MARGARET WARNER: It is to Lahore what Restaurant Row is to New York City. Food Street teems with outdoor nightlife in the heart of Pakistan's cultural capital. And for the diners enjoying curries, barbecues, and a host of other Pakistani favorites, there is also the country's uncertain political situation to chew over.
ASHGAR HUSSEIN, Sales Manager: It's been eight years, and you can see there's no change in this country. Things are getting worse.
MARGARET WARNER: Like many of his fellow diners, Ashgar Hussein, sales manager for a U.S. multinational bank in Lahore, says he's lost confidence in his president, General Pervez Musharraf. The army chief of staff, who seized power in a 1999 coup, has seen his popularity plummet. People here hold him responsible for rising prices, persistent poverty, and lagging middle-class incomes. Polls show a majority now want him gone.
ASHGAR HUSSEIN: It's quite difficult for a common person currently to survive in this environment in his military dictatorship. And he should hand over the entire rule of law and government to a democratic, legalized, elected government.
MARGARET WARNER: Even General Musharraf concedes, as he did in his weekly TV show on Thursday, that he stands at a political crossroads without the protection of the popularity he once enjoyed.
GEORGE W. BUSH, President of the United States: Thank you, Mr. President.
MARGARET WARNER: Washington's staunchest regional ally in the war against terror, as he nears the end of a five-year term in office, suddenly looks vulnerable after a year of startling setbacks. In March, tens of thousands of Pakistanis demonstrated against his attempt to remove Supreme Court Chief Justice Iftikhar Muhammad Chaudhry from the bench.
Next came the army siege of the Red Mosque in Islamabad. After days of fighting Islamic militants, President Musharraf personally vowed to crush the remaining holdouts unless they gave in.
PERVEZ MUSHARRAF, President of Pakistan (through translator): Those who are still inside, my request to them is that they should also come out and surrender. And if they don't surrender, I'm telling you right now they will die.
MARGARET WARNER: Today, bullet holes on the trees surrounding what's left of the compound testified to the siege's fiery end. The army assault left more than 100 dead and triggered a wave of suicide bombings by angry Islamic radicals in downtown Islamabad and elsewhere.
Farther west, Islamic militants in Pakistan's tribal areas intensified their brutal assaults on Pakistani troops. And then, late last month, the Chaudhry-led Supreme Court ruled that an exiled Musharraf political rival must be allowed to return.
ASMA JAHANGIR, Chair, Human Rights Commission of Pakistan: I think the fatal mistake of Musharraf was that of every dictator: first of all, to think that you're indispensable; and, secondly, that you can do no wrong; and, thirdly, that no one can challenge you.
MARGARET WARNER: Prominent human rights lawyer Asma Jahangir says Pakistanis are finally holding Musharraf to account.
ASMA JAHANGIR: What fundamentally has to be understood is that this is not a country where people any more are unaware, any more afraid to speak up, and are willing to share either economic and political power with a military that has no vision, that is oppressive, and that has made mistake upon mistake upon mistake.
MARGARET WARNER: Poised to exploit the president's predicament are two former prime ministers accused of corruption, both living in exile in London. Benazir Bhutto, with U.S. backing, has been trying to negotiate a power-sharing agreement with Musharraf that would let him remain as civilian president while opening up the parliamentary elections to real competition. Over the weekend, she conceded those talks had stalled, but vowed to return to Pakistan anyway to lead her center-left opposition party in upcoming parliamentary elections.
BENAZIR BHUTTO, Former Pakistani Prime Minister: I'm taking the risk of going back to Pakistan, not because I want to be prime minister a third time. I'm taking that risk to go back and be prime minister to help save my country from the threats of the extremists and the terrorists who are trying to seize control of our country and could turn Pakistan into a failing state.
MARGARET WARNER: After five years in exile in Saudi Arabia, Nawaz Sharif now runs his comeback operation above a travel agent's office in downtown London. Refusing any deal that preserves Musharraf in power, Sharif is vowing to fly back next Monday to lead his center-right party in the elections, despite the government's threats to revive charges against him.
NAWAZ SHARIF, Former Prime Minister of Pakistan: Pakistan was never meant for dictatorship or military rulers. It was meant for democracy. So we're not taking on any confrontation. If there's any act of confrontation from the other side, we've got to face it, because we want a democratic Pakistan.
MARGARET WARNER: Pakistan's opposition leaders fault Musharraf for failing to deliver on his 2000 pledge to restore democracy by 2003.
CHAUDRY NISAR ALI KHAN, Pakistan Muslim League Nawaz: He thinks Pakistan can't survive without him. Now, that's a very, very dangerous mindset.
MARGARET WARNER: Opposition parliamentarian Chaudhry Nisar Ali Khan was once close to Pervez Musharraf, but he served in Prime Minister Nawaz Sharif's cabinet. And after Musharraf came to power, he was put in prison and under house arrest for nearly two years.
CHAUDRY NISAR ALI KHAN: Every day sees the weakening of Musharraf's grip on power, and he is entirely himself to blame. At this very crucial juncture of history, he has tried to once again gain strength by trying to cut backroom deals or background deals with mainstream political leaders. But this is typical Musharraf, totally inconsistent, likes to cut deals, makes promises, goes back on commitments.
MARGARET WARNER: In negotiating with Bhutto, Musharraf's team indicated he was prepared to shed his army uniform before standing for re-election by parliament, but the president's ruling party, which has been taking out newspaper ads extolling his achievements, are pressuring him not to do so, at least not on Bhutto's timetable.
Tariq Azim Khan is the public face of the Pakistani government. A minister of information and ruling party senator, he says Musharraf is not clinging to the uniform for his own sake.
TARIQ AZIM KHAN, Deputy Information Minister, Pakistan: Had it been normal circumstances, I suppose he would not have any big worries about giving up the uniform and be elected civilian president. But what is going on in our borders, what's going on in Afghanistan, the war on terror, I think, you know, we need a strong man at the helms of affairs. And we know from -- our history tells us that the uniform provides us extra strength to a person.
MARGARET WARNER: So do you think military rule is actually pretty good for Pakistan?
TARIQ AZIM KHAN: The reality on the ground is that, for the first time, though the parliament is complaining, for the first time, we are having a stability which has given us excellent economic results, 7 percent-plus GDP growth each year, people enjoying 15 percent increases in salaries and pensions every year, never has happened before. This has only been able to happen because the stability has been provided.
MARGARET WARNER: That certainly is the reality on the ground for Karachi-based businessman Hamid Ali Khan. Six years ago, the British-educated 38-year-old Pakistani opened Club Havana, a cozy British-style cigar bar. Every night, the city's financial and political elite puff on the finest cigars imported directly from Cuba. Business is flourishing, their host says, thanks to Pervez Musharraf.
HAMID ALI KHAN, Owner, Club Havana: You know what? Life is very good. I hate to say it, you know, because I was brought up to believe in democracy. I was brought up to believe, you know, in a great process of elections and all. But you know what? As a businessman, I think he's done a great job.
MARGARET WARNER: There's no arguing that Karachi, the country's business capital, has done exceedingly well in the past eight years. The total value of the Karachi Stock Exchange has risen more than five-fold since Musharraf seized power. Investors like the stability he brought after what they say was a decade of economic woes under Bhutto and Sharif.
The guarantor of that Musharraf-style stability has been the military, and some in the ruling party are urging him to use it now to impose marshal law, if the Supreme Court tries to thwart Musharraf from getting himself re-elected on his own timetable and terms.
But retired General Talat Masood says he's not sure the army would do Musharraf's bidding.
GEN. TALAT MASOOD (Ret.), Pakistani Army: The army is the last institution which wants to sort of move against its own people. It is very unhappy when it loses support of the people.
MARGARET WARNER: Masood says the military's backing of Musharraf has come at large cost. This once-respected institution heard itself regularly denounced by the pro-chief justice demonstrators, and army officers report being dressed down in public by Pakistani civilians.
GEN. TALAT MASOOD: Well, I would say that the best course for President Musharraf would be to really genuinely go for free and fair elections and say that he's not a candidate this time for elections, because in no way in a true sense he can be a candidate unless he manipulates.
MARGARET WARNER: As Musharraf considers his options, there's one group that seems oblivious to the political toing-and-froing: the one-third of Pakistanis who live below the poverty line. This slum in the heart of one of Karachi's wealthiest districts is a warren of unpaved lanes, open sewers, and swarms of flies. Residents told us they want relief of a very tangible kind.
DEEDAR ALI KOHKAR, Storeowner (through translator): The poor are poorer. He should control prices. Everything has doubled. Something that used to cost one rupee now costs two. Please tell him to lower prices. Flour has become very expensive; sugar has gone up in price. Our main request to him is to control prices.
MARGARET WARNER: The sense of hopelessness was on vivid, open display. We watched as drug addicts, some no older than 13, gave themselves morning fixes of heroin, unconcerned by the presence of our camera or the children playing around them.
It's communities like these that haven't seen any improvement in people's lives through decades of alternating civilian and military role, not even during the economic boom of the Musharraf era. This neighborhood and tens of thousands like it throughout Pakistan are the urgent unfinished business of whatever government follows.
Opposition leaders say they know they have to break the cycle of corruption and self-interest that plagued previous eras of civilian rule and govern for the benefit of all Pakistanis.
CHAUDRY NISAR ALI KHAN: Pakistanis sit on the edge of a precipice, and the only way we can bring it back is to revive the confidence and the faith of the people of this country in Pakistan, and that can only be done if we rule in the interests of the people and the state and not in the interest of politics.
MARGARET WARNER: But Pakistanis enjoying the sunset hour at Karachi's Clifton Beach expressed a weary cynicism about such pledges or the possible return of Bhutto or Sharif.
LIAQUAT ALI, TV Repairman (through translator): Why should people be interested in politics? Politicians always fulfill their own interests and leave. That's why people have backed away from politics; politicians only advance their own interest.
MARGARET WARNER: The Musharraf camp describes the general as confident he can determine his own political future and that of the country in the weeks ahead. That hinges on his ability to navigate some treacherous political waters and the legal challenges now looming on Pakistan's horizon.