Nawaz Sharif's ouster

Bump in the road or prelude to chaos?

The Supreme Court of Pakistan's decision to dismiss Nawaz Sharif as prime minister comes at a critical time for the South Asian country of nearly 200 million people. The country was starting to turn a corner after years of being dominated by economic malaise, domestic terrorism and the consequences of a failed United States-led military campaign in neighbouring Afghanistan.

Political stability was one of the driving factors for this improvement. After winning the general election in 2008, the Asif Ali Zardari-led Pakistan People's Party government dragged itself to the finish line to hold elections five years later. Voters booted out the ineffective government in the 2013 elections and gave Mr Sharif's Pakistan Muslim League (PML) the reins to run the country for the third time since 1990. Elections are again due in 10 months and without this political crisis, Mr Sharif would have become prime minister for a record fourth time.

Except it is not to be. Mr Sharif's political fortunes began to change last year when hackers leaked documents from a Panamanian law firm which showed that his family had undeclared properties in London that were bought when he was not in government. Mr Sharif's political opponents pounced on the scandal and went to court to seek his disqualification.

Last Friday, the Supreme Court directed criminal proceedings against Mr Sharif and his family when they failed to prove the wealth was legal. The court also disqualified him from office because in his electoral declarations, he did not disclose income from a business in the United Arab Emirates. With Mr Sharif's sacking, the government will function under an interim prime minister until the next polls.

Outside the courts, Mr Sharif had crossed swords with the powerful military. Even though he didn't cross the military's OB marker of relations with rival India, he and the generals didn't see eye to eye on many domestic policies. In the streets, a new political adversary, cricketer-turned-politician Imran Khan, ratcheted up the pressure with protests, especially in Punjab, Mr Sharif's political bastion and the most politically important of the country's four provinces.

For Mr Sharif, the immediate future will be a personal and political fight for survival. At 67 and not in the best of health, he faces yet another legal battle about his business interests. These court battles are not new to Mr Sharif whose business and political interests were always intertwined. But this time, the battle also threatens his business and political heirs - sons Hassan and Hussain and daughter Maryam.

For Pakistan, an unabated political crisis can undo the hard-earned gains of the recent past.

The Supreme Court directed criminal proceedings against Mr Nawaz Sharif and his family when they failed to prove that their properties in London were legal. The court also disqualified Mr Sharif from office because in his electoral declarations, he d
The Supreme Court directed criminal proceedings against Mr Nawaz Sharif and his family when they failed to prove that their properties in London were legal. The court also disqualified Mr Sharif from office because in his electoral declarations, he did not disclose income from a business in the United Arab Emirates. PHOTO: AGENCE FRANCE-PRESSE

Security has markedly improved to the point that beaches in Karachi are crowded with families late into the night. Shopping malls are packed and property prices have reached new highs. The economy is expected to expand by at least 5 per cent over the next three years and MSCI recently added Pakistan back to its emerging markets index. Overall, there is a positive feeling of optimism, one that vanished after the assassination of Ms Benazir Bhutto in 2007.

The challenges for Pakistan are many. First, elections are due in 10 months. The court's decision has been a godsend for Mr Khan, who took Mr Sharif to court and has waged a 21-year battle to lead the country. The PML, which still commands a majority in Parliament, will have to hold itself together to win - and win decisively against the combined opposition of a suspicious military, an activist judiciary and emboldened political opponents. Mr Khan will continue to pressure the PML in Punjab. If the PML fails to win in Punjab, it may fail to form the next government. If so, Mr Sharif's political career will be effectively over.

Second, the economy is expanding but faces structural headwinds. Mr Sharif bolted Pakistan firmly onto China's One Belt One Road project through the US$62 billion (S$86 billion) China-Pakistan Economic Corridor (CPEC), which will upgrade the country's crumbling infrastructure needed to push economic growth beyond 7 per cent in the medium term.

The CPEC is a long-term project but it comes with massive debt that will require an expanding economy, growing exports and a strong treasury, overseen by a politically confident government, to be repaid on time. If a balance of payment crisis emerges in the next 12 to 24 months, Pakistan will have to head to the International Monetary Fund for a bailout or enter into tough negotiations with Beijing. Neither is a good option.

Finally, terrorists will see this uncertainty as an opportunity to regroup. Military campaigns have significantly reduced but by no means eliminated terrorist threats. If this hard-fought momentum is lost because the politicians and military are distracted, a re-emergence of terrorism will have a cascading effect on sentiment and the real economy.

How the next 12 months play out in ever-chaotic Pakistan will determine whether Mr Sharif's sacking was just a detour or an exit to wilderness again.

• The writer is managing director of HJ Advisory (Singapore), a Singapore-based boutique country risk advisory firm.

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on July 31, 2017, with the headline Bump in the road or prelude to chaos?. Subscribe