U.S. Govt. Top Secret Report. ECONOMIC AND POLITICAL DOMINATION OF EAST AND WEST
The basic facts seem to support the East Pakistan charge of economic domination by the West. The economic disparities between East and West Pakistan have been so serious for so long that the Pakistan Government’s highest planning authority has been forced to take official note of them.
A recent report by a panel of experts to the Planning Commission of the Government of Pakistan provides authoritative documentation of the widening of economic disparities, in the two regions. The most striking fact in this report is the widening gap between the income of the average West Pakistani and his Eastern counterpart. In 1959-60, the per capita income in West Pakistan was 32% higher than in the East. Over the next ten years annual rate of growth of income of West Pakistan was 6.2% while it was on 4.2% in East Pakistan. As a result, by 1969-70 the per capita income of the- West was 61% higher than in the East. Thus in ten years the- income gap doubled in percentage terms, it increased even- more in absolute terms.
East Pakistanis Blane three instruments of central government policy for their plight:
(a) Pakistan’s scant indigestible resources, plus foreign aid, are directed unduly to the development of West Pakistan to the comparative neglect of East Pakistan.
(b) In particular, East Pakistan’s foreign trade earnings are diverted to finance imports for West Pakistan.
(c) Economic policy favors West Pakistan at the expense of the East. Specially, tariffs, import controls, and industrial licensing compel East Pakistan to purchase commodities from West Pakistan which, but for the controls, they could obtain more cheaply in world markets.
We believe the East Pakistani claims to be largely justified. First, it is indisputable that the bulk of public investment has been in West Pakistan though the majority of the population lies in the East. With 60% of the population, East Pakistan’s share of central government development expenditure has been as low as 20% during 1950/51—1954/55 attaining a peak of 36% during the Third Five Year Plan period 1965/66—1969/70. East Pakistan has received an even smaller share of private investment, less than 25%.
It may be true, as defenders of Pakistan government policy claim, that the great bulk of worthwhile investment opportunities have been in the West, though the relative ■ attractiveness' of the West may be more the effect of overall government policy than a cause. In any event the fact remains that investments in the West have done little or nothing for the people in the East.
As for the second point, it is clear that foreign exchange has been allocated to the detriment of East Pakistan. Over the last two decades East Pakistan’s share of total Pakistan ■ export earnings has varied between 50% and 70% while its share of imports has been in the range of 25% to 30%. Until 1962—63 East Pakistan has shown significant surpluses on foreign 'account, which has changed in recent years to small ■ deficits. By contrast the West’s foreign trade has shown a substantial and chronic deficit that has absorbed virtually all foreign exchange made available through foreign aid.
With respect to the third point, general economic policy- has clearly favored West Pakistan. The West’s preponderant share of imports and investments might have provided inexpensive necessities for all of Pakistan’s people. In fact, it has allowed the development of inefficient industries, which, ironically, have prospered largely because of tariffs and quotas- that have made East Pakistan a captive market. 40% of all exports of West Pakistan are sold to East Pakistan; in 1968- 69 the West sold 50% more to the East than it bought from the East.
An analysis of foreign trade data reveals that a net transfer of resources has taken place from East to West Pakistan. According to the official report referred to above, East Pakistan has transferred approximately $2.6 billion to West Pakistan over the period 1948-49 to 1968-69.
In short, Pakistan’s economic policies are harmful to East Pakistan. “Exploitation” may be a strong word, but it seems clear, all in all, that East Pakistan’s economic interest has been subordinated to those of the West, and that the East Pakistanis have had good cause to resent that fact.
The economic domination of East Pakistan has been facilitated by West Pakistani dominance of the Central Government. The military regime of Pakistan has existed, with modifications, since 1958, and decision-making authority rests with a well-entrenched civil service and their military bosses. All senior military members of the administration have been West Pakistani in 1960, and the proportion has not changed much since. The Deputy Chairman of the Planning Commission and the Central Finance Minister, key individuals in resource allocation, has always been West Pakistanis.
The location of the Central government in West Pakistan has encouraged the concentration of industry and the entrepreneurial class in West Pakistan. Such a concentration is to be expected in an economic system where direct allocation control of resources by the government makes direct access: to government authorities a prime business asset.
A recent report by a panel of experts to the Planning Commission of the Government of Pakistan provides authoritative documentation of the widening of economic disparities, in the two regions. The most striking fact in this report is the widening gap between the income of the average West Pakistani and his Eastern counterpart. In 1959-60, the per capita income in West Pakistan was 32% higher than in the East. Over the next ten years annual rate of growth of income of West Pakistan was 6.2% while it was on 4.2% in East Pakistan. As a result, by 1969-70 the per capita income of the- West was 61% higher than in the East. Thus in ten years the- income gap doubled in percentage terms, it increased even- more in absolute terms.
East Pakistanis Blane three instruments of central government policy for their plight:
(a) Pakistan’s scant indigestible resources, plus foreign aid, are directed unduly to the development of West Pakistan to the comparative neglect of East Pakistan.
(b) In particular, East Pakistan’s foreign trade earnings are diverted to finance imports for West Pakistan.
(c) Economic policy favors West Pakistan at the expense of the East. Specially, tariffs, import controls, and industrial licensing compel East Pakistan to purchase commodities from West Pakistan which, but for the controls, they could obtain more cheaply in world markets.
We believe the East Pakistani claims to be largely justified. First, it is indisputable that the bulk of public investment has been in West Pakistan though the majority of the population lies in the East. With 60% of the population, East Pakistan’s share of central government development expenditure has been as low as 20% during 1950/51—1954/55 attaining a peak of 36% during the Third Five Year Plan period 1965/66—1969/70. East Pakistan has received an even smaller share of private investment, less than 25%.
It may be true, as defenders of Pakistan government policy claim, that the great bulk of worthwhile investment opportunities have been in the West, though the relative ■ attractiveness' of the West may be more the effect of overall government policy than a cause. In any event the fact remains that investments in the West have done little or nothing for the people in the East.
As for the second point, it is clear that foreign exchange has been allocated to the detriment of East Pakistan. Over the last two decades East Pakistan’s share of total Pakistan ■ export earnings has varied between 50% and 70% while its share of imports has been in the range of 25% to 30%. Until 1962—63 East Pakistan has shown significant surpluses on foreign 'account, which has changed in recent years to small ■ deficits. By contrast the West’s foreign trade has shown a substantial and chronic deficit that has absorbed virtually all foreign exchange made available through foreign aid.
With respect to the third point, general economic policy- has clearly favored West Pakistan. The West’s preponderant share of imports and investments might have provided inexpensive necessities for all of Pakistan’s people. In fact, it has allowed the development of inefficient industries, which, ironically, have prospered largely because of tariffs and quotas- that have made East Pakistan a captive market. 40% of all exports of West Pakistan are sold to East Pakistan; in 1968- 69 the West sold 50% more to the East than it bought from the East.
An analysis of foreign trade data reveals that a net transfer of resources has taken place from East to West Pakistan. According to the official report referred to above, East Pakistan has transferred approximately $2.6 billion to West Pakistan over the period 1948-49 to 1968-69.
In short, Pakistan’s economic policies are harmful to East Pakistan. “Exploitation” may be a strong word, but it seems clear, all in all, that East Pakistan’s economic interest has been subordinated to those of the West, and that the East Pakistanis have had good cause to resent that fact.
The economic domination of East Pakistan has been facilitated by West Pakistani dominance of the Central Government. The military regime of Pakistan has existed, with modifications, since 1958, and decision-making authority rests with a well-entrenched civil service and their military bosses. All senior military members of the administration have been West Pakistani in 1960, and the proportion has not changed much since. The Deputy Chairman of the Planning Commission and the Central Finance Minister, key individuals in resource allocation, has always been West Pakistanis.
The location of the Central government in West Pakistan has encouraged the concentration of industry and the entrepreneurial class in West Pakistan. Such a concentration is to be expected in an economic system where direct allocation control of resources by the government makes direct access: to government authorities a prime business asset.
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