Last week, power-loom factory owners in Faisalabad fired upon workers staging a peaceful protest against acute forms of exploitation. The workers responded forcefully (though not violently) and virtually paralysed the administrative apparatus. Only after the personal intervention of the Punjab labour minister were the enraged protesters placated.

This is not the first or the last time that such an incident has taken place in the second biggest industrial city in Pakistan. Faisalabad's industry, not unlike that elsewhere in the country, is heavily personalised, with small workshops scattered across the city's residential areas in which working conditions are almost inhuman and child labour is rife. Over the last few years, workers have become better organised and have challenged their oppressive working conditions, but neither the government nor the owners have responded with any degree of seriousness. It, thus, is no surprise that the situation has reached the boiling point.

The factory owner who ordered the firing upon the workers in this latest incident is an MPA affiliated with the Pakistan Muslim League-Quaid (PML-Q). This is not to say that a factory owner associated with any other mainstream party is necessarily more committed to protecting workers' basic freedoms. However, it does suggest just how anti-worker the recently deposed PML-Q regime was.

Given the backdrop of an extremely anti-worker government over the last many years, it is very significant that workers were able to mobilise effectively to protest the shooting, and then compel the authorities to at least make rhetorical commitments to improving pay and working conditions. Of course, government functionaries have made various promises in times gone by and will likely do so again in the future; but as workers' capacity to organise themselves improves, it will become increasingly difficult for the government to renege on promises as has been the case far too often in the past.

While it is ultimately workers' organisation that will determine if and to what extent things improve, the overall state of affairs is not set to get any better in any meaningful way in the short- or even medium-term. In the first instance, there is a massive surplus pool of labour available to work that makes it difficult for workers to drive a hard bargain. Many in the ranks of the unemployed are often willing to work for even less than the going rate. Of course, laying off workers who have learnt on the job is not a costless exercise for owners, but ultimately the latter prefer subservience to a relatively skilled yet agitated workforce.

The related point has to do with the political will of the current government. Factory owners can get away with shooting, firing and maiming workers in large part because the state is quite willing to tolerate such actions. Indeed, the PML-Q regime bent over backwards for both local and foreign capital under the pretext that investment and industrial activity has to increase dramatically for Pakistan's economy to survive the 21st century global marketplace. The new ruling coalition has not necessarily inspired a great deal of confidence with working people as yet and its policy statements tend to suggest that the neo-liberal framework will remain in vogue.

The recent announcement that workers will be allowed to purchase 10 percent of shares in state enterprises sold to the private sector is a case of the government engaging in populist rhetoric. In short, the political leadership knows that privatisation is extremely unpopular, but remains committed to the policy in line with the demands of its financiers in Washington and Tokyo. To fend off criticism, it is implying that workers' acquisition of 10 percent of divested shares will make a significant difference in the post-privatisation outcome. But if anyone is even slightly fooled, the example of Pakistan Telecommunications Limited (PTCL) can be invoked to clarify matters.

24 percent of PTCL's shares were sold in June 2005 to Arab company Etisalat, but more crucially the government relinquished complete control over management. This gave Etisalat full power to make decisions about PTCL's future direction. Hardly two years later, more than 30,000 regular employees were let go and more than 8,000 contract workers are currently on the chopping block. The fact that the government retains 76 percent of the shares has no bearing on management affairs. Thus, even if workers were to acquire 10 percent shares in privatised state enterprises, they would not be given management control, and hence would remain as vulnerable to the whims of anti-worker managers as the power-loom workers of Faisalabad.

Then workers are also subject to the ruthlessness of the global production chain in which capital is allowed to be as mobile as it needs to be to expand itself. In other words, the putrid working conditions of third world labour in industries such as textiles can be explained in large part by the fact that international capital comes and goes as it pleases. It is a well-known fact that the t-shirts that are produced in Pakistan are also produced in dozens of other third world countries, which means that the big brand name producers of the world simply jump ship and 'outsource' to a new location if and when they feel it is more profitable to do so. Given the huge pool of surplus labour, this is a major structural constraint to improved working conditions.

Finally, there is the impact that Chinese industry is having on economies around the world. In short, the Chinese industry operates at a scale that just about everyone else can only dream about and it specialises in many low-cost consumer industries that are the major source of export earning for third world economies such as Pakistan. So, for example, Pakistani textiles have been subject to much more ruthless competition from Chinese textiles than anyone else over the last many decades. And things are set to get even more cutthroat.

All told, power-loom workers of Faisalabad are fighting not just a factory owner or two, but the imperatives of global capitalism. It is an almost impossible battle and cannot be won if the Pakistani government acts essentially as the shameless representative of capitalist interests. The only countries in the world where labour is making some ground versus capital -- and that too very little -- are where pro-labour governments have come to power in recent times, Venezuela and Bolivia the most obvious examples. The 'people's government' that came to power after February 18 needs to put its money where its mouth is, or else risk radicalisation of an increasingly restive and exploited workforce.

Tarek Fatah is a secular Muslim, a writer and a political activist, based in Canada. He has been a vocal critic of pan-Islamist movement. Because of his iconoclastic and radical views on the deplorable condition of Muslim communities worldwide, he has often invited anger and even death threats, but he is a courageous man and never flinches at saying what he believes in.

Fatah was born in Karachi in 1949 to parents who had migrated to Pakistan from Bombay (now Mumbai) after the subcontinent's partition. He had his schooling in Karachi. In the late 1960s, he was a left-wing student leader. Because of his revolutionary ideas on equity and social justice, the then military governments jailed him twice. He started his journalistic career in 1970 with the now defunct Karachi newspaper the Sun and later worked with the Pakistan Television (PTV). After Ziaul Haq's military coup in 1977, he moved to Saudi Arabia, where he worked in the advertising field for 10 years.

Fatah finally migrated to Canada in 1987, where he lives with his wife and two daughters. He has written numerous columns for mainstream Canadian publications; and in addition to appearances in many TV programmes, he has hosted Vision TV's programme Muslim Chronicle. In 2001, he founded the Muslim Canadian Congress (MCC), an organisation of liberal Muslims in Canada. This organisation, which espouses secularism and gender equality, has proved to be an effective countervailing force against Islamist organisations active in North America.

More recently, Fatah has authored a phenomenal book, titled Chasing a Mirage: The Tragic Illusion of an Islamic State. The book argues that radical Islamists have hijacked the religion by falsely invoking the Holy Quran and Prophet Muhammad (PBUH) for advancing their political agendas. It urges Muslims to give up on the Islamic state and strive for the spiritual state of Islam. In this book, which has generated a healthy debate, Fatah invites his brothers-in-faith to end political violence that militates against core Islamic values of grace and peace. The News on Sunday interviewed Tarek Fatah recently in Toronto. Excerpts follow:

The News on Sunday: Would you like to tell us something about your schooling and college days in Karachi?

Tarek Fatah: My first school was St Andrews, very close to the Karachi Race Club and next door to the mansion of Joe d'Souza, who was to die in Montreal many moons later. From 1955 to 1965, I went to St Lawrence's Boys School, near Soldier's Bazaar, at one time the tiniest of Karachi's lush neighbourhoods, and home to its large Ismaili community. When I did my Matriculation in 1965, two things happened that shaped my life: the 1965 war with India and my first days in Adamjee Science College, where I saw the face of the 'other' Karachi, the people who came from the shantytowns, known then as the 'Jhuggie Colonies' -- the city's vast Urdu speaking working class and its brimming left-wing activists.

For the first time, I met Marxists and poets who would speak as if it were a bait baazi (poetry recital) competition. The war against India and the new ideologies I ran across in the college changed me profoundly, from what people referred to as an English-medium-kid to the real world of bhook nang (poverty). The rest is a 40-year-long struggle for social justice, against Islamist politics that keeps Muslims from moving forward as they are asked to look in their mythical past to reach for the future.

TNS: You spent your early years in Karachi. Would you like to tell us something about the Karachi of those days?

TF: Karachi in those days was a very different city. Zoroastrians, Hindus and Christians, as well as Balochs and Sindhis, framed the city's multi-cultural ethos as a modern metropolis. Today, it seems that the founding fathers of the city have simply evaporated; leaving no trace of Mayor Jamshed Nusservanjee or the JS d'Souza & Co, who graced Victoria Road where Dawoodi Bohras and Anglo-Indians chatted with Aga Khanis and the occasional Jew from the synagogue known as the 'Israeli Masjid'. If this sounds too foreign to you, then that is how much my city of birth has changed in the past 50 years. Many of those who abandoned Karachi are now living in Canada!

TNS: Why did you establish the Muslim Canadian Congress (MCC)?

TF: After 9/11, we realised that if Muslims did not rise against the forces of radical Islam, our future generations in the West would suffer immensely, as they would be labelled as terrorists. We also realised the Islamic leadership was practising gender apartheid, and mixing religion with politics. That inspired us to set up the MCC, to promote the idea of real equality between Muslim men and women, and to demand the separation of religion and the state in all matters of public policy.

TNS: What do you understand by secular Islam?

TF: There is no such thing as secular Islam. There, however, is something known as the 'secular Muslim'. The best way I can describe such a person is to refer to Maulana Abul Kalam Azad and Maulana Hasrat Mohani. The two were practising Muslims and scholars, but they kept their faith as a moral compass and did not work towards establishing Shariah in the public domain. Today, scholar Abdullahi An-Na'im, who teaches Law at Emory University in Atlanta, is one such person. The late Muhammad Mahmoud Taha, who was an Islamic scholar but still campaigned against the introduction of Shariah in Sudan, was another example. He headed the Republican Brothers in Sudan and the government hanged him based on a fatwa (edict) obtained by the Muslim Brotherhood.

TNS: You founded the MCC, which is an organisation with a Muslim group-identity. Do you find it compatible with your commitment to secularism?

TF: I do not see any contradiction. We are Muslim Canadians, who believe that the future of our communities in the country and the rest of the world lies in how we proceed with real universal laws that apply to all citizens irrespective of race or religion. This is our secular goal. Whether one is a Hindu in Pakistan or a Christian in Egypt or a Jew in Saudi Arabia, the state should not have different levels of citizenship based on one's faith or race.

TNS: Some political analysts believe that America's so-called 'war on terror' has given a new lease of life to jihad. Do you agree?

TF: They are right, but why should we be surprised? The United States created the monster of jihadis to fight the Left in the Muslim world and now it finds the chickens coming home to roost. The only hope is that an Obama presidency will reverse the deep slide into mediocrity that has become increasingly synonymous with the US.

TNS: Most analysts view radical Islam as a reaction against the West's imperialistic policies. Do you agree with this perception?

TF: That is nonsense. Radical jihadis have no problem with Western imperialism; they just do not want to be its victims. Where were they when US imperialism was showing its horrors in Vietnam? When Reagan ordered the invasion of Grenada, did any of the US-based Islamist groups protest? No. As long as the US hit other people, including the Yugoslavians, the Islamists and their jihadi offshoots were pleased. In fact, jihadis would be more than happy if the US were to bomb Israel or the United Kingdom. You would see the same mullahs dancing on the streets and distributing gulab jamans if the US F-16s dropped concussion bombs on Tel Aviv. Therefore, these people are not against US imperialism. What they want is that the US trains its guns on some other hapless victim, so they can get back on the CIA gravy train.

TNS: Does modernisation necessarily involve Westernisation? Can Muslims modernise without Westernisation?

TF: If Muslims cannot manufacture some of the most basic tools of the post-industrial society and if a billion people together cannot come up with ideas that could rival those of the Wright Brothers, Rousseau or the inventors of insulin, then it would be foolish to imagine that we could modernise without becoming part of the global community. And this community, whether we like it or not, is led by what is emerging in Europe and North America.

TNS: Why do most Muslims fail to integrate with the Western society?

TF: Well, many do and do it quite well. Whether it is Canada or the UK, many Muslims are members of parliament. They head major corporations and trade unions, and are active in the arts and the anti-war movement. However, the Muslims who have integrated somehow do not fit the stereotypical image of a Muslim -- the man with a beard in flowing gowns and the woman in a tight, skin-wrapped scarf imported straight from the streets of Cairo.

TNS: Should Muslim stop wearing hijab?

TF: No, they should have the right to wear whatever they desire. Similarly, nobody should have the right to label those women who do not wear hijab as lesser Muslims or suggest that the women who do not cover their heads are bad Muslims.

TNS: What is your precise definition of an Islamist?

TF: An Islamist is a Muslim who uses Islam as a political tool to conduct his or her politics and believes that parliament should not be the maker of a nation's law. In comparison, a Muslim is one who believes in the five pillars of Islam, none of which requires the presence of an Islamic state.

TNS: Islamists are flourishing in the West, yet they hold it in contempt. How do you explain this contradiction?

TF: They are like parasites that live off the host plant and destroy it as they feed themselves.

TNS: Do Islamists pose a genuine threat to the West?

TF: Yes, they do. The Islamist jihadis are a death cult, hell bent on their suicide mission to destroy what they feel is a challenge to God. It is not the US they hate; it is their aversion to joy itself. Their contempt for modernity dates back to the Renaissance, which Syed Abul Ala Maudoodi described as the "pernicious tree" in his book entitled Sick Nations of the Modern Age.

TNS: In your youth, you were a Marxist student leader in Pakistan. Is Marxism still relevant in the post-Cold War world?

TF: Of course, Marxism is relevant, more so today than a decade ago. The contradiction between labour and capital still exists, and manifests itself in a different way compared with the old coalminers organising for a five-day, 40-hour working week. Today the nature of capital has changed, as has the nature of labour, and Marxists have to adapt Uncle Karl's theories to the reality of a new world economic order.

A call-attention-notice to liberal and moderate Muslims worldwide to put their act together

Chasing a Mirage: The Tragic Illusion of an Islamic State

Author: Tarek Fatah

Publisher: John Wiley & Sons Canada

Price: $31.95

Pages: 410

The book under review is Tarek Fatah's encounter with truth, most of which is unsavoury, to say the least. Because Fatah takes some highly controversial and even taboo subjects by the horn, the book can be termed an act of great courage. It is a sort of call-attention-notice to liberal and moderate Muslims worldwide to put their act together and take on the regressive Islamists, who have hijacked their faith for political power and pelf.

Tarek Fatah is no stranger to controversy. In the late 1960s, he was a left-wing student leader in Pakistan. Being uncomfortable with his struggle for equity and social justice, the then military governments arrested and incarcerated him twice. After a distinguished career in journalism and advertising, he finally settled in Canada, his adopted homeland, in 1987.

Fatah has been contributing op-eds to mainstream Canadian newspapers, such as the Toronto Star, the Globe and Mail and the National Post. In addition to appearances in many TV programmes, he has been hosting Vision TV's popular programme Muslim Chronicle. Because of his eclectic, iconoclastic and liberal views on Islam, and the current deplorable plight of Muslim communities across the world, Fatah has often invited ire and even death threats from his more conservative brothers-in-faith. But even the death threats have not deterred him from saying what he so passionately believes in.

In 2001, Fatah founded the Muslim Canadian Congress (MCC), an organisation of liberal and moderate Muslims in Canada. It supports liberal and secular causes throughout the world. Since its inception, the MCC has been an effective countervailing force against Islamist organisations that have an obscurantist agenda to pitch the already disadvantaged Muslims against the world community.

Since its publication, Fatah's first book, entitled Chasing a Mirage: The Tragic Illusion of an Islamic State, has generated a lot of controversy and healthy debate on a number of issues, which have been bothering Muslims for the last 1400 years. It is not a textbook on Islamic history, yet it offers a scholarly and well-researched critique of the Middle Eastern Islamic dynasties for affording the readers a better understanding of the so-called Islamic states in a historical perspective.

Fatah maintains that throughout Islamic history, there has been no such thing as an "Islamic state" and that the term is actually an illusion. Relying only on hard and irreducible historical facts, he tries to drag Muslims out of comforting, yet misleading, myths. "Muhammad (PBUH) was not sent to earth to be a ruler of the Muslim world. He was Allah's apostle on earth, a messenger for all humanity, who left behind a moral compass to serve as guide for a more ethical, equitable and just society," he maintains.

Presenting a succinct analysis of the Caliphate, which most Muslims revere as Islam's golden age, Fatah invites the Muslims "to consider the possibility that the state and government created by Abu-Bakr (RA) after the death of Muhammad (PBUH) was not the first Islamic state, but rather the first Arab state. It encompassed the Arabian Peninsula and gave the Arab people a sense of pride in their accomplishments. It allowed them to contribute to human civilization as other civilizations had done before them."

"This state found its legitimacy in Arab identity and Quraysh tribal ancestry. Islamic principles of universalism and equality came second. Had it been an Islamic state, the Sindhi and Berber Muslims would not have been treated as second-class Muslim citizens, forced to pay jazia -- a tax imposed on non-Muslims by Islamic caliphates," he adds.

While discussing the mirage the Islamists are chasing, Fatah makes a thoughtful and incisive distinction between an "Islamic state" and a "state of Islam", which in fact are two parallel strains of the religion. The first -- an "Islamic state" -- is a utopia nurtured by political Islam; it comes into being when a political entity uses Islam to govern and control society. On the other hand, the second -- a "state of Islam" -- is an individual's moral and spiritual choice, which governs his or her personal life.

Fatah has no issue with the second, which he says is rooted in core Islamic spiritual values and is compatible with modern democracy. This spiritual Islam has enriched Muslim communities with poetry, music, mathematics and science. On the other hand, he believes that the first is linked with terrorism and subjugation of women and minorities. The political Islam, he adds, is at loggerheads with the Western liberal democracies for a chimerical supremacy.

Eulogising Islam as a religion of peace and freedom, Fatah advises the Muslims to get rid of the dreams of establishing a formal, political Islamic state that governs using Islamic principles and laws. Instead, he urges the Muslims to seek a state of Islam within themselves, in a more spiritual sense, and adopt a secular approach to everyday life.

Tarek Fatah discusses at length present day Pakistan, Iran and Saudi Arabia as case studies of political Islam in the contemporary world; and shows how in each place Islamist ideas were promoted and actualised, and how they fared. He shows how unreliable leaders have used the utopia of an Islamic state to acquire illegitimate control over people. He also shows how these theocracies have discriminated against women and minorities, and have been harsh on dissent.

Fatah also discusses issues such as jihad, hijab, Shariah, Islamic banking, terrorism and Islamist's agenda of waging a holy war against the West for the greater glory and supremacy of Islam. The most important thing about the book is that it is highly readable. The author gives the reader his unique perspective on many an issue plaguing Muslim communities in clear and precise, yet forceful, prose.

In short, Fatah has written this book with passion, which is manifest in poetical expression reminiscent of Joseph Conrad. In this important addition to literature on the subject, he has given us many an insight into the predicament of Muslims in the modern world and it should be a must-read for anyone who cares about these issues.

-- Zubair Masood

The NWFP government has presented a surplus budget of more than Rs170 billion for the financial year 2008-09. The revenue estimates for the next fiscal have been projected at Rs170.904 billion, while those of expenditure at Rs170.559 billion, thus a surplus of Rs345 million. In the outgoing financial year (2007-08), which ends tomorrow, the Muttahida Majlis-e-Amal (MMA) government had presented a deficit budget of Rs114.5 billion. However, the ruling coalition in the province should not be carried away by just presenting a surplus budget -- the practice of last several years has been that the budgets are revised to make up for cost overruns, and the projected surplus ends up in deficit.

In the NWFP Budget 2008-09, of the total revenue receipts of Rs100.089 billion, the share of provincial receipts has been estimated at even less than eight percent: Rs7.385 billion. In the outgoing financial year, the provincial revenue receipts were estimated at Rs6.2 billion. In short, the increase of only Rs1.185 billion in provincial revenue receipts is not commensurate with the increase of more than Rs56 billion in the total outlay of the budget. This sort of almost total dependency on the federal government, to say the least, is not a healthy sign for a province of more than 20 million population.

However, there are two sides to the story. The first is the inability of the NWFP government to generate more revenue on its own. According to economic experts, the provincial government should have by now devised innovative ways of revenue generation from its own list of subjects to lessen the dependency on the federal government. However, the Awami National Party (ANP)-Pakistan People's Party (PPP) coalition government at the helm of affairs in the NWFP cannot be held responsible for this, because it has just come to power; and the onus of responsibility largely falls on the MMA government that ruled the province from 2002 to 2008.

One of the main reasons that the MMA did not levy any new taxes during its tenure was that the party did not want to annoy the voters. What comes as a surprise is that the new NWFP government has also not tried to increase the province's revenue base. A plausible explanation is that the province's financial managers are unaware of the importance of diversifying the resource base and its overall healthy impact on the economy.

The second side of the story is linked with the extremely narrow provincial revenue base -- mainly due to the country's over-centralised economic structure, which has particularly placed the NWFP at a greatly disadvantageous position. For instance, the three main resources of the province -- hydroelectric power, tobacco crop, and oil and gas -- are included among federal subjects. As profit on hydel power, the NWFP gets only Rs6 billion annually and, surprisingly, even this amount has been capped since 1997. Experts calculate that this amount should now to be equal to Rs29 billion annually, based on the AGN Kazi formula that envisages an 11 percent incremental increase in the NWFP's share in the net hydel profits. Moreover, the 2008 decision of the Hydel Profits Arbitration Tribunal to give the NWFP Rs110 billion as net hydel profits has also been kept in the cold storage, which could otherwise have added substantially to the revenue receipts of the province.

The placing of tobacco cess under the Central Excise Duty (CED) is another sheer injustice to the NWFP. A colossal amount of Rs38 billion is currently generated under this head, of which only a fraction is given to the NWFP and the remaining is distributed among the other three provinces on the basis of population. The only silver lining for the NWFP is the gradually increasing royalty -- estimated to be Rs4.429 billion in the next fiscal -- on deposits of oil and gas located in the province. Now it is now up to the provincial government to make further efforts to develop oil and gas resources, and use them as a bargaining chip for generating more revenue from indirect sources.

The amount of Rs67.3 billion earmarked for current expenditure in the next fiscal suggests that the NWFP is living beyond its means. This amount could have been considerably reduced through the adoption of austerity measures at the governmental level, but it seems that the ruling coalition in the NWFP lacks the will to do so. This is evident from a large number of government vehicles seen plying on the roads round the clock. Another big chunk of the province's expenditure -- more than one-third or Rs57.237 billion to be precise -- has been earmarked for food subsidy, under the head of capital expenditure. This indeed is heavy burden on a province whose total budgetary outlay is just about Rs170 billion.

In the provincial budget for the next financial year, an amount of Rs6.559 billion has been earmarked for the Police Department. This amount is 27 percent more than the department's budget in the outgoing fiscal. This, indeed, is a step in the right direction and the most commendable aspect of the NWFP Budget 2008-09, because the law and order situation in the province is poor, to say the least. It is another matter that to meet the monumental challenges that the NWFP faces in terms of law and order even this amount may not prove to be enough.

Strangely enough, the expenditure on food-related subsidies -- Rs57.237 billion -- in the provincial budget for the next fiscal is even more than the total funds earmarked for the Annual Development Plan (ADP) -- Rs41.545 billion. In the budget for the outgoing financial year, the size of the ADP was Rs39.5 billion. This means that there has only been a fractional increase of about Rs2 billion in the ADP's outlay. As a matter of fact, if inflation and increasing costs of construction materials and services are taken into account, the ADP is even much less than that of the outgoing fiscal. This, once again, is not a good sign for a province that, according to the latest socio-economic indicators, is even more backward than Balochistan.

One does not need to be a rocket scientist to guess that it would be impossible to bring about any substantial change in the lives of more than 20 million residents of the province with the meager amount earmarked for the ADP. In short, the annual provincial development budget for the next fiscal comes to only Rs200 per person. To hope that this paltry sum would contribute to the development of each individual living in the NWFP over the next fiscal is akin to building castles in the air. This should also be an eye-opener for the federal government, as well as developed countries and international agencies, because the NWFP has been bearing the brunt of the Afghan war for more than 30 years and is still the main theatre of the so-called 'war on terror'.

Education is one of the best antidotes to keep extremism and terrorism at bay, as well as promote tolerance. However, due to empty coffers, the NWFP government has been able to earmark only Rs5.507 billion for this sector in the ADP. The allocation for the health sector is even less and only a paltry sum of Rs3.94 billion has been earmarked for it in the ADP. This is alarming, especially considering that millions of cases of Hepatitis have been reported in the province in the recent past. Moreover, it is saddening to note that an amount of only Rs429 million has been earmarked for the development of the province's hydel power potential, though NWFP politicians never tire of making tall claims in this regard. What purpose would this amount serve is anybody's guess!

It would not be incorrect to say that the recently presented Sindh Budget for the next fiscal is a reflection of the Federal Budget 2008-09, because more or less similar announcements have been made in the two documents. For example, the province followed the Centre in providing huge incentives to the agriculture sector, giving tax relaxation to the stock market for another two years, increasing government employees' salaries and pensions by 20 percent, allocating big chunk for development programmes, and recognising the importance of health and education sectors by substantially increasing allocations for them.

A major challenge for the province, however, will be to convince the Centre and the other three provinces to agree on the National Finance Commission (NFC) Award formula proposed by it. Sindh wants revenue collection and backwardness as the basic criteria for allocating funds to the provinces under the NFC Award, while Islamabad currently allocates funds to the provinces on the basis of population only. The total outlay of the Sindh Budget 2008-09 has been estimated at Rs267.8 billion, with a deficit of Rs14 billion. This amount is Rs33.3 billion or 14.2 per cent more than the revised estimates for the outgoing financial year (2008-09), which ends tomorrow.

It is important to mention that in the outgoing fiscal, Sindh failed to spend the original allocation of Rs236.2 billon and the amount had to be revised downwards to Rs234.5 billion. This leads to only two possibilities: either the province had initially allocated more funds than it actually required or it did not finish work on some of the development projects due to be completed by June 30.

On the positive side, Sindh has increased allocation for the Annual Development Plan (ADP) despite being faced with financial constraints. For the next fiscal, the province has earmarked an amount of Rs89.3 billion for the ADP, which is 23 percent higher than the revised estimate of Rs72.3 billion for the outgoing fiscal. Announcing the ADP's outlay during his budget speech, Sindh Chief Minister Qaim Ali Shah -- who also holds the portfolio of finance -- said: "Despite fiscal constraints, we have decided not to cut down the development spending, because we must provide services and programmes that can facilitate urgent relief and help us move towards long-term economic consolidation and growth."

Sindh's development outlay includes Rs55 billion for the provincial ADP, Rs12 billion for district governments, Rs2.73 billion for the Sindh Development Social Services Programme, Rs2 billion for the Sindh Cities Improvement Programme and Rs510 million for the Drought Emergency Relief Assistance. Besides this, there are foreign-aided projects of Rs4.35 billion and federal grants worth Rs12 billion for development purposes.

In the ADP, the biggest amount (about Rs9 billion or 13 percent of the total) has been earmarked for the transport and communication sector, as the Sindh government accords utmost priority to it. Most of this amount would be used for the construction of roads linking farms to markets. Similarly, a hefty amount of Rs4.87 billion has been earmarked for the agriculture sector, including livestock and fisheries. This amount is 36 percent more than the allocation of Rs3.5 billion for the agriculture sector in the outgoing fiscal.

The construction of dams, including that of the Nai Baran dam on a fast-track basis over an area of 30,000-40,000 acres; promotion of flower and fruit nurseries; establishment of an agro export processing zone at Karachi; training of women in cotton-picking; upgrading of hospitals and rehabilitation of health training institutions; strengthening and developing of social sectors; and youth development programmes are also included in the schemes to be executed under the provincial ADP in the next fiscal.

However, the Sindh government might face some problems as far as the revenue collection estimates are concerned. The slowdown in the overall national economy amid corrective measures being taken by the State Bank of Pakistan (SBP), the Ministry of Finance (MoF) and the Federal Board of Revenue (FBR) might create some hurdles in the way of provincial revenue collection.

The increase in the SBP interest rate to more than 12 percent from 10.5 percent, effective from May 23, and another likely increase of 50-100 basis points in the monetary policy to be announced shortly are preventing the circulation of money in the market. This step would definitely help control the all-time high inflation, but at the same time it would also narrow down the demand and supply of commodities, which in turn would have negative effects on the growth of industry.

The Sindh government has already kept the agriculture sector out of taxpayers' net, while slowdown in industries and services performance is also expected to embarrass the provincial government on revenue collection side. Moreover, the Sindh chief minister has also announced withdrawal of 0.1 percent stamp duty levied in the 2006 Finance Bill on par value of each electronically transferred share in the Karachi Stock Exchange (KSE). According to an estimate, Sindh would lose Rs6 billion under this head alone.

However, an increase of 0.3 percent in infrastructure cess would help generate more revenue for the province. The levy is currently 0.5 percent on imported goods. The Finance Bill stipulates various slabs for infrastructure cess on imported goods. Therefore, Sindh has set the target of revenue receipts for the next fiscal at Rs207.8 billion, which is 17.5 percent higher than the revised estimate of Rs176.9 billion for the outgoing financial year.

Moreover, capital receipts have been estimated at Rs14.5 billion for the next fiscal. Compared with the revised estimate of capital receipts for the outgoing financial year, Rs4.5 billion, they are more than three times higher. The estimated current capital receipts for the next fiscal comprise Rs3.7 billion in local payments, Rs345 million from the Sindh Development Social Services Programme, Rs6.75 billion from the World Bank, Rs1 billion from the European Commission and Rs2.7 billion from the Asian Development Bank (ADB).

The capital expenditure for the next fiscal has been estimated at Rs9.5 billion, against the revised target of Rs8.5 billion for the outgoing financial year. The overall revenue and capital receipts for the next fiscal have been estimated at Rs222.3 billion, against the estimated revenue and capital expenditure of Rs190.5 billion, thus a surplus of Rs31.9 billion.

The current revenue expenditure has been estimated to increase by Rs17.1 billion to Rs181 billion in the next fiscal. Similarly, the provisional expenditure is estimated to increase by Rs12.7 billion to Rs103 billion in the next fiscal, as compared with the revised target of Rs90.3 billion in the outgoing financial year.

The Punjab government presented its annual budget on June 17, having a total outlay of Rs416.94 billion. Of this amount, Rs256.948 billion have been allocated for the current expenditure; whereas the remaining Rs160 billion for the Annual Development Plan (ADP). If we take away the Rs17 billion being kept in the provincial budget for pro-poor subsidies, the net revenue expenditure comes to Rs239.948 billion.

The provincial government claims to have tried to enforce financial discipline and austerity through the budget. Besides, it has also tried to increase the province's own revenue, to have greater fiscal space to meet the expenditure to be made in certain areas. The huge ADP allocation of Rs160 billion for the next fiscal, as compared with the revised ADP estimates of Rs121 billion for the outgoing financial year (2008-09), which ends tomorrow, hints at government's intention to focus heavily on development.

One needs to remember that the Punjab Budget 2008-09 has been presented in the backdrop of major challenges facing the economy. These include the recurring increases in the prices of food and petroleum products. Therefore, it was imperative for the provincial government to protect the poor and the needy from the negative effects of these challenges, at least to some extent.

To show commitment to the poor, the ruling coalition in the province -- led by the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan People's Party (PPP) -- has announced subsidies of Rs17 billion for them. In return, it has won applause from the masses for intentions to tax the rich and distribute the proceeds among the poor. However, critics term the offering of subsidies to the poor a temporary intervention that protects the poor from the price-hike without increasing their ability to earn more. To them, what matters more is the creation of more income generation activities for the poor, which is a long-term solution to their woes.

The Punjab Budget 2008-2009 has an anticipated net surplus of Rs147.763 billion, which will be used to finance most of the total development expenditure of Rs160 billion. The remaining Rs13 billion will come through foreign grants and foreign project assistance. On this issue, the Punjab finance minister criticised the previous government for announcing the ADP without addressing the resource gap of Rs30 billion -- something that led to its drastic revision.

Coming to the subsidies, the Punjab government has set aside Rs10 billion in the shape of food subsidy for the poor and Rs3 billion for health insurance to treat the poor patients. The subsidy would help them buy three essential food items -- flour, cooking oil and pulses. There won't be any direct cash transfers, because such programme may clash with the one pursued by the federal government and may result in compensating the same household twice.

According to the plan, subsidy cards will be issued to the deserving households, through which they would be able to buy the above-mentioned food items from selected shops at reduced rates. A task force will be formed to monitor this process. Relief will also be provided to the urban commuters by giving subsidy to urban transporters. Other subsidies include provision of Rs1 billion for write-off of loans of widows and revival of the Green Tractor Scheme.

There has always been opposition to provision of subsidies on grounds that they temporarily increase the purchasing power of the poor and lead to inflationary pressures. But the newly formed Punjab government was not in a position to invite public wrath by imposing new taxes that directly affect the poor or denying them any relief.

On the receipts side, the Punjab government estimates to gain much more in the next fiscal than what it received in the outgoing financial year. The budget documents reveal that the general revenue receipts are estimated at Rs389.896 billion in the next fiscal, compared with Rs356.171 billion in the outgoing financial year, representing an increase of 9.47 percent. To enhance its own revenue sources, the Punjab government has pitched the estimates for provincial tax receipts at Rs40.362 billion, as compared with budgetary estimates of Rs37.316 billion in the outgoing fiscal.

Before discussing the sources of increased provincial tax revenue, let us have a look at province's total receipts! The share from Federal Divisible Pool Taxes under the existing formula stands at Rs284.638 billion, Straight Transfers at Rs4.938 billion, Federal Grants ar Rs23.344 billion, Provincial Tax Revenue at Rs40.362 billion and Provincial Non-Tax Revenue at Rs36.613 billion. Punjab is likely to get a major increase of Rs57.704 billion under Federal Divisible Pool Transfers in the next fiscal, because the share of provinces in federal taxes is increasing gradually.

The Punjab government has decided to tax imported luxury vehicles at the rate of Rs200,000 on cars with an engine capacity of 2,000cc to 3,000cc, and Rs300,000 on cars with an engine capacity exceeding 3,000cc. Vehicles purchased by the government for official purposes or vehicles with a seating capacity exceeding 10 people will be exempted from the luxury tax. Entertainment duty on horse races, enhancement of sales tax from 15 to 16 percent and bringing of the non-transferable purchase / sale through development organisations / co-operatives under the net of stamp duty are other sources of increased revenue. Buoyed by the increased fiscal space, the Punjab government estimates to obtain Rs23 billion less loans in the next fiscal.

The provincial government has made public its plans to pursue an ambitious development plan at the cost of Rs160 billion in the next fiscal, which is 24 percent more than the outgoing financial year's revised estimate of Rs121 billion. Of this amount, Rs58.64 billion would be spent on social sector, Rs30.13 billion on education and Rs26.1 billion on health.

An encouraging development has been the government's willingness to fully fund the ongoing projects likely to be completed within the next year. Therefore, it plans to earmark 60 percent for the ongoing projects and 40 percent for the new ones. Much to the relief of uncertain employees of Rescue 1122, the provincial government plans to spend Rs2.5 billion on expansion of this emergency service in the whole province.

Infrastructure is estimated to receive Rs17.5 billion for the construction of roads, Rs11.3 billion for the irrigation system, and Rs8 billion for water supply and sanitation. There is an allocation of Rs37.052 billion in the Punjab Budget 2008-09 for law and order, because the government says it wants to change the police culture in the province, besides providing security and protection to the public. On the basis of past experience, there is little hope that the increased budget for police will translate into efficient service delivery.

An allocation of Rs7 billion has been made in the provincial budget for the next fiscal for social sector schemes. These include caring for destitute women, senior citizens, orphans, widows, abandoned babies and disabled; imparting skills to vulnerable groups to make them economically independent; constructing shelter homes, women barracks in jails, children homes and old age homes; and strengthening the existing shelter homes (Dar-ul-Amans) and establishing new ones in the remaining districts of the province.

An amount of Rs699 million has been kept for the establishment of five new hydel power stations in the province, which will be able to produce 350-megawatt electricity. Last but not the least, the agriculture sector will get a major share of the budgetary spending. To boost the sector, the Punjab government plans to provide tractors at subsidised rates to small farmers, besides giving 12.5 acre land on lease to educated and landless farmers.

The Balochistan Budget 2008-09, having a total outlay of Rs71.191 billion, was presented much later than the other three provinces, mainly because of the financial crisis facing the area-wise largest province of the country. It is for this reason that the provincial budget for the next fiscal has a huge deficit of Rs8.806 billion, to overcome which the resource-stricken province would have to rely once again on external sources.

According to the Balochistan Budget 2008-09, the size of the development programme is Rs15.745 billion, while the current expenditure is estimated at Rs47.521 billion and the capital expenditure at Rs7.924 billion. On the other hand, the total receipts are estimated at Rs62.385 billion, consisting of Provincial Own Resources of Rs3.476 billion and Federal Transfers of Rs48.050 billion. The provincial budget for the next fiscal also includes Rs6.228 billion as capital receipts and Rs4.630 billion as Foreign Project Assistance.

The Provincial Own Resources include tax receipts of Rs0.972 billion and non-tax receipts of Rs2.504 billion. The Federal Transfers comprise direct transfers of Rs8.519 billion, subvention / grants of Rs13.607 billion and share in taxes of Rs25.922 billion. Therefore, the total receipts, including both tax and non-tax, of the province are estimated at Rs62.385 billion.

The provincial development programme for the next fiscal includes Annual Development Plan (ADP) of Rs11.757 billion and Foreign Assistance of Rs3.987 billion, thus totalling to Rs15.745 billion. According to estimates in the budget document, 224 development schemes of the outgoing financial year (2008-09), which ends tomorrow, will be continued in new fiscal, while no new development schemes have been announced. However, an amount of Rs3.25 billion has been earmarked in the ADP for new development schemes, which will be conceived by the provincial legislators.

The logic used is that the recently elected MPA did not have enough time to conceive new development schemes for their constituencies. A major portion of the development budget has been earmarked for black-topped roads, which will connect farms in the province to national highways. On the positive side, no new tax has been imposed in the provincial budget for the next fiscal. A total of 2,424 new posts in different sectors have been created and an amount of Rs430.218 million has been earmarked for this purpose.

Compared with the outgoing fiscal, the outlay of the Balochistan Budget 2008-09 is Rs7.3 billion more. Similarly, the development expenditure has been increased by Rs2.27 billion. This increase shows that the province's expenditures are increasing with the overall inflation in the country. The provincial budget for the next fiscal has received a mixed response from different walks of life.

The government considers it a pro-poor budget on the grounds that it is tax-free, while the poor perceive it as a burden on the basis of its extended volume in non-tax receipts, which are estimated to be 23 percent more than that of the outgoing fiscal. These non-tax receipts also include community and social services, which have a direct impact on the poor. Also, very little consideration has been given to quality education and health care facilities in the provincial budget for the next fiscal.

The anticipated transfers to the province in the 2008-09 budget under the National Finance Commission (NFC) Award have increased by 24 percent in comparison with the outgoing fiscal, while there is a decrease of five percent in straight transfers, which include surcharge and royalty on gas. The province is providing gas to the whole of country, but its low share in terms of surcharge and royalty on gas remains a big question.

Besides an estimated five percent increase in provincial tax receipts, there is a 23 percent increase in provincial non-tax receipts, which will directly affect the poor residents of Balochistan. Compared with the provincial budget for the outgoing fiscal, the budget for the next financial year denotes a 13 percent increase in capital receipts and 39 percent increase in other receipts. On the whole, there has been an 18 percent increase in total receipts in the next fiscal, when compared with the outgoing financial year's budget.

The province also plans to reduce its total deficit by 17 percent in comparison with the outgoing financial year's budget. One feels that this target is achievable if simplicity is adopted at all levels of government, especially considering that Rs3 billion are also expected from the prime minister's discretionary fund to heal the province's ailing economy.

A major portion of the province's development budget for the next fiscal -- 38 percent -- has been earmarked for general administration. The second priority in development schemes has been accorded to economic affairs (35 percent), including the sectors of agriculture, livestock, fisheries, minerals, roads, water and power. The emphasis of such schemes, however, is on roads. Education has been given the third priority in the development budget and its share has been estimated at 14 percent.

In the Balochistan Budget 2008-09, only 1.8 percent of the estimated development expenditure has been allocated for health. This is much less than the sector's share in the budget for the outgoing fiscal. According to original estimates, the share of health in the budget for the financial year 2007-08 was 4.2 percent, however it was later revised to 2.3 percent. The reduced percentage of budget for the health sector clearly shows that it has not been accorded the priority it deserved. It also means that the poor of the province have been provided with less opportunities to avail medical facilitates, which will ultimately make them dependent on the private sector.

Education and health are the two main public sectors that are perceived as a relief to the poor. Unfortunately, however, allocations for the two sectors have never been fully spent or were not made available. It shows that the provincial government is eager to allocate resources for these sectors, but lacks the absorption capacity to fully spend the earmarked money.

A major problem with the budget documents is that they only show the original and revised estimates, but do not show the actual expenditure made in various sectors. Thus, both the parliamentarians and the general public remain unaware of this. The monopoly of the bureaucracy on the budget formation process helps it maintain the information gap regarding the actual expenditures. The poor performance trends in areas of education and health in the last few years show that there is some problem, either with the budget planning or its implementation. This also enhances the chances of corruption and makes the budget implementation process dubious.

The Balochistan Budget 2008-09 has been presented along with an overdraft of Rs19 billion. As far as the Gas Development Surcharge (GDS) is concerned, the federal government owes Rs128 billion to Balochistan; however, only Rs2.5 billion have so far been paid to the province under this head. On the other hand, the province pays Rs28-30 million per month as interest to the State Bank of Pakistan (SBP), which is a major hurdle in the way of proper utilisation of the budget. Efforts to change this overdraft in soft loan are underway, but it will take time.

The provincial budget for the next fiscal needs to be regularly monitored by parliamentarians, so that its optimal utilisation can be ensured. A mid-term budget review could make this process more transparent. The budget for the education and health sectors, in particular, needs to be tracked according to the planned schemes, because it will accrue enormous benefits to the poor.