine democracy with discipline’”.

REFORMS INTRODUCED DURING AYUB KHAN’S REGIME

Ayub Khan introduced numerous reforms in various sectors of the country including:

Political Reforms Agricultural Reforms Economic Reforms Social Reforms and Educational Reforms Foreign Policies, etc.

1. POLITICAL RFORMS

Ayub Khan annulled the 1956 Constitution. The National Assembly was dismissed and a huge number of national and provincial politicians were arrested and charged with corruption. Political parties were made illegal and there were strict controls on people holding meetings and on the freedom of the press. More than 1600 civil servants, screened for ‘misconduct’, were either dismissed or forced into early retirement. Ayub Khan's message was clear: he, not the civil servants, was in control. Sterner measures were used against the politicians.

PRODA and EBDO

The PRODA prescribed fifteen years' exclusion from public office for those found guilty of corruption. About 3,000 officials were dismissed and many other were reduced in rank as a result of these measures.

In August 1959, Ayub Khan passed the Elective Bodies Disqualification Order (EBDO). They authorized special tribunals to try former politicians for "misconduct," an infraction not clearly defined. Under this, 75 leaders were disqualified for participating in political activities for 8 years (until December 1966). Under the EBDO, Ayub Khan primarily targetted East Pakistani politicians from the Awami League while leaving the Muslim League largely untouched.

Under Article 5 of EBDO:

1) Public servants who had been removed from service on any charge other than inefficiency;

2) Persons who had ever been served with an order under the Security of Pakistan Act or a similar law relating to an act prejudicial to the defense, external affairs, or the security of Pakistan;

3) Persons found guilty by the Federal Court or High Court or a tribunal under PRODA; and

4) Persons convicted of any offence, and sentenced to more than two years imprisonment stood debarred from being candidates or members of an elective body, until 31 December 1966

It was estimated that about 6,000 persons, half of them from East Pakistan, were disqualified under Article 5 of EBDO.

Article 7 or 8 of EBDO was used to go after senior party leadership who escaped disqualification via Article 5:

Under Article 7, any person served with a notice could opt to retire from politics until 31 Dec 1966, in which case further proceedings against him were dropped. In case this option was not exercised by the respondent, an inquiry would be instituted under Article 8 and if found guilty, he would be disqualified up to December 1966. (from Separation of East Pakistan)

A further 78 politicians were disqualified under article 7 and 8.

Prominent politicians disqualified under these three articles of EBDO were the top leaders of the East Pakistan Awami League including Sheikh Mujib ur Rehman and Hussain Shaheed Suhrawardy. Maulana Bhashani was also arrested.

On 30 January 1962 Suhrawardy was arrested in Karachi under the Security of Pakistan Act which authorized his detention without trial for a year. It was an irony that a politician who was the Prime Minister of the country was accused of activities “fraught with such danger to the security and safety of Pakistan that one could fairly describe them as treasonable” which was [obviously] the biggest shock of his life”.

When a habeas corpus petition was filed in Lahore High Court challenging his illegal detention, Ayub Khan conveniently promulgated an Ordinance suspending the habeas corpus rights of those detained under the Security of Pakistan Act.

Prosecution could be avoided if the accused agreed not to be a candidate for any elective body for a period of seven years. Some people, including Suhrawardy, who was arrested, fought prosecution. About 7,000 individuals were "EBDOed.". This effectively eliminated many important figures who might have challenged Ayub Khan;s rule.

The Press and Publications Ordinance

The Press and Publications Ordinance was amended in 1960 to specify broad conditions under which newspapers and other publications could be commandeered or closed down. Trade organizations, unions, and student groups were closely monitored and cautioned to avoid political activity, and imams at mosques were warned against including political matters in sermons.

1959 Basic Democracies

The first step in Ayub Khan’s constitutional reforms came with introduction of the Basic Democracies Order on 26 October 1959. This was a four-tier system which would consist of a Village Council at the most basic level, a Sub-district Council, a District Council and Divisional Councils. Thus, ordinary people elected union council members who in turn elected district and divisional members. The Local District Magistrates and Divisional Commissioners would act as chairmen of the local bodies. Regarding the Basic Democracies, Ayub Khan stated on the radio on 2 September 1959:

“We have given it the name Basic Democracies for the very obvious reason that we want it to grow and evolve from

the very first rung of the political ladder so it finds roots deep among the people.”

According to the system, the country was divided into 80,000 single member constituencies known as BD wards with a population of 1000-1200 people. Later, it was stated in the 1962 Constitution that the 80,000 elected Basic Democrats would also form the Electoral College for the election of the President and members of the Central and Provincial Legislatures.

The first elections to Basic Democracies were held in January 1960 in which 40,000 Basic Democrats were elected in each province. Ayub asked the Basic Democrats for a vote of confidence. Almost 95% of them declared their confidence in him as President. On February 7 1960, the Basic Democrats elected Ayub Khan as the President of

Pakistan. Ayub khan, who had seized power, was then able to claim that he had the backing of the people of Pakistan.

Constitution Commission

On 17th February 1960, Ayub Khan appointed a Constitution Commission to make recommendations for a new constitution, which was headed by Justice Shahab-ud-Din. The commission submitted its report to the President on 6th May 1961. It recommended a presidential form of government, adult franchise, revival of political parties system and a powerful legislature. The report of the commission was referred to five-member sub-committee which finalized the draft of the constitution.

1962 Constitution

The new constitution was announced on 1 March 1962. Although Ayub Khan described it as combining ‘democracy with discipline’, in reality it set up a presidential form of government. Its main features include:

The country shall be called the Republic of Pakistan. The new constitution shall be federal with a single house at both central and

provincial levels. The President could not be removed unless impeached. The President nominated the Cabinet from the members of the National

Assembly, but they would have resign from the National Assembly if made ministers.

The President nominated the heads of the judiciary and the provincial governors (who then nominated their Cabinets).

The National Legislature could not pass a law without the approval of the President.

The constitution shall be amended only by a two-thirds majority of the Assembly and assent of the president. If the president does not agree, it shall need a three-quarters majority. Even then, the president shall choose whether to dissolve the Assembly or call a referendum.

There shall be parity between the two wings in the Central Legislature. All citizens are equal and all minority interests shall be safeguarded.

The new constitution reflected Ayub’s own interpretation of the political set-up of Pakistan and was based on his experience of Pakistan’s political, economic and social institutions. It was introduced without debate and Ayub brought martial law to an end soon afterwards.

The new National Assembly met on 8 June 1962. One of its first acts was to remove the ban on political parties. It appeared that Pakistan was moving nearer to a democratic

system, but actually, Ayub’s reforms had increased the powers of the ruling elite. This had happened because the major landlords dominated the elections to the Basic Democracies and often used coercion or bribery to influence the results.

CRITICISM AGAINST POLITICAL REFORMS

The political reforms introduced by Ayub Khan also faced criticism.

1962 Constitution The Constitution also further upset the people of East Pakistan. They felt that they would have little part in governing Pakistan. Gradually, they were coming to realize that Pakistan’s government was in the hands of military and civil officials from West Pakistan. Various steps were taken to placate them:

o Both Urdu and Bengali were recognized as two of the national languages.o The National Assembly Session was to be held in both Dhaka and

Islamabad.o If the President were from West Pakistan, then the Speaker of the

National Assembly was to be from East Pakistan and vice versa.o During the absence of the president, the speaker shall officiate as acting

president.o Each province shall be given maximum autonomy.

Despite these measures, the people of East Pakistan still believed that Pakistan was, in reality, government of East Pakistan by West Pakistan. This resulted in a feeling of unease among them.

Insistence on the One Unit Scheme Ayub’s insistence on the One Unit Scheme (which had been introduced in October 1955) produced instant reaction among the small provinces and regional parties of Bengal. For this purpose, they started agitation against Ayub’s regime to force him to dissolve One Unit.

A Controlled Democracy The National Assembly passed a number of controversial bills during its life.

o One bill, passed in June 1964, allowed the president to remain in office until a successor was found.

o The Electoral College Bill meant that an electoral college of 80,000 would be elected who in turn would elect the president.

2. AGRICULTURAL REFORMS BY AYUB KHAN

Ayub Khan took revolutionary steps to improve the agricultural sector of Pakistan. From the very beginning, a few notable agricultural families had spread their tentacles in the political set-up of Pakistan. In the former West Pakistan, politics was dominated by a few wealthier landowner families.

Land Reforms Commission

In order to eliminate the monopoly of the big landowners and particularly the absentee landlords, in the politics,, Ayub Khan’s regime appointed a Land Reforms Commission immediately after taking power, in October 1958. The commission submitted its report within three months. This led to a series of land reforms aimed at providing security for tenure and fairer distribution and ownership of land. The main features of the reforms were as follows:

1) A person could not own more than either 500 acres of canal irrigated land or 1000 acres of unrelated land or 36000 produce index units whichever is more. In addition, an owner was allowed to have 150 acres of land for gardens and pastures. Over and above the limit, the land was to be taken by the Government after the payment of suitable compensation to the owners.

2) Utilization of resumed area. The excess land acquired by the Government was sold on reasonable conditions to the tenants. Afterwards, the remaining land was sold to the deserving persons.

3) Creation of pool. The sale-proceeds of the acquired land was pooled in a separate fund. This fund was utilized for payment of compensation to the landlords to meet the administrative expenses in implementing the development projects in the acquired land and clearing of the bad debts.

4) Jagirs. Every kind of jagir, religious, charitable or educational institutions, was abolished; However, the institutions were given grants-in-aid.

5) Protection to tenants. Illegal ejectment of the tenants was prohibited. In case a tenant was legally ejected, he was to be provided alternative land. He was also to be properly compensated for the improvements made in the land.

6) Proprietary rights for the occupancy tenants. The existing law with regard to giving proprietary rights to the occupancy tenants was made operative as usual.

7) Prohibition of illegal exactions. Illegal exactions by the landlords were prohibited.

The ownership ceiling under 1959 reforms was quite high because.

It applied to individuals instead of families. The owners were allowed to transfer land up to a specified limit before

calculation of their entitlements. Special exemptions were also granted for land under orchards and livestock

farms.

As a result of reforms, a total of 2.5 million acres of land was resumed and 2.3 million areas of land was distributed to nearly 1.8 lakh peasants. These reforms however set the ball rolling for successive agrarian reforms and started a movement for voluntary reductions in individual ownership, encouraging creation of a strong middle-class of owner-operated farms of economic size.However, although some people benefited, the powerful landlords managed to hang on to most of their land holdings. Quite a bit of the land they gave up was actually very poor land that they were glad to get rid of!

Other Measures Taken For Agriculture

Three major dams were built to help irrigation. The Agricultural Development Bank of Pakistan (ADBP) was set up. Farmers

were also loaned money to build wells to reduce the need for canal irrigation.

Green Revolution

Between 1959 and 1964, agriculture grew at an overall rate of 3.7%, but this rate was overshadowed by an even greater rate of 6.3% between 1965 and 1970. Between 1966/7 and 1967/8, the years when the Green Revolution was at its peak, agricultural output grew by 11.7%, and it maintained a high growth rate of 9.6% in 1968/9 to 1969/70. Wheat production increased by 91% and rice production increased by 141%.The phenomenal increase in growth took place in two phases.

1. 1960-1965 During this phase, the main cause of the growth was the increase in irrigation facilities, mainly tube wells.

Between 1960-65, about 25,000 tube wells were installed, each costing R.s. 5000-12000 and the farm area serviced by tube wells doubled.

2. 1966-1970 During this second phase, the growth took place mainly the expanded irrigation facilities were supplemented by the technology package of high yielding varieties (HYV) seeds, chemical fertilizers and pesticides.

Two HYV seeds, one for wheat, developed by the International Wheat and Maize Institute in Mexico, and the other for rice, developed by the International Rice Research Institutes in the Philippines, were introduced in Pakistan. Since the HYV seeds required large sources of water, those areas that had better irrigation facilities and those that had installed tube wells were the first to adopt these seeds. Moreover, farmers who wanted to use the new seeds were also seen sinking tube wells and the number of tube wells in the country increased from 34,000 to 79,000 beween 1965-1970. More than half of the irrigated area of the country (6 million acres) was cultivated with the improved seeds in 1969/70.

Fertilizer consumption also saw a dramatic increase of 150% between 1965-70 and a rise of 235% between 1965-1971.

Tractor imports were systematically encouraged by the provision of cheap credit through institutions such as ADBP. At the same time, the overvalued exchange rate made tractors available in Pakistan at prices considerably below world market prices. The number of tractors therefore increased from 2000 in 1959 to 18,909 in 1968.

CRITICISM AGAINST AGRICULTURAL REFORMS

Though the agricultural reforms introduced by the Ayub Khan Regime increased agricultural growth and output and led to the Green Revolution, it also caused various problems.

Issues of Tube wells o They were highly regionalized, mainly in the rich, old districts, e.g. 91% of

the 76,000 tube wells in 1968 were in Punjab.

o Given the size and cost of tube wells, they were mainly installed by landowners with over 25 acres of land (70%) while only 4% were installed by farmers owning fewer than 13 acres.

o Poor and illiterate farmers could not take benefit of the credit policies offered by the ADBP to purchase and install tube wells.

Therefore, the apparently ‘neutral’ effect of increasing irrigation through tube wells seems to have serious repercussions on interregional concerns, economic status and the ability to borrow money.

Issues of Tractorization o In the early 1970s, 38% of all the tractors in the country were located in

the Multan Division in Central Punjab, while 58% were located in the three divisions of Lahore, Multan and Bahawalpur.

o There was also a very close link with tube well ownership; 75% of privately owned tractors were on farms that had sunk tube wells.

Thus, tractorization was also carried out by resourceful farmers and was associated with a proximity to urban markets and services.

Regional and Income Disparities o Since the installation of tube wells, purchase of tractors and access to

credit were inaccessible to poorer farmers, they did not share fruits of the Green Revolution.

o Khyber Pakhtunkhwa and south-eastern parts of Sindh had inadequate access to water and the HYV technology. Thus, regional disparities increased.

Thus, the Green Revolution of Pakistan was produced by the farmers who owned between 50 and 100 acres, almost all of them in Punjab. The Green Revolution has therefore been called and ‘Elite Farmer Strategy’.

Land Reforms o The land reforms allowed farmers to have their lands valued in PIUs, up to

a maximum of 36,000 PIUs (The PIU is ‘estimated as a measure of the gross value per acre of land by type of soil and was, therefore seen as a measure of productivity’.) However, the measurement of the PIUs was based on pre-partition revenue settlements, which substantially under-reported the true value of the land.

o Almost three-quarters of resumed land, at least in the Punjab, was uncultivated and untenanted. This meant that the amount of land available for redistribution was even more limited.

o Landlord-tenant relations were left unchanged, to be governed by the tenancy acts passed in the early fifties and to be supervised by the revenue service.

3. ECONOMIC REFORMS BY AYUB KHAN

Ayub Khan’s economic policies have been divided into the Industrial and Trade Reforms introduced by his regime.

1) INDUSTRIAL REFORMS

Economic development was a priority for Ayub Khan. For a long time, he had been Chairman of the Planning Commission, and he recruited able economists and advisers, many of whom had been trained in the USA. He particularly admired graduates of Harvard University in Boston. So successful were his policies that businessmen and leaders around the world began to praise the ‘Pakistan Miracle’.

Ayub Khan’s era is known for the industrialization in the country. He created an environment where the private sector was encouraged to establish medium and small-scale industries in Pakistan. This opened up avenues for new job opportunities and thus the economic graph of the country started rising.

In February 1959, the Government announced a new industrial policy of “gradual liberalization of economy” to pave way for smooth industrial growth. The main emphasis was put on the utilization of raw materials available in the country to benefit small and medium scale industries. The extreme bureaucratic restraints were removed by a more market-oriented approach. Among the steps that were taken in the promotion of industrialization were:

Establishment of Financial and Development Corporations

Pakistan Industrial Development Corporation (PIDC) played an important role. It was set up with a capital of R.s 1 billion. PIDC was put in charge to promote the following industries:

Jute Paper-board and newsprint Heavy engineering Fertilizers Sugar

Cement Textiles, etc.

Industrial Trading Estates

Four new estates for small industries were established in

Bahawalpur, Gujarat, Larkana and Peshawar

This helped in the process of industrialization by handling the initial difficulties faced by new industrialists.

Price Controls

In October 1958, the government took several measures to check the rising spiral of prices. Price controls covering a large number of consumer goods and industrial raw materials were imposed. These measures led to a fall in prices and improvement in supply position of a large number of articles.

Prices of the industrial goods were stabilized through the price mechanism which relaxed the control over industrial investment and trade. Moreover, the government removed the constraints on profit margin and prices.

Price Stability

While growth was higher in the 1960s, inflation remained in check; the average annual rate of growth of prices was only 3.3% moreover.

The first impulse of the Ayub regime had been to impose and strictly enforce sweeping price controls.

As a part of the package of measures to fight inflation, government borrowing from the banking system for financing fiscal deficits was reduced sharply.

The 1960’s were the only period in Pakistan’s fiscal history when significant public savings i.e. the excess of government revenues receipt over revenue expenditures materialized.

Efforts to broaden the direct taxation system kept the indirect taxation to minimum and hence prices of goods remained stable.

Needs of additional defence spending were met by additional taxation. Substantial additional taxation, undertaken especially during the Third Plan, helped to increase the ratio of taxes from 6.1 % of GDP in 1959-60 to 7.6% in 1969-70.

Investment Promotion Bureau

In order to attract foreign investment, the government set up an investment promotion bureau in April 1959. The main function of this organization was

To sanction proposals for the establishment of new industries involving foreign investments.

To provide guidance to industrialists and serve as a clearing house for problems of foreign investors in the matter of procurement of land, building materials, water, power, railway etc.

To give information and guidance to private investors.

Therefore, this led to encouragement of private enterprise. Moreover, industrial legislation was introduced with a view to facilitating the growth of industry with minimum government interference. Further incentives were also given for encouragement of exports.

Other Measures Related To Industry

Supply of credit o Credit was liberally provided to the industrial sector by both the

commercial banks & the specialized credit institutions, e.g. Agricultural Development Bank of Pakistan (ADBP).

o National Investment trust was set-up to attract small saving into industrial investment.

Foreign Aid and Loans o Foreign aid and loans received from friendly countries played a dominant

role in industrial and economic development of Pakistan. Without such aid the remarkable growth in that era could not be possible. Loans were taken

from more industrialized western countries, particularly the USA, Germany and the UK.

Investments o New industries were given tax holidays and dividend income up to R.s

3000 was declared tax free.o Liberal policies in tax concession and other measures taken by

government led to the inflow of capital. According to the State Bank of Pakistan, foreign private investments increased from 13.20 Million in 1956 to 26.28 Million in 1966.

o During 1960-1965 real investment grew very rapidly, reaching a peak of 21.5% of GDP in 1964-1965 before declining rather sharply to 14.6% in 1969-1970.

o Private investment growth in West Pakistan during 1960-1965 was explosive as it increased over three folds in short period of just five years.

o It declined over by 20% in next five years but still during the 1960’s, real private fixed investment more than doubled, grew faster than public investment, and accounted for nearly half of the total fixed investment by 1969-1970.

o Political stability, liberalization of investment controls and ample availability of foreign exchange were key factors influencing a pronounced acceleration in the pace of private investment. The policies were made less strict for private investment.

o The increase in investment contributed to an increase in economic growth naturally.

Water and Power Investments o Massive investments were made in water and power in West Pakistan,

including the Indus Basin Replacement Works spending. o Total water and power investments in West Pakistan during the 1960’s

exceeded US $2.5 Billion and accounted for more than 50% of total public sector spending.

o Ayub Khan officially opened the Warsak Dam in 1961. This huge hydr-electric project on the Kabul River was built to irrigate 120,000 acres of thirsty land as well as supply 160,000 kilowatts of electricity for a large area of West Pakistan. The project was financed jointly by Canada and Pakistan.

o The Mangla Dam, which is the sixteenth largest dam in the world, was also constructed from 1961 to 1967 across the Jhelum River.

Unification of Domestic Markets o Domestic markets were unified so that the finished goods could travel

easily from one place to another. In 1962, an oil refinery was established in Karachi. A Mineral Development Corporation was set up in 1962, for the exploration of

mineral deposits. In 1964, an economic union was formed with Iran and Turkey, the Regional

Cooperation for Development (RCD) in which the three countries agreed to develop ties in trade, commerce and industry.

2) TRADE REFORMS

The main emphasis of the trade policy in 1959 was on indirect controls on imports and on domestic prices of other goods. A number of measures were taken on import licensing that made market forces more important in determining the ownerships of import licenses.

Export Bonus Scheme

The Export Bonus Scheme (EBS) which was introduced in 1959, was a flexible and fascinating device which was used both to subsidize exports and to allow a safety valve on imports, while maintaining the basic structure of import controls on the vast majority of imports and while maintaining at the same time the official exchange rate at its existing level.

Under the Export Bonus Scheme, an exporter received:

The amount of rupees converted at the official exchange rate Bonus Vouchers equivalent to some percentage of his export earnings (the

percentage varied from time to time and from commodity to commodity).

The scheme allowed a free market in the bonus vouchers for certain commodities.

It increased exports, particularly of manufactured goods. The export of raw jute fell from 60% of total exports in 1958 to 20% in 1968, while the exports of cotton and jute textiles increased from 8.3 to 35% in the same period, and other exports increased from 2 to 20% in the same ten years.

The Bonus Voucher Scheme also made the import of raw materials and machinery much easier when there was increased demand for such imports. Over 1959-64, total imports increased much more rapidly than exports or GNP, and the composition of imports continued to shift towards the import of capital goods and processed intermediate goods.

Open General Licensing Scheme

The Open General License (OGL) allowed newcomers to enter the trading sector. A large amount of foreign exchange was allocated to the OGL, and the new traders made substantial profits and gains from possessing import licenses.

Free List

The most market-friendly change was the introduction of the Free List, which permitted the import of certain goods without any license. The Free List was extended over time from four items to fifty in 1964.

CRITICISM AGAINST ECONOMIC REFORMS

Ayub’s economic policies are said to be one of the major causes of his downfall. While they were responsible for improving growth, on the other hand, they widened the gap between the two wings of the country and gave rise to educational and class inequalities.

Criticism of Industrial Reforms

Though there is little disagreement over the fact that the growth rates in agriculture, large-scale manufacturing and GDP showed quite astonishing trends between 195801968, disagreements exist over the nature and consequences of those growth rates and over the interpretation of the economic policies.

Increasing disparities existed in regional income. Real wages failed to increase significantly. Industrial economic power was concentrated in only few hands (22 families

controlling 66% of the country’s industrial assets).

Criticism Of Trade Reforms

The value of exports covered under the scheme did increase appreciably but the data does not tell the whole story.

The rise in exports of processed goods was at the expense of the raw materials that would otherwise have been exported.

Also, to the extent that the diversion of certain goods from the home to the foreign market releases domestic purchasing power to procure goods which could otherwise be exported, there is a presumed loss of earnings.

Moreover, allowing for a trend factor, some exports may have taken place even if this scheme had not been introduced.

Finally, many exporters sold their goods in the foreign market at lower prices, sometimes even below cost, since they calculated their return in Rupees in which terms the loss could be made up by the sale of bonus vouchers.

The government was able to be so generous on its import policy due to the large amount of foreign aid the military government received. More than 40% of the imports of the government were financed by the foreign aid component, which was 6% of GDP in 1964/5.

After the foreign exchange squeeze, when aid was severely curtailed after June 1965, the government had to abandon its liberal import policy and felt it necessary to reimpose a number of import controls. The free list, which was the most important step in the decontrol of imports taken during the first half of the 1960s-was subject to increasing administrative restrictions which negated its very purpose.

The Free List was reduced from sixty-six items in 1964 to fourteen in 1969 and to eleven in 1971.

There was also a cut in the licensable list.

4. SOCIAL REFORMS BY AYUB KHAN

Ayub Khan’s regime took several measures to improve the social sector. These include the following:

Action against Hoarding, Black Markets and Smuggling

With many shortages of goods, there was ample opportunity for some people to make a great deal of money by selling goods on the black market. Some goods were hoarded so that the price would rise and they could be sold at a bigger profit. All this put up the prices of goods that ordinary people had to pay in the shops and markets. Tough action brought down prices. Goods were seized from profiteers and many arrests were made.

Fixation of the prices of essential foods

Shortly after taking power, the government fixed the price of milk, vegetables and ghee to stop traders from making too much profit at the expense of the people.

New Housing Developments

Thousands of people who had been displaced by partition still lived in dreadful slums. A new and enthusiastic minister for Rehabilitation, lieutenant- General Azam Khan, set about tackling the refugee problems. A massive new housing development at Korangi provided new homes for refugees living in Karachi. 75,000 refugees were settled in newly built dwellings near Karachi.

Moreover, laws were passed that factory owners had to provide accommodation for their workers at a reasonable rent.

Reform of the Marriage and Divorce Laws

In 1961, the Muslim Family Laws Ordinance helped improve the position of women. Divorce by simple repudiation was no longer allowed. Marriages and divorces had to be registered and approved by a court. Further marriages also had to be approved by a court. The minimum age for marriage was set at 16 for women and 18 for men and the grandson of a pre-deceased son was allowed to inherit the property of his grandfather.

Although these laws were difficult to impose, they were an important step towards improving the rights of women.

Measures to control population

Ayub Khan’s government tried to control population growth. In 1955 a legal commission was set up to suggest reforms of the family and marriage laws. Ayub Khan examined its report and in 1961 issued the Family Laws Ordinance.

A Family Planning Program was set up which was largely funded by American loans.

The government used radio, cinema, newspapers, posters and leaflets to persuade Pakistanis to limit the size of their families.

Health Facilities

Medical facilities were also improved. More medical and nursing training schools were set up. This was to increase the number of well-trained doctors and nurses in the country.

Modernization Of Islam

Ayub Khan took several steos to modernize Islam during his regime.

In 1962, the term Islamic Republic was dropped in favor of simply Republic of Pakistan.

An Advisory Council f Islamic Ideology was set up to advise Ayub Khan as to whether or not policies and laws were acceptable on Muslim principles.

The Ayub government set up an Ulema Academy in Lahore. It was an attempt by the government to modernize the ulama and religious leadership in the country. Moreover, religious leaders associated with the Academy were handpicked by the government, who could extend help to and support the regime in the hour of need.

CRITISISM AGAINST SOCIAL REFORMS

The biggest policy failure in the Ayub era was in the social area. The weak economic policies, overvalued exchange rate, inefficient taxation and overgenerous credit and incentive polices were main causes of the social issues.

The Family Planning Program did not prove to be very successful. It had limited impact on birth rate because the health workers themselves were illiterate and the program became prone to corruption. It was also criticized by the religious sections of the society.

The laws introduced for improving the status of women in the society also were unable to change the patriarchal society of Pakistan and they were also resisted by the ulemas.

The religious sections of the society severely resisted the modernization agenda. Religious leaders saw the reforms of Ayub Khan as a direct challenge to the traditional role of the ulama as the guardians of Islam and advisers to Muslim governments.

There was an increasing inequality in urban incomes as confirmed by a study of relative income shares in Pakistan’s largest scale manufacturing. The share of wages and salaries in net output fell suggesting an increase in the share of profits. As the reported profits were underestimated so actual share of wages and salaries was much lower.

Wages did not increase despite improvement in labor productivity which was due to serious limits on the powers of labor union. The fact that profits remained high was a result of trade and exchange rate policies and high barriers to entry.

5. EDUCATIONAL REFORMS

Ayub Khan’s efforts at educational reform had mixed results. The wide-ranging Report of the Commission on National Education was very important in the development of

education in Pakistan. It identified the importance of education as an investment in national growth. As a result:

Education up to Class V was made free and compulsory. Secondary education boards were set up to oversee secondary schooling up to

Class XII. A new curriculum for schools was drawn up and it was suggested that new

textbooks should be published. An extensive literacy program was started, building new schools and colleges. Technical education was made mandatory. University reforms were more difficult. There was great student anger at the

decision to extend degree courses from two to three years. Progress was made to improve scientific education and research.

Civil Defense training was made mandatory in the schools and colleges.

CRITICISM AGAINST EDUCATIONAL REFORMS

The neglect of education sector is a major criticism of the Ayub era.

The Second Plan set target of increasing primary school enrolment ratio in West Pakistan to 56% in 1965 but the ratio improved only to 36% because the population growth rate had been seriously underestimated.

The Third Plan again set a target of raising enrolment to 70% but the actual expenditures on education were much lower because of lower resources. This cut in educational expenditures decreased the share of primary education by a disproportionate amount.

A major problem was girl’s education as female education was given low priority in West Pakistan by the governing elite and social attitudes who did not favor educating women.

Secondary school enrolment grew at a rate same as primary education with more growth in higher education and this was concentrated mostly in private sector institutions. The urban bias in education was intensified.

The neglect of basic education in 60’s has remained a drag on the modernization of the economy because it has meant an increase in the number of illiterate persons. The policy failure was compounded by rapid and unforeseen population growth. This major problem was recognized by President Ayub and in 1960 a Family Planning Program was developed. It had limited impact on birth rate because the health workers themselves were illiterate and the program became prone to corruption.

6. A NEW CAPITAL

Since partition, the capital had been Karachi. Ayub’s government decided to build a new capital. This was because:

Traditionally, development in Pakistan was focused on the colonial centre of Karachi, and President Ayub Khan wanted it to be equally distributed.

Moreover, Karachi having warm and humid weather conditions was located at one end of the country, making it vulnerable to attacks from the Arabian Sea. A capital which was easily accessible from all parts of the country was needed.

Karachi, a business center, was also considered unsuitable partly because of intervention of business interests in government affairs.

Until 1958, the intention had been to build a new capital at Gadap, near Karachi. In 1958, a commission was constituted to select a suitable site for the national capital with particular emphasis on location, climate, logistics, and defence requirements along with other attributes. After extensive study, research, and a thorough review of potential sites, the commission recommended the area northeast of Rawalpindi in 1959. Thus in 1959, the government moved several hundred miles from Karachi to the Punjab, where the site of Islamabad was chosen. The newly selected location of Islamabad was closer to the army headquarters in Rawalpindi and the disputed territory of Kashmir in the north.

A Greek firm of architects, Konstantinos Apostolos Doxiadis, designed the master plan of the city which was based on a grid plan and triangular in shape, with its apex towards the Margalla Hills. Construction was started in October 1961. Whilst the new capital city was being built, temporary buildings were used at Chaklala, just outside Rawalpindi. The city came into life on 26 October 1966 when the first office building of Islamabad was occupied. In 1967, Islamabad was officially made the capital. Work on the city’s principal buildings, streets, and facilities continued and was completed by the mid1970s. It is a modern and carefully planned city.

The Secretariat Blocks are the administrative and policy planning nerve center of the country. They cover an area of 92,900 square meters. The city is divide into eight largely self-contained zones, each characterized by its predominant usages (such as the diplomatic enclave, the commercial district, the educational sector, the industrial and residential areas, etc.) each with its own shopping area and park.

Criticism against the new capital

The following factors related to Islamabad caused great resentment:

The change was yet another cause of discontent in East Pakistan. They preferred other sites for the national capital including, of course, in their part of the country.

Building Islamabad cost a great deal of money at a time when many Pakistanis were expecting shortages.

It was claimed that Ayub Khan’s friends in the army and in the industry were making fortunes out of land speculation in the new city.

PAKISTAN’S RELATIONS WITH THE EXTERNAL WORLD DURING AYUB KHAN’S REGIME

Ayub Khan articulated his foreign policy on several occasions, particularly in his autobiography, Friends not Masters. His objectives were the security and development of Pakistan and the preservation of its ideology as he saw it. Toward these ends, he sought to improve, or normalize, relations with Pakistan's immediate and looming neighbors--India, China, and the Soviet Union. While retaining and renewing the alliance with the United States, Ayub Khan emphasized his preference for friendship, not subordination, and bargained hard for higher returns to Pakistan.

1) RELATIONS WITH INDIA

Indus-Water Treaty

Other than ideology and Kashmir, the main source of friction between Pakistan and India was the distribution of the waters of the Indus River system. As the upper riparian power, India controlled the head works of the pre-partition irrigation canals. After independence, India had, in addition, constructed several multipurpose projects on the eastern tributaries of the Indus. Pakistan feared that India might repeat a 1948 incident that curtailed the water supply as a means of coercion. A compromise that appeared to meet the needs of both countries was reached during the 1950s; it was not until 1960 that a solution finally found favor with Ayub Khan and Jawaharlal Nehru.

The Indus Waters Treaty of 1960 was backed by the World Bank and the United States. Broadly speaking, the agreement allocated use of the three western Indus rivers (the

Indus itself and its tributaries, the Jhelum and the Chenab) to Pakistan, and the three eastern Indus tributaries (the Ravi, Beas, and Sutlej) to India. The basis of the plan was that irrigation canals in Pakistan that had been supplied by the eastern rivers would begin to draw water from the western Indus Rivers through a system of barrages and link canals. The agreement also detailed transitional arrangements, new irrigation and hydroelectric power works, and the waterlogging and salinity problems in Pakistan's Punjab. The Indus Basin Development Fund was established and financed by the World Bank, the major contributors to the Aid-to-Pakistan Consortium, and India.

INDO-PAK WAR 1965

Ayub Khan had to deal with the war between India and Pakistan that took place in 1965, which caused further problems for his regime.

Pre-War Escalation

Since Partition of British India in 1947, Pakistan and India remained in contention over several issues. Although the Kashmir conflict was the predominant issue dividing the nations, other border disputes existed, most notably over the Rann of Kutch, a barren region in the Indian state of Gujarat. The issue first arose in 1956 which ended with India regaining control over the disputed area. Pakistani patrols began patrolling in territory controlled by India in January 1965, which was followed by attacks by both countries on each other's posts on 8 April 1965. Initially involving border police from both nations, the disputed area soon witnessed intermittent skirmishes between the countries' armed forces. In June 1965, British Prime Minister Harold Wilson successfully persuaded both countries to end hostilities and set up a tribunal to resolve the dispute. The verdict, which came later in 1968, saw Pakistan awarded 350 square miles (900 km²) of the Rann of Kutch, as against its original claim of 3,500 square miles (9,100 km2).

After its success in the Rann of Kutch, Pakistan, under the leadership of General Ayub Khan, believed the Indian Army would be unable to defend itself against a quick military campaign in the disputed territory of Kashmir as the Indian military had suffered a loss to China in 1962. Pakistan believed that the population of Kashmir was generally discontented with Indian rule and that a resistance movement could be ignited by a few infiltrating saboteurs. Pakistan attempted to ignite the resistance movement by means of a covert infiltration, codenamed Operation Gibraltar. The Pakistani infiltrators were soon discovered, however, their presence reported by local Kashmiris, and the operation ended in a complete failure.

The War

On 5 August 1965 between 26,000 and 33,000 Pakistani soldiers crossed the Line of Control dressed as Kashmiri locals headed for various areas within Kashmir. Indian forces, tipped off by the local populace, crossed the cease fire line on 15 August.

Initially, the Indian Army met with considerable success, capturing three important mountain positions after a prolonged artillery barrage. By the end of August, however, both sides had relative progress; Pakistan had made progress in areas such as Tithwal, Uri and Poonch and India had captured the Haji Pir Pass, 8 km into Pakistan-Administered Kashmir.

On 1 September 1965, Pakistan launched a counterattack, called Operation Grand Slam, with the objective to capture the vital town of Akhnoor in Jammu, which would sever communications and cut off supply routes to Indian troops. Ayub Khan calculated that "Hindu morale would not stand more than a couple of hard blows at the right time and place" although by this time Operation Gibraltar had failed and India had captured the Haji Pir Pass. Attacking with an overwhelming ratio of troops and technically superior tanks, Pakistan made gains against Indian forces, who were caught unprepared and suffered heavy losses. India responded by calling in its air force to blunt the Pakistani attack. The next day, Pakistan retaliated, its air force attacked Indian forces and air bases in both Kashmir and Punjab. India's decision to open up the theater of attack into Pakistani Punjab forced the Pakistani army to relocate troops engaged in the operation to defend Punjab. Operation Grand Slam therefore failed, as the Pakistan Army was unable to capture Akhnoor; it became one of the turning points in the war when India decided to relieve pressure on its troops in Kashmir by attacking Pakistan further south.

India crossed the International Border on the Western front on 6 September, marking an official beginning of the war. This had not been anticipated by the Pakistanis and the area was largely undefended. The developments brought the Indian Army within the range of Lahore International Airport. As a result, the United States requested a temporary ceasefire to allow it to evacuate its citizens in Lahore. However, the Pakistani counterattack took Khem Karan from Indian forces which tried to divert the attention of Pakistanis from Khem Karan by an attack on Bedian and the adjacent villages.

On the days following 9 September, both nations' premiere formations were routed in unequal battles. A heroic defence by the troops in and near Lahore prevented it form being captured by the Indian troops.

Although war was not officially declared yet, the Indians launched a second major offensive in the Sialkot sector. However, it was repulsed by the Pakistan army.

A full-fledged war broke out between the two countries. After three weeks of fighting, peace was achieved on 23 September by the intervention of the great powers that

pushed the two nations to a cease fire for fears the conflict could escalate and draw in other powers.

Tashkent Declaration

A meeting was held in Tashkent in the Uzbek SSR, USSR (now in Uzbekistan) beginning on 4 January 1966 to try to create a more permanent settlement.

The Soviets, represented by Premier Alexei Kosygin moderated between Indian Prime Minister Lal Bahadur Shastri and Ayub Khan.

The Tashkent Declaration of 10 January 1966 was a peace agreement between India and Pakistan after the Indo-Pakistani War of 1965.

The conference was viewed as a great success and the declaration that was released was hoped to be a framework for lasting peace. The declaration stated that

The Prime Minister of India and the President of Pakistan agree to make all efforts to establish good relations between India and Pakistan in accordance with the United Nations Charter. They affirm to renounce the use of force in the settlement of their disputes.

The President of Pakistan and the Indian Prime Minister agree to withdraw, no later than February 25, 1966, all armed personnel to the position held before August 5, 1964.

Both India and Pakistan agree to follow the principle of non-interference in their affairs and will discourage the use of any propaganda against each other.

Both the countries also agree to reopen normal diplomatic functioning and to return of the High Commissioners of both the countries to their posts.

Measures towards the restoration of economic and trade relations, communications, as well as cultural exchanges between the two countries were to be taken. Measures were to be taken to implement the existing agreements between Pakistan and India.

Prisoners of war would be repatriated. Discussions would continue relating to the problem of refugees and eviction of

illegal immigrants. Both sides will create conditions that will prevent the exodus of the people.

The Tashkent conference, under United Nations, American and Soviet pressure, compelled Pakistan and India to restore their national boundary and the 1949 ceasefire line in Kashmir. This eventually led to dissatisfaction and protests against the Ayub Khan leadership.

2) RELATIONS WITH USA

General Muhammad Ayub Khan after taking over the government in a bloodless coup, 1958 made an announcement regarding the foreign policy of Pakistan and mentioned that we are “the most allied ally” of the United States. This shows that during this era Pakistan became more pro-west. Ayub Khan believed that Pakistan could not make progress unless the Kashmir problem was solved, which was not possible without the help of the Western Bloc. That’s why Ayub Khan depended on Western Bloc, especially United States. At that time Pakistan was facing two major problems: the unresolved Kashmir issue and the perceived Security threat from neighbor country, India. On the other side the United States aims were to help Pakistan and to maintain her independence in an area threatened by communism.

On 5th March, 1959 Pakistan and the United States signed the bilateral agreement of Defense for bilateral cooperation. According to this agreement, United States agreed to cooperate with Pakistan to deal with its security threats and its defense requirements. At the same time the Government of the United States was promoting its national interest by maintaining the peace in South Asia and especially by the preservation of the independence and integrity of Pakistan. Pakistan reaffirmed its determination to resist the aggression, when United States promised “that in accordance with the constitution of United States, it will take such appropriate action to promote peace and to combat the communist’s stability in the Middle East and also in Pakistan.” The United States also declared that any attack on Pakistan would be considered as attack on America. This United States-Pakistan alliance, during the height of the cold war, promoted world peace instead of communist aggression and upgraded defense of Pakistan against all aggression including the possible threat from India.

Relations After 1959

Events after 1959 showed that the American attitude towards Pakistan was more lukewarm. During the 1060s, relations were often strained.

In 1962, China and India went to war. As China was communist, the USA immediately sent military aid to help India fight. This move offended the Pakistan government, which rigidly argued that it should, at the very least, have been consulted before India was given aid. Pakistan’s leaders also argued that the Americans should have forced the Indians to accept arbitration on the Kashmir issue as a price for receiving aid. Although the Americans promised to consult Pakistan in future, in practice they were pleased to get the large non-Communist state (India) into an agreement.

After 1962, both China and the Soviet Union seemed keener to have Pakistan as an ally than the USA. In 1962, Ayub Khan visited China and in 1965, the Soviet Union. These visits displeased the USA.

During the 1965 war between India and Pakistan, the USA joined the UK in an arms embargo on both countries. As the Pakistan army was almost entirely dependent on the USA for supplies and training, the embargo was far more damaging to it than to India.

However, despite these incidents, Ayub Khan was generally considered the architect of good relations between the USA and Pakistan.

He allowed the Americans to build air bases in Pakistan. He also remained loyal to the USA during the highly embarrassing ‘U2 Affair’ on

1 May 1960, when an American spy plane had taken off from Peshawar and had been shot down over Soviet territory.

3) RELATIONS WITH THE SOVIET UNION

During the Ayub Khan Regime, relations deteriorated and improved again due to several events.

In May 1960, relations reached a low point when a spy plane form the US base in Peshawar was shot down over the Soviet Union. The Pakistan government denied any knowledge of the American spying, but the Soviet government did not accept this.

However, relations improved gradually after 1960.

In 1961, the Soviets, as a gesture of goodwill, agreed to begin exploring for oil in Pakistan.

When India accepted help from the USA in its war with China in 1962, the effect was to drive Pakistan and the Soviet Union closer together.

When China began to give Pakistan aid in 1963, the Soviet government decided to take even more decisive steps to ally with Pakistan. In 1963, it loaned Pakistan 11 million pounds and it shifted from its previous open support for India over Kashmir to a neutral stance.

In April 1965, Ayub Khan paid an official visit to the Soviet Union and further agreements on trade and oil exploration were reached.

In January 1966, the Soviet Union hosted a peace conference between India and Pakistan at Tashkent. The Pakistan representatives were impressed with the organization of the conference and the Soviet success in holding the conference raised its prestige in Asia.

In 1968, when the Americans decided to close their airbase at Peshawar, the Soviet Union began to supply arms to Pakistan.

However, at this point, relations with the Soviet Union worsened. The Soviet Government was not happy with the fact that Pakistan was accepting aid and arms from the USA as well from the Soviet Union.

4) RELATIONS WITH CHINA

Relations with China improved greatly during the Ayub Khan Regime. This was due to the war between India and China which soured relations between India and China.

In 1962, Ayub Khan visited China and met Chairman Mao and PM Zhu en Lai, thus paving way for a long time tested friendship between the two countries

In March 1963, China and Pakistan began talks to settle their own border dipute. They were successfully completed by March 1963. In the settlement, the Chinese made more concessions to Pakistan than the Pakistanis as they were keen to win Pakistan’s friendship to counter declining relations with India and the Soviet Union.

Early in 1963, Pakistan and China announce a series of trade agreements. China grated Pakistan a $60 million interest free loan and soon became the world’s largest purchaser of Pakistani cotton. Pakistan also claimed that China had agreed to come to Pakistan’s aid in any war with India.

In August 1963, Pakistan International Airlines bagan regular flights to China, which helped to increase movement and trade between the two countries. PIA was the first international carrier ever to operate in certain Chinese cities.

In 1964, China made a statement supporting Pakistan’s policy in Kashmir. In return, Pakistan supported China’s entry into the UN

During the 1965 war with India, China supplied military aid to Pakistan and applied diplomatic pressure on India to prevent it from attacking Pakistani positions. Chinese support almost certainly helped Pakistan obtain better terms in the ceasefire.

5) REALTIONS WITH BRITAIN AND THE COMMONWEALTH

Relations with Britain got strained during the Ayub Khan Regime when the British government made it clear that it did not feel bound through membership of the SEATO and CENTO pacts to support Pakistan in the 1965 war against India.

However, Britain played an important role during the 1965 tensions by engineering the agreement to resolve the Rann of Kutch dispute and in helping to bring about a cease fire at the end of the battle. The final agreement was signed by Pakistan at the Commonwealth Conference in London during June 1965.

The British action to suspend arms sales on 8 September to both sides did not affect relations. Pakistan appreciated the fact that Britain had criticized India for crossing the international boundary on 6 September 1965, a criticism which had created uproar in India.

AYUB KHAN’S FOREIGN POLICY-CONCLUSION

Ayub Khan attempted to change his pro-Western foreign policy into one of bilateralism. He wanted to develop balanced relations with all the major powers. But his cultivation of China angered the US, which was providing more than 50% of Pakistan’s foreign aid. At a time when his foreign policy and foreign aid were in crisis, Ayub Khan plunged Pakistan into an adventure to capture Kashmir by force. The Indo-Pak War of 1965 ended with grave consequences for Pakistan. The US ended all military and economic aid. After the war, economic aid was restored at a lower level but the ban on military aid continued.

The post-war Tashkent Agreement relegated the Kashmir issue to the background. The ban on military aid, decline in financial allocations, and overtures to India for mutual reductions in the armed forces caused alienation in the military ranks. Moreover, the war aggravated socio-economic problems that had already started to appear due to Ayub’s policies.

Therefore, Ayub Khan was not very successful in his foreign policy.

ELECTIONS 1965

Background

Elections for the Presidency were to take place in January 1965. Ayub Khan was nominated by a new party, the Convention Muslim League, which he had helped form.

Ayub Khan believed that the opposition parties were too divided to put up a credible opponent in the elections. The opposition parties all agreed to support the sister of the Quaid, Mohtarma Fatima Jinnah.

Results

In the election, Ayub Khan won 64% of the votes compared to Miss Jinnah’s 36%

This result was challenged by the opposition, who claimed that the voting had been rigged.

There were riots in Karachi and East Pakistan in which 20 people were killed.

Ayub Khan had been reelected but at the price of riots by opposition groups, who believed their candidate had been cheated.

POLITICAL UNREST AND THE DOWNFALL OF AYUB KHAN

After the 1965 war with India which had been provoked by Ayub’s government, Ayub told the people that Pakistan had won the war, but the Tashkent Treaty contained no reference to how the Kashmir issue should be solved. It was to regain that disputed Kashmir territory that Pakistan had started the war.

Ayub Khan sacked the Foreign Minister, Zulfiqar Ali Bhutto, who he blamed for the failings of the war. Bhutto now became a focal point for opposition to Ayub.

DECADE OF DEVELOPMENT

By November 1968, Ayub Khan had become immensely unpopular with the masses. A scathing criticism of Ayub’s policies had extremely demoralized the regime and he found it difficult to subdue the people’s anger. The politicians and officials close to Ayub Khan suggested that a ‘A Decade of Development’ should be celebrated to deflect the mounting criticism against the regime. The main purpose behind the celebration was to attract people’s attention towards the achievements of his time in office by declaring his tenure, ‘A Decade of Development’.

Pakistan’s economic statistics seemed very impressive.

The rate of economic growth had picked up very sharply after Ayub Khan’s assumption of power. During the 1960s, the average annual growth rate was over 7%, which meant that gross national wealth quadrupled in ten years.

The economy was not just growing twice as well, it was also growing three times faster than that of India or any other country in South Asia.

During the second Five Year Plan (1960-65), manufacturing output grew at an annual rate of 11.5%.

During the same period, people’s incomes went up by an average of 14%.

Therefore, the state of Pakistan’s economy convinced many international economic experts who believed that Pakistan had finally managed to wriggle out of the vicious circle of poverty.

CRITICISM AGAINST THE DECADE OF DEVELOPMENT

The economic progress and statistics which looked so impressive at the outset were to appear misleading later. Ayub’s Decade of Development did not stand up to its promise. The various reforms which he had initiated bounced back and did not work as he had foreseen.

In 1968, the chief economist in the Planning Commission of Pakistan revealed that only 22 industrial families were controlling 66% of the country’s industrial assets and 80% of its insurance and banking services. This image proved politically very damaging to Ayub Khan.

Most of the new wealth was concentrated in West Pakistan which provided a pretext for the hostility to flare up in East Pakistan. Planning and development efforts geared to a sharp rise in public investment rate in East Pakistan. These efforts succeeded and public sector investment rate in East Pakistan went up than that of West Pakistan but private investment continued to lag behind substantially.

Many Pakistanis saw little improvement in their standard of living. There was an increasing inequality in urban incomes as confirmed by a study of relative income shares in Pakistan’s largest scale manufacturing. Wages did not increase despite improvement in labor productivity. Most of the benefits went directly to those directly involved as owners, investors or managers in the businesses that were expanding.

The number of people living in severe poverty actually rose from 8.65 million in 1963 to 9.33 million by 1968. This was also due to uncontrolled population growth that undercut whatever economic growth there may have been, even in the West Wing. At that time, population growth as 2.2% a year, one of the highest in the world. Where national income per capita was R.s 261 in 1962, it decreased to R.s 259 in 1963.

People were angry that millions of rupees were spent on the celebrations of the Decade of Development for one whole year, at a time when they were experiencing economic difficulties. The Third Year Plan also could not be implemented as taxes were increased, prices went up and there were many shortages.

Therefore, the ‘Decade of Development’ is also referred to as the ‘Controversial Sixties’.

DOWNFALL OF AYUB KHAN

The celebrations of the Decade of Development led to further riots and protests.

In 1967, Bhutto organized a new mass political party, the Pakistan People’s Party. The protests they organized soon turned into serious disturbances and Ayub Khan placed his former minister under arrest for several weeks.

When Ayub Khan carried out widespread arrests, including Bhutto, there were more protests, which spread to East Pakistan. In East Pakistan, Mujib-ur-Rehman’s Awami League became serious threat to the President’s authority.

On a visit to Peshawar, Ayub Khan became the target of a failed assassination attempt.

Throughout 1968, the protests and riots were impossible to stop. In October 1968, there were student protests all over Pakistan. Bhutto had captured the public mood in West Pakistan with his campaign for ‘Islamic Socialism’.

In January 1969, eight of the opposing parties formed the Democratic Action Committee. They wanted proper elections, the lifting of emergency powers and autonomy for East Pakistan.

On 17 February 1969, Ayub Khan withdrew the emergency powers and released many political prisoners arrested the previous October. But he had done too little too late.Even Ayub’s cherished Basic Democrats resigned in large numbers. The opposition rapidly gained support while he and his party lost it.

By March, Ayub Khan realized that he did not have enough support to stay in power. On 25 March 1969, he resigned. But he did not call for new elections to choose the new President. Instead, he handed over power to the army and for the second time in its short history, Pakistan experienced martial law.

CONCLUSIONS

For Pakistan the period of 1960-5 was of quickening the tempo for growth. There was a dramatic turnaround in investment and growth in both East and West Pakistan. This was a result of Ayub’s strong commitment to development.

This development momentum was seriously disrupted by the 1965 war with India. Reduction in foreign aid availability and increased defence spending squeezed investment. In the second half of 1960’s the net foreign inflows tended to stabilize but were still higher in relative terms in 1969-70 than a decade earlier. This was leading Pakistan to high dependence on foreign developed countries. We were getting reliant on the developed countries for every sector of our economy.

Rural areas benefited from high agricultural growth while urban areas suffered from the consequence of slowdown in manufacturing and construction and cuts in social spending. Growth of GDP remained high both in East and West

Pakistan in the second half of 1960s but this was concentrated mostly in agriculture in West Pakistan.

The non-economic consequences of 1965 war were more disastrous for Ayub. East Pakistan was left without adequate defence spending during the war with India, there was growing economic disparity and lack of sufficient political participation.

In economic policy terms, major failures were the perpetuation of the industrial and trade policies of 1950s and an excessive reliance on external assistance.

Despite these economic policy failures and accusations of presiding over a regime run on ‘crony capitalism’, the Ayub era was an exceptionally successful period of economic management and a ‘success’ by whatever criteria were available at that time to measure success.

RECOMMENDATIONS

The Ayub Khan government should have included more democratic institutions so that each province could have more autonomy and the demands of the people, e.g. those of the people of East Pakistan could have been addressed properly. The Constitution should also have given more power to democracy.

A proper system of check and balance of the private institutions should have been introduced which should also have been followed strictly to prevent the concentration of economic power within a few hands.

Quality control, the provision of infrastructure like communications and energy, and direct incentives to exporters should have been implemented instead of supply-side policies (prices, inputs, tax incentives, etc.) instead of making the country so dependent on foreign aid and instead of the export bonus voucher scheme that caused serious distortions in the economy.

Ayub Khan should have given more attention to the low-income sector to prevent income and regional disparities. To avoid the resentment of the religious sectors, he should have considered their advice and alterations should have been made to the modernization policy to make it less offensive to the religious sectors.

Effective land reforms should have been implemented that would not have left large loopholes to make intra-family and intra-household transfers. And credit should have been made more accessible to the poor farmers so that they could also take benefit of the Green Revolution.

Moreover, the war against India should not have been fought as it only led to waste of resources while no agreement was reached regarding the Kashmir dispute. And Ayub Khan should not have rigged the elections as this caused further discontent against him.

REFERENCES

Books and Articles

Pakistan-A Historical And Contemporary Look By Farooq Naseem Bajwa. Introduction To Pakistan Studies By M. Ikram Rabbani The History and Culture of Pakistan By Nigel Kelly Pakistan-History, Culture and Government By Nigel Smith Issues In Pakistan Economy By S. Akbar Zaidi The Green Revolution and the Gene Revolution in Pakistan: Policy Implications

by Robert E. Evenson Forced Modernization and Public Policy: A Case Study of Ayub Khan Era (1958-

69) By Sarfraz Husain Ansari

Web Sites

http://www.brecorder.com/ http://herald.dawn.com/ http://storyofpakistan.com/ http://en.wikipedia.org/ http://www.academia.edu/

http://countrystudies.us/ http://www.infoplease.com/ http://www.google.com/