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governance Change
in theory infrastructure Changing
policy patterns Lacking
fuel for the fire development performance
A call for reforms Taxes should be imposed through a proper consultation method, preferably through the parliamentary process By Huzaima Bukhari and Every civilised society respects and adheres to the
cardinal principle that one should not be forced to pay a tax imposed by a
government without having the opportunity to vote for or against the tax
measure, either directly, or through elected representatives. The present democratic government, like its
predecessors, has not respected during its four years the demand of people
for evolving an equitable tax system. Since the exit of Musharraf, the
elected government has imposed a number of new tax obligations in
violation of the well-established rule “no taxation without
representation”. The legislative work related to levying taxes is
exercised exclusively by the Federal Board of Revenue (FBR) and the
parliament just acts as a rubber stamp. The result is that FBR has failed
to collect actual tax potential — which is not less than Rs6-8 trillion
— and also destroying trade and business growth with its irrational and
oppressive tax policies. Tax system is one of the fundamental elements of a
constitutional democracy. The important questions such as who is to be
taxed, how much and for what purposes, are essentially political
questions. These kinds of questions are always resolved through a
political process. How tax
obligations are to be imposed, administered and enforced are
constitutional questions. The imposition, administration and enforcement
of taxes raises problems about the rule of law, proper division of powers,
the role of judiciary and so on. Since the imposition and administration of taxes is a
purely constitutional issue, it cannot and should not, be tackled by an
executive branch of the government — in our case by the FBR. Political process for the establishment and
reinforcement of a constitutional democracy and democratisation of society
has always been destroyed in Pakistan both by military and civilian
regimes. The present regime, on assumption of power, instead of taking
strict and firm actions against tax evaders and wealth plunderers started
protecting them. Many top politicians, being beneficiaries of the
infamous National Reconciliation Ordinance wanted to safeguard their
financial empires inside and outside Pakistan. The FBR remains busy, shifting the tax burden on the
common people and protecting the interests of the rich and mighty. They
portray common citizens as tax evaders although everybody having a mobile
phone is paying 10pc as income tax on each recharge. The real culprits are
the rich classes that do not pay taxes according to their ability and for
whom the FBR has crafted presumptive and minimum tax regimes so that they
can pass on their burden of taxes on the end users. Tax bureaucracy provides unprecedented help to tax
evaders through tax amnesty schemes, one permanently available in the form
of section 111(4) of the Income Tax Ordinance, 2001. The much-publicised
process of accountability is also a farce. Pay us and go home is the modus
operandi of National Accountability Bureau (NAB). Had the FBR and NAB played their role properly, we
would have seen prosecution and confiscation of property of tax evaders
and the plunderers of national wealth. On the contrary, even the Prime
Minister of the country is ready to be convicted rather than writing a
letter to Swiss authorities requesting return of the country’s looted
wealth. Had the asset-seizure legislation been passed and implemented, by
this time the State exchequer would have been credited with billions of
much needed extra money. The present regime has also proved to be yet another
advocate of status quo and not a force capable of altering the fate of the
poor. The present regime is vigorously imposing new tax obligations for
funding their luxuries, depriving the common man of food, health,
education and drinking water etc. Taxes should be imposed through a proper consultation
method, preferably through the parliamentary process, rather than through
administrative discretion. The government has been forcing the President
to keep on issuing badly drafted ordinances prepared by incompetent
officials of FBR without any contribution of the Cabinet, let alone
eliciting public opinion or expert professional advice. The excessive use of administrative discretion and
delegation of legislative authority to tax bureaucracy has destroyed the
entire tax system of the country. The tax bureaucrats sitting in FBR have
been playing havoc with the tax laws by vehemently issuing Statutory
Regulatory Orders (SROs) and administrative instructions. The SRO culture
continues unabated even by democratic governments in order to serve
financial interests of cartels and impose all kinds of oppressive,
anti-people tax laws as well as introduce recovery measures through
administrative instructions. Tax administrative authorities should be given powers
to deal with tax evasion and avoidance, but this kind of broad
administrative discretion to alter the law passed by the parliament is
unconstitutional. It violates Article 162 of the Constitution and negates
the principle of the Rule of Law. Tax system and tax laws should be framed
and enacted through a democratic process and once they are passed,
properly implemented by the tax administration. All the segments of society should adhere to the rule
that nobody is above the law. In Pakistan, these laws are meant only for
the helpless, whereas the mighty and the privileged classes resort to open
defiance of law. No tax should be imposed unless the government has
actually exercised the legal power to impose it. In some countries such as
France and Belgium, this “right” to choose untaxed alternatives is
understood in constitutional rules enjoining the strict interpretation of
law. There exists a serious danger in today’s Pakistan
that the very legitimacy of the taxation system may be destroyed, if not
ultimately, the legitimacy of the government. Oppressive tax measures are
not a basis for good governance. The fragile trust between citizens and
the rulers, professionals and their clients, employers and employees is
easily destroyed, as is the tenuous social solidarity between groups at
different levels of society.— A Freiberg Ripple From the Bottom of the
Harbour: Some Social Ramifications of Taxation Fraud (1988) 12 Criminal
Law Journal 136, at 158. The present regime must understand that Rule of Law in
the context of tax requires that taxation must include not just the safety
of the individual against unlawful actions of fiscal authorities, but also
assurance of the loyal taxpayer that he is not abused and taken for a
ride, whereas smarter people get away with tax avoidance/amnesty schemes. We will never achieve stability if our political,
legal and financial institutions remain threatened by those having money
power. These basic institutions and the associated value structures should
be properly safeguarded, as these are in fact, public capital and the
social infrastructure of liberal democratic society. If the political leadership wants to protect the
interests of citizens, it must pave the way for reform of democratic
institutions without which instability will deepen. There is a genuine
apprehension that any further disintegration of our political, legal and
financial institutions may culminate into a complete disaster. The writers, tax
lawyers, are Adjunct Professors at Lahore University of Management
Sciences (LUMS)
Change
in theory Social change Author: Mahmood Mirza Pages: 102 Price: Rs 200/- Publisher: Takhleeqat, Lahore Mahmood Mirza, an accomplished Lahore-based tax
lawyer, keeps contributing to national discourse for a better Pakistan.
Following a tumultuous agitation in Sindh in 1984 against the military
regime of Gen Ziaul Haq, he had written a well-researched and timely book,
“Aaj Ka Sindh” in which he had identified the political and economic
deprivations of the province and suggested ways to find a way-out. He had
also written on improving tax culture in the country and modernising the
Muslim state in his previous endeavours. The current monograph deals with
the subject of social change for transforming the country into a humanist,
knowledge-based, welfare society. In the first two chapters, the author has given an
overall view of the country’s social and economic conditions by
analysing facts and figures. In his opinion, big landholdings, black
money, populism, ethnic and tribal bonds, religious associations, support
from intelligence and military establishment form the basis of political
influence in the country, while power is concentrated in the hands of a
small elite. However, high rate of urbanisation is impinging on the
traditional social basis of political system. Mirza believes Pakistan is transitioning from a
feudal-tribal society to a semi-industrial society. This transition phase
has created its own fault lines: wasteful elite versus millions of poor
people; a small Western-educated class versus poorly-educated or
illiterate masses; a small liberal class versus millions of orthodox; the
privileged versus the public full of complaints; and champions of women
rights versus those who oppose the modern role and status of women in the
society. In these circumstances, the author says, extremism and
militancy are also on the rise as the interpretation of Islam promoted by
the ruling and orthodox groups has widened the sectarian divide and
enhanced the rift between liberal and orthodox elements. To get out of
this morass, Mirza suggests, we should not adopt a violent revolutionary
path but a peaceful democratic process of social and political change
because a revolutionary approach will be exploited by religious extremists
and ethnic groups to their benefit. Instead, he wants a conscious struggle
for social restructuring in the country and mobilisations of people for
voluntary community development that is led by a new breed of what he
terms as ‘social politicians’. In his view, neither traditional
politicians nor non-political social workers like Abdus Sattar Edhi,
howsoever remarkable their work may be, can produce the required social
change. Mirza envisages a movement for a social change in the
country through social politicians who will first bring about behavioural
changes in the people, or a section of the society, by promoting the ideas
of humanism, tolerance, self-respect and self-reliance and rendering
social services to the people at the grassroots level. This social
movement will fight the forces of extremism and fanaticism on the one hand
and organise institutions of social welfare for the masses like free
healthcare and schools on the other. This is a kind of humanist movement
free from religious colour. In this regard, the author is inspired by the Turkish
movement initiated by mystic scholar Fatehullah Gullen. Under the
movement, 2,000 schools in Turkey besides radio and television stations,
newspapers and magazines were launched. The movement later influenced the
present ruling AK party in Turkey which ushered in rapid economic
development and positive social changes in Turkey. Similarly, Mahmood Mirza wants his social politicians
to establish a political party in the second phase of their struggle and
establish a socio-economic system in Pakistan, based on modern knowledge
for the well-being of the people at large. He believes this system will
free people from hunger, malnutrition and psychological diseases. The author emphasises that political change, dealing
with improvement in the management of state affairs, is not adequate for
the present-day Pakistan, but a simultaneous movement for social change is
essential to improve the conditions of the people and politically empower
them. He advises social politicians to start their work on
peaceful lines with a medium-term agenda and not to get into conflict with
the powers that be. Instead, he says social politicians should consolidate
their base through their community work for a comprehensive social change
which will be finally implemented by the political wing of the movement. It seems the author is unconsciously impressed by
Imran Khan’s career who first established his credentials as a social
worker and philanthropist by establishing Shaukat Khanum Cancer Hospital
and later jumped into politics. One may say the author wants hundreds of
Imran Khans, but with a difference that his proposed social politicians
would not support any extremist movement as Imran Khan does by speaking
for the Taliban. Mahmood Mirza has based his plan of action on the
goodwill of the people and on the assumption that a group of society
sincerely wants to work for the welfare of the masses. He has not factored
in class interests in the dynamics for implementing the agenda of peaceful
social change. He has also not explained why the yuppies would take pains
to do community work in the areas inhabited by the poor, leaving aside the
luxuries of their life. However, the ideals spelt out by the author are
quite noble and those who have the passion to make this country a better
place to live can’t ignore his message.
infrastructure A few weeks ago, the Lyari Development Authority
launched Hawkes Bay Town (Scheme 42) as a step to provide housing for the
needy. The plan and procedure adopted for this venture is based on the
time beaten procedure of balloting. The interested individuals deposit applications in the
banks. Computer determines who would get the land. Common sense informs
that those who have more capital can afford to deposit multiple forms and
win a better probability to obtain the plot. It has been an accepted principle that plots are given
to those who occupy it. This approach which has been successfully
demonstrated in schemes called as Khuda ki Basti has been found a viable
mechanism to stem speculation. The Sindh Disposal of Urban Land Ordinance of 2002
incorporated this factor to benefit the poor. It is sad to note that law
was repealed by provincial legislature in 2006. The law had
institutionalised a mechanism for transparent allotment of land which is
now disbursed arbitrarily. The then government wished to have a speedy mechanism
for land disbursement at its disposal. And the real poor continued to
wait. It will be in all fairness to demand the re-promulgation of the said
law now for public good and transparency. Sindh, as a province, had considerable reserves of
state land which later fell within the limits of urban areas.
Historically, this land which was considered as an asset and was carefully
utilised for residential, commercial, agricultural, recreational,
industrial and other purposes, at least in the large cities, changed
considerably. Instead of an asset, it was viewed as a tradable
commodity. This gave rise to evolution of a land market which was entirely
uncontrolled, discretionary and haywire in nature. Nascent market forces
determined the utilisation and transaction of land compared to rational
public choices. Without realising the social, ecological and even long
term economic consequences, the sales and transaction of land has
continued unabated. Political interest has been one of the prime factors
that determined the procedure of land supply. This interest superseded the
urban and regional planning considerations, objectives and policies of the
administration, fiscal liabilities and even legal limitations. Whereas the
upper tiers of government were largely involved in this process, the Chief
Minister of various governments played the key role in land allotment due
to the infinite authority vested in his office as well as political clout
that he enjoyed. Bypassing the laws, regulations and norms thus became
a routine exercise which did not let any land supply mechanism to
function. In brief, land parcels were allotted due to political pressure
from the influentials/party workers and bullies of various kinds.
Political bribes were also given in the form of land. The announcement and
cancellation of housing schemes was done on the same basis. Government
departments, law enforcing agencies, financial institutions and urban
development authorities simply became a carrier of orders in that working
setup. Land disposal schemes mostly developed as a
clandestine marriage of convenience rather than a transparent and equal
opportunity enterprise. The attempts made in this respect have been
severely criticised by the users, media and analysis. Only recently, the
government has finalised allotment of about 9000 acres of land under a
large scale scheme called as the Education City. It has created many
doubts. For example, subsidised land has been offered to many institutions
that are operating on commercial objectives without providing relief to
the common people. Traditionally, the existing pattern of land ownership
has a direct bearing on its transition in the urban scenario. The clan
influences, appropriation and possession of land were the important
factors that governed the directions of development. When land was in
private ownership under traditional landlords, they lobbied with the
public sector officials to devise the development policies/priorities to
maximise their own benefit. Planning and development of communication schemes,
transportation projects and investment in infrastructure schemes were
largely manipulated on the same basis. The fringes of large cities are the
most important choices in this regard. The north western outskirts of
Karachi are some of the main locations where local landlords have
traditionally benefited from the growth of the city. The existing patterns of land supply created a visible
disparity between the privileged and non-privileged classes. Land was
procured, developed and sold through the priorities and conditions laid
down by the public sector agencies in liaison with the powerful interest
groups. These groups attempted to maximise their respective
profits by making the decisions in their own favour. Land supply was one
such prerogative. Thus, the unprivileged had to fend for themselves in the
informal locations as per availability of land. Many negative repercussions have developed in the
course. The inner city ring of Karachi between 0-10 kilometers radius has
most of the upper income groups residing in the area. Squatters and
low-income localities are far away making the poor to commute long
distances to their places of work in dilapidated transport systems. In the procedures of land development and supply, the
distinction between formal and informal sector is swiftly diminishing due
to the incapability of the formal sector to control the overall factors
that affect land market. The concepts and implementation mechanisms of the
public sector have begun accepting the existence of informal sector
operations to a considerable extent. This is evident from the fact that evictions of
informal settlements have been taken after cautions and the government
regularises them in the usual working norms. De-facto ownership of land is
now given due regard in the development operations and is often
temporarily recognised. Incremental housing development, in comparison to the
other options of land supply and housing, has been found as the most
effective mode that can ensure transparency. It has the advantage of
possessing adaptability for urban, semi urban and rural areas due to its
flexibility of approach. The concept requires basic institutional cover
from the provincial government, city and district governments and the
other departments of the province for application. Without a parent law, land allotment will become
dubious. Use of discretion shall supersede the institutionalised handling
and management of land assets. Grey areas shall also evolve between
government to government transfers of land. Another core area of contention has been the reserve
prices and market prices. For valuing land, the reserve prices were
normally fixed without any scientific criteria. However, it is important
to note that the cumulative reserve price could only be determined upon
the finalisation of land use, prescription of correspond
criteria/indicators of infrastructural inputs, macro scale locational
characteristics and prospective development projects finalised by the
government.
Changing
policy patterns Pakistan attracts the interests of big-bosses of this
globe due to its geography and the Pakistan-specific chapter of the war on
terror. After the death of Osama Bin Laden, the country entered into
backdoor planning to further administering the interest of what we may
call ‘international establishment’. This would at least keep Pakistan
into the arena of next plan for “western belt of South Asia”. Hence,
technically this can be called western belt of South Asia. The coming general-elections of Pakistan is the
ultimate ‘opportunity’ for ‘big bosses’ to construct the plan as
Pakistan is dramatically changing its political nature and this, of
course, furnishes the international policymakers with significant input to
cobble together the ruling-setup of Pakistan. Washington and the international community can choice
their partner with easy access in Pakistan because the total share of
“Pakistan-political-cake” would be divided into six
shareholders/parties. Washington needs multiple choices in Pakistan. By
this logic Washington could exercise couple of option, to erect and
support the. Within Pakistan the liberals wouldn’t be in a
position to sideline the non-liberals because of religious and
fundamentalist roots and this phenomenon would further strengthen the
point of view of Washington policy for intervention in South Asia,
especially in Pakistan. The next ruling of Pakistan would determine the
support to implement the required actions for the same plan because the
coming years would face the energy shortage and this region would suppose
to solve the requirement of energy issue and long-term military basement. Therefore, Southern-Pakistan is the central and ideal
land to implement the western belt plan of South Asia and this would lead
the Washington to add its input in politics of Pakistan. For the implemenation of the same plan, Washington
needs sick democratic Pakistan which could obey the formal and informal
instruction, therefore, international policymakers wouldn’t add the
value to strengthen democracy in Pakistan. The leaderless Pakistan would face the trouble of bad
governance and corruption while the appearance of any resistible
revolution is almost insignificant whereas economy would be subject to
international financial institutions. However, the role of Pakistan military would be
subject to new government because the tenure of most of the military high
command would be retried in the next year and the coming government could
select the new favourite military high command. In case of inverse-circumstances, which could be
military rule, then Washington could manage the same plan using informal
support to military rule as the same model of Musharraf regime. Meanwhile,
the probability of military rule is somehow low due to activism of Supreme
Court and political parties. Appointment of the new chief justice of Pakistan would
be the opportunity for the new government. Therefore, the command of
military and/or Supreme Court, could produce resistance in the
implementation of plan for western belt of South Asia while international
policymakers could address the same issue by injecting economic shock in
the economy of Pakistan. This would create the pressure on Pakistan
policymakers to deal with Washington. The common Pakistani prefers short-term benefits. He
or she also has a short memory while the wisdom of political awareness is
almost dying which gives additional support to local and international
players to perform in Pakistan. Washington has less time to address the
issue pertaining to the western belt of South Asia via Pakistan. The
coming general election is the zero point for the same plan. The writer is
Senior Economist Pakistan Institute of Labour Education and Research bilaleconomist@hotmail.com Lacking
fuel for the fire Only a strong domestic industrial and agriculture base
in the country can ensure a strong economy, presently at a critical stage
in the wake of rising twin deficits — fiscal deficit and current account
deficit. The Planning Commission has estimated that the total
investment of about $4 billion per annum is required to meet the
country’s energy needs which are projected to grow at a pace of 2.0 GW
per year in the next five years. According to an updated version of the Pakistan
Integrated Energy Model Policy Analysis Report, almost 12 GW of new
capacity will be added to the system by 2015, of which over 8.0 GW is in
planning stage. The report represents a least cost development path for
the Pakistan energy sector that supports the government’s projections
for GDP growth. However, the projections depend on many factors such
as the demand projections, the prices assumed for fuel, the cost and
performance of the future technology options, the future characteristics
of the existing and committed power plants, and demand sector end use
technology choices. Growth of Pakistan economy has become a tricky
business. No foreign investment can be chipped in without a reliable and
affordable supply of energy. Furthermore, as the past several years of
load-shedding have demonstrated, it is not just the economy but the
quality of life of the people of Pakistan is at stake if the country is
not able to identify a reliable roadmap for its energy future. The options are many and major decisions need to be
made by policy makers. The energy requirements would become double than
present and it would cross the figures 120 MTOE (million tons of oil
equivalent) in 2015 if the government plans to achieve the growth target.
It may be mentioned here that Pakistan meets 80 percent of its energy
requirement through import. On the other hand, international prices of oil have
not only broken the past records but touching new heights which, directly
or indirectly, are affecting the black gold industry badly. Speculators estimate that the oil prices would reach
to $100 per barrel very soon. Wapda, for producing electricity, purchases
oil at high price and shifts the financial burden on the consumers. High
electricity tariff has already affected the entire economy. It is because
the rising prices of daily life items decrease the real income of the
people. There is a general impression that the basic reason of
energy crisis is the irrational, short-term and wrong policies of the
government. The government needs to overcome the corruption-marred poor
policy making to take necessary and important decisions at the right time.
It should also focus, develop, and promote other
resources of energy like atomic energy, search, and use of natural gas,
import of natural gas, solar energy, coal and wind energy, apart from oil.
Energy crisis has declined the industrial production
by 50 percent due to which the rate of unemployment has increased. This
crisis has set damaging effects on the fixed income groups because the
cost of goods and services increases rapidly. Pakistan economy is under strong pressure of energy
crisis. The ongoing world recession is adding fuel to the fire. Business
community is not happy with government performance as far as resolution of
energy crisis is concerned. The industrial growth is upside down. Forced closures
for long hours have made many production units unviable across the
country, particularly Punjab. Agriculture sector has also taken the hit,
impacting the farming capacity due to short supply of energy. Meanwhile, high inflationary pressure, likely to stay
at 12pc during the current year, has shed economic growth further due to
limited availability of credit to the private sector. Textile industry is
expressing its inability to export inflation. A dismal industrial growth has resulted in massive
unemployment. The textile industry is pursuing the government for
sustained gas supply to the Captive Power Plants. The government is unable
to do so because of high demand from domestic consumers. Closing down of
gas-dependent mills is leaving labourers out of job on a large scale. As a
result, street crime is on the rise. Many industrialists are receiving
threats of kidnap for ransom. One way of tackling the ongoing energy crisis is
permanent closure of gas-dependent Captive Power Plants (CPPs),
particularly in textile industry, relatively a cheap fuel against furnace
oil to generate electricity. There is a tariff difference of about Rs3 per
unit between the mills with gas-dependent CPPs and the Pepco-fed units. The CPPs consume 600MMCFD gas with low efficiency,
which means more wastage of precious fuel in generation of electricity.
All these CPPs should be handed over to Pepco for power generation. It
should be mandatory for Pepco to ensure 24/7 smooth supply of electricity
to the industry. Pepco can also introduce special tariff for industry, a
bit higher than what costs these mills on CPPs. The industry circles have only one apprehension on
this arrangement that the government would not be able to ensure priority
of electricity supply to industry. They are of the view that they would
not only be deprived of their present share in gas but also electricity
supply. The government should act fast and legislate on this point for
prudent use of gas as a fuel to produce cheap electricity and keep
industry wheel running uninterrupted. The writer is
President American Business Forum, Chairman and CEO NetSol Technologies,
Honourary Consul of Australia for the province of Punjab, Pakistan and
former Co-Chairman of Federal Government’s Task Force on Information
& Communication Technologies) development With the passage of the 18th Constitutional Amendment
the simmering questions between the federation and the federating units
have been addressed to a greater extent. The abolition of the concurrent
legislative list and devolution of major subjects and functions related to
social sector and service delivery have provided provinces with greater
autonomy, authority and resources to develop their policies, priorities
and initiatives to address long standing development needs of local
communities. Some analysts have said that the 18thConstitutional
Amendment, wittingly or unwittingly, has implemented 4.5 out of six points
of Sheikh Mujeeb-ur-Rehman, seeking greater provincial and regional
autonomy coupled with fiscal decentralization. The centralist tendencies of the Pakistani state were
reversed by the political wisdom of democratic forces after more than six
decades with the heavy cost of breaking of the country and rupture of the
state and the society. The 18th
Constitutional Amendment has, indeed, brought major structural
changes by rewriting the federalist character of the country. It has
shifted the focus of the state from a unitary and centralist to a
participatory and inclusive federation. Although the federating units have
emerged as autonomous and authoritative entities of the governance, yet
without the elected local governments in the country, the state of
Pakistan remains incomplete. As the Article 7 of the Part II of the Constitution of
Pakistan defines: “... ‘the State’ means the Federal Government, [Majlis-e-Shoora
(Parliament)], a Provincial Government, a Provincial Assembly, and such
local or other authorities in Pakistan as are by law empowered to impose
any tax or cess.” Article 32 of the Principles of Policy also emphasises
that, “The State shall encourage local government institutions composed
of elected representatives of the areas concerned and in such institutions
special representation will be given to peasants, workers and women”. The amended Article 140 (A), however, clearly
identifies three tiers of the government as constitutional foundations of
the State of Pakistan. The 18th Amendment, however, has further laid down
four fundamental benchmarks for the local governments, which include:
political, administrative, financial and electoral. The Article 140 (A) (1) of the Constitution reads:
“Each Province shall, by law, establish a local government system and
devolve political, administrative, and financial responsibility and
authority to the elected representatives of the local governments.” Moreover, sub-clause 2 of the same article stipulates
the election assignment by stating: “Election to the local governments
shall be held by the Election Commission of Pakistan.” While Chapter I
of the Part VIII of the Constitution elaborates the roles and
responsibilities of Chief Election Commissioner and Election Commission in
nine sequential Articles (See Article 213, 214, 215, 216, 217, 218, 219,
220 and 221). If Article 7 is read in conjunction with Article 140
(A) (1), the intent of the legislature has unequivocally been embodied in
the Article cited above. And bare reading of the text indicates that the
constitutional definition of State remains incomplete without elected
local governments in Pakistan. Thus, a basic and an important link will
remain missing in Pakistan unless provincial governments move with a sense
of urgency to put in place the third tier of governance under their
jurisdictions. The federal republic of Pakistan has 117 districts,
including 7 federally administered agencies, 8 city districts, 358 tehsils,
62 towns and 6,138 union councils consisting of over 50,000 villages. In
the absence of elected local government the citizens of these areas are
denied of their constitutional right to representation at political and
fiscal fronts. The development needs and demands of these areas are
not being articulated and included in the overall budget making as these
are the provincial governments making arbitrary decisions for these areas.
This distant and vertical decision making is creating fiscal and political
distortions in the country. This is evident from a recent Punjab Fiscal Study
conducted by Department for International Development (DFID) (2010) which
has identified five categories of fiscal distortions in Punjab which
include: increasing number of development schemes, faulty sectoral
allocations, huge number of unapproved schemes, block allocations,
regional disparity in allocations and disconnect with recurrent budget. In all four provinces, the local government funds are
being decided and diverted by the provincial headquarters which encourages
elite capture and leads to regional and sub-regional disparities. The spirit of the 18th
Constitutional Amendment and the 7th NFC Award is being mutilated
by the provincial authorities and political leadership. Therefore, it
becomes incumbent on the provincial governments that they comply with the
constitutional command of putting the elected local government systems in
place to reap the dividends of political and fiscal devolution ushered in
by the 18th Amendment and
7th
NFC Award. Local governments still remain the unfinished agenda
item for the Pakistani democracy on the one hand and the state of Pakistan
remains incomplete without the third tier of governance in the country on
the other. The writer is
Executive Director of School of Political and Strategic Communications,
Islamabad. Email: amjad.544@gmail.com) Poison
in the air South Asia with a combined population of roughly 1.6
billion people, is a low-income region and home to half of the world’s
poor. With increasing urbanisation and economic growth and having a
quarter of the world’s population, air pollution is an increasing
concern in South Asian countries. Environmental degradation remains a challenge in
almost all the countries of South Asia. With the increase in industrial
activity, exponential growth in the number of vehicles and population, the
contribution of each country to the South Asia regional air pollution will
increase over time. Emissions levels of Sulfur dioxides, nitrogen oxides
and suspended particulate matter have been rising steadily over the past
few decades. The suspended particulate matter (SPM) is of great concern in
South Asia. In most of the countries, the levels of SPM exceed the
national standards and cause severe health impacts and environmental
damage. WHO guideline levels of suspended particulate matter (SPM)
exceed in the air of most of mega cities of South Asia owing to economic
growth and increasing the energy demand, greenhouse gas emissions have
risen in South Asia by about 3.3pc annually since 1990. Coal is the main
source of energy in the region, followed by natural gas. South Asian countries — Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka — have carried out a number of
projects/activities for the creation of a meaningful framework to limit
air pollution. A greater participation of member states is required
and a regional framework is needed for better understanding and
cooperation among the member states, on issues related to air pollution.
An effective implementation of a regional framework with shared
responsibilities towards air pollution reduction measures across the
member countries is vital for sustained economical growth, protection of
environment and to safeguard public health, especially of future
generations, in the region. A number of international Conventions and Treaties
have also been signed by most of the South Asian states and every member
state has constituted its own designated organisational authority for the
implementation of international conventions and treaties. The major hurdles in the implementation of these
treaties and conventions are common to all states, which include lack of
financial and technical support, lack of coordination, inefficient legal
and regulatory framework, no access to relevant databases and lack of
awareness among the local populations. SAARC could be a possible forum, to provide support
for establishing forums and to look into ways and means in generating
possible support for air pollution reduction in the region. While SAARC has been in function for about 25 years
now, the impact of this framework, especially with regard to air pollution
is yet to be seen. SAARC needs to be strengthened with a monitoring and
evaluation mechanism to observe whether the member countries are making
progress on reducing air pollution and its associated impacts in the South
Asia region. There needs to be a mechanism of binding commitments
so that member countries keep the promise of reducing air pollution
seriously and if it could be mandatory for them to make some progress in
this regard. Through technical assistance protocols, countries
would be able to learn from each other, thereby making the goal of
minimising air pollution and its trans-boundary effects not only possible
but also achievable. It is also strongly recommended that SAARC summits
should be more frequent so that the momentum of the agenda of air
pollution is not lost. Air pollution leads to atmospheric transport of
pollutants, affecting countries of the region in more than one ways, thus
making air pollution a regional issue. Being a regional problem, no one
country, especially in a poor and diversified region like South Asia, can
tackle it at its own. Lack of financial support, skilled and trained
manpower, technology and technical know-how further limit one single
country capability to handle it. As air pollution impacts the region, to
combat it, a regional focus and approach is essential in which all member
countries of the region have a role to play with equal but diversified
responsibilities. The objective of a Legally Binding Agreement for South
Asia (LBA-SA) should be to protect human health and ecosystem by setting
up time framed air pollution reduction targets. Some salient features of the envisaged LBA-SA could
be: (a) the recognition of the problem of increasing air pollution in
South Asia and its resulting environmental, economical and health impacts
on the population of the region (b) reduction of air pollution through the
exchanges of information, consultation, research, monitoring., policy and
assessments. (c) the recognition that obligations regarding control and
reduction of emissions of agreed air pollutants, should allow for flexible
and differentiated national programs, to be implemented by individual
parties to the agreement. This would be to achieving the most
cost-effective and environmentally benign improvements of air quality in
the whole region. For the implementation and further development of the
programme for monitoring and evaluation of long-range transmission of air
pollutants, a comparable or standardised procedure for monitoring is
strongly recommended which should be based on the framework of both
national and international programmes. Mechanisms would also need to be established for
capacity building, finance, intra-state available technology transfer,
knowledge and information exchange. The specific elements of the LBA may
be further built up on the above to address/accommodate “Policy Actions
at the National and Regional Levels.” The LBA-SA should acknowledge and ensure an active
role of civil society in the development and implementation of the LBA-SA
and finally, among others, the LBA-SA should establish effective and
enforceable treaty compliance provisions. Importantly, such an instrument would encourage
governments to pass legislation in their respective countries, set up or
revise and improve minimum emission standards for industrial, vehicular
and brick kiln emission, use of filters to clean emissions and improved
fuel quality, banning the use of unclean or ‘dirty’ fuels for domestic
or industrial consumption. The writer is
senior advisor, chemicals and sustainable industrial development at
sustainable development policy institute (SDPI), Islamabad
performance The Planning Commission recently announced that it is
working on a plan to lower major economic targets for the next financial
year because of economic difficulties and transfer the responsibility of
financing social sector projects to the provincial governments from the
Public Sector Development Program (PSDP). This will be a major restructuring of the planning
process but will also radically change the composition of the PSDP in the
next budget. It is also reported that the Commission will see induction of
provincial members to represent their provinces in a major policy
formulation and development planning in accordance with the 18th
Amendment. Starting with the next budget, the federal government
will largely move out of the social sector and it will become the
responsibility of the provinces. However, the centre will complete the
ongoing development schemes and will continue to support higher education
sector. It is expected that despite political compulsions, the
size of next year’s federal PSDP would be around Rs350 billion, instead
of Rs470 billion envisaged under the medium-term budgetary framework (MTBF)
and budget strategy paper (BSP) introduced last year. Likewise, the
provincial PSDPs will be of around Rs495 billion instead of Rs680 billion
estimated earlier. With these cuts the overall size of the PSDP will
hover around Rs950 billion instead of Rs1150 billion earlier estimated for
the next financial year and the development expenditure will be about 3.6
percent of the GDP instead of five percent estimated in the MTBF. It is also speculated that owing to political
pressures the size of the PSDP might be increased. And if unreasonable
spending is not resisted it might push up budget deficit now being
targeted at 4.5 percent of the GDP for next year. During the year 2011-12 the total allocation of annual
developmental budget was Rs 730 billion which provided the provinces with
Rs430 billion while the share of federal government was Rs300 billion. Out
of this total allocation, the Rs155 billion was allocated for
infrastructure, Rs122 billion for social sector and Rs23 billion for
others sectors. The Commission officials also reported that major
macroeconomic targets for the next year envisaged in the Mid-term
Budgetary Framework had already become unrealistic and would be scaled
down. Simultaneously, the economic (GDP) growth rate for the year is also
revised to a mere five percent instead of 5.5 percent estimated earlier,
and the inflation target will be set at 10 percent. The target for tax revenue is being lowered to 10.7
per cent from 11.7 percent and non-tax revenues by 0.2 percentage points
to four percent. The total revenue is estimated at 14.7 percent instead of
the earlier estimate of 15.9 per cent of GDP. The existing composition of PSDP, including
infrastructure, social sector, would be replaced by productive activities,
infrastructure development, social development, special areas and special
programmes. The NGF will focus on productivity enhancement, investment in
software instead of hardware, competitiveness, domestic markets, new role
for cities and entrepreneurship. These changes in development planning and budgetary
structures represent a paradigm shift and must be analysed. There may be
some merits behind this new paradigm of planning but it can only be judged
if the new thinking is applied with some sense of learning from the past
mistakes and focus more on substantive development issues ignored for
decades. Though it can be argued that there is no strong and
clear relationship between PSDP and economic growth but the reality
remains that it has been the only source of trickling development down to
those the most marginalized and deprived. Other sources of development are
meager and far below people’s needs. Among several reasons of failure of PSDP ensuring
sustainable development is that the focus of these funds has largely
remained on infrastructure building, ignoring genuine needs of social
development of communities facing worst forms of neglect, deprivation and
under-development. Most of the infrastructure projects benefit the
already privileged and urban population. Till last year, a major chunk (57
percent) of Pakistan’s Rs300 billion PSDP was spent on infrastructure
building, involving nuclear energy, power, railways and communication and
only 42pc was invested on the development of social sector. The amount is normally reduced owing to government’s
efforts to lower fiscal deficit, low and stagnant tax to GDP ratio and
rapid growth of current expenditure. Previous governments have been
cutting the size of PSDP during mid-year reviews if their expected revenue
or funding targets are not met according to the expectations. For every Rs100 allocated in PSDP, Rs38 do not reach
the beneficiaries. The benefits of PSDP could only reach if approval and
implementation processes are put in place through reforming the planning
mechanism in the country. It is also a fact that PSDP heavily relies upon
foreign assistance and suffers drastically due to uncertainties whenever
flow of assistance is stalled. PSDP provides lubricant to the economic
growth engine while involving the hard and soft services. The programme takes into account important subjects
such as infrastructure, social development, production and disaster
management. The country was facing fiscal constraints during the
transition phase of transferring the subjects from Federation to provinces
under 18th Amendment. While there will be shift in this thinking we expect
more focus on social sector, including primary education, basic health,
public health, water and sanitation and farm level infrastructures as
opposed to large-scale infrastructure projects. It also needs to be understood that economic growth is
one of the major factors in boosting the economy of a country and no
progress can be made without increasing the long-run growth rate,
therefore, a new approach is required to improve the economy. Growth rate has been volatile and the long-run growth
is continuously declining because we have forgotten economic growth as
policy and ignored our social development needs that are pre-requisites to
any economic growth. Pakistan is the only country in South Asia where
long-run growth rate is continuously declining. It also needs to be understood that the PSDP cannot
alone increase the growth rate. Besides building infrastructure, there
shall be higher focus on better and efficient government, good governance,
competitive markets, better social development, creative cities and
conducive environment for trade and entrepreneurship. We need to manage all the sectors, including rural
development that will benefit a large percentage of population already
impoverished and living in extreme conditions. Similarly, the growth
strategy must target youth and community. Among several other constraints
of growth, there is a lack of competitive markets and government reforms
and lack of professionalism to economy and focus on policy and
regulations. The issue is not policymaking or making regulations
but their implementation. Bureaucratic set-up is the main hurdle in the
implementation process. Now the issue is how to develop a vibrant youth
and community. Countries cannot grow economically and socially without
providing children a quality education, ensuring better health,
controlling child and women mortality, effectively dealing with disasters
and other basic and urgent needs of its citizens. Unfortunately, education
is not our priority and we spend only 1.24 percent of the budget for
education while countries like Malaysia is spending 23 percent of its
budget for this purpose. The reforms agenda can only benefit if it rationalises
projects maintaining a priority-based completion criterion, building human
capital and undertaking development project in public-private partnership,
assuring full release of PSDP budget without cuts and careful
re-estimation of cash flows and benefits. We hope that the new planning
framework will take into account these basic needs. The writer is
Deputy Chief of South Asia Partnership Pakistan and Global Campaigner irfanmufti@gmail.com
The capital
movement The global foreign
direct investment (FDI) peaked in 2007 ($1.97 trillion) before falling to
$1.74 trillion in 2008 and $1.18 trillion in 2009 as the world economy
passed into recession. In 2010, FDI rose by 12
percent to $1.24 trillion. Between 2007 and 2010, worldwide FDI fell by 59
pc. In case of Pakistan, the fall in FDI inflows has been even larger. In
2007, the country received FDI of $5.59 billion, which dropped to $5.43
billion in 2008, $2.33 billion in 2009 and to $2.01 billion in 2010. In all, FDI inflows into
Pakistan have come down by 178 pc between 2007 and 2010 and the
country’s share in global FDI receipts has dropped from 0.28 pc to 0.16
pc during this period. A series analysis of FDI
inflows worldwide based on the data reported in Unctad Handbook of
Statistics 2011 brings out the following facts: Developed economies have
seen their FDI inflows fall significantly from $1.3 trillion in 2007 to
$965.11 billion in 2008, $602.83 billion in 2009 and $601.90 billion in
2010. Their share in global FDI has dropped from 66.27 pc in 2007 to 48.40
pc in 2010. Developing economies saw
their FDI inflows increase from $573.03 billion in 2007 to $658 billion in
2008 before falling to $510.57 billion in 2009. In 2010, the FDI receipts
went up to $573.56 billion. The fall in FDI in 2009 was mainly due to
recession in the developed countries, which are the major source of
capital inflows. The developing countries’ share in global FDI has
jumped from 29 pc in 2007 to 46 pc in 2010. In case of transition
economies, FDI inflows increased from $91 billion in 2007 to $120.98
billion in 2008 before falling to $71.61 billion in 2009 and further to
$68.19 billion in 2010. However, their share in global FDI has gone up
from 4.62 pc in 2007 to 5.42 pc in 2010. In case of the least
developed countries (LDCs), FDI increased from $26 billion in 2007 to $33
billion in 2008 before falling to $26.53 billion in 2009 and to $26.39
billion in 2010. Their share in global FDI has marginally increased from
2.0 pc in 2007 to 2.1 pc in 2010. Among trading blocs, the
27-member European Union (EU) remains the largest recipient of FDI though
its share in global inflows has gone down sharply in both absolute and
relative terms. In 2007, the EU with $850.52 billion receipts accounted
for 43 pc of FDI. In 2010, it received only $305 billion FDI and its
global share was 24.50 pc. In case of the Saarc
region, FDI inflows increased from $32.62 billion in 2007 to $50.28
billion in 2008 but fell to $39.44 billion in 2009 and $28.33 billion in
2010. The share of Saarc in global FDI inflows went up from 1.66 pc in
2007 to 2.28 pc in 2010. Within the region, India remains the largest
beneficiary of FDI, with receipts of $25 billion in 2007, $40.4 billion in
2008, $34.6 billion in 2009 and $23.7 billion in 2010. Indian share in
global FDI inflows went up from 1.27 pc in 2007 to 1.91 pc in 2010. China, the USA, the UK,
France, Germany, Hong Kong, and Singapore remain the principal recipients
of FDI. In case of the USA, the largest recipient of FDI, inflows
increased from $216 billion in 2007 to $306 billion in 2008 before falling
to $152 billion in 2009. In 2010, FDI again rose to $228 billion. The
country’s share in world FDI receipts has risen from 11 pc to 18 pc
during this period. In case of China, FDI
inflows increased from $83.5 billion in 2007 to $108.3 billion in 2008
before falling to $95 billion in 2009. In 2010, FDI again rose to $106
billion. The country’s share in world FDI receipts has risen from 4.24
pc to 8.50 pc during this period. In case of the UK, FDI
inflows dropped from $196.39 billion in 2007 to $91.48 billion in 2008,
$71 billion in 2009 and to $46 billion in 2010. In case of France, FDI
inflows came down from $96.2 billion in 2007 to $64 billion in 2008, $34
billion in 2009 and $33.90 billion in 2010. In case of Hong Kong, FDI
inflows increased from $54.3 billion in 2007 to $59.6 billion in 2008
before falling to $52.39 billion in 2009. In 2010, FDI again rose to $69
billion. Among developing
countries in addition to China and Hong Kong, Saudi Arabia has emerged as
a major FDI recipient. The Saudi FDI receipts rose from $22.8 billion in
2007 to $38.1 billion in 2008 before falling to $32 billion in 2009 and
$28 billion in 2010. Among the transition
economies, Russia is the major FDI destination. The Russian FDI receipts
rose from $55 billion in 2007 to $75 billion in 2008 before falling to
$37.62 billion in 2009. In 2010, FDI increased to $41 billion. Why do a handful of
countries continue to have the lion’s share in FDI inflows? Why do all
the LDCs taken together as well as the entire SAARC region receive FDI
half the level of that goes into the small territory of Hong Kong? The
answer can be given by highlighting the following factors which promote or
restrict FDI inflows. One reason for low level
of FDI in LDCs and most developing countries including South Asia is low
per capita income. This is a catch 22 situation for these countries, which
need FDI to bridge the gap between domestic savings and the desired level
of investment caused by low per capita income.
Generally, the larger a
market, the greater attraction it holds for foreign investors. This is for
at least three reasons. In the first place, a large market has a high
level of aggregate demand. In the second place, a large market makes it
possible for businesses to actualize the economies of scale and thus bring
down the cost of production. In the third place, in a large market
generally surplus labour is available which increases the marginal utility
of capital. An obvious example of the relationship between market size and
FDI inflows is China. However, mere market size, though important, is not
sufficient to attract FDI. A case in point is India, the second largest
market after China, whose share in global FDI is less than 2 pc compared
with China’s 8.50 pc. Created assets, the
existing level of human resources and commercial and physical
infrastructure, are also important. It is created assets which partly
explain why a tiny Hong Kong receives more FDI than a giant India. Another important factor
is protection of investment and the related assets such as intellectual
property rights. But there are exceptions. China, for example, lacks an
effective IPRs enforcement system but still it is the most attractive
market for foreign firms. Then there is the
overall investment climate including the investment related policies of
the host government and the domestic political and economic environment. A
country characterized by economic and political instability, bad law and
order, poor governance, adhocism of policies, a negative political image,
corruption in high places and lack of fair treatment to foreign
enterprises does not have a good potential for foreign investment, because
these factors increase the risk of doing business. Many developing
countries including Pakistan do not fare well on these counts.
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