Despite repeated assurances from government high-ups, the ever-increasing energy crisis continues to take its toll on the country's economic growth in general and the industrial sector in particular. Representatives of the manufacturing sector have raised this issue at every platform and even threatened to shut down until they start receiving uninterrupted power supply. The owner of a textile mill, Jaguar Textiles Mills Ltd, even threatened to commit suicide in case the government's promise of providing uninterrupted power supply to industry was not fulfilled. But despite all this, the problem seems to persist and pessimism prevails among the major stakeholders.

Economic experts and representatives of the business community fear that the unavailability of power supply to industry will be a major reason for the country's failure to meet several targets for the ongoing fiscal year. To name a few, Pakistan is much behind the set targets of exports, trade deficit, revenue generation and overall growth. The unprecedented escalation in oil prices, which touched $147 per barrel at one stage, was also a major impediment to industrial growth last year. However, surprisingly, the continual decrease in oil prices since July has not helped much.

The situation is so bad that even a mill owned by the federal adviser on textiles, Dr Mirza Ikhtiar Baig, has been shut down, mainly due to the energy crisis and the high cost of doing business. Baig Spinning Mills Ltd, a big name in the industry, closed its production units long time ago and all efforts to revive it failed because there was no positive change in the fundamentals. The fact that a liquidator was appointed, all payments of banks cleared and shareholders accommodated to an extent shows that the financial problems the mill was facing were much less than those caused by the energy deficit.

Muhammad Arif, a manager at Style Textiles in Lahore, tells The News on Sunday that the energy crisis has pushed them to a wall and they are finding it hard to meet their commitments with international buyers. Short of gas, his factory is burning wood to generate power and maintain the minimum required temperature in boilers. "On average, we need 1,000 kilograms of wood to meet our daily needs," he informs.

Arif says they had switched to gas some years ago when electricity tariff was increased drastically by the government. "Now gas has also become a rare commodity, forcing the closure of manufacturing units." He thinks the most pressing task they are faced with is to meet the international commitments. "Once we are done with this, we will decide whether to take new orders from foreign buyers."

The fact that the most protests have taken place in industrial cities like Faisalabad, by workers of the textile industry, does not mean that other sectors are not pressed to the limit. The reason they are so prominent is that the textile sector is the most organised in the country. Otherwise, not a single manufacturing sector is able to reconcile with the existing state of affairs.

A recent news report has revealed that the current energy crisis has also affected the production of the pharmaceutical industry adversely in the country and led to shortage of essential medicines, including the live-saving ones. It also fears missing the export target of about $1 billion by 2010, says Pakistan Pharmaceutical Manufacturers Association Chairman (North) Muhammad Asad.

The pharmaceutical industry is facing difficulties in production of life-saving medicines because of the load shedding of gas and electricity. The industry's representatives demand that it should be exempt from load shedding in public interest just like hospitals, which are provided regular power supply on the orders of the government.

Federal Advisor on Petroleum and Natural Resources Dr Asim Hussain says during last six to seven years no appreciable exploration has taken place in the country while the demand continues to rise. Citing the example of gas, he says: "During the last one year 235,000 new consumers have been added, 770 CNG station set up and 4,700 new commercial connections installed, but without any appreciable exploration." He adds that between December and February, gas supply is discontinued to the industry and ensured to domestic consumers. "Even then the shortfall is more than 500 million cubic feet and is increasing every day."

To sustain, a large number of industrial units are now generating power themselves. However, this option is available only to those who can afford it. Small mills are not in a position to afford self power-generation and have to rely on the Water and Power Development Authority (WAPDA) as a backup when gas is not available. That is why smaller units like power looms have shut down, and thousands of people have been rendered jobless or forced to work on hourly basis.

Now let us have a look at some statistics released by the concerned ministries and departments. According to the Ministry of Commerce, the country's trade deficit increased to $9.559 billion in the first half of the current fiscal year as compared with $8.292 billion in the same period of the last fiscal, indicating an increase of 15.27 percent. The major reason for this, according to the ministry, is declining exports, caused by the unprecedented load shedding of power and gas.

Provisional figures compiled by the Federal Board of Revenue (FBR) show that the collection of direct taxes remained short of the target by Rs25.4 billion during the first half of the current fiscal year: Rs203.6 billion against Rs229 billion. Finance Ministry officials fear that Pakistan will miss the annual revenue target set under the IMF programme, owing to the slowing down of the economy and sluggish growth of the large-scale manufacturing sector. They also believe that the energy crisis is one of the biggest reasons for the negative growth of the large-scale manufacturing sector in the country.

However, FBR spokesperson Mehmood Alam, who is also member Facilitation and Taxpayers Education, tells TNS that the exact impact of the energy crisis on revenue collection cannot be calculated. He says though the energy crisis has a direct link with shortfall in revenue collection, it is hoped that the situation will improve soon.

Many social observers make a strong argument for the interrelationship between freedom and development. A United Nations Development Programme (UNDP) study published in the mid-1990s revealed a high correlation between human freedom and human development; countries that rank high on the freedom index also rank high on the developmental scale. The theory is that potential freedom unleashes the creative energies of people, resulting in higher levels of income and progress.

This, however, does not always work in practice. The classic example is post-communist Russia. Although there is much more human freedom in today's Russia than there was in the former Soviet Union, the Russian economy is much weaker than the Soviet economy was. Through most of the 1990s, the Russian economy shrank by 20 percent a year, with the result that by about 1997 Russia's economy was about the same size as that of tiny Denmark. The reason for this decline was mismanagement; a problem compounded by Russia's fumbling attempts to replace command-economy mechanisms by market-economy institutions.

It is only in recent years that the Russian economy has picked up again, boosted by high oil and gas prices that Moscow exports in huge quantities to Western Europe. Today, Russia is flush with cash, while other countries around the world are being squeezed by the global credit crunch triggered by the collapse of the US financial sector, including some of the biggest names in the business. But with the recent steep decline in oil and gas prices, economic growth in Russia is likely to nosedive.

When switching from a socialist command economy to a market economy, the Chinese did not make the mistake that the Russians did. China adopted a market-economy strategy, but retained its socialist political system. This helped China to make a much more orderly transition from a command economy to a market economy. As a result, the Chinese economy has been the world's fastest growing economy for the last 20 years. As the figures for 2008 show, the Chinese economy is now the third biggest in the world, behind only the US and Japanese economies. If China's present growth rate of over nine percent a year continues, it is expected to overtake the United States as the world's biggest economy by 2030.

Philip Kotler, Somkid Jatuspripitak and Suvit Maesincee, co-authors of the path-breaking study The Marketing of Nations, argue that, "Although a good economy, a good society, and a good political process are all desirable, they are difficult to achieve." In fact, they are in a trade-off relationship with each other in many cases, the authors of the study argue. Some of the major trade-offs are:

More freedom means less social cohesion and less security.

A healthy environment may require a slower income growth.

Technology transfer means high interdependence in international relations.

High income growth and equal income distribution are difficult to reconcile; the goals of human capital growth may conflict with the goals of savings and capital formation.

An overvalued exchange rate, meant to keep import prices low to help consumers, may ultimately lead to a currency crisis.

International competitiveness of one nation is often built at the expense of other nations, leading them to retaliate (this is what happened in the case of Japan).

High employment and stable prices do not always go together.

Economic development is not a problem that belongs only to economists; social, cultural and political factors must be taken into account in arriving at a full picture of a nation's "opportunity potential". The authors of the study argue that the key to economic development is to build the nation's vision and macro-policies on a firm understanding of how organisations and individuals initiate behaviour and respond to stimuli.

"The assumption that businesses are pure profit maximisers and consumers are pure utility maximisers can carry the analysis only so far," the authors argue. "Indeed, these assumptions can distort the analysis by precluding major cultural and political differences that shape how firms and citizens respond to economic development initiatives," they say.

The authors of the study see a positive role for government to play in setting favourable macro-policies and in establishing micro-support programmes that help businesses realise their full potential in creating wealth. "A nation's government, in partnership with business and various social groups, must achieve a national wealth-building strategy and consensus if it hopes to succeed in the highly competitive global marketplace," they observe.

The authors note that one way to think about a nation's wealth potential (in terms of GNP) is to focus on the distribution of GNP expenditures on goods and services by different sectors – household, business, government and foreign. The consumption of goods and services by individuals and households is termed personal consumption expenditure. The second major category of a nation's wealth is gross private domestic investment – the purchase of goods and services by the business sector. The fixed part of these investments comprises the purchases of new capital goods, such as factories, machinery and equipment. The third category is government spending, comprising government consumption expenditures and public investment.

We can also view a nation's wealth in terms of inputs, throughputs and outputs. As the authors of the study note, the input component comprises factors of production (both capital and labour). "Such factors of production can be inflowing from abroad (by means of inward investment), recycling within the economy (by means of local reinvestment), or outflowing from the economy (by means of outward investment)," the authors note.

These factors of production are then used as inputs for domestic production. "One of the key production tasks is to maximise the output/input ratio (productivity)," the authors note. "The outputs of this production serve domestic consumption and exports. However, when domestic demand exceeds domestic production, this gap is usually filled by imports."

The authors of the study note that government has substantial effects on everyday business and personal choices through such measures as the provision of physical and social infrastructure, fiscal and monetary policy, investment policy, industry policy, trade policy, etc. Government policies encourage or discourage growth and employment prospects through the effects that such policies have on people's choices to save, invest, work and use their leisure.

The objective should be to ensure that incentives created by government policies maximise economic development. Investment policies should strengthen the input component of the nation's economic process, particularly inward investment and local investment. Industry policy should enhance the nation's industrial competitiveness in the global marketplace. The nation's industrial portfolio should be developed to serve both domestic and export markets, and to reduce imports. Thus, trade policies take on a major role here.

Dr Zafar Moeen Nasir belongs to Rawalpindi, where his family migrated from Kashmir. He did his BA from Asghar Mall College, Rawalpindi, and MSc in Economics from Quaid-e-Azam University (QAU), Islamabad. In 1983, he joined the Pakistan Institute of Developmental Economics (PIDE) as a Junior Researcher. In 1989, he got a USAID fellowship to study in America. He did his Master's from Kansas State University in Manhattan. Due to his excellent academic record, the university administration asked him to do his PhD and gave him a teaching assistantship. He secured straight 'As' in both Master's and PhD.

On completion of his PhD, Dr Nasir was offered teaching assignments at different affiliate institutions of Kansas State University. After teaching there for two years, he decided to return to Pakistan in 1997. He joined PIDE again and served as Staff Economist and Senior Economic Researcher. In 2000, he was selected through a global competition – conducted by the International Monetary Fund (IMF), World Bank and Global Development Network – for research proposals in the field of economics. Subsequently, he was offered to conduct research at the IMF Headquarters in Washington, DC. There he worked on an assignment regarding the IMF's role in poverty reduction.

In 2003, Dr Nasir was promoted as Chief of Research of PIDE. In 2006, he joined the Ministry of Labour and Manpower as Director Policy. In this capacity, he wrote three policies for the Government of Pakistan: the National Employment Policy, National Migration Policy and National Human Resource Development Policy. The first has been finalised, while the second is in the final stages. In 2008, he again joined PIDE as Chief Economic Researcher. The News on Sunday interviewed Dr Zafar Moeen Nasir recently. Excerpts follow:

The News on Sunday: What have been the findings of your research study regarding the IMF's role in poverty reduction?

Dr Zafar Moeen Nasir: This study is still incomplete, though it has come up with controversial findings so far. For instance, it reveals that when a country adopts an IMF programme, due to the accompanying conditionalities, it reduces expenditure on the social sector. When developmental expenditure is cut, the vulnerable and poor groups get affected the most, and their consumption patterns change.

TNS: What are the finer points of the National Employment Policy you authored?

ZMN: For generation of employment, there is a need to foster the process of growth. Therefore, the emphasis is on all sectors, including agriculture, manufacturing and services. I have suggested specific programmes for these sectors, as well as identified the issues and given recommendations. If these recommendations are considered and implemented, each sector of Pakistan's economy will grow.

TNS: Does it mean you have recommended deficit financing?

ZMN: No, I am not saying there should be deficit financing. There is no need to put more public money into these sectors, because the infrastructure already exists. You just have to remove some bottlenecks. For instance, there was 'One Village One Product' programme, but so far, I don't see any progress because of it. However, I have suggested very concrete measures, which, if adopted, can improve our rural economy. Though we are producing quality products now, there are no market linkages and standardisation. Therefore, there is a focus on this aspect – having medium- to long-term impact on employment – of growth promotion. Some specific projects can be initiated immediately for employment generation. The first is the National Internship Programme, through which graduates can get the much-needed experience and, if they are good enough, industry will accommodate them. This will be like a link between the academia and the industry, both of which will benefit in the final analysis. The second is the National Training Programme, under which the government can identify with the help of industry the areas where training is required. This way, we will not only have skilled workforce, but we will also create employment opportunities. Thirdly, there can be targeted development programmes under which the government should immediately start construction of houses. In Pakistan, we have a shortage of six million houses, so there is a huge potential in this sector. The only thing the government has to do is to facilitate the process. The construction industry has linkages with more than 50 other industries. Therefore, once construction picks up, all related downstream industries will follow suit. Therefore, our focus is on generating employment though growth on the one hand and through targeted programmes on the other hand.

TNS: Having authored the National Migration Policy, what steps have you suggested for solving the problem of brain drain?

ZMN: It was a big problem until recently. However, with Higher Education Commission's initiatives to bring back talented Pakistanis, the situation is now changing. If the country's economic and security situation improves, many Pakistanis who are settled abroad will return. They have the experience, wealth and wherewithal that they can use for the welfare of our people. We just have to give them a chance, but with better economic and security situation and, above all, good governance.

TNS: What lessons should countries like Pakistan learn from the ongoing financial crisis in the West, especially the United States?

ZMN: Fortunately or unfortunately, Pakistan is not being affected much by the ongoing financial crisis, because it is not largely integrated into the global financial system. However, we have mismanaged ourselves, thus we are facing record current account and fiscal deficits. The lesson is that consumers are the kings in this economic system, but you have to extend cooperation only until a sustainable limit. Don't go beyond your limit, because exactly this has happened in the West.

TNS: What is the conclusion of your research on the current economic crisis in Pakistan?

ZMN: Although Pakistan achieved a growth trajectory of 7-8 percent in the last few years, this growth was volatile. The main reason was that our focus was on the services sector only. Investment in this sector is always fluid: as along as you are getting big returns, you will invest; otherwise, you will shift to some other sector. That was why our stock market and services sector were booming, but there was no real growth in the sectors of manufacturing and, in particular, agriculture. In only the last few years, twice there was negative growth in the agriculture sector. Investment in the manufacturing sector was also inadequate. Similarly, the energy sector was largely ignored.

TNS: Pakistani economists often suggest the top-down approach, such as monetary policy adjustments or exports diversification to arrest economic and financial downslide. Rarely does one suggest the bottom-up approach of economic and financial decentralisation. Why?

ZMN: Because though we can go from the base to the top, we do not have the capacity at that particular level. Even if we devolve the whole system to district or tehsil level, we will not get the required support from there.

TNS: What about the provincial level?

ZMN: We already have some autonomy at this level. Federal resources are distributed among the provinces and they have their own developmental programmes, besides the authority to collect some of the taxes.

TNS: But isn't the revenue base of the provinces very narrow?

ZMN: Yes, it is extremely narrow. The reason for this is that of the 165 million Pakistanis, only 1.3 million pay taxes.

TNS: Do you think that tax collection will improve if a major portion of the taxes is handed over to the provinces?

ZMN: If we are serious in improving the revenue though tax collection, we have to reform the whole system. It is not the question of devolving the process to lower tiers. Moreover, we have to educate the people that it is their responsibility to pay taxes; if they want development, they have to pay their share of taxes.

TNS: Don't you thing that the only way of doing this is to put the burden on the people, because otherwise they may never realise?

ZMN: I think there are many good ways of alluring the people to pay their share of taxes. You can give them incentives, honour their contribution and recognise their sacrifices, so that they feel that they are part of the government. Besides this, chapters on taxes and savings and their importance should be included in the curricula.

TNS: But can we wait that long?

ZMN: It is always right time to start good things.

TNS: In real terms, what percentage of Pakistan's economy is undocumented?

ZMN: There are different estimates. Some people say the size of underground economy in Pakistan is equal the size of documented economy. We can safely say that if the size of Pakistan's documented economy is $160 billion, there is also an undocumented economy of at least $100 billion. Recently, the government launched a programme asking people to pay two percent tax and whiten their black money. However, there is still fear in the people's mind that if they come forward, they will be persecuted. Therefore, we need to devolve a very transparent system to convince people in this regard.

TNS: How important is financial and resource devolution in Pakistan at this critical juncture of the country's history?

ZMN: I think it is high time to rethink our priorities. If we really want to go for financial devolution, then we have to first develop our infrastructure. We need to have some minds sitting at lower tiers who can execute development projects. However, we must fully devolve the sectors of health and education, including skill development.

TNS: What is you view about agriculture income tax?

ZMN: The vast majority of our landowners hold less than 12 acres of land, so agriculture income tax will put an extra burden on them. If you want to get more taxes from the agriculture sector, you have to concentrate on big landlords, who have accumulated a lot of wealth through agriculture.

TNS: Don't you think that the state in Pakistan only protects the interests of dominant economic classes?

ZMN: The reason is that those who have money have been in the parliament and at the helms of affairs. America is dominating the world because it has power, resources and technological capability. Those who have power, resources and technological capability will always dominate.

TNS: But where goes the responsibility of the state?

ZMN: The state in Pakistan has been held hostage by elite classes.

TNS: Why Pakistan has not been able to produce economists of the stature of Amratya Sen and Muhammad Yunus?

ZMN: Pakistan has produced some very good economists, who have served at the highest level. For instance, MM Ahmed has been Vice President of the World Bank; Mohsin Syed has been Director Middle East of the IMF; Hafeez Pasha has served at the United Nations; Sartaz Aziz has served at the FAO; and Masood Ahmed is currently working as Director Middle East of the IMF. However, you are right that we have failed to produce people like Amratya Sen; probably it will take a few more years.

(The author is a journalist and research scholar.

Email: razakhan@yahoo.com)

On New Year's Day, the 50th anniversary of the Cuban Revolution was celebrated within the island republic amidst relatively little fanfare. Predictably the rest of the world paid scant attention. What was circulated on the mass media about revolutionary Cuba 50 years after it came into being repeated the same tired themes of the last five decades: that Cuba is a dictatorship, ordinary people are poor and miserable, and a new age of 'democracy' and 'freedom' will dawn upon Cubans once the Castro brothers are finally replaced.

The power of the media lies in the fact that its narratives remain largely unquestioned. More than all the other repositories of hegemonic ideas in society, including the school, workplace and church / mosque / temple, the media is able to script entire histories of peoples and places, many of which are fictitious; and by spewing out such histories over and over again, it transforms them into immutable 'truths'.

Nevertheless, it is possible to resist media hegemony simply by employing basic intuition. So, for example, if Fidel Castro has been such a brutal and unpopular dictator, why is it that his 'dictatorship' has survived for 50 years? Is he so omnipotent that he has been able to stunt all challenges to his rule? Is Castroism synonymous with the unbridled use of coercive force against ordinary people by friends of the United States, such as Pakistan, Colombia and Egypt?

The answer to such questions is not a secret. Cuba's major income-earning industry is tourism. Millions of foreigners, including Americans, patronise Cuba's tourist attractions every year. Such openness seems a bit inconsistent with the narrative of brutal 'dictatorship'. In fact, by caricaturing Cuba simply as a 'dictatorship', the corporate media – more so in the US than anywhere else – insults the Cuban people, arguably the most politically conscious and mobilised population on the planet.

Why not mention that the social gains that have been made by Cubans in the last 50 years are virtually unparalleled anywhere in the world, especially when one considers the relentless economic embargo that has been imposed on the island by the US almost as soon as the Revolution was consolidated in the early 1960s. Cubans are highly educated and are amongst the healthiest people in the world. As important is the fact that public morality is substantively different from the functional and alienated moral orders that prevail in virtually every other society in the world.

There are, of course, myriad of problems in Cuba, some if not all of which can be attributed to the traumatic economic changes that were forced upon it by the collapse of the Soviet Union and the communist bloc more generally. And the hardships that have been caused by the economic squeeze have produced dissent. There is also dissent against the policies of government more generally. This dissent is, in many cases, openly expressed.

On the whole, mainstream media depictions of revolutionary Cuba tell us almost nothing about what Cuba is, and instead paint a picture that has served the ideological purposes of successive American administrations. This is not to suggest that Cubans do not want change of sorts, as members of any society would. The Cuban Revolution was a social experiment to improve the human condition, transcend the injustices of capitalism and resist the dictates of US imperialism. Any such experiment does not produce a utopia; however, the mistakes made in the course of the Revolution must inform a better experiment in the future.

But what needs to be said about Cuba is that such an experiment was undertaken, has survived and does so because the Cuban people have consciously built the Revolution and the ideals that it represents. Until recent popular upheavals in other countries in Latin America, Cuba remained the solitary example of a revolutionary experiment that stubbornly resisted the hegemony of capitalism and an unending onslaught of imperialism. This was no mean feat. And this is why the 50th anniversary of the Cuban Revolution is such an important event for oppressed people everywhere.

For the better part of Pakistan's existence, we have been told that communists or anyone professing a similar commitment to a world in which human relations are not subordinate to commodity relations are, variously, kafirs, a threat to our freedom, immoral, etc. Of course, the narrative that prevailed throughout the Cold War was cynical to the extreme; on the one hand, Soviets were godless and to be resisted at all costs, while the Chinese – also communists, of course – were our best friends and the 'special relationship' between Pakistan and China was to be coveted for all times.

We never had the benefit of personal contact with either the Chinese or the Soviets through the Cold War period. Following the 2005 earthquake, however, long after the Cold War had ended, we were fortunate to host a large contingent of Cuban doctors. These doctors wore their 'communism' on their sleeves; they gave of themselves selflessly, clearly the most engaged of all foreign relief workers that came to Pakistan following the devastation in the NWFP and AJK.

Subsequently, 'friendly relations' have been established between Pakistan and Cuba: our students are receiving medical training on the island and there is talk of enhancing bilateral trade on numerous fronts. This is no doubt a positive development whichever way one looks at it. But it is worth asking the question: can we ever hope to build a society like the one that Cubans have built over the last 50 years?

We should aspire to. But this means recognising the tremendous sacrifices that the Cuban people have made to build their Revolution, and then to protect it from all kinds of conspiracies and intrigues. There is no guarantee that the Revolution will survive into the unknown future, but it can be said for sure that the Cuban people will not give it up just because the corporate media 'suggests' that they should.

Compared with developed countries, the vast majority of developing countries are facing energy and environment crises, both of which are interrelated and highly complex. The relationship between energy production and its environmental impact is, however, not so diabolical if environmental policies are formulated in accordance with the local context and are implemented impartially. Sadly, the energy-deficient Pakistan has designed environmental policies, but faces challenges in their implementation. Defiance to policies at the local level and their concomitant partial implementation by the concerned authorities is resulting in an imbroglio – an acute shortage of a clean and healthy environment!

The rampant use of dwindling forest wood to meet energy needs is an indication of this imbroglio; meeting energy needs at the expense of clean environment is damaging the local environment. On the other hand, the enforcement agencies seem ignorant of the fact that social degradation and deforestation complement each other. As noted by the World Bank's strategic environment assessment of Pakistan in 2006, environmental degradation is responsible for an estimated 45 million cases of respiratory diseases, 30,000 premature infant deaths and $6 billion in economic losses each year.

Charcoal production in various parts of Pakistan is resulting in environmental degradation; increased deforestation to meet energy requirements in many rural areas is posing a serious challenge to the local environment. Though charcoal making is not common in all parts of Pakistan, some rural areas have seen an unprecedented increase in its manufacturing facility called bhattas (kilns). These bhattas are a serious threat to the local environment, starting from deforestation to the eventual chemical emissions.

In District Layyah (Southern Punjab), for example, we see an unprecedented increase in the number of charcoal kilns mushrooming on main roads. Constructed as round mud ovens, their number has increased in the last few years under the 'watchful' eyes of the local authorities. This only goes on to show that environmental concerns do not figure in the development ethos followed in Pakistan.

Conversion from wood to charcoal produces dangerous quantities of carbon monoxide, reflecting a substantial waste of forest wood and hazardous smoke discharge. Zulqarnain Ahmad, an inspector at the Environmental Protection Agency (EPA), District Layyah, says: "These kilns use highly hazardous methods of wood combustion. Because making charcoal requires incomplete combustion, the process produces carbon monoxide, a highly dangerous greenhouse gas."

Ahmad shows to The News on Sunday a survey report of about 500 kilns located on the main road from Layyah to Chowk Azam. "Interestingly, all these kilns have been constructed along the main road, suggesting that the local authorities knew about them from the beginning. However, no action has been taken against them yet," he says. The EPA, District Layyah, was established in 2007, but it still does not have the equipment to detect emission levels from the charcoal kilns and other industrial units.

The local population is angry with the administration for showing leniency to charcoal kiln owners. "It is evident that these people are cutting forest wood under official patronage. De-vegetation of our grazing lands had already been initiated by the government and now large-scale deforestation is also taking place," says Malik Ashiq Husain, a schoolteacher of Union Council Mandi Town, Tehsil Layyah. When contacted, the Revenue Department of the district did not respond to queries regarding imposition of any tax on the charcoal kilns.

However, Ahmad says initially each charcoal kiln owner paid Rs100 on six-monthly basis; however, currently no such system exits. Husain tells TNS that he had filed a case against one of the kiln owners who had set up three kilns near the school. The kiln owner later agreed to demolish the kilns after an out-of-court settlement in the village's panchayat.

The growing number of charcoal kilns poses serious environmental, social and security challenges. "The owners of these kilns are mostly Afghan refugees who have been living in Southern Punjab for years. We don't know the objective behind starting this business, but know for sure that the local administration has limited control over them," says Mazhar Nawaz Lashari, a local rights activist.

In May, the district government had issued a notice to the kilns owners to shut down their operations; however, they got a stay order from the Civil Court and the case is still pending with it. Nonetheless, according to the Pakistan Environmental Protection Act, 1997, "under the section 21, the sub-section 9 states that no court other than the Environment Tribunal can deal with such cases," Ahmad argues. The Environment Tribunals were established by the federal EPA in areas deemed necessary by it, with the prime objective of checking such irregularities.

Amidst security concerns in the region, the district administration has directed all line departments to resolve the stalemate with the charcoal kiln owners. Locals, however, see this as a delayed and half-hearted initiative to save the local environment. Lashari believes the environment is still not an issue for the local authorities. "It is only because of security hazard that these kilns are being labelled as an environmental hazard," he asserts.

Besides charcoal kilns, many other examples are evident of the deteriorating environment in the country's rural areas. For example, areas close to sugar mills are also vulnerable. Though sugar mills and other big industrial units have to submit necessary documentation before installation, in the case of smaller units like brick or charcoal kilns these procedures are not followed. Thus, the rural areas are victims of neglect by both local and provincial / federal authorities.

The charcoal kilns in District Layyah are destroying natural resources at various levels: firstly, the cutting of forest wood; secondly, the adoption of unsafe methods to produce charcoal; thirdly, the emission of carbon monoxide at dangerous levels; and finally, the previous defaults are reinforcing the deterioration of people's health and the environment. The country's rural areas need special attention for preserving the environment, because they are the primary source of agricultural production. Their natural habitat and its conservation should be of prime concern to the higher authorities; however, on the contrary, enforcement is restricted to selected urban areas.

The EPA recently issued orders to the Capital Development Authority (CDA) to immediately stop construction work on the Zero Point Interchange project, because the agency had failed to submit the project's environment impact assessment despite many reminders. The EPA said the orders were issued – under Section 16 of the Pakistan Environmental Protection Act, 1997 – because of massive chopping of trees and dust pollution caused by construction activities of the project.

There is no doubt that complacency, negligence and sheer indifference to environmental protection can cause our annihilation. Policies are, in essence, devised to create an enabling environment to ensure acceptability, conformity and uniformity; any escape from either of these components invites pilfering and eventually chaos. These cases highlight that our apex environmental body should adopt uniform policies and engage the local authorities in implementation of environment-friendly programmes. Or, if this is too difficult, then at least minimum standards should be ensured.

Over the last decade, the manufacturing sector has become the backbone of Pakistan's economy and it now accounts for over 75 percent of the country's exports. Therefore, for boosting Pakistan's economic growth, it is imperative to develop the country's manufacturing sector. However, the data on economic growth shows that real growth in manufacturing has declined, though there has been some improvement in output and overall gross domestic product (GDP) rate.

According to government reports, the manufacturing sector – which includes textiles, sugar, cement and basic metals – grew at an average of 8.8 percent during fiscal year 2006-07. However, the growth of almost all major sectors has declined in the ongoing fiscal year, because of which many industrial units have shut down and unemployment has increased sharply. The overall economic scenario presents a gloomy picture with reducing exports and increasing interest rates for banks' credit facility.

Several constraints are inherent in the government policy and planning pertaining to the advancement of industry, particularly the manufacturing sector; however, the major reason for the decline in the growth of the manufacturing sector is the unprecedented energy crisis. The shortage of energy has resulted in huge losses to manufacturers, even forcing many to close their units. Moreover, the increased charges of electricity and gas have increased the cost of production of all items, leading to increase in the prices of commodities and reduction in purchasing power of the common people.

In the recent past, the industrial hubs of Pakistan – such as Karachi, Lahore, Faisalabad and Gujarawala – have witnessed a sharp increase in unemployment, because many textile looms and manufacturing units have shut down due to hours of power and gas outages. Such negative trends have also added to the country's deteriorating economic condition because of reduced foreign investment. There is a dire need to revive the industrial sector, because foreign loans would not last for long; eventually our industrial and agricultural sectors will determine the future of economic activity in the country. There is also a need to devise some timely strategies to overcome the current economic crisis. The resources need to be managed properly, besides focussed efforts to expand and diversify the means of power generation.

In addition to the ongoing power crisis, some traditional problems continue to haunt the manufacturing sector. For example, the focus of the manufacturing sector continues to be on conventional industries, many of which are not in high demand in the international market. The upgrading of technology is not a priority for most of the manufacturers, and international trends of production and consumer demand are not being followed. As a result, the country's exports have declined. The available transportation and communication infrastructure is also inadequate to meet the requirement of a growing industrial sector.

Besides this, the cost of production is higher for Pakistani manufacturers due to higher employment costs, rents, interest rates, fuel and electricity charges, and cost of both local and imported raw material. The government has taken some steps at different intervals, but due to poor planning and implementation, they have not been able to achieve the desired results. On the other hand, other South Asian governments provide incentives to their manufacturers, thus reducing the cost of production and ultimately helping the masses.

Diversification of and sustainable growth in the manufacturing sector is essential for Pakistan in an increasingly competitive international environment. Small and medium enterprises (SMEs) need to be encouraged to enhance productivity; however, rather than focussing on new installations, the existing structures should be provided with basic facilities and subsidies. The availability of electricity, fuel and gas for the industrial sector should be ensured, because this has a far-reaching effect on the economic growth and employment level of the country.

Attention should be paid to sectors with comparative advantage, such as agro-based industries and textiles, to improve the export-led growth; rather than focussing on import substitution. The private sector is a key stakeholder in Pakistan's economy and to encourage its participation in business activity, the government needs to offer it due incentives. Technology and human resource management will also have to be modernised to meet the improving standards at the international level, and the government needs to take initiatives in this regard.

The transport and communication infrastructure needs to be improved for efficient and fast linkages throughout the country, and for improving the level of exports. This will also reduce the cost of production. We have seen that manufacturing sectors of China and other South East Asian countries captured the world market, because of their improved transport and communication infrastructures.

There is also a need for quality control in the manufacturing sector to improve the competitiveness of Pakistani products in the international market. An efficient and transparent legal and regulatory system is also required to settle the disputes and maintain quality standard of products. The government should take on broad all stakeholders while devising a mechanism for quality control and for its effective implementation.

Though successive governments have established a number of industrial zones across the country for industrialisation, yet effective planning and coordination are required between the public and the private sector for getting the desired results. Other than the availability of energy and provision of subsidies, improvement in law and order situation will contribute positively to the growth of the manufacturing sector.

The recent official communiqué to all federal government ministries, divisions and attached departments to reduce non-development expenditures by 20 percent has been dubbed as an emergent measure to bring down the fiscal deficit to 4.5 percent – the level agreed with the International Monetary Fund (IMF). However, according to some media reports, the covert purpose is "to meet the growing defence needs in the wake of rising tension with India".

Adviser to Prime Minister on Finance Shaukat Tarin, while dispelling the impression, has claimed that "the purpose behind drastic cuts in the cost of extra fuel, travel, establishment and other kinds of non-development expenditures by the government departments is to save available funds." He has been saying repeatedly Pakistan cannot afford wasteful, luxurious, non-essential spending by the huge government machinery.

According to critics, this measure will not improve the economy's health substantially. Instead, they demand a comprehensive reform agenda for ensuring long-term fiscal stability, sustained economic growth, rapid industrialisation and social mobility of the deprived segments of society. In a cash-starved economy like Pakistan's, the measure of reducing non-development expenditure of federal government departments by 20 percent – having an impact of about Rs150-200 billion in the current fiscal year – is a welcome step, but we need to do much more to become a self-reliant economy.

It is shameful that our current expenditure for 2008-09 is Rs1.493 trillion (74.3 percent of total budgetary outlay), while the size of the Public Sector Development Programme (PSDP) is only Rs550 billion (even this has been reduced by Rs110 billion due to the financial crunch). It should have been the other way around. This would only be possible only if we reduce the size of the government machinery by one third and monetise all the benefits of civil servants.

Successive governments – both civilian and military – have not bothered to go for downsizing of the gigantic administrative setup. The proposed 20 percent cut in expenditure will not make much difference for the civil-military clique, because it is already enjoying extraordinary benefits; on the other hand, poor clerks and police constables are performing their duties under pathetic conditions. The government has to borrow more and more to meet its day-to-day current expenditure – meant largely for foreign tours and lavish living of politicians and senior government officers. In short, Tarin has not unveiled the entire truth. He must tell the nation how much the government has allocated for the President House, Prime Minister's House and provincial Governor's Houses – more than the entire budget of the judiciary.

The slow economic growth, coupled with lavish spending of government officials, is pushing Pakistan deeper and deeper into the debt trap – domestic debt is now over Rs3.5 trillion and external debt has reached 28 percent of gross domestic product (GDP). Considering this, even if the Federal Board of Revenue (FBR) manages to collect the enhanced target of Rs1.360 trillion, it will be offset by the much faster growth of the current expenditure. Therefore, more taxes are no answer to existing maladies.

The internal and external debt will keep on increasing unless we go for all-out reforms, blueprints of which have been elaborated by Nadeem Ul Haque, former vice-chancellor of the Pakistan Institute of Development Economics (PIDE), in his article titled Reform or Face Fundamental Ascendancy. Haque has aptly emphasised that "the state must first provide the social contract – good law and order and security of life. It must dismantle the rent seeking that protects the rich. Rent seeking right relies on three main components: state subsidies, licensing and regulation; special perks and privileges for ministers and army and civil service employees and land distribution system that allows the poor man's land to be acquired for the elite, especially the army and civil service."

Dr Hafeez Pasha, chairperson of Panel of Economists appointed to advise the government, must consider the points raised by Haque while preparing report for the next budget. The new economic policy, besides curtailing non-development expenditures, should also emphasise reforms for economic growth and social justice. Pasha and his team of economists must recommend to the government to do away with the existing benefits of government servants by monetising them; sell all government land for industrial and commercial purposes; and reduce the size of the defence budget by 30 percent and the number of posts entailing pension in government and semi-government departments from 350,000 to 120,000 between 2009 and 2013.

The prevalent economic crisis confirms persistent failure of successive governments to overcome fiscal imbalances and check ever-increasing wasteful expenditures. The budget deficit rose to Rs777.2 billion (7.4 percent of GDP) in fiscal year 2007-08 and the scenario for the current year is equally bleak. Last year, the government met the fiscal deficit through the highest-ever bank borrowing of Rs625 billion and over Rs75 billion cut in the development expenditure.

The most deplorable act on the part of economic managers has been reductions in the development budget, both in 2007-08 and 2008-09. The claim that this was unavoidable due to massive reductions in revenue receipts is false; this happened only because of unprecedented increase in the current expenditure. The total revenue in 2007-08 increased by almost Rs200 billion and stood at Rs1.499 trillion, compared with Rs1.297 trillion in 2006-07, yet due to 36 percent growth in wasteful expenditure there was revenue deficit of Rs202 billion.

The government has failed to reduce the current expenditure, while the common people keep on paying more and more taxes. The total expenditure in 2007-08 increased substantially by 21.7 percent, compared with 19.2 percent in the preceding fiscal year. In absolute terms, the total expenditure amounted to Rs2.276 trillion in 2007-08 against Rs1.675 trillion in 2006-07, showing an increase of over Rs600 billion or 36 percent.

It is a pity that successive governments have failed to bridge the gap between the current expenditure and tax collection. We can never overcome the revenue deficit unless the rulers drastically cut wasteful expenditures. The erratic taxation at the expense of the poor – the real victims of fiscal highhandedness – is not a solution, but part of the problem. It is an established fact that despite resorting to all kinds of highhandedness and unjust withholding taxes, the FBR has failed to improve the tax-GDP ratio, which is hovering at around 9.5 percent for the last decade.

The burden of a number of presumptive taxes levied under the income tax law (which are nothing but crude forms of indirect taxes pushing more and more people below the poverty line) has been shifted from income-earners to consumers and clients. These presumptive taxes have not only distorted the whole tax system, destroyed economic growth and made the consumers / clients the ultimate sufferers, but have also failed to bridge the fiscal deficit that has soared to Rs777.2 billion in only the first six months of the current fiscal year (July-December 2008).

The rulers say 62-year-old problems cannot be solved in a few months or even in a term of five years for which they have been elected. Their major problem is the failure to deal with powerful bureaucratic machinery, which is not only inefficient, outmoded and ineffective, but is also a self-perpetuating corrupt apparatus. The bureaucrats – most of them appointed as sycophants – control and guide the ministers and politicians at large. On their recommendations, the parliamentarians pass bills for increase in their emoluments and benefits. Through this method, bureaucrats ensure for themselves continuity of luxuries, such as government-maintained houses, fleet of vehicles, domestic servants, etc. Both the elected representatives and their cronies in the bureaucracy are artfully skilled in thriving lavishly on taxpayers' money.

The mighty bureaucrats advise corrupt politicians how, in the form of tax amnesty and money-whitening schemes, both of them can protect their benami assets in and outside Pakistan. The unscrupulous businesspeople, with the 'help' of their political and bureaucrat friends also indulge in massive tax evasion, remaining unpunished through these shameless schemes. This unholy triangular alliance of corrupt politicians, powerful bureaucrats and greedy-unscrupulous businesspeople has turned Pakistan into a rent seeking state.

Bureaucrats please their political masters, who in turn provide protection to them and overlook their administrative excesses and corruption. In this scenario, a meager 20 percent reduction in non-development expenditure is inadequate. The government, through effective asset-seizure legislation, must confiscate all the untaxed assets of politicians, bureaucrats and businesspeople without exception. The public auction of such ill-gotten-untaxed assets will reduce the government's debt. If the rulers start paying taxes and give up wasteful expenditures on personal comfort and luxuries, the rest of the nation will follow suit.

Pakistan's edible oil requirements and import bill continue to rise constantly due to increase in population / consumption and smuggling to neighbouring countries. The country's edible oil import bill swelled to $2.2 billion in 2007-08 against $958 million in 2005-06, largely due to increase in international prices and decrease in the share of domestic production from 30 percent to 27 percent of total requirements. To lessen its dependence on imported edible oils, Pakistan has been trying to enhance its domestic production. However, despite an increase in the local production of edible oils from 0.740 million tonnes in 2003-04 to 0.833 million tonnes in 2007-08, the country's import of edible oils is increasing constantly.

Pakistan's initiative to increase the domestic production of edible oils aims at achieving self-sufficiency in this commodity or at least moving in that direction, increase in industrialisation and income of growers, round-the-year utilisation of rural workforce, and environmental upgrading. The primary source of vegetable oils are coconut, corn, cotton seed, oil palm, olive, peanut, safflower, soybean, sunflower seed and canola; while almond, poppy, pumpkin, sesame and walnut seeds are used as oil sources in seasoning / salad dressing.

In Pakistan, edible oils are mostly extracted from cottonseed, canola, mustard / rapeseed, sunflower and imported soybean. Though cotton crop is grown primarily for lint, last year it contributed over 50 percent to local edible oil production as a byproduct. In 2007-2008, the production of cottonseed in the country was 3.568 million tonnes, while that of sunflower, canola and mustard / rapeseed was 696,000 tonnes, 218,000 tonnes and 172,000 tonnes, respectively.

Sunflower has emerged as a popular cash crop in Pakistan and the area under its cultivation has increased by over 700 percent during the last seven years, increasing to 1.130 million acres from 154,000 acres, due to its profitability vis-à-vis other crops. The price of sunflower seed in the open market last year was Rs1,600 per 40 kilograms. Besides, it needs little water and short harvesting time. Similarly, the area under canola cultivation increased to 402,000 acres in 2007-2008 from 359,000 acres a year earlier.

However, the area under cottonseed cultivation decreased to 7.547 million acres in 2007-2008 from 7.599 million acres a year earlier. Similarly, the area under mustard / rapeseed cultivation decreased to 576,000 acres from 628,000 acres in 2006-07, because the government has itself been encouraging farmers to replace mustard / rapeseed with non-toxic and more profitable cultivars like canola. Among the government's initiatives to enhance local oilseed production those relating to oil palm and olive production need special mention.

Along Pakistan's coastal zones, over 500,000 acres of land (300,000 acres in Sindh and 200,000 acres in Balochistan) has been identified as suitable for the plantation of oil palm, a cash crop of great economic importance that provides food, fibre and oil. Each hectare under oil palm yields ten times more oil than most other crops, and income far exceeds expenditure when inter-cropping and oil palm plantation is done simultaneously. During the seven to eight years required for the maturity of an oil palm tree, income can be generated through inter-cropping of banana, papaya, fodder and vegetables.

With temperatures ranging between 24-35 degrees Celsius, Pakistan's coastal zones, according to the Coastal Development Authority, are suitable for the cultivation of oil palm. The potential areas suitable for oil palm plantation include Matli, Tando Muhammad Khan, Nindo Shah, Tando Bago, Kunri, Umerkot, Digri, Jhudo, Jamesabad, Tando Allahyar, Tandojam, Mirpurkhas, Khipro, Hala, Talhar, Keti Bandar, Chohar Jamali, Thatta and Ghulamullah in Sindh; and Hub, Somiani, Lasbela, Pasni and Gwadar in Balochistan.

Pakistan initiated oil palm plantation on experimental basis in the late 1970s, when seeds imported from Indonesia, Malaysia and Sri Lanka was planted in the country's coastal region. The success of trial production led to a 10-year pilot project (1996-2005) for the plantation of oil palm, a primary source of vegetable oil used mainly in cooking, and making margarine, confectionery, non-dairy products and soap. Oil palm byproducts are used in manufacturing rugs, rope, coconut, broom, etc.

In addition to a public sector 360-acre farm in Sindh, oil palm has already been planted over 2,260 acres in the private sector, in Sindh and Balochistan. In Sindh, the areas under oil palm cultivation are located in Thatta, Badin, Hyderabad, Mirpurpkhas and Sanghar; and in Balochistan in Lasbela. Encouraged with results of the pilot project, the government has launched a new five-year project (2005-2010), envisaging an expenditure of Rs113 million and aimed at motivating farmers to bring an additional 12,000 acres of land under oil palm cultivation.

In addition to extending help to farmers in land preparation for plantation, the government has set up two nurseries, in Thatta and Lasbela, for supplying imported saplings of oil palm at highly subsidised rate of Rs35 per sapling. The authorities have already imported 200,000 saplings of oil palm; while they envisage importing 500,000 more next year for providing these to farmers at subsidised rates.

Though fruit-bearing oil palm trees exist over 1,000 acres of land, no oil extraction mill has been set up in the country so far due to lukewarm interest of investors. For want of oil crushing mills, currently there is no market for oil palm fruits, a highly discouraging situation for farmers. Some of them have, out of frustration, even rooted out their fruit-bearing trees. The authorities need to provide relief to oil palm farmers until the establishment of palm oil crushing mills or, alternately, buy oil palm fruits from farmers for export. However, it is encouraging that the authorities have recently requested Malaysia to provide help to Pakistani investors in establishing palm oil extraction mills.

A perennial crop that has an economic life span of about 30 years, oil palm needs fresh water for irrigation and grows to a height of 30 metres (100 feet). It is a unique crop in that all of its parts can be used. Its fruits yield two types of oils – palm oil from the escarp and palm kernel oil from the seed, both of which have different physical and chemical properties. Besides the fruit itself, the terminal bud (palm cabbage) and young stems are edible and considered a delicacy in some areas. It also holds tremendous business opportunities in the value-added downstream oleo-chemical industry.

Adopting a two-pronged approach of grafting and new plantation, Pakistan is now working on a project aimed at converting eight million wild olive trees into oil-bearing species of the European-type olive by June at a cost of Rs186.370 million. Adopting the techniques of top working and grafting, some seven million wild olive plants, mostly in the NWFP, have been converted into fruit-bearing varieties. According to an estimate, there are over 45 million wild olive trees in Malakand, Kohat, Mardan, Chitral and Hazara in the NWFP; the Federally Administered Tribal Areas (FATA); Potohar, (Rawalpindi-Islamabad), Chakwal and Attock in Punjab; and Zhob and Barkhan in Balochistan.

Under new plantation, olive orchards have been established at over 955 acres of land in the NWFP (at Tarnab-Peshawar, Sangbhatti, Khawoo, Kandare and Toru Kas in Mardan district and Pirsabak in Nowshera district), Punjab (Potohar) and Balochistan. Launched in 2005, the project aims at cultivating over 300,000 olive saplings in the NWFP, Punjab and Balochistan at a cost of Rs39.185 million.

In view of the country's potential to increase olive production and the economic potential of the plant, the government commissioned Italian experts who have identified 800,000 hectares, largely in FATA and Swat, as ideal for olive cultivation. The experts have also trained 1,500 workers (growers, army personnel and NGO staff) in olive cultivation and harvesting. Italy has also donated to Pakistan an oil-extraction unit having a capacity of 400 kilograms per hour, while the government has itself purchased four oil-extraction units having a capacity of 50 kilograms per hour.