By Amir Zia
Money Matters
The News
Dec. 26, 2011
The SBP in its report has not offered any new diagnosis and prescription for the country’s economic woes. It has reiterated and reasserted what already remains known, but being one of the top regulators, the SBP’s observations carry weight which weighs hard on the government and its team of economic managers
The charge sheet of poor economic governance against the government has now become official with the release of the State Bank of Pakistan’s (SBP) annual report on the state of the country’s economy. Although the SBP’s report for fiscal 2010-11 has not revealed anything new, it summed up in detail the mismanagement and failures of the Pakistan Peoples’ Party (PPP)-led government in handling the country’s economy, putting an official seal to its verdict.
In these uncertain and volatile political times, when the government faces mounting overt and covert pressure from the opposition and a segment of state institutions to quit and call early elections, the SBP report proves yet another blow for this beleaguered setup, which appears battling for its survival.
All the red flags raised by independent economic experts and analysts about the government’s inaction on crucial policy matters, misjudged priorities and poor governance have been bunched together in the SBP report which paints an alarming picture of the state of the economy.
The continuing cycle of stagflation stems more from what the SBP calls ‘the structural deficiencies’ in Pakistan economy than any other factor. The irony is that the government has no strategy and political will to lead the country out of it.
The age-old fiscal problem, often described as the mother of all economic ills by experts, continues to haunt the economy as the government fails to expand the tax base despite repeated promises made to the International Monetary Fund (IMF) and local stakeholders. The imposition of the value-added tax (VAT), re-christened the reformed general sales tax (RGST), has now become a forgotten story. The government also has no plans to impose fair taxes on the grossly under-taxed sectors of the economy including agriculture and services.
The massive fiscal slippages on domestic debt and the crowding out of the private sector add to the economic woes, which are compounded by the acute power shortages. On the external front, Pakistan braces for tough times because of a possible slowdown in exports due to the recessionary economic trend in the United States and European Union.
Pakistan’s massive flow of workers' remittances, which allowed the country to achieve record high foreign exchange reserves earlier this year, could also take a hit in the coming years because of job losses in the recession-hit world economy.
The bigger concern should be the drying up of external inflows from international financial institutions which play a crucial role in slashing the country’s budget deficit. The gist of all these four inter-related factors of concern – highlighted countless times by a number of economists – have been summed up in one paragraph on the very first page of the SBP report.
The following pages of the report remain a chronicle of what the government failed to do pushing the country’s economy into a deeper hole.
‘The real issue is the government’s inability to implement fiscal reforms, and in some cases, not even being able to secure the required legislation,’ the report says.
The crucial decisions of the imposition of RGST, broadening of the tax net, phasing out of subsidies in a timely manner and restructuring the loss-making public sector enterprises were either delayed or not implemented, the report added.
Yes, it is the sad story of one failure after another. The Finance Ministry’s spin masters, including Finance Minister Abdul Hafeez Shaikh, must come out with an explanation for their inaction on crucial policy matters.
The SBP report devotes an entire chapter to the energy sector, highlighting the way the government mismanaged its affairs, starting from the controversial decision of bringing in rental power projects (RPPs) to that of the unnecessary delay in dealing with the problem of circular debt.
‘In our view, commissioning of RPPs to increase generation capacity was misplaced, as Pakistan is operating well below its installed capacity due to the circular debt problem,’ the report said.
‘In May 2011, the government disbursed Rs120 billion to Pepco in lieu of outstanding subsidy payments; however, this amount was not sufficient to resolve the issue conclusively, and total circular debt had reached to Rs251 billion by end-June 2011.’
The report says that in the final analysis, all the economic problems can be traced to poor governance. ‘Economic policies will be ineffective unless they are supported by strong institutions and are consistent with other government policies.’
‘A cross-country comparison shows that institutional weakness at all levels of government; the judiciary; civil service; law enforcement; regulatory bodies and agencies for oversight and accountability, are directly responsible for poor economic growth.’
No wonder that this situation has wrecked the business environment in Pakistan, where extremism and terrorism also work as a dampener and discourage both foreign and local investment.
According to a recent study by the World Bank on the ease of doing business, Pakistan has slipped to 105th position from 96th out of 183 countries evaluated.
As political polarization and tussle increases and the country wobbles from one crisis to another, the tidings for the economy remains bad.
The PPP government, which failed to carry out reforms in the earlier part of the term, hardly seems in a position to start the corrective measures now because it is locked in a battle for survival. The looming elections will also discourage the ruling party and its allies to initiate reforms. The longer political instability and uncertainty persist, worsen the economic situation would get. The country’s economic woes manifested through double digit inflation, low growth, growing unemployment and acute energy shortages will further fan social unrest and political turmoil. One crisis feeding the other, making economic recovery a much lengthier and more painful job for any set of present or future economic managers.
The SBP in its report has not offered any new diagnosis and prescription for the country’s economic woes. It has reiterated and reasserted what already remains known, but being one of the top regulators, the SBP’s observations carry weight which weighs hard on the government and its team of economic managers. However, the SBP’s warning shots are unlikely to change the ways of the government ñ at least for now.
Monday, December 26, 2011
Sunday, December 11, 2011
Review: Imran Khan Pakistan - A Personal History
By Amir Zia
Newsline
December 2011
Khan’s personal analysis of the origin and spirit of the Pakistan Movement underlines his simplistic and superficial understanding of those times. In fact, it appears more akin to former military ruler General Zia-ul Haq’s distorted and twisted propagandist history, which still remains spart of our curriculum
To many rational minds, Imran Khan’s latest book, Pakistan – A Personal History, may appear as confusing as his politics. The former cricketer-turned-politician’s shallow and clichéd interpretation of Pakistan’s history, repeated assertions of its Islamic identity and his dabbling in the world of spiritualism, in which he finds gurus who predict the future and reveal the past, are indicative of a mind which is orthodox.
This book may please the right-wingers, but it will disappoint all progressive Pakistanis as well as western readers to whom Khan is projecting himself as a messiah of this violence-ridden nation which is struggling to cope with the demands of the 21st century.
Khan has gone the extra mile to conjoin democracy with Islam and Islam with democracy, although the two stand in stark contrast to each other. Islam allows no dissent, alteration and divergence from its fundamental teachings. Democracy is all about dissent and the will of the people. It draws its strength from secularism, which does not allow interference of religion in the affairs of the state. There can be a secular state, which is undemocratic, but no democratic state can exist without secularism as its cornerstone. This, perhaps, is one of the key reasons behind Pakistan’s flawed democracy, along with the strong tribal and feudal systems that remain a dominant force in Pakistan’s politics, leaving little room for democracy to take root, flourish and deliver.
Yes, even a political science graduate can tell you that democracy is a product of the industrial revolution and a strong, educated middle-class which, unfortunately, is found wanting in the Islamic Republic of Pakistan and most Muslim countries.
Khan’s personal analysis of the origin and spirit of the Pakistan Movement underlines his simplistic and superficial understanding of those times. In fact, it appears more akin to former military ruler General Zia-ul Haq’s distorted and twisted propagandist history, which still remains spart of our curriculum. For instance, Khan, in his zeal to promote the Islamic basis of Pakistan, equates Quaid-e-Azam Mohammed Ali Jinnah’s religious views with those of Mohandas Karamchand Gandhi by saying that both stood on the same page vis-a-vis the role of religion in politics.
All those who have studied the Movement are aware that Jinnah opposed Gandhi’s explicit use of Hindu symbolism in politics, and argued that it would eventually divide the country. This had been Jinnah’s position even in the 1920s, when many Indian Muslims were passionately supporting the Khilafat Movement to save the Ottoman Empire after the end of World War I. The movement was backed by Gandhi and the Indian National Congress in an attempt to lend steam to their non-cooperation movement against the British Raj. But Jinnah was among those frontline leaders who openly opposed it on grounds that it was fundamentalist in nature and essentially a flawed cause. Jinnah’s position and foresight proved right when religion became the dividing line in British India, and the one-time champion of Hindu-Muslim unity had to lead the Pakistan movement to ensure the political and economic rights of Muslims living in the Muslim-majority parts of India. A treasure trove of documents, research and literature are available on these historic events, but perhaps they do not fit the narrow prism through which Khan wants us to view the Pakistan Movement.
Much in the nature of a born-again Muslim, Khan keeps revisiting themes of cultural hegemony of the West, and glorifying the traditional values and conventions at home. The confusion in his mind is glaring when in one breath he admonishes the West and its ways and, in the other, praises it for establishing “a proper welfare state.” He repeats the clichéd and overused quote of an Egyptian scholar Muhammad Abduh (1849-1905), in which he says that he “saw no Muslims in Europe but a lot of Islam.”
The book remains repetitive in terms of certain themes, including the writer’s own spiritual experiences, glorification of tribal values and customs, Islam’s democratic principles which he fails to define, and the corruption of the country’s ruling elite.
Those parts of the book that deal with Imran Khan’s struggle and achievements as a professional cricketer are inspiring – especially the manner in which he fought injuries at the peak of his career and led the team to the World Cup victory in 1992.
“The moment you relax and stop pushing yourself is the moment you start going downhill,” Khan writes. “I first strove to play cricket for Pakistan, then my goal became to be my country’s best all-rounder, then the best fast bowler. From there I wanted to become the best all-rounder and the best fast bowler in the world. When I was made captain the ambition became turning the team into the best in the world….” (Page 120-121).
For Imran Khan, life is a journey of achieving one goal after another. From cricket to building the first cancer hospital, and then a university, then aiming to build two more hospitals – indeed, it is the story of a high achiever in life. Khan’s romance with politics, his years in the political wilderness and his passion to emerge as an alternate to the corrupt ruling elite, all are nicely summed up in the book.
His brief anecdotes with frontline politicians – Nawaz Sharif, Benazir Bhutto and General Zia-ul-Haq – offer an interesting read. For instance, details of a 1987 episode in which Nawaz Sharif, then chief minister Punjab, imposing himself as captain of the Pakistan side for a warm-up match against the visiting West Indian team at Lahore’s Gaddafi Stadium and actually coming out to open the innings offers an insight into General Zia’s protégé.
“None of the team could believe what we were seeing; he (Nawaz) was going to open the innings with Mudassar Nazar against the West Indies, one of the greatest fast-bowling attacks in cricket history. Nazar wore batting pads, a thigh pad, chest pad, an arm guard, a helmet and reinforced batting gloves, while Sharif simply had his batting pads, a floppy hat – and a smile… I quickly inquired if there was an ambulance ready” (Page 131-132).
The portion where he talks about building a cancer hospital in his mother’s memory is moving and underlines Khan’s tenacious nature. Although Khan has devoted a chapter to his failed marriage, many readers might wish for more details about the circumstances that led to his break-up with Jemima. But Khan remains a fiercely private person.
The tribal system, its code of honour and values are a constant catchphrases in the book. Khan maintains that the tribal areas were “crime free” before the upheavals of the recent years, ignoring the fact that before the start of the war on terror, the entire belt remained the epicentre of smuggling and gun-running in the region. The known criminals and absconders used to take refuge in these areas and vehicles snatched from various parts of the country landed in the tribal belt. But Khan, in his zeal to glorify tribalism and the jirga system, shuts his eyes to all these facts. He makes a passing reference to the tribal practice of ‘honour’ killings which are being endorsed by jirgas in the rural areas. In fact, he views these jirgas as an “ancient democratic system.” The oppression, the backwardness, the myopic worldview and total alienation from the modern world, all of which stem from tribalism, fail to bother the Khan.
The writer’s interpretation of the war on terror also reveals his limited understanding of local, regional and global politics. Khan argues that extremism and terrorism are the result of US presence in the region and he believes that once the US walks out of this region, terrorism will end.
Unfortunately, he fails to point out how that will happen when terrorists and terrorism have penetrated deep inside the social fabric of Pakistan. The author ignores the fact that extremism and terrorism remain a potent threat to the state of Pakistan today. This twin evil can only be fought when political forces and the establishment confront these extremist forces and defeat them both ideologically and practically.
Overall, Imran Khan’s knowledge and understanding of the history of Pakistan is deeply flawed. Consequently, one would refrain from placing Imran Khan’s Pakistan – A Personal History in the league of the greats like Jawaharlal Nehru’s The Discovery of India, or Zulfikar Ali Bhutto’s The Myth of Independence, which are considered classic political literature in South Asia due to their vision, deep political and historical insight and intellectual content. It is nowhere near even Benazir Bhutto’s Daughter of the East, or Pervez Musharraf’s In the Line of Fire, which offer fresh insights, perspectives and details on issues that are critical for Pakistan.
Monday, November 14, 2011
No takers for Pakistan
By Amir Zia
Money Matters
The News
November 14, 2011
Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keeping foreign investment away from the country
Some of the once most lawless, poor and backward African countries have emerged as new zones of economic development and growth. Countries including Rwanda, Mozambique, and Nigeria are now among the sought after destinations for global investment and joint ventures. In South Asia, India is seen as an “economic power house” of the 21st Century. Indians now appear more interested in seeking joint ventures and investment opportunities abroad rather than trying to attract foreign money into their country. Many Indian business tycoons appear on a buying spree of world famous brands and companies. They are making their mark in the world and Indian economic success and growth is equated with China which is all set to overtake the United States as the world’s biggest importer.
Talk about the much smaller economies of South Asia, including Sri Lanka and Bangladesh. They too are witnessing an upward swing. These countries are pushing their exports and attracting foreign investment. The economies of Southeast Asia, including Malaysia, Vietnam and Indonesia, also have an economic success story to tell.
The other emerging economies – from the Middle East to Latin America – are all focusing on reaping the benefit of globalisation, economic integration, inter-dependence and regional trade. Where does Pakistan – the world’s lone Muslim nuclear power with a might army – stands in this economic race? Does our country – with a vast market of around 180 million people -- emerge on the radar of foreign investors? And most importantly, is our ruling elite serious in transforming Pakistan into an economic and trade hub? Lip service and wish-lists apart, are there any serious moves to push the country back into a high-growth trajectory?
The recent Commonwealth Business Forum (CBF), held in Perth, not just underlined Pakistan’s irrelevance when it comes to big business and money, but also exposed the ineptness and lack of will of our government and its institutions in pushing the country’s economic agenda.
The CBF provided Pakistan a rare opportunity to showcase itself as a trade and investment destination on such a big platform where more than 1,400 business and government leaders from 54 countries, including 16 heads of governments, participated over the three days – October 25-27.
The CBF’s country-session on Pakistan, held on October 27, proved an eye-opener as there was a clear lack of interest in the economic and investment opportunities which the country wants to offer. The session was attended by less than 50 people – almost half of them Pakistanis. Only a handful of foreign delegates, some of them from neighbouring India and a few others from Africa, attended the session. The Indians were there apparently more as a goodwill gesture or out of curiosity, while African delegates attended the session on the last minute urgings of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Senator Haji Ghulam Ali, who was upset at the low turnout and empty seats of the huge hall.
Minutes before the start of the Pakistan session, dozens and dozens of delegates had come out of the same hall after attending a similar session on Mozambique. Other country-specific sessions, including those of India, Malaysia and Namibia, attracted much bigger crowds.
This signifies the lack of interest among foreign investors and businesspeople in Pakistan which is now seen as a forgotten story, though the country was among the best performing economies of Asia till 2007.
Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keep foreign investment away from the country.
The numbers are telling. From the highs of 8.42-billion-dollar net foreign investment in financial year 2007, it slumped to a meagre1.91 billion dollars in FY 2011.
The problem is compounded by the fact that there appears no drive and no vision among the economic managers to change the perception about Pakistan for the better. The CBF proved one of this missed opportunities in which the government officials, including those affiliated with Pakistan’s embassy in Australia and those who frequently take joy-rides on the national exchequer, hardly made any effort to push and market this session about their country. All was left up to the CBF organisers, who could provide the platform and announce the event, but expecting them to lure participants to the hall was perhaps too much to ask for.
Indeed, Pakistani speakers comprising Abdul Razak Dawood and Mian Mohammad Mansha, two of Pakistan’s leading business minds, along with Tariq Puri of the Trade Development Authority of Pakistan, pleaded Pakistan’s case well, but their show was in front of mostly empty chairs.
The participation of businesspeople from Pakistan also remained slim – just half-a-dozen. This was an event where, according to the organisers, around 10 billion dollars worth of business and investment deals were signed. Countries much smaller than Pakistan – both in terms of population and size of the economy – had much bigger and more aggressive participation at the CBF, which is one of the top three international forums of the world.
In most formal and informal interactions at the CBF, investors and officials from other countries were more interested in discussing al Qaeda, the Taliban, security issues and the crime rate in Pakistan. Is Pakistan drifting toward anarchy? Are the extremists in a position to take over the country or parts of it? Is the army sponsoring the Taliban? Do you really believe that no one in your military establishment knew about Osama bin Laden? Tell us about your president…? While some of these questions appear bizarre given they are about a country which has suffered the most due to terrorism, yet they showed how the world sees Pakistan. Such questions also underscore our inability and failure in changing the perception and our reality for the better.
In today’s world in which the buzzwords remain investment, trade and economic growth, Pakistan is hardly mentioned on international forums or if mentioned, it is for all the wrong reasons.
How can Pakistan and its economy be brought on the front-burner globally? For this, our ruling elite must bring the economy to the forefront on the domestic front. This is one of the biggest challenges the country faces today, but no one seems ready to throw down the gauntlet.
Money Matters
The News
November 14, 2011
Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keeping foreign investment away from the country
Some of the once most lawless, poor and backward African countries have emerged as new zones of economic development and growth. Countries including Rwanda, Mozambique, and Nigeria are now among the sought after destinations for global investment and joint ventures. In South Asia, India is seen as an “economic power house” of the 21st Century. Indians now appear more interested in seeking joint ventures and investment opportunities abroad rather than trying to attract foreign money into their country. Many Indian business tycoons appear on a buying spree of world famous brands and companies. They are making their mark in the world and Indian economic success and growth is equated with China which is all set to overtake the United States as the world’s biggest importer.
Talk about the much smaller economies of South Asia, including Sri Lanka and Bangladesh. They too are witnessing an upward swing. These countries are pushing their exports and attracting foreign investment. The economies of Southeast Asia, including Malaysia, Vietnam and Indonesia, also have an economic success story to tell.
The other emerging economies – from the Middle East to Latin America – are all focusing on reaping the benefit of globalisation, economic integration, inter-dependence and regional trade. Where does Pakistan – the world’s lone Muslim nuclear power with a might army – stands in this economic race? Does our country – with a vast market of around 180 million people -- emerge on the radar of foreign investors? And most importantly, is our ruling elite serious in transforming Pakistan into an economic and trade hub? Lip service and wish-lists apart, are there any serious moves to push the country back into a high-growth trajectory?
The recent Commonwealth Business Forum (CBF), held in Perth, not just underlined Pakistan’s irrelevance when it comes to big business and money, but also exposed the ineptness and lack of will of our government and its institutions in pushing the country’s economic agenda.
The CBF provided Pakistan a rare opportunity to showcase itself as a trade and investment destination on such a big platform where more than 1,400 business and government leaders from 54 countries, including 16 heads of governments, participated over the three days – October 25-27.
The CBF’s country-session on Pakistan, held on October 27, proved an eye-opener as there was a clear lack of interest in the economic and investment opportunities which the country wants to offer. The session was attended by less than 50 people – almost half of them Pakistanis. Only a handful of foreign delegates, some of them from neighbouring India and a few others from Africa, attended the session. The Indians were there apparently more as a goodwill gesture or out of curiosity, while African delegates attended the session on the last minute urgings of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Senator Haji Ghulam Ali, who was upset at the low turnout and empty seats of the huge hall.
Minutes before the start of the Pakistan session, dozens and dozens of delegates had come out of the same hall after attending a similar session on Mozambique. Other country-specific sessions, including those of India, Malaysia and Namibia, attracted much bigger crowds.
This signifies the lack of interest among foreign investors and businesspeople in Pakistan which is now seen as a forgotten story, though the country was among the best performing economies of Asia till 2007.
Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keep foreign investment away from the country.
The numbers are telling. From the highs of 8.42-billion-dollar net foreign investment in financial year 2007, it slumped to a meagre1.91 billion dollars in FY 2011.
The problem is compounded by the fact that there appears no drive and no vision among the economic managers to change the perception about Pakistan for the better. The CBF proved one of this missed opportunities in which the government officials, including those affiliated with Pakistan’s embassy in Australia and those who frequently take joy-rides on the national exchequer, hardly made any effort to push and market this session about their country. All was left up to the CBF organisers, who could provide the platform and announce the event, but expecting them to lure participants to the hall was perhaps too much to ask for.
Indeed, Pakistani speakers comprising Abdul Razak Dawood and Mian Mohammad Mansha, two of Pakistan’s leading business minds, along with Tariq Puri of the Trade Development Authority of Pakistan, pleaded Pakistan’s case well, but their show was in front of mostly empty chairs.
The participation of businesspeople from Pakistan also remained slim – just half-a-dozen. This was an event where, according to the organisers, around 10 billion dollars worth of business and investment deals were signed. Countries much smaller than Pakistan – both in terms of population and size of the economy – had much bigger and more aggressive participation at the CBF, which is one of the top three international forums of the world.
In most formal and informal interactions at the CBF, investors and officials from other countries were more interested in discussing al Qaeda, the Taliban, security issues and the crime rate in Pakistan. Is Pakistan drifting toward anarchy? Are the extremists in a position to take over the country or parts of it? Is the army sponsoring the Taliban? Do you really believe that no one in your military establishment knew about Osama bin Laden? Tell us about your president…? While some of these questions appear bizarre given they are about a country which has suffered the most due to terrorism, yet they showed how the world sees Pakistan. Such questions also underscore our inability and failure in changing the perception and our reality for the better.
In today’s world in which the buzzwords remain investment, trade and economic growth, Pakistan is hardly mentioned on international forums or if mentioned, it is for all the wrong reasons.
How can Pakistan and its economy be brought on the front-burner globally? For this, our ruling elite must bring the economy to the forefront on the domestic front. This is one of the biggest challenges the country faces today, but no one seems ready to throw down the gauntlet.
Sunday, November 6, 2011
Destined to fail
By Amir Zia
Weekly Money Matters
The News
October 24, 2011
There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation.
The federal cabinet’s October 12 energy conservation plan has been off to a rocky start. Shopkeepers are angry and threatening protests and shutter downs if forced to close shops early. They want to keep to business as usual, which for many of them means starting the day late at around 11 a.m. or 12 noon and keeping shutters open till past midnight -- even in times of an acute electricity shortage. In big urban centres, including Karachi and Lahore, late night shopping remains a trend for the past many decades now.
The small and big chambers of businesspeople and industrialists -- from Karachi to Peshawar -- are also unanimously opposing the two weekly days off. They say it hurts productivity, hits exports and general business activities at a time when the overall economy remains sluggish and sentiments negative. They want low power tariffs and an uninterrupted supply, which appear fair demands on paper, but unfortunately beyond the powers of this government to fulfil. The magic wand quick-fix solutions are only the stuff fit for fairy tales and not of the troubled world we live in.
The major opposition parties and provincial governments say that the centre announced the controversial plan without consultation or taking them into confidence. They appear in no mood to cooperate.
Yes, the overwhelming response to the cabinet’s decision of reintroducing two weekly days off, closure of shops at sunset and staggering holidays in the industrial sector to reduce power consumption during peak hours, remains of disapproval and defiance.
The only section of the population that appears contented and happy with the plan are the government and private-sector employees, including those of banks, who now get an extra day off on Saturday. They can sleep longer, relax a bit more and have time with their families or in front of the television -- depending on the bent of mind. But the harsh fact remains that the satisfaction of these fortunate few is not going to end the energy woes of Pakistan.
All the bickering, the divide and discord over the federal cabinet’s energy management programme indicates that like the past, it is destined to fail again. The coming winters are likely to be tougher for most Pakistanis as massive energy shortages, including that of natural gas and of hydro-power, will hit every section of society.
The struggling government and its institutions lack the capacity and ability to address the complex challenges of the energy sector in the short- to mid-term even if from today every decision and step they take remains 100 percent professionally sound and honest.
There are no quick fixes to the complex problem of massive circular debt which hovers at around 300 billion rupees. This has been the most significant factor behind the current electricity woes in the country which has sapped the liquidity of major companies operating in the energy sector -- from upstream to the downstream institutions. No wonder that despite having a generation capacity, the output of power plants remains low as one institution fails to clear the dues of the other.
The non-payment of dues, massive electricity theft and land and line losses aggravate this problem.
The government does not have the kind of political will which can take decisive steps against the parasitical vested interests nor does it have the resources needed to revamp the rickety old distribution network of the power companies.
The high and volatile international oil prices also remain beyond the government’s control, while the plans to import natural gas from the Central Asian countries and Iran still remain a pipe-dream.
What could be the possible options in this scenario?
Of course, the government has to plan for the long-term, which means at least giving the authorities 5 to 10 years to complete the high investment projects if they start work on them from today. This includes giving a fresh impetus to the exploration of new hydrocarbon reserves and exploiting the available ones including Thar coal, which remains easier said than done given the high risk of investment and the current security environment in the country. But still this is one avenue which offers hope over the next 5 to 10 years.
Construction of new mega dams is not just a high investment game but a political hornet's nest and a big environmental issue. A dam can take years and years to materialise even if hypothetically, political parties build a consensus on this tricky issue.
Import of multi-billion dollar natural gas through pipelines from Iran or Central Asia is tied to bigger regional and geo-political developments. It also remains a prospect for some distant future.
To ease the energy problems in the near term, the government has to start with restructuring of the power sector, fighting the menace of the deep-rooted corruption, electricity theft and controlling the distribution losses as well as to take measures to conserve energy.
The federal cabinet’s October 12 announcement may be a good plan on paper for energy conservation, but it remains poorly executed. However, this does not mean that the idea should be abandoned.
The energy poverty of Pakistan can be addressed to an extent in the near-term by educating people about the need to make the best use of sunlight and an intelligent and prudent use of natural gas and electricity.
There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation. Once there is a consensus, the authorities need to implement the plan in all fairness and without any wheeling and dealings with interest groups.
Pakistani state institutions have a poor record of giving concessions to pressure groups. The more vocal or violent the group is, the bigger concession it can extract from the state. This needs to be changed and the state must establish the rule of law. In the case of the energy conservation drive, it simply means applying already framed laws which require shops to shut businesses at sunset and start their day early. This is practiced all over the civilized world. Why can’t it happen in Pakistan? Why we are not ready to give up our bad habits of starting the day late?
The shutter power managed to doom such energy conservation drives in the past as well. Will they be allowed to succeed again?
The major political parties, some of whom enjoy a firm vote bank among shopkeepers and traders, need to rise above their petty politics and self interest and help the government implement this plan. The opposition Pakistan Muslim League Nawaz and the two government allies – the Muttahida Qaumi Movement and the Awami National Party -- can play a crucial role in implementing this plan.
The government also needs to convince the media and other leaders of public opinion about the merits of energy conservation. But before it does so, it needs to take symbolic steps of conserving energy itself. This may include switching off air-conditioners at the Parliament House where even during the hot summers of Islamabad, lawmakers appear in imported suits and jackets. Why can’t these public representatives dress up in line with the Pakistani climate rather than donning clothes which suit cooler European climates more?
When the people see the ruling elite pitching their share in energy conservation -- no matter how symbolic -- they will also not hesitate in doing what is required of them.
The recent bouts of violence in several cities of Punjab and the past energy riots in Karachi show that the energy crisis has all the potential to transform into an explosive political issue that can further shake this already polarised and divided state. The energy issue is also directly linked to the economy. The wheels of production must not stop. That needs to be given top priority. Until the country seeks long-term solutions to bridge the energy deficit, energy conservation is the only way through which we can mitigate the intensity of this crisis. We must not hesitate in making the right choice -- no matter what the cost.
Weekly Money Matters
The News
October 24, 2011
There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation.
The federal cabinet’s October 12 energy conservation plan has been off to a rocky start. Shopkeepers are angry and threatening protests and shutter downs if forced to close shops early. They want to keep to business as usual, which for many of them means starting the day late at around 11 a.m. or 12 noon and keeping shutters open till past midnight -- even in times of an acute electricity shortage. In big urban centres, including Karachi and Lahore, late night shopping remains a trend for the past many decades now.
The small and big chambers of businesspeople and industrialists -- from Karachi to Peshawar -- are also unanimously opposing the two weekly days off. They say it hurts productivity, hits exports and general business activities at a time when the overall economy remains sluggish and sentiments negative. They want low power tariffs and an uninterrupted supply, which appear fair demands on paper, but unfortunately beyond the powers of this government to fulfil. The magic wand quick-fix solutions are only the stuff fit for fairy tales and not of the troubled world we live in.
The major opposition parties and provincial governments say that the centre announced the controversial plan without consultation or taking them into confidence. They appear in no mood to cooperate.
Yes, the overwhelming response to the cabinet’s decision of reintroducing two weekly days off, closure of shops at sunset and staggering holidays in the industrial sector to reduce power consumption during peak hours, remains of disapproval and defiance.
The only section of the population that appears contented and happy with the plan are the government and private-sector employees, including those of banks, who now get an extra day off on Saturday. They can sleep longer, relax a bit more and have time with their families or in front of the television -- depending on the bent of mind. But the harsh fact remains that the satisfaction of these fortunate few is not going to end the energy woes of Pakistan.
All the bickering, the divide and discord over the federal cabinet’s energy management programme indicates that like the past, it is destined to fail again. The coming winters are likely to be tougher for most Pakistanis as massive energy shortages, including that of natural gas and of hydro-power, will hit every section of society.
The struggling government and its institutions lack the capacity and ability to address the complex challenges of the energy sector in the short- to mid-term even if from today every decision and step they take remains 100 percent professionally sound and honest.
There are no quick fixes to the complex problem of massive circular debt which hovers at around 300 billion rupees. This has been the most significant factor behind the current electricity woes in the country which has sapped the liquidity of major companies operating in the energy sector -- from upstream to the downstream institutions. No wonder that despite having a generation capacity, the output of power plants remains low as one institution fails to clear the dues of the other.
The non-payment of dues, massive electricity theft and land and line losses aggravate this problem.
The government does not have the kind of political will which can take decisive steps against the parasitical vested interests nor does it have the resources needed to revamp the rickety old distribution network of the power companies.
The high and volatile international oil prices also remain beyond the government’s control, while the plans to import natural gas from the Central Asian countries and Iran still remain a pipe-dream.
What could be the possible options in this scenario?
Of course, the government has to plan for the long-term, which means at least giving the authorities 5 to 10 years to complete the high investment projects if they start work on them from today. This includes giving a fresh impetus to the exploration of new hydrocarbon reserves and exploiting the available ones including Thar coal, which remains easier said than done given the high risk of investment and the current security environment in the country. But still this is one avenue which offers hope over the next 5 to 10 years.
Construction of new mega dams is not just a high investment game but a political hornet's nest and a big environmental issue. A dam can take years and years to materialise even if hypothetically, political parties build a consensus on this tricky issue.
Import of multi-billion dollar natural gas through pipelines from Iran or Central Asia is tied to bigger regional and geo-political developments. It also remains a prospect for some distant future.
To ease the energy problems in the near term, the government has to start with restructuring of the power sector, fighting the menace of the deep-rooted corruption, electricity theft and controlling the distribution losses as well as to take measures to conserve energy.
The federal cabinet’s October 12 announcement may be a good plan on paper for energy conservation, but it remains poorly executed. However, this does not mean that the idea should be abandoned.
The energy poverty of Pakistan can be addressed to an extent in the near-term by educating people about the need to make the best use of sunlight and an intelligent and prudent use of natural gas and electricity.
There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation. Once there is a consensus, the authorities need to implement the plan in all fairness and without any wheeling and dealings with interest groups.
Pakistani state institutions have a poor record of giving concessions to pressure groups. The more vocal or violent the group is, the bigger concession it can extract from the state. This needs to be changed and the state must establish the rule of law. In the case of the energy conservation drive, it simply means applying already framed laws which require shops to shut businesses at sunset and start their day early. This is practiced all over the civilized world. Why can’t it happen in Pakistan? Why we are not ready to give up our bad habits of starting the day late?
The shutter power managed to doom such energy conservation drives in the past as well. Will they be allowed to succeed again?
The major political parties, some of whom enjoy a firm vote bank among shopkeepers and traders, need to rise above their petty politics and self interest and help the government implement this plan. The opposition Pakistan Muslim League Nawaz and the two government allies – the Muttahida Qaumi Movement and the Awami National Party -- can play a crucial role in implementing this plan.
The government also needs to convince the media and other leaders of public opinion about the merits of energy conservation. But before it does so, it needs to take symbolic steps of conserving energy itself. This may include switching off air-conditioners at the Parliament House where even during the hot summers of Islamabad, lawmakers appear in imported suits and jackets. Why can’t these public representatives dress up in line with the Pakistani climate rather than donning clothes which suit cooler European climates more?
When the people see the ruling elite pitching their share in energy conservation -- no matter how symbolic -- they will also not hesitate in doing what is required of them.
The recent bouts of violence in several cities of Punjab and the past energy riots in Karachi show that the energy crisis has all the potential to transform into an explosive political issue that can further shake this already polarised and divided state. The energy issue is also directly linked to the economy. The wheels of production must not stop. That needs to be given top priority. Until the country seeks long-term solutions to bridge the energy deficit, energy conservation is the only way through which we can mitigate the intensity of this crisis. We must not hesitate in making the right choice -- no matter what the cost.
Monday, October 3, 2011
Wasted Energies
By Amir Zia
Weekly Money Matters
The News
October 3, 2011
While the KESC-SSGC dispute is taking its toll on the people of Karachi, fundamentally it remains a policy issue, which the government needs to resolve
It is a tussle between two vital public utilities – the privately-run Karachi Electric Supply Company (KESC) and the state-run Sui Southern Gas Company Limited (SSGC) – which daily punishes millions of residents of the teeming port city of Karachi in the form of frequent and prolonged power outages.
The KESC accuses the SSGC of “unjust and inadequate” supply of natural gas -- the cheap and clean fuel source for power generation. The KESC management says that against the “approved quota” of 276 MMCFD of gas, it is being supplied only 160 MMCFD for power generation, which remains well below its needs. This forces the KESC to use three time costlier furnace oil for power generation, which makes its operations financially unfeasible and results in a sharp increase in tariffs.
The SSGC management says that it has no formal agreement with the KESC for the gas supply. “Without an agreement, we are not bound to ensure gas supplies to the KESC,” says SSGC’s Managing Director Azim Iqbal Siddiqui. “They (the KESC) keep referring to the ECC (Economic Coordination Committee) decision, but there is nothing in writing. But still we keep supplying gas to the power utility in the larger public interest.”
The problem between the two companies is aggravated due to the fact that the KESC owes SSGC a staggering 30 billion rupees worth in outstanding dues, which is almost one-fourth of the gas company’s total balance sheet, according to SSGC officials.
However, the KESC says that its total payable to SSGC remains around 23.3 billion rupees to-date. The power utility remains unable to clear this outstanding amount because of its dues worth 81.5 billion rupees out of which nearly 50 billion rupees are owed by the government and its various departments. The Karachi Water & Sewerage Board alone owes 15 billion to KESC. "But the KESC has paid SSGC 22.6 billion rupees against the gas purchase of 25.6 billion over the last 12 months," says Ghufran A. Khan, KESC’s chief marketing and communication officer.
The issue of non-payment of dues by one energy company to the other is part of a much larger problem of accumulated circular debt worth 284.4 billion rupees as on September 14, 2011, according to government figures. This is having a crippling affect on the entire energy sector.
Siddiqui, the SSGC’s managing director, says that when KESC was a state-run company, there was no need for a written agreement or guarantees. But being a private company now, the KESC has to operate under some framework, he said.
The cash-strapped SSGC has to perform a high-wire act to clear dues of its suppliers – especially the foreign oil and gas companies operating in Pakistan, including the ENI and British Petroleum, which have been given sovereign guarantees by the government.
The KESC and SSGC managements have a long list of complaints against one and another, but the fact of the matter remains that the current crisis stems from poor management and planning and lack of vision in the energy sector, which is now hurting each and every segment of society and taking its toll on the country’s already battered economy.
The way this government has been handling the energy sector in general and affairs of the KESC in particular sends negative signals to foreign investors around the world, underling the country’s inconsistent policies and unpredictable pattern of decision-making. This comes on top of the chronic problems of political instability, terrorism, crime and insecurity which infest Pakistan today and discourages both foreign and local investment.
Those foreign investors, who have somehow landed in our country despite all these odds, are given a rough deal. The KESC, which earlier faced the wrath of government-backed trade unions for months that adversely affected its power generation, distribution and maintenance operations, is just one example of how foreign investors are being treated in the country. The government assured the KESC a gas supply of 276 MMCFD for its existing plants when the Dubai-based Abraaj Capital took its management control in late 2008, and later committed an investment of $361 million. The government also promised an additional 130 MMCFD for KESC’s under construction 560 megawatts capacity power plant worth $450 million, but failed to deliver on any of these commitments.
The SSGC says that lower gas production from some fields forced it to slash KESC’s supplies. On paper, it may seem a fair excuse, but a deeper analysis shows that the woes of KESC and the people of Karachi are linked to the highly flawed gas allocation policy for private captive power plants. It is a known fact that most captive power plants, which are run on low-cost gas, benefits industries of the high, mighty and politically connected of this land. These industrialists get uninterrupted gas supplies on lower rate than the KESC.
Considering the fast depleting gas fields, the government needs to review its gas allocation policy keeping in mind the interests of the larger section of the population rather than small pressure and interest groups. Yes, industries are important and they need uninterrupted power supplies to keep the wheels of the economy moving, but this needs to be done in a fair and transparent manner and certainly not at the cost of the larger public interest.
According to estimates, SSGC supplies around 300 MMCFD of gas to commercial entities and industries, including around 175 MMCFD to captive power plants in Karachi alone. The quantum of gas supply remains higher than that of the KESC, which has to meet the electricity demands of more than 15 million people of Karachi.
The KESC management says that if an additional 175 MMCFD gas is diverted to its power plants, the utility would be in a position to significantly reduce power outages in Karachi and stem the rising tide of electricity bills.
“This would also help the government to significantly reduce payment on account of Tariff Differential Claim that in turn would help to eliminate the ongoing circular debt crisis,” said Ghufran A. Khan of KESC.
It is not just the KESC, but the entire power sector that has been suffering because of the controversial gas allocation policy despite the fact that it pays the highest gas tariff.
The industrialist lobby maintains that they had been forced to go for captive power because of KESC’s inability to ensure electricity supplies, while the SSGC says that it has to honour its commitment for the gas supply to these plants.
If the government wants to mitigate the negative fallout of the scarce gas resources, it will have to review and prioritize the use of gas and ensure parity of price between the power sector and the captive power plants.
On June 30 this year, the ECC decided to implement the uniform gas load management policy and observe two days per week gas holiday in industries and CNG stations with a view to divert gas supplies for power generation. But this decision was never implemented due to the pressure of the vested interests.
“It is ironic that the KESC’s flagship 560 MW new power plant is suffering and its testing phase is being compromised due to insufficient gas supply while industries and CNG stations are enjoying uninterrupted supplies,” said Khan of the KESC.
The SSGC supplies 80 MMCFD gas to 670 stations, which is around eight percent of its total supplies of 1.1 billion MMCFD. The Sui Northern Gas Pipelines Limited (SNGPL) supplies gas to nearly 4,000 CNG stations and allocates much higher quota of gas for the transport sector.
The government needs to rethink and revisit its flawed policy of encouraging the use of CNG for road transport purposes. The use of CNG for passenger buses and public transport make sense as it benefits the low-income group and remains environmentally friendly. But the policy of subsidizing, the fuel cost of the middle and upper middle classes and their cars needs to be revisited and changed. One way is to increase the CNG price and bring it at par with that of petrol. But will the vested interests allow the government to take any right steps?
While the KESC-SSGC dispute is taking its toll on the people of Karachi, fundamentally it remains a policy issue and not a row between two institutions on small technical matters, which the government needs to resolve. So far it has only allowed matters to deteriorate. That’s what we call the tragedy of delay in typical Pakistani style.
The Shape of Things to Come
By Amir Zia
Newsline
September 2011
The criminalisation of politics and the politicisation of crime have been a bane for Karachiites for decades. Almost all major political parties operating in Karachi have armed wings, and many of them remain directly or indirectly involved in crime.
In an era of sound bites, fast food, and 20-20 cricket matches, the route to stardom is often short and swift. And so it was for PPP’s former home minister Dr Zulfiqar Mirza. Like a shooting star, Mirza blazed across television screens on August 28, holding audiences spellbound. Loud tone, inflammatory language, and startling revelations and accusations – it was a performance guaranteed to catch maximum viewership and win fantastic TRPs. Overnight the controversial doctor became an unlikely hero and was feted by all those who have issues with the Muttahida Qaumi Movement (MQM) and Rehman Malik.
Zulfiqar Mirza’s outburst at the Karachi Press Club on August 28, televised live on all TV channels, has fired up several popular political commentators and reputed analysts, who are spilling over with analysis. For some, Mirza’s “thunderbolt has shaken the Zardari status quo,” while for others it has exposed the MQM and its anti-state designs. There are a few who believe that Mirza’s tirade had President Asif Ali Zardari’s blessings and is part of his carrot-and-stick policy with which he deals with the MQM. And then there are those analysts who believe that Pakistani politics has changed forever after Mirza’s “disclosures.” His assault on Interior Minister Rehman Malik is being viewed as a watershed in the country’s traumatic history.
Mirza’s disclosures – made sometimes with one hand placed over the Quran or with the Quran held over his head – seem to have struck a chord with many frustrated Pakistanis, who are worried by the state of the country’s politics and violence and killings in Karachi.
But in an atmosphere thick with a barrage of allegations and counter-allegations emanating from all sides, people need to take a step back to weigh and review the implications of Mirza’s statements, which have intensified ethnic and political bitterness in Sindh. Putting aside multi-hued conspiracy theories, the focus should be on Zardari’s stated policy of reconciliation, which does not gel with Mirza’s hardline against the MQM.
The allegations Mirza levelled against the MQM in his address to the media include the involvement of militants belonging to this urban-based party in the assassinations of political rivals, as well as the alleged letter written by its leader Altaf Hussain to former British Premier Tony Blair in September 2001, in which he assured him of MQM’s support in the fight against terrorism, and asked western powers to help in disbanding the ISI. Mirza’s charge-sheet against the MQM, which contains several oft-repeated allegations, is aimed to put Sindh’s second largest party on the back foot by opening a Pandora’s Box of past and present controversies surrounding it.
Mirza’s press conference, in which he announced his resignation from the Sindh cabinet and party office, came after more than 1,400 killings had taken place in the first eight months of 2011, and when finally after a long delay the PPP government half-heartedly ordered a crackdown on the criminal networks operating from Lyari – one of its own strongholds in Karachi – as part of a surgical strike in nine major trouble spots in the city.
In this polarised atmosphere, one can argue why Lyari was earmarked for the operation first and not any other part of the city. According to Rehman Malik, the PPP decided to target its own constituency first, in order not to appear partisan to its own coalition partners. Additionally, the suo moto hearing, currently underway, by a five-member bench of the Supreme Court on Karachi’s turmoil, which claimed more than 500 lives in July and August alone, must certainly have intensified pressure on the government and forced it to act amidst calls by many quarters to summon the army for restoring peace and the rule of law in Pakistan’s commercial and financial hub. The government’s move to launch an operation in Lyari may have angered Mirza, who is known to have developed close ties with the Peoples' Amn Committee. But the bottom line remains that while there are other powerful criminal-cum-political players in the city, the recent wave of mayhem, extortion and crime has been largely and directly linked to the controversial Peoples’ Amn Committee, established by the notorious gangster Rehman Dakait, who was killed in a police encounter in Aug 2009.
The Amn Committee remains a unique phenomenon – a crime mafia, a platform for disgruntled PPP supporters, as well as workers fighting what they call their “corrupt elected representatives,” and a pro-peoples welfare group akin to Robin Hood and his band of Merry Men, who once ruled Sherwood Forest in 13th century England, robbing the rich to give to the poor. The Committee did exactly that and introduced several social welfare programmes in Lyari – Karachi’s oldest, but one of the most backward neighbourhoods – and enjoys considerable support among many of its residents. But unlike Robin Hood and his archers, the criminal activities carried out by supporters of the Amn Committee offset its pro-people image.
The Committee, now led by Uzair Baloch, a relative of Rehman Dakait, operates more as a crime mafia, extending its reign of terror across most of the major retail and wholesale markets located in the vicinity of Lyari. In 21st century Karachi, a 13th century mindset means only trouble. However, the problem is not of criminal activities alone.
Ever since some local PPP leaders – including Mirza – began to prop up the Amn Committee as a counter-balancing force against the MQM’s muscle power to expand their influence and turf using the Committee’s militants, violence in the city has risen to another level. Efforts by the Amn Committee to branch out to other areas of the city in the past three years have led to a wave of killings, an intra-gang war, and political and ethnic violence.
It can be said that after the relative calm and peace during the rule of former military leader Pervez Musharraf, who was accused of favouring the MQM in a big way, Karachi drifted back to the brutality and lawlessness witnessed in the 1980s and 1990s when widespread ethnic violence, target killings, and tortured bodies stuffed in gunny bags were a norm. The decade of the 1980s saw the rise of violent ethnic politics, and witnessed Altaf Hussain and his party emerge as the dominant force in urban Sindh. Most of the bloodletting during the 1990s was the result of the conflict between the mainstream MQM and its dissident, splinter group, now known as the MQM-Haqiqi, in the creation of which state institutions played a key role as they tried to prop up their own hand-picked leadership.
It was during these traumatic times that the city first witnessed the rise of organised political extortion or bhatta – the ‘credit’ for which is mostly given to the MQM for putting the system in place. The MQM was known for getting a lion’s share of the booty by hook or by crook, but in recent years it has curbed its practice of using brute force to raise funds or bhatta, in an attempt to carve a niche for itself in mainstream national politics and expand its network to the other parts of the country. However, most other political and religious parties and ethnic groups in Karachi jumped into the fray of raising funds in the name of donations, often at gunpoint, and continue to fight one another over the collection of animal hides during Eid-ul Azha, and over zakat, fitra and charity during Ramazan.
The Amn Committee is among the groups that have jumped into the fray of fund collection. Recently, not only did it lock horns with the MQM, but its blatant use of force to extort money even forced traders and shopkeepers to stage an unprecedented shutter down in April earlier this year, with frequent warnings of repeating the same last month. Mirza’s support of the Amn Committee – to the extent that he even called its members “his children” – has been the bone of contention between the PPP and the MQM for some time now and even cost him his job at the home ministry. Much to Mirza’s dismay, the PPP’s central leadership outlawed the Amn Committee in March 2011, though its operations continued despite the official ban. Interior Minister Rehman Malik played a key role in addressing the MQM’s concerns regarding the Amn Committee and its activities.
As home minister, Mirza could have remained neutral. Instead he chose to patronise them to counter the MQM. Mirza’s disclosures, too, would have carried more weight and underlined his sincerity, if along with the MQM he had mentioned the involvement of the Amn Committee in crime, violence and extortion in Karachi. But he chose to reveal only half the truth in an apparent attempt to deflect the focus from the Amn Committee and the notorious Lyari warlord, Baba Ladla.
The criminalisation of politics and the politicisation of crime have been a bane for Karachiites for decades. Almost all major political parties operating in Karachi have armed wings, and many of them remain directly or indirectly involved in crime. The ranks of political parties are infested with criminals from different ethnic backgrounds, who run crime and encroachment networks in the guise of political party workers.
One can differ with the PPP on countless issues, but harbouring criminals and extortionists was never part of its history and goes against its grain and political ethos. PPP workers, especially while fighting the oppressive martial law regime of General Zia-ul Haq, became more radical after the controversial hanging of their founding chairman and elected Prime Minister, Zulfikar Ali Bhutto. Some even opted for an armed struggle, but it was a political struggle. Mirza and his associates, by design or by default, tried to change the PPP ethos for narrow, short-term gains.
Today, the MQM stands in a sharp contrast to its past of conducting politics on ethnic lines. Now it woos other ethnic groups, putting aside its 1980s and 1990s style of politics which does not suit its future ambitions of transforming itself into a national party. In its own self-interest, the MQM is trying hard to grow out of the politics of extortion and militancy. However, the party still holds the muscle power that can bring the city to a grinding halt at a few hours notice, and match fire with fire with political rivals and dissidents. And every once in a while it returns to its violent past when it feels its interests are being threatened. The MQM will have to shun the politics of violence and start playing by the book to whitewash its tainted past which catches up with it time and again.
It is the responsibility of all major political parties to build a consensus on the dos and don’ts of conducting politics. They should undertake to expel criminals from within their ranks, take a pledge of non-violence, and refrain from activities that disturb public life and inconvenience citizens, such as holding protests and rallies and announcing shutterdown strikes that bring all economic activity to a halt causing immeasurable suffering to the common man.
While public and media pressure is vital to push political parties in this direction, this move cannot achieve any measure of success unless state institutions, especially the intelligence agencies, stop playing one group against the other and allow their favourites to indulge in crime and violence. Our establishment, which has a sordid history of meddling in politics, should resist the temptation of propping one group against the other. Instead, they should focus on establishing the rule of the law, and ensure the independence of the police force and the effectiveness of the judiciary so that criminals and terrorists can be punished irrespective of their political, ethnic, or religious affiliations.
In other parts of the world, consensus has built the rules of co-existence as political rivals and diverse ethnic and religious groups learn to live, tolerate and accommodate each other. Pakistan needs to do the same to break political dogmas, start consensus-building and redefine the rules of the game. While all political forces have several skeletons in their cupboards and have made grave mistakes, there is a need to try and make democracy work and function out of this very mess and chaos.
While going after criminals operating in Lyari is a step in the right direction, the government must also take the MQM, as well as the Awami National Party (ANP) into confidence, and then continue to expand its dragnet to other areas.
Another important factor to keep in mind while evaluating Mirza’s charges is his turn-around from the publicly stated PPP policy of reconciliation and consensus-building. One can criticise and differ with President Zardari on a hundred and one counts, but his move to break ice with the MQM following the 2008 elections was a step in the right direction.
The PPP and the MQM remain natural allies not just because they represent rural and urban constituencies in the same province, but also because both parties endorse secular politics, which in its essence serves as a bulwark against the forces of religious extremism and terrorism. Ideologically, these two political forces have a lot more in common with each other, and with the ANP.
An alliance between the MQM, PPP and the ANP would make perfect political sense and would be vital for peace and progress in Sindh. The central leaders of these parties have an awareness of the necessity of this alliance. And it goes to their credit, that in times of crisis and despite internal strains and clashes of interest at the lower cadres of their respective parties, they have managed to keep their wobbly alliance working for this long. Case in point: when the MQM walked away from the coalition, the lines of communication between the two remained open. This is an absolute must for building peace, and is vital for the survival of democracy.
There should be zero-tolerance among all the major political parties for those political workers who promote ethnicity or sectarianism. Second and third tier hardliners within in the PPP and MQM ranks who seem to thrive on conflict and tussle between the two need to be kept on a tight leash for the greater public good and in the national interest. Rural and urban Sindh, and the inhabitants of this province, must join hands for peace and the rule of law. Ethnic groups living in Sindh are bound by unbreakable cultural, economic and political ties, which need to be strengthened by not forcing uniformity, but by accepting and celebrating their diversity.
Mirza tried to play on the wicket of the nationalists when he made absurd allegations of a conspiracy to transform Sindhis into Red Indians, and by passing some bitter remarks against Urdu-speaking immigrants and their descendants. But he he must remember that even the nationalists failed to gain mileage in rural Sindh, where the federalist PPP continues to dominate election results.
It is ironic that while holding the Holy Quran, Mirza conveniently forgot the role of certain state institutions in creating the present mess in Sindh through their unconstitutional and unlawful activities of playing one political force against the other and stifling democratic forces, especially all through the 1980s and 1990s.
The PPP suffered the most during that period. Instead, Mirza was full of praise for the ISI and the army as he tried to prove his patriotic credentials. Praising state institutions surely is no crime, but Mirza’s context should be a cause of concern for his party leadership.
Zulfikar Mirza, who claims to be such a PPP diehard and a true friend of Asif Ali Zardari, should have used the party platform to argue and air his dissent. By coming out in public with his differences and attacking his own party, he has only embarrassed his party leadership.
He would have served the PPP better if instead of patronising the Amn Committee, he had channelled his aggression in trying to create economic opportunities and jobs for the people of Lyari and improving their lives through social development and education.
But the fire-spitting Mirza‘s style of politics could prove damaging to Sindh and its people, and the PPP’s stated vision of national reconciliation. How much more leverage will President Asif Ali Zardari give his friend, and how will he handle Mirza’s, should we call it calculated or emotional, outburst, only time will tell.
Thursday, September 22, 2011
Abandoning Reforms?
By Amir Zia
The News
September 22, 2011
By pulling out of the IMF programme, the government effectively averted reforms till 2013 and got itself a free hand to take those steps which are a firm “no” from the global lenders but are seen as crucial in the election year for any political party
Should we celebrate the fact that Pakistan has managed to get rid of the International Monetary Fund (IMF) umbrella yet again and has won back its economic “independence and sovereignty” as many opinion-makers, experts and politicians have been demanding for some time? Will the decision to part ways with the IMF - considered the ultimate villain by many rightwing and leftwing pundits - bring prosperity, growth, and better days for the toiling masses? Will it put the country back on the high-growth trajectory and help reduce double-digit inflation? And does this mean that the era of IMF programmes is now over for Pakistan?
These questions remain pertinent as another IMF programme with Pakistan met a premature death due to the government’s unwillingness to deliver on the promised reforms seen necessary to end the low-growth and high-inflation cycle that has been plaguing the country for the last three years. Despite repeated promises, the government failed to deliver on any of the performance benchmarks, including imposition of the Reformed General Sales Tax (RGST), slashing the fiscal deficit gradually to below four percent and phasing out the untargeted subsidies, especially in the energy sector that cost the national exchequer a whopping 350 billion rupees in the last fiscal year.
These benchmarks were not thrust on the government unilaterally by the IMF. It was the PPP government which agreed to these reforms when it signed the Standby Arrangement with the IMF in November 2008 in the wake of a balance of payment crisis. The conditions were not imposed, but were homegrown. That is why it is called the IMF-supported programme.
Former finance minister Shaukat Tarin, who signed the deal, kept the programme on track in its initial phase. Once Tarin was gone, his successor, Abdul Hafeez Shaikh, failed to match his words with actions. The politics of expediency, bitter opposition from PPP allies, and rivals and interest groups never allowed reforms to take off under Shaikh’s leadership. Yes, there were floods and terrorism that prevented Pakistan from realising its economic potential, but these were factored in as the IMF repeatedly shifted the goal post. However, the government failed to meet any performance benchmarks, which were lowered to accommodate Pakistan’s difficult circumstances. This noncompliance resulted in the suspension of the programme in May 2010 following which disbursement of the last two tranches worth $3.7 billion of the $ 11.3 billion loan were put on hold. Since then, Shaikh and his team have made a number of promises concerning the implementation of the programme, all of which were subsequently broken. Shaikh hardly had a chance to get the stalled programme revived as doing so necessitated tough, unpopular steps such as imposing the RGST, introducing power-sector reforms and slashing untargeted subsidies. But such measures remained out of the finance ministry’s power – especially when the political masters have their eyes set on the next elections due sometime in 2013. And going by conventional wisdom, whenever electoral politics is about to gain momentum, it is not the time to take tough measures. The easy way out for the government was to pull out of the IMF programme, which it did, by announcing the decision on September 16 on the eve of Shaikh’s departure to Washington for annual talks with the multilateral donors.
By pulling out of the IMF programme, the government effectively averted reforms till 2013 and got itself a free hand to take those steps which are a firm “no” from the global lenders but are seen as crucial in the election year for any political party. This means giving subsidies and benefits to select sectors and interest groups that help consolidate a vote-bank. In the PPP case, the prime beneficiaries remain farm owners and feudal lords, who already made a windfall following the government’s controversial decision to increase the support prices of key commodities including wheat, which has a high inflationary impact.
The government’s confidence to go solo comes from its relatively comfortable fiscal position - thanks to around $18 billion foreign exchange reserves, continued flow of high remittances from Pakistanis working abroad and higher exports. Certainly, this is enough to keep the government going in the remaining months of this fiscal year and the next – in which elections are due - without facing a balance of payment crisis. If the government manages to import oil on deferred payments, it will get more breathing space.
But the real issue is not surviving from one year to the next. The real question is whether the government and Pakistan’s ruling elite want to go for structural reforms which are a must to keep the state viable. Unfortunately, there is hardly any resolve or even serious debate when it comes to pressing economic issues. No wonder even the big decision to end the IMF programme was largely ignored by the opposition. There was hardly any comment, evaluation, or criticism from parliamentarians, which underlines the fact that the economy is one issue which is not on the radar of the country’s ruling elite. Only some economists discussed the pros and cons of this decision which will have a catastrophic impact on the economy in the mid to long-term as a delay in reforms means that the country will remain stuck in a high-inflation and low-growth cycle in the years to come.
It will not just hurt the poor, the lower and the middle-income groups, but will also further erode the investment climate. It sends a negative signal to foreign investors, already wary of Pakistan in a climate in which even the domestic investors are on the sidelines and busy finding safe havens for their money abroad.
The absence of an IMF-supported programme will make it difficult for Pakistan to raise funds from other multilateral and bilateral donors, who doubt the government’s ability to run and govern the economy in a transparent manner. Indeed, the PPP government can gain political mileage in the short term by abandoning the IMF programme, but its long-term price will be paid by the people and the economy - already battered by floods, rain, terrorism, violence, political instability and poor governance.
The people of Pakistan rightly deserve an assurance from finance ministry wizards in loud and clear terms that in quitting the IMF programme, they are not abandoning the process of reforms. The civil society, economists and the political parties need to keep pushing the government to take measures to expand the tax base – that include taxing the agricultural income, controlling unnecessary expenditure and providing clean governance. Failure to do so will take us back to the IMF door sooner rather than later as has happened so often in the past.
The News
September 22, 2011
By pulling out of the IMF programme, the government effectively averted reforms till 2013 and got itself a free hand to take those steps which are a firm “no” from the global lenders but are seen as crucial in the election year for any political party
Should we celebrate the fact that Pakistan has managed to get rid of the International Monetary Fund (IMF) umbrella yet again and has won back its economic “independence and sovereignty” as many opinion-makers, experts and politicians have been demanding for some time? Will the decision to part ways with the IMF - considered the ultimate villain by many rightwing and leftwing pundits - bring prosperity, growth, and better days for the toiling masses? Will it put the country back on the high-growth trajectory and help reduce double-digit inflation? And does this mean that the era of IMF programmes is now over for Pakistan?
These questions remain pertinent as another IMF programme with Pakistan met a premature death due to the government’s unwillingness to deliver on the promised reforms seen necessary to end the low-growth and high-inflation cycle that has been plaguing the country for the last three years. Despite repeated promises, the government failed to deliver on any of the performance benchmarks, including imposition of the Reformed General Sales Tax (RGST), slashing the fiscal deficit gradually to below four percent and phasing out the untargeted subsidies, especially in the energy sector that cost the national exchequer a whopping 350 billion rupees in the last fiscal year.
These benchmarks were not thrust on the government unilaterally by the IMF. It was the PPP government which agreed to these reforms when it signed the Standby Arrangement with the IMF in November 2008 in the wake of a balance of payment crisis. The conditions were not imposed, but were homegrown. That is why it is called the IMF-supported programme.
Former finance minister Shaukat Tarin, who signed the deal, kept the programme on track in its initial phase. Once Tarin was gone, his successor, Abdul Hafeez Shaikh, failed to match his words with actions. The politics of expediency, bitter opposition from PPP allies, and rivals and interest groups never allowed reforms to take off under Shaikh’s leadership. Yes, there were floods and terrorism that prevented Pakistan from realising its economic potential, but these were factored in as the IMF repeatedly shifted the goal post. However, the government failed to meet any performance benchmarks, which were lowered to accommodate Pakistan’s difficult circumstances. This noncompliance resulted in the suspension of the programme in May 2010 following which disbursement of the last two tranches worth $3.7 billion of the $ 11.3 billion loan were put on hold. Since then, Shaikh and his team have made a number of promises concerning the implementation of the programme, all of which were subsequently broken. Shaikh hardly had a chance to get the stalled programme revived as doing so necessitated tough, unpopular steps such as imposing the RGST, introducing power-sector reforms and slashing untargeted subsidies. But such measures remained out of the finance ministry’s power – especially when the political masters have their eyes set on the next elections due sometime in 2013. And going by conventional wisdom, whenever electoral politics is about to gain momentum, it is not the time to take tough measures. The easy way out for the government was to pull out of the IMF programme, which it did, by announcing the decision on September 16 on the eve of Shaikh’s departure to Washington for annual talks with the multilateral donors.
By pulling out of the IMF programme, the government effectively averted reforms till 2013 and got itself a free hand to take those steps which are a firm “no” from the global lenders but are seen as crucial in the election year for any political party. This means giving subsidies and benefits to select sectors and interest groups that help consolidate a vote-bank. In the PPP case, the prime beneficiaries remain farm owners and feudal lords, who already made a windfall following the government’s controversial decision to increase the support prices of key commodities including wheat, which has a high inflationary impact.
The government’s confidence to go solo comes from its relatively comfortable fiscal position - thanks to around $18 billion foreign exchange reserves, continued flow of high remittances from Pakistanis working abroad and higher exports. Certainly, this is enough to keep the government going in the remaining months of this fiscal year and the next – in which elections are due - without facing a balance of payment crisis. If the government manages to import oil on deferred payments, it will get more breathing space.
But the real issue is not surviving from one year to the next. The real question is whether the government and Pakistan’s ruling elite want to go for structural reforms which are a must to keep the state viable. Unfortunately, there is hardly any resolve or even serious debate when it comes to pressing economic issues. No wonder even the big decision to end the IMF programme was largely ignored by the opposition. There was hardly any comment, evaluation, or criticism from parliamentarians, which underlines the fact that the economy is one issue which is not on the radar of the country’s ruling elite. Only some economists discussed the pros and cons of this decision which will have a catastrophic impact on the economy in the mid to long-term as a delay in reforms means that the country will remain stuck in a high-inflation and low-growth cycle in the years to come.
It will not just hurt the poor, the lower and the middle-income groups, but will also further erode the investment climate. It sends a negative signal to foreign investors, already wary of Pakistan in a climate in which even the domestic investors are on the sidelines and busy finding safe havens for their money abroad.
The absence of an IMF-supported programme will make it difficult for Pakistan to raise funds from other multilateral and bilateral donors, who doubt the government’s ability to run and govern the economy in a transparent manner. Indeed, the PPP government can gain political mileage in the short term by abandoning the IMF programme, but its long-term price will be paid by the people and the economy - already battered by floods, rain, terrorism, violence, political instability and poor governance.
The people of Pakistan rightly deserve an assurance from finance ministry wizards in loud and clear terms that in quitting the IMF programme, they are not abandoning the process of reforms. The civil society, economists and the political parties need to keep pushing the government to take measures to expand the tax base – that include taxing the agricultural income, controlling unnecessary expenditure and providing clean governance. Failure to do so will take us back to the IMF door sooner rather than later as has happened so often in the past.
Monday, September 19, 2011
The IMF and After
By Amir Zia
Money Matters
The News
Sept. 19, 2011
The bitter pill of IMF-supported reforms could have been the right prescription to achieve high growth and lower the inflation rate, but it meant taking unpopular decisions. For the PPP and its allies, implementing a meaningful reform agenda when elections are drawing near, could be a recipe for disaster
The government has formally announced its decision to end the International Monetary Fund (IMF) programme that has remained in limbo since August 2010 because of Pakistan’s failure to carry out the promised reforms considered vital to revive the country’s ailing economy and pull it out of the vortex of low growth and high inflation.
The timing of the announcement is significant as it came ahead of Finance Minister Abdul Hafeez Shaikh and his team’s departure to Washington for annual talks with the IMF and World Bank due later this month. The announcement shows that the government has abandoned all its plans to introduce reforms, which it promised in November 2008 while signing the Stand-by Arrangement with the IMF.
The government may boast that the decision to pull out of the IMF programme without its completion reflects the strength of the economy, but appearances can be misleading in the long-run and its implications serious for the country.
However, in the short-term, the government will be able to keep the economy afloat on the back of high foreign exchange reserves of around 18 billion dollars, continued record remittances from Pakistanis working abroad and expected high export yields. The Finance Ministry officials are not wrong when they say that Pakistan’s fiscal position remains comfortable – at least in the current financial year and perhaps in 2012-13, which will lead to the next general elections.
The bitter pill of IMF-supported reforms could have been the right prescription to achieve high growth and lower the inflation rate, but it meant taking unpopular decisions. For the PPP and its allies, implementing a meaningful reform agenda when elections are drawing near, could be a recipe for disaster. Therefore, pushing reforms to the backburner makes sense for the PPP think-tank until the hurly-burly of elections is over and the battle lost or won. Yes, the time for reform for any political government is at the start of the innings and not at its end. Ironically, the PPP did not make any serious attempt to push for reforms even at the beginning of the term, although it was PPP’s former finance minister Shaukat Tarin, who brokered the Stand-by Arrangement with the IMF.
The arrangement, revised to $11.3 billion from the initial sum of $7.6 billion, is the eighth IMF programme with Pakistan which met a premature death out of a total of nine. The only programme, Pakistan ever completed was in 2004 under the former military rule of General Pervez Musharraf when its economy was hovering in the high growth trajectory of seven percent on an average for five years in a row.
The vital goals under the IMF’s Stand-by Arrangement included the imposition of the integrated value-added tax (VAT), cutting down the budget deficit to 4.2 percent and below and scrapping all the untargeted subsides, including the ones given in the power sector. The programme had two objectives – “to restore macroeconomic stability and confidence through a tightening of macroeconomic policies; and to ensure social stability and adequate support for the poor and vulnerable in Pakistan.”
But the PPP-led government dragged its feet on all these fronts due to political considerations and opposition by strong vested interest groups, who were duly backed not only by the key opposition parties but even those in the ruling coalition. The initial goals agreed with the IMF were revised and readjusted scores of times, but the government still failed to achieve any one of them.
The strong resistance by businesses and traders forced the government to abandon its half-hearted attempts to impose the proposed VAT, and on paper got it replaced by a diluted reformed general sales tax (RGST). Then even the RGST plan was dropped, though the government promised to get it going by October 1, 2010. The government’s failure to impose the RGST simply means that all the plans to expand the country’s narrow tax base have been shelved – yet again. The powerful lobby of feudal lords, who like their fiefdoms also dominate parliament, effectively torpedoed the demand of taxing agricultural income. Thus, Pakistan has to remain contented with its slim nine percent or so tax-to-GDP ratio, which is among the lowest compared to economies of our size and even smaller in Asia and our own region.
The budget deficit target has been eluding the government from day one because of its inability to raise revenues and cut expenditures. During the last three fiscal years, the budget deficit has remained on the high side of six percent and above against the initial targets of 4.2 and below. Most economists call high budget deficits the “mother of all troubles” for an economy, which results not just in high inflation, but also macroeconomic instability. Curtailing the deficit is seen as a must to eliminate the financing of government expenditures by the State Bank of Pakistan (SBP). The heavy public financing by the SBP and other commercial banks fuels inflation and crowds out the private sector from the credit chain – as has been happening since this democratically elected government came to power in early 2008. No wonder that Pakistan’s public debt has soared to more than 11 trillion rupees at the end of the last fiscal from 4.8 trillion in June 2007.
The federal government has also failed to broker an agreement with the provincial governments that they maintain fiscal discipline – which remains necessary to the overall lowering of the budget deficit.
One of the key steps, which the government had to take to lower expenditure, was phasing out the energy subsidies. The power sector subsidies and losses cost the national exchequer around 350 billion rupees in the last fiscal year. According to the IMF programme, the reduction had to be achieved with the assistance of the World Bank, but courtesy the vested interests, Pakistan’s power sector continues to bleed because of the rampant electricity theft and distribution losses of up to 35 and 40 percent.
The election fever, for which political wheeling and dealings have already started, is unlikely to give any space to Finance Minister Shaikh to take any firm measures to lower budget deficit, curtail government borrowing, slash power subsidies or to expand the tax base. At the most, he will try to remain glued to the wicket and keep the economy floating in a run-up to the elections or worse he may quit – though the chances are unlikely – as his predecessors have done.
But what will be the implications of the government’s decision of walking away from IMF and not implementing reforms?
The worst part is that Pakistan is all set to remain stuck in the low growth and high inflation cycle for another three to four years at least –as the government has failed to take measures to turn the tide. This means that the poor will sink deeper into poverty on the one hand while on the other, more people will be joining their ranks because of unemployment, lowering of income and erosion in the purchasing power of the rupee – which will hit people with a fixed income the most.
Abandoning the IMF programme will also make it difficult for Pakistan to raise funds from other multilateral and bilateral donors.
At a time when even domestic investors are not betting on Pakistan's economy and have put investments here on hold or have redirected them to other parts of the world, the government’s decision to say “goodbye” to the IMF will shatter their confidence even further. Similarly, it will be much harder to lure foreign investors in an environment where they are already staying away from Pakistan.
The decision will prove a blow to the country’s privatisation programme, which remains stalled since the PPP government assumed power in early 2008. It is a bad omen because it means the loss-making public sector utilities will continue to remain a huge drain on the economy.
Pakistan economy is all set to remain in a mess and brace itself for tougher times in the mid- to long-term in the absence of an IMF programme and monitoring which helped the country’s financial managers to stay on course and resist the demands of their political bosses. But clearly, for the ruling coalition, elections are more important than the country’s long-term economic interests.
Thursday, September 15, 2011
Rain Havoc
By Amir Zia
The News
September 15, 2011
This annual rain mess in Karachi remains a management disaster, reflecting the lack of planning, vision and indifference of successive governments, which have collectively failed to give this city even a proper drainage system
“We live in Karachi in a world removed from reality... For instance, it is our conviction that it does not rain in Karachi. That it has never rained in Karachi. That it will never rain in Karachi. Everything in this city is anchored to this conviction. The roads, the drainage systems, power, telephone and telegraph cables... Despite our bravado, we are, I feel, victims of a misunderstanding with nature. For it is not at all true that it does not rain in Karachi. And when it does, it pours. The roads are flooded, some are washed away. Power fails. Telephones do not work. Cars and buses are stranded... This happens every time it rains in Karachi.”
Omar Kureishi, one of the finest journalists, writers and broadcasters of his times, wrote these lines more than five decades ago for a publication called “Pakistan Standard”. It is part of Kureishi’s first book – Black Moods, published in 1955. If this article, titled “Rain” were reproduced with the omission of a few lines on the sufferings of refugees in the downpour, it would seem as if the late writer penned his thoughts in today’s Karachi.
Yes, when it comes to rain and its aftermath, not much has changed in Karachi since the early 1950s – we see submerged roads, stranded vehicles, open manholes, overflowing gutters and broken power cables. And we see the callous attitude of the country’s high and mighty and the sufferings of commoners who dangle from buses in heavy rain and wade their way for miles through knee-deep water to reach their homes. The unfortunate ones die when they step on a snapped power cable or an open sewer, while the fortunate ones arrive home to narrate their ordeal with a sense of pride. For, now being safe in Karachi is also an achievement.
If in the 1950s, the McLeod Road and the Drigh Road used to get inundated, in 2011, their fate has not changed despite the change of names to I I Chundrigar Road and Sharae Faisal. In fact, the situation is now even worse thanks to population explosion and manifold increase in the traffic.
Most major roads and streets of the city – whether new or old – have been flooded with rain and sewerage water with only up to a maximum of 140 millimetres of rain in some parts of the city in two days. This is hardly a downpour to deluge a city and cripple normal business and industrial life. But in Karachi it does.
Representatives of industry, business and trading communities say that they suffered accumulated losses worth billions of rupees in lost working hours and due to the fact that rainwater immersed many of their warehouses, shops and factories.
The same roads and areas get flooded in rains year after year even in the main commercial and business districts of the city and where government offices and buildings are located. Even Chief Justice Iftikhar Chaudhry got a taste of Karachi rains when his car got stuck in the water. He had to abandon his vehicle and take another to reach the Supreme Court.
Can one get away by calling the rain havoc in Karachi a natural disaster? No, definitely not. This annual rain mess in our city remains a management disaster, reflecting the lack of planning, vision and indifference of successive governments, which have collectively failed to give Karachi even a proper drainage system.
The city, which contributes almost 68 percent to the country’s revenue collection, always lurches back to normalcy on its own and the resilience of its citizens rather than steps taken by rulers to alleviate their sufferings.
Poor governance, clash of petty interests, a confused mindset and corruption are manifested at every level. The empowered local governments can help resolve the festering civic problems in a far better way, but we have turned them into a controversial political issue. We continue to debate and argue over the merits and demerits of the system and keep changing its laws. The lack of centralised command in Karachi is also responsible for most of its civic problems. There are seven cantonment boards, which operate independent of the city district government. This is the greatest obstacle in taking a holistic approach for the development and planning of the city and its infrastructure.
The rain havoc could have been mitigated if the local authorities had taken the trouble of dredging the sewerage and storm water lines in time and removed encroachments blocking the natural and manmade waterways. But we are more tuned to shedding crocodile tears after every mishap brought about by our own doings.
Veterans like Kureishi have written a mountain of words. Minor writers like me continue to add to the pile after every rain. But there are many unpleasant issues and topics which never change in this land of the pure. And one of these constants for this generation – as it was for Mr Kureishi’s – and perhaps for the future ones too, is the crumbling and non-functioning drainage system.
The rainwater will subside in the coming days and the sun will shine again. Life will be as normal as it can get in a city like Karachi, but come another rainy season and it will be the same old grind.
Monday, September 12, 2011
Two Worlds
By Amir Zia
Weekly Money Matters
The News
Sept. 12, 2011
As politicians heap scorn on one another and fan emotions, establishing the rule of law, bringing peace and stability – all vital to get the economic activities going –are not even part of their discourse
Springfield –a small, rural town of less than 3,000 inhabitants in the US state of Kentucky – is trying to attract and retain workers, investors and entrepreneurs not only from its own Washington county but also the neighbouring ones so that it can serve as a regional economic and agricultural hub. Lush green meadows and acres and acres of corn and tobacco fields, dotted by family-run wineries and horse and cattle farms, remain the backbone of its economy. Here, the local government welcomes and facilitates people from other regions to set up new business ventures and establish trade links with locals. The aim is to boost the home market and products in these challenging economic times when there remains a tough competition to attract investment and businesses.
Louisville, the largest city of Kentucky, located at about an hour’s drive from Springfield, replicates the effort of attracting human resource and investment on a grander scale. The local authorities of this city –the hometown of Muhammad Ali, the cultural icon and champion boxer of the 20th century – have launched an innovative talent attraction programme called the Greater Louisville International Professionals (GLIP). It targets foreign talent to come, work and live in this city of around 700,000 people and showcases Louisville as a “welcome and inclusive city of possibilities.” So far, the GLIP– launched in 2009 –has representatives of 94 countries, which includes Pakistan. These representatives, called ambassadors, serve as point persons and resource for their respective countries and help new international residents acclimate to Louisville. GLIP has more than 800 online members and database of 2,700 foreign-born professionals, executives and entrepreneurs, international academia and local business executive and recruiters, who work internationally.
Concerns about global terrorism make the process of getting a visa and immigration to the United States slow and cumbersome – an issue which the local authorities have taken up with their federal government. However, international talent continues to trickle into this “land of opportunities.” The high US rate of unemployment – recorded at 9.1percent in August 2011 – the recent debt crisis that resulted in the downgrading of the credit rating of the US government’s bond for the first time in the country's history, and the sluggish economy, fail to deter people from pursuing the American Dream.
Many American economists, planners and the man on the street believe that the current difficult economic phase will pass as it happened during the Great Depression (1929-1941) and the inflation woes of the 1970s. They see that 10 to 30 years down the road, the United States would need a vast talented pool of human resource and investment – and the foundations for which are being laid today. No wonder that from a small rural town to a mid-sized city and to the state level – efforts at every tier appear in one direction.
In the globalised world when regions, countries, cities, towns and villages – each in their own respective spheres compete with one another to attract talent and capital – this vision and strategy is vital for success. Prospering economies around the world are following it – from the Far East to Middle East and Europe to the United States. Even our South Asian neighbours including India, Bangladesh and Sri Lanka, are on a road to progress and trying to integrate themselves into the region and the globalised world.
On the contrary, in Pakistan, we do our best to scare away potential investors and threaten and rob those who happen to be here. Let alone foreign, even many local investors are being forced to shut businesses and look for other options. A number of educated and professional Pakistanis are looking for an escape route from this land of the pure. Political instability, inconsistent policies, terrorism, crime, insecurity, extremism and corruption –all have made Pakistan unlivable and an international pariah despite the fact that the country offers a vast market of around 180 million people, tremendous natural resources and a pool of talented and hardworking people, including highly educated professionals.
The lack of vision is reflected at every level. Many of our regional politicians see workers even from outside their province as a threat, let alone trying to attract talent and investment from abroad. Balochistan is a case in point, where there has been a systematic campaign of terror and violence going on against people who are being dubbed as “settlers,” though many of the victims have been living there for generations. The lawlessness in Balochistan has halted all the exploration and drilling for new hydrocarbon resources for years now.
The small port city of Gwadar, seen as an investor’s dream and a happening place only a few years ago, has lost its steam. The reason: terrorism and violence that spring in the region from the misconception that the local population will lose rather than gain because of the influx of outside talent and resources. While successive government can be criticised for their failure in removing this fallacy, local politicians, too, remain unable to see the opportunity and find ways to become part of the development and act as a catalyst for progress in the larger public interest. The parochial tribal mindset and unimaginative and rigid bureaucracy and officialdom in Islamabad have been unable to build a consensus and find a way forward.
A couple of years ago, while interviewing a prominent nationalist leader, who was railing against the supposed threat of outside workers and investment to the local population, I could not help but saying that his political position appears against the global trend and makes no economic sense. His prompt reply was that his province was no Dubai, Singapore or Malaysia nor does he want it to become like them. The irony remains that the children of this politician studied at an expensive private English-medium school in Karachi, but having similar institutions in places like Gwadar or Turbat, which can attract students from across the country, was not part of his agenda, vision or political discourse.
Coming to Karachi, the country’s economic and industrial hub and once our own local city of opportunities and dreams, we see that it has been brutalised to its core. This megapolis still draws workers from all over the country, but its economic pace and rhythm has been broken – thanks to the political mafias which patronize extortion, kidnapping for ransom, robberies and all the other sort of crimes. As these mafias fight bloody turf wars and torture and kill rivals, it is economic activity which has taken the biggest hit. Many of the established businesses are struggling, while new investments remain on the hold. Many small, mid and large players have shifted to other places, even abroad, and many more plan to join this exodus as every part of the city has become unsafe and insecure.
As politicians heap scorn on one another and fan emotions, establishing the rule of law, bringing peace and stability – all vital to get the economic activities going –are not even part of their discourse. We have started to look at one another with suspicion and distrust –both individually and collectively, divided along political, ethnic and religious grounds. Instead of creating economic opportunities, we are bent upon destroying them brick by brick. Political parties, the government, and the state institutions – all have failed to rise to the challenge and provide the vision which brings back peace and puts economic development and progress back on the agenda. As the world moves forward, the parochial mindset is slowly but surely stifling the country at every level.
Monday, September 5, 2011
Destination Pakistan
By Amir Zia
Money Matters
The News
Sept 5, 2011
The Commonwealth Business Forum offers a unique platform where the government can reposition the country as an attractive, investment-friendly place
Packaging and selling Pakistan as an investment, trade and business destination at international forums has never been the strength of our successive governments. Whenever we interact with the outside world on global or regional platforms – be it the United Nations, Commonwealth, Organisation of Islamic Conference, or the South Asian Association for Regional Corporation (SAARC) – the focus, by and large, remains more on politics or highlighting the protracted conflict of Kashmir with India, rather than the economy.
Permanent state interests, indeed, cannot be ignored and should remain part and parcel of any international engagement, but at the same time Pakistan needs to broaden its canvas and use foreign relations as a tool to advance its economic interests. In today’s competitive, globalised world, both the developed and emerging economies are vying hard to attract investment, the best possible human resource and opening trade and business avenues for their products. However, Pakistan has been found lacking on these fronts due to its lingering political instability, internal conflicts and the war on terrorism – which have held back its enormous economic potential.
The situation has especially been challenging since the Pakistan Peoples’ Party (PPP) government took power in 2008 as it not just struggled to give a clear economic vision, but failed even to keep its economic team intact. No wonder, there has been a steady and steep decline in both local and foreign investment as Pakistan’s economy remains stuck in a low growth and high inflation cycle for the last four years after witnessing a robust economic growth of around 7.0 percent from 2001-07.
While on the domestic front, the government needs to take tough decisions in line with the International Monetary Fund’s stalled programme that includes doing away with untargeted subsidies, expanding the tax-base, carrying out power sector reforms and reviving the country’s stalled privatisation programme, on the international front, it needs to aggressively market and sell Pakistan as an investment, trade and business destination.
The coming Commonwealth Business Forum (CBF) scheduled for October 25-27 in Perth Australia, offers a unique platform, where the government can reposition Pakistan as an attractive, investor-friendly country and try to refocus the international community’s attention on opportunities here, moving away from the narrow prism of extremism and terrorism.
"The CBF aims to deliver $10 billion in business deals," said Arif Zaman, Commonwealth Business Council’s advisor on South Asia and Corporate Governance. “Pakistan should also aim to get a slice of it.”
The Commonwealth Business Council has sent Zaman, a British national of Pakistani origin, to Pakistan for an extended stay of six months in the build-up to the CBF and the Commonwealth Heads of Government Meeting set for October 28-30.
Prime Minister Yousuf Raza Gilani also plans to participate in the meeting with a high-powered delegation comprising government officials and leaders of the country’s business and corporate world.
“The CBF will provide a unique opportunity for both businesses and governments to learn from more than 100 distinguished speakers and panelists, including heads of governments, finance ministers and businesspeople,” Zaman said.
The forum will allow participants not just to meet and discuss trade, investment and partnership opportunities and prospects, but develop new business leads and identify trade and investment partners, he told Money Matters in an interview.
There will be opportunities to conduct and conclude business deals in one-to-one meetings, build networks, influence the global debate on important trade and investment issues and contribute to policy recommendations to the Commonwealth heads of the government, added Zaman, who has also authored the bestselling briefing on “Reputational Risk” in 2004.
Zaman said that after a long gap Pakistan would participate in the meeting of heads of governments of the Commonwealth as a full-member.
“The good thing is that issues relating to military rule and democracy (in Pakistan) are no longer on the agenda. This creates space to talk about other things, especially the economy and investment.”
After the United Nations, the Commonwealth is the largest grouping of countries, comprising 54 members. It remains the only organisation -- outside the UN itself -- to transcend regional organisations and bring together North and South.
According to a handout of the Commonwealth Business Council, which is organising the CBF, the member countries of this forum now account for 20 percent of world trade and some of the fastest growing economies in the world are part of this association, including Australia, Canada, India, South Africa and the United Kingdom.
“Over four trillion dollars in trade happens every year within the Commonwealth and its combined GDP nearly doubled between 1990 and 2009,” the handout said.
Zaman, who has been meeting government officials and business leaders in Pakistan in an attempt to ensure their maximum participation in the forum, said that Pakistan has been invited to chair a roundtable discussion with key business leader on opportunities in the country.
“This is one of the most supportive developments to have come from the Commonwealth since both Pakistan’s return as a full member in 2008 as well as since the current government in Islamabad took office,” he said.
“A special session on South Asia will bring together the Jang Group and The Times of India to talk about the award-winning Aman ki Asha initiative on Pakistan and India and the progress made by business leaders of both countries.”
The Aman ki Asha initiative was launched by the Jang Group, Pakistan’s biggest media group, and the Times of India Group in January 2010 as a campaign for peace between nuclear-armed Pakistan and India which are uneasy neighbours and have remained locked in a protracted dispute over the divided Himalayan region of Kashmir. The two nations have fought three full-scale wars and one mini-war on Kashmir since their independence in 1947.
The peace campaign has evoked huge interest both in the region as well as abroad and helped strengthen peace lobbies in both the countries.
Zaman said that India and Pakistan remain the two biggest member countries of the Commonwealth in terms of population and the association wants to help facilitate efforts for peace at a time when both New Delhi and Islamabad have resumed peace talks.
The Commonwealth document says that the CBF is taking place at a critical time when the developed world continues efforts to secure recovery from the recession and tackle challenges of maintaining open markets and when emerging markets are enjoying a greater prominence on the world stage than ever before.
“At a time of growing interest in emerging markets, Pakistan should not underestimate but underline the opportunities the Commonwealth now provides for making the case and building the community for doing business here… No other forum brings together such diverse countries in order to do business.”
Zaman said that the Commonwealth Business Council looks forward to a significant presence from Pakistan at CBF and remains keen to work with stakeholders to make an intensive and extensive participation at this platform.
According CBF, it presents a unique opportunity for Pakistan on three levels. The first, an opportunity for increased trade and investment between Pakistan and Australia including but not limited to the dairy, infrastructure, energy, mining and education sectors.
The forum also gives Pakistan a chance for increased trade and investment in key Commonwealth markets where the Pakistani companies can leverage existing relationships and reach.
“There is a cost advantage to Pakistan of trading with the Commonwealth that many business people, policy makers and media may not fully realise.”
It also provides an opportunity to build the case for visiting Pakistan and doing business here in the coming months and for people to see for themselves the potential that Pakistan offers in established and emerging sectors and develop business relationships.
“A proposed international investment forum in Bhurban involving the Board of Investment in early December 2011 provides a tangible and early opportunity for Pakistani participants in CBF to extend to people they meet in Australia.”
Zaman said Pakistan never fully leveraged its membership in the Commonwealth. “Pakistan does not have to buy space, but sit in its place. It has got a platform,” he said.
This is an opportunity not only for big businesses, but also for small businesses, including women entrepreneurs and rural representation.”
The Commonwealth forum, undoubtedly, offers the government a chance to bring Pakistan and its economic potential back on the world stage. Let’s hope we make the best use of it.
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