Terrorism, corruption and Chinese investment: The stakes in Pakistan’s second-ever democratic election 

  • Violence continues to maul Pakistan's voters as a suicide blast in northwestern Quetta killed at least 29 people and injured more than 30 at a polling station Wednesday morning.
  • Corruption, economic development, terrorism and foreign relations are some of the major issues at stake as Pakistan votes Wednesday in the second democratic national election in its history.
  • The election's run-up has been stained by allegations or harassment, suppression, violence and bribery by politicians, extremist groups and the military.
An election official seals ballot boxes before people vote during Pakistan's general election at a polling station in Islamabad on July 25, 2018. 
AAMIR QURESHI | AFP | Getty Images
An election official seals ballot boxes before people vote during Pakistan's general election at a polling station in Islamabad on July 25, 2018. 

Violence continues to maul Pakistan's voters as a suicide blast in northwestern Quetta killed at least 29 people and injured more than 30 at a polling station Wednesday morning.

The attack was claimed by the Islamic State, which also took responsibility for an attack that killed 151 at an election rally on July 13, the second-deadliest attack in Pakistan's history.

Terrorism, corruption, economic development and foreign relations are some of the major issues facing Pakistan’s next government. But whether progress will be made on any of those fronts after the world’s sixth-most populous country votes in its general election Wednesday is far from certain.

The south Asian nation of 208 million has depleted its foreign currency reserves and suffers from a widening current account deficit, meaning an International Monetary Fund (IMF) rescue will be necessary, analysts say. This while rampant corruption and sporadic terrorist attacks, as well as a wave of extremist candidates attempting to enter politics, threaten security, foreign investment and international relationships even amid an improving trade environment.

Meanwhile, Pakistan’s tense relationship with Washington — which recently suspended $2 billion in security assistance to Islamabad over accusations that it was failing to curb terrorist activity within its borders — has broadened the opportunity for China to deepen its ties with the country.

The contenders

Regional observers have often likened Pakistani politics to a soap opera. No Pakistani prime minister has ever completed a full term since the state’s inception in 1947, with most leadership tenures halted by coups, resignations, arrests, or assassinations. The 2018 election is only the second democratic vote in a country ruled by the military for nearly half its history. Its first one, in 2013, was marked by a slew of terrorist attacks by the Pakistani Taliban that left more than 170 people dead.

This election’s top contenders are the incumbent Pakistan Muslim League (PML-N) party — whose leader, former Prime Minister Nawaz Sharif, is currently in jail on corruption charges involving the Panama Papers and permanently banned from politics — and the country’s former cricket team captain Imran Khan with his social democratic Pakistan Tehreek e-Insaf party (PTI), also known as the Pakistan Movement for Justice.

The formerly dominant Pakistan People’s Party (PPP) is fielding 29-year old Bilawal Bhutto, whose mother Benazir Bhutto, the country’s first female prime minister, was assassinated in 2007. He stands nearly no chance of winning, but the PPP will likely form an alliance with one of the top two parties.

Supporters of Pakistani cricketer turned politician Imran Khan of the Pakistan Tehreek-e-Insaf (Movement for Justice) attend a campaign rally in Karachi on July 22, 2018.
RIZWAN TABASSUM/AFP/Getty Images
Supporters of Pakistani cricketer turned politician Imran Khan of the Pakistan Tehreek-e-Insaf (Movement for Justice) attend a campaign rally in Karachi on July 22, 2018.

While it’s unlikely that any single party will attain a majority in the National Assembly, analysts at Eurasia Group forecast the center-right PLM-N to secure a plurality, with a post-election alliance among remaining parties potentially allowing the PTI’s Imran Khan to become prime minister. Eurasia puts this probability at 60 percent.

Enduring corruption

The conservative PML-N is the country’s largest party and has been associated with both entrenched state corruption and a pushback against Pakistan’s powerful military, with Sharif’s government particularly vocal in condemning its influence in civilian politics. Sharif claims his arrest was a result of a military plot. His brother, Shehbaz Sharif, who is de facto leader of the PML-N while his brother is in jail, is expected by many to win the prime ministership, though his race with Khan is so far a close one.

"No Pakistani prime minister has ever completed a full term since the state’s inception in 1947, with most leadership tenures halted by coups, resignations, arrests, or assassinations. The 2018 election is only the second democratic vote in a country ruled by the military for nearly half its history."

Khan, meanwhile, the charismatic and popular cricket hero, has been particularly outspoken against corruption.

“We would expect significant progress in tackling corruption only in the unlikely scenario that the PTI wins enough seats to to form a majority government,” said Christopher McKee, chief executive of country risk firm PRS Group.

Still, the party has fielded several candidates facing corruption charges. Kamal Madishetty, Pakistan analyst at the Economist Intelligence Unit (EIU), told CNBC he saw “no reason to believe any political party has a serious intention of tackling the menace.”

Chinese investment boom

Pakistan’s business environment rankings remain poor, ranking 147 out of 190 in the World Bank’s latest Ease of Doing Business Ranking. But it’s seen a sizeable uptick in foreign direct investment (FDI) — February 2018 FDI figures were up 132 percent on the previous year to $340.8 million — thanks in large part to China’s CPEC, the China-Pakistan Economic Corridor, a series of joint projects in sectors like infrastructure and power production.

Pakistani cricketer turned politician Imran Khan of the Pakistan Tehreek-e-Insaf (Movement for Justice), speaks to supporters during a campaign rally ahead of the general election in Karachi on July 22, 2018.
RIZWAN TABASSUM | AFP | Getty Images
Pakistani cricketer turned politician Imran Khan of the Pakistan Tehreek-e-Insaf (Movement for Justice), speaks to supporters during a campaign rally ahead of the general election in Karachi on July 22, 2018.

Hasnain Malik, global head of equity research and strategy at emerging markets investment bank Exotix Capital, noted that examples like Brazil, India and Kenya show that corruption doesn’t necessarily stand in the way of economic growth or investor returns.

“Still, corruption is a constraint on the Pakistan story,” Malik said, adding that “fiscal sustainability cannot be established” unless corruption across the country’s large undocumented and untaxed sector is addressed.

Recent terrorist attacks, particularly the devastating July 13 Islamic State-claimed suicide bombing in Balochistan, may also hurt investment — Balochistan is a central part of the CPEC. Over the past three years, however, the general trend has been one of improved security thanks to government efforts.

IMF reforms on the horizon

The previous government of Nawaz Sharif also oversaw positive improvements in cross-border trade and high growth with low inflation, but increased domestic and foreign debt as well as depleted foreign currency reserves will necessitate a rescue — most likely from the IMF, analysts agree.

"Increased investment and growth will hinge on the steps taken by the next government to restore confidence, which will very likely necessitate the embrace of an IMF-guided reform program,” McKee said. Reforms would have to be designed to rein in the fiscal and current-account deficits, reduce corruption, and stem the losses from public-sector enterprises. Conveniently, IMF help is something that all of the country’s leading politicians support.

The military barrier

Activists and observers allege that the military is supporting Khan’s opposition PTI to keep Sharif’s party in check, given the latter’s campaign to put much of the military’s power into civilian hands. And members of the PML-N have complained of harassment, threats and arrests against them from the military’s intelligence services, as well as bribes to join Khan’s team and media suppression.

Foreign relations will continue to be controlled by the military, which means the election will have little impact on Pakistan’s adversarial relations with India, a fellow nuclear-armed state, regional experts say. Meanwhile, the large number of extremist candidates running for assembly could result in intensified anti-U.S. and anti-India rhetoric feeding into Pakistani discourse.

The threat of terrorist attacks as well as widespread expectations of vote rigging and bribery ahead of the vote itself will undoubtedly throw the election’s legitimacy into question, especially among its often persecuted minorities.

As the country courts new partners while alienating others and terrorism remains an enduring threat, whoever takes the helm in Pakistan’s new government will be tasked with navigating a dense web of challenges, and will undoubtedly be closely watched.