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direction energy Neglected
area Going
unnoticed policy Bridging
the trust gap mechanism
Growing concerns
direction Policy void Absence of an industrial policy is one of the major reasons for the bad shape of our industry By Shujauddin Qureshi The present government
has not given an Industrial Policy to the industrial sector despite making
repeated commitments during the last four years. The former Industries
Minister, Mian Manzoor Ahmed Wattoo, announced in July 2009 that the
industrial policy would be announced in a couple of months to promote
industrial sector and increase overall economic growth. However, a few
months have been converted into a few years, but no policy has been
announced as yet. Although successive
governments in the past have announced policies and packages for some
sectors of the industry like textile, power generation, information
technology, etc., but a proper industrial policy has not been announced in
Pakistan. No industrial policy has been announced in the country since
1977. “It is a pity that our
industrial sector is without an industrial policy for decades, which has
marred our economic growth,” says Majyd Aziz, an industrialist and
former President of Karachi Chamber of Commerce and Industry. “We have
to think out of box and give attention on the development of our
industrial base,” he says, adding, “Industrial policy should encompass
all factors to increase exports and employment.” Absence of an industrial
policy has left the sector looking for options and guidelines. “We
don’t have a strategic direction in industrialisation,” says Khurram
Shahzad of InvestCap Securities. He says the country is facing economic
crises mostly due to energy shortage. Khurram believes the
government’s new industrial policy should focus on diversification of
the industrial base. “We have to move away from focusing only on
textiles. We have to develop other industries also, particularly
non-traditional ones like mining, agro-based, fisheries, leather and
value-addition industries. The present government
gave some attention to the formulation of an industrial policy. It even
formed an Industrial Policy Task Force or Core Group, which prepared a
draft Industrial Policy in 2010 after a comprehensive three-month
consultative process. The draft policy,
titled, “Industrial Policy, its Spatial Aspects and Cluster” advocates
state support for industrialisation. “The relative success of the Asian
Tigers and more recently of China and India in sustaining high growth
rates has been on the back of an activist industrial policy. The extent of
state intervention in these economies ranged from a variety of input
subsidies; tax exemptions; tariff protection to direct public sector
investments in large scale projects e.g., steel manufacturing plant in
Korea and Japan,” the report identifies. The draft policy has
been evolved through a consultation process. The stakeholders, including
industrialists, trade associations, chambers of commerce and industry,
public sector institutions and universities gave their recommendations for
the industrial policy and the draft policy was presented to Federation of
Pakistan Chambers of Commerce and Industry (FPCCI), Chambers of Commerce
and Industry in Karachi, Sukkur, Hyderabad, Multan, Peshawar, Faisalabad,
Gujranwala and Lahore. The final presentation was made in Islamabad to the
members of the task force along with a diverse group of the industry
leaders. Why there was no follow-up on the report remains a mystery. Pakistan needs a
comprehensive Industrial Policy with an implementation framework for
increasing exports in the country. Three members of the Core Group: Prof.
Abid A. Burki, Prof. Kamal A. Munir, and Mr. M. Usman Khan along with Mr.
Masud Akhtar, Dr. Shaukat Hameed Khan, and Mr. Tasneem Noorani have also
prepared an implementation plan to make the policies actionable and to
assign roles and responsibilities for various actions to appropriate
agencies and departments. “The Planning
Commission has already approved the industrial policy and the government
wants to present it in the parliament for final approval,” says Prof.
Abid Aman Burki, Department of Economics, School of Humanities, Social
Sciences and Law at Lahore University of Management Sciences (LUMS). In an
interview with TNS Prof. Burki hopes the policy would be announced and
implemented during the current year. Burki points out that
the policy assigns central role to the state in the process of
industrialisation. The major role is to be played under the implementation
mechanism of the industrial policy by Industrial Development Board (IDB),
which would be the main institution to implement and monitor the outcomes.
Prof. Burki says the
delay in announcement of the industrial policy has been caused due to
unavailability of funds from the World Bank, which would be the major
donor for it. He says the World Bank is usually reluctant to finance
industrial policies of the developing countries. Currently, a team of
World Bank is on visit to Pakistan and they are meeting with different
stakeholders. “The Industrial Policy
would be a departure from Pakistan’s experience with free-market economy
over the past thirty or so years, which have been proved as disastrous,
especially when one considers the relative success of its peers such as
China, Korea, India, Malaysia, Thailand and now Vietnam, over the same
period,” says Prof. Burki. According to experts,
the proposed policy follows the tried and tested policy of indigenous,
broad-based industrialisation to attain prosperity. It champions national
industry and seeks to build indigenous capabilities, even if it is more
costly in the short-run. The policy relies on a model that seeks growth
through exports as well as development of domestic markets. What are the targets of
the new Industrial Policy? It is mainly aimed at sustaining economic
growth rate at 8 percent in the manufacturing sector per annum which will
help double the manufacturing output in the next ten years. Other objectives of the
policy are the expansion of the currently stagnant industrial employment
from 13 percent of labour force to at least 20 percent. Accounting for
employment elasticity means an addition of 4 million workers to the
industrial workforce, who will need to possess different and higher skills
to succeed in the global competitive environment. The proposed policy
targets a radical increase in Pakistan’s manufacturing value addition (MVA)
by more than 100 percent, diversification from the traditional resource
based/low technology enterprise to medium and high technology enterprise;
a sharp increase in exports of medium and high technology manufactures to
10 percent from the current 1.5 percent. The proposed industrial
policy has focused on energy and power. Pakistan’s energy consumption
stands in contrast to almost all industrial economies with domestic use of
electricity at 46.6 percent equaling the combined use by industry at 12.1
percent, agriculture 27.1 percent and commerce 7.4 percent. The policy foresees that
as Pakistan industrialises, this mix will change with industrial energy
consumption going up manifold. Interestingly, current per capita
electricity consumption is only 531 KWh, which has actually fell from 615
KWh in 2006. This per capita consumption is a paltry 1/6th of
Malaysia’s. A minimum of 20,000 MW generation capacity will need to be
added during the next 10 years, the industrial policy points out. The government in power
over the next 2-3 years will prioritize provision of energy to
manufacturing installations over other users. Current energy tariffs will
be replaced with a structure with industry paying the lowest tariff and
domestic consumers paying the highest. Because of the greater share of
domestic consumers, the benefits given to industry and commerce can be
substantial. It will be NEPRA’s responsibility to initiate such a tariff
regime into effect. Under the proposed
policy, a group of primary industries will be supported in order to
improve access and provide lower cost of inputs for value addition. These
include steel and chemicals. The proposed policy
advocates transfer of technology, promotion of value addition, compliance
with standards, government’s preference to local industries in all its
procurements, setting up industrial clusters and parks, compliance with
the WTO provisions, skill development of manpower, improvement of logistic
facilities, elimination of output-based subsidies for exporters,
encouraging foreign direct investment, and environmental compliance in
industrial sectors. Facing various social,
political and economic crises, the government has to announce the new
industrial policy before end of its 5 year term, ahead of announcement of
new general elections scheduled for 2013.
energy The recent strike by
Compressed Natural Gas (CNG) sector, which continued for over a week,
brought the stakeholders to the talking table and resulted in acceptance
of few of the demands. The government agreed on not imposing the feared
cess on the sector for a year, reducing weekly load-shedding by 8 hours
and keeping gas prices around 60 per cent of the existing petrol prices. The representatives of
the CNG sector seem to be content with these concessions. However, at the
same time, they are uncomfortable with the extraordinary incentives
announced for prospective Liquefied Petroleum Gas (LPG) importers.
Besides, the aggressive campaign launched jointly by industry, power and
fertilizer sector, etc, against allocation of gas quota for CNG sector is
a matter of great concern to them. While the parties
pitched against the CNG sector blame it on speeding up the depletion
process of gas reserves, it refutes the claim saying it uses only 8 per
cent of the total consumption. Secondly, it terms government’s inability
to explore new gas reserves the main reason behind the depletion of the
existing ones. Had the case been so, the countries using it as vehicle
fuel for decades would have abandoned its use, it is claimed. The question that haunts
the common people is that whether the recently signed agreement would last
for long or not. They have heard of many similar pacts in the past which
have been flouted with impunity for various reasons on many occasions. The
policy is also not clear. While there is ban on import of CNG kits and
their fitting in vehicles by assemblers,
roadside vendors are converting vehicles to CNG endlessly, thus
adding to the existing fleet. The News on Sunday
talked to the stakeholders to identify the reasons behind periodic
revisions in CNG policy. A comparison of countries where it’s a
preferred fuel was also referred to get a better picture. It was learnt that,
historically, CNG was introduced as a fuel during the 1960s. Italy started
using natural gas as an alternative to diesel. That initiative saw a boost
in the recent years as lot of efforts began to tap CNG as a renewable
energy source and due to its lower price and higher mileage, CNG has
become a favoured mode of fuel around the globe. By the year 2009, there
were around 500,000 CNG vehicles in 34 highly developed countries of
Organization for Economic Co-operation and Development (OECD) and in
Germany alone, CNG-fitted vehicles are expected to increase to two million
units of motor-transport by the year 2020. In India, all public
vehicles are required by law to run on CNG. And over 20 per cent of
private automobiles also use CNG as a fuel due to its cost advantage. New
Delhi, India’s capital is home to the largest fleet of CNG public
transportation vehicles in the world. CNG sector also pleads
on grounds that countries with the highest numbers of CNG vehicles in
circulation are strategizing the conversion of their vehicle fleets to
smoothen the transitions for consumers and providing a number of
developments but in Pakistan the situation has been reversed. For example, they say,
Singapore has a Green Vehicle Rebate (GVR) for users of CNG technology.
First introduced in January 2001, the GVR grants a 40 per cent discount on
the open market value (OMV) cost of newly registered green passenger
vehicles. The opponents have their
own reasons to give. For example, the industry sector represented by APTMA
bigwig, Gohar Ejaz, says the government is wasting 500 mmcfd of gas on CNG
stations just to save Rs 50 billion while it can secure up to Rs 300
billion by diverting gas supply to the industry and Independent Power
Producers (IPPs). Besides, it says there is no use subsidising private
transport and only public transport should be provided this fuel to
directly benefit the poor. Talking to TNS, Malik
Khuda Bakhsh, President CNG Station Owners Association, says “the
government is against the sector not for the reason that reserves are
depleting but to promote LPG import. It has taken this decision without
keeping in mind that LPG is a costly imported fuel and its uninterrupted
availability at current prices would be a problematic issue,” he adds. He says an argument in
favour of CNG is that it is lighter than air and thus will normally
dissipate in the case of a leak, giving it a significant safety advantage
over LPG which is twice as heavy as air and dissipates slowly. Because of
this, LPG flows along floors and tends to settle in low spots, such as
basements and such accumulations can cause explosion hazards. This is the
reason why LPG fuelled vehicles are prohibited from indoor parkades in
many jurisdictions. Despite these
reservations, the Oil and Gas Regulatory Authority (OGRA) has allowed 17
companies to manufacture LPG cylinders and allowed different investors to
set up over 100 LPG stations across the country. The CNG sector blames all
these steps are being taken without forming certain rules and regulations. An official in the
ministry of natural resources shares it with TNS that the situation can
improve if only theft of gas is curbed. Switching to fuels like coal is
also an option but the problem is that different sectors are fighting for
the only reservoirs available to them. If newer fuels are used, there
would be abundant gas to run vehicles. No doubt, he says, the
major fault of the government is that it does not make projections and
explore new energy resources which can correspond to the increase in
demand. The government, he suggests, must control the rate at which the
fleet of CNG-run vehicles is growing and strive to meet the existing
demand. The solution that suits
all is that Pakistan must go ahead with its plan to import gas from Iran
against all odds. “Importing cheaper gas is much better than importing
costly petrol. While the immediate demand can be fulfilled this way, the
government can attract foreign investment for exploration,” he
concludes.
Neglected
area The month of
June is normally abuzz with budgets and announcement of development
programmes by the centre, provinces and the left over tier of local
governments. As one reviews the
trends of developmental outlays during the recent past, one aspect is
stark clear. The governments are very keen to steer development through a
bucket full of projects. For the bureaucrats,
politicians, technocrats, contractors and suppliers, it makes a lot of
worth. Quick initiation through tenders, ample opportunity to include
individual choices and whimsical demands, easy releases of mobilisation
and procedural funds, finite completion time, possibility to get folks of
choices employed or indirectly benefited and enormous political dividend
to trumpet completion as a testimony of success are some attributes. The sufferers in this
state of affairs are the people of Pakistan and the contexts and sectors
that are unabashedly cited as the recipients of project bound benefits.
Let us take a few examples to understand the scenario with some clarity. The Railways has been a
sector which has benefited from many projects either related to
procurement of finished products or re-vamping of already developed
infrastructure. Figures and accounts will probably become inadequate to
prove the disservice that has been done to this vital sector of
communication by ill-timed and poorly conceived projects and piecemeal
attempts. What the Railways
required is a well thought out plan based upon objective review of the
sectoral conditions, decision-making environment, covert intentions of
associated stakeholders and future need of spread out beneficiaries. Needless to say, a few
billions spending in isolated projects cannot bring this haywire sector
back on rails. And implementation of any such technically sound and
administratively mature plan must be done religiously. The other sectors of
national performance face the same challenge. Our economic managers, under
the usual pressures from their political bosses, structure a modicum of
development justice by allocating funds to projects in most of the
sectors. However, if one asks
them about the cumulative impact that may be caused by the launch of these
projects and their completion, they would have no clue about it all. A
case in point is the array of projects in school buildings and upgradation
that has been reincarnated in various names and fancy nomenclature under
the witty advices of donor agencies. Again, the capacity to
calculate the funds spent on this otherwise ‘noble’ objective may fall
short, but the situation on the ground is anything but satisfactory. A
trip from the outskirts of Karachi to Sukkur will make the traveler come
across hundreds of school buildings which are either dilapidated,
abandoned, progressively decayed or destroyed but surely not functioning
as a school. W While formal accounts
denote such project ventures as success, it is only limited to the
pecuniary benefits to contractors, consultants and their invisible
facilitators. It goes without saying that by increasing the number of
school buildings or issuing appointment letters to teachers with dubious
credentials, educational standards are not raised. Planning for most vital
sectors need administrative decisions and input on war footings. The
energy sector has a direct bearing on the cumulative outputs of all the
sectors. Acute shortage has now hit unbearable limits in many parts of the
country. One finds that
investments in time-beaten technologies and expensive projects continue
unabated. The vast potential of alternative energy projects stays
unutilised for reasons best known only to the powers that be. According to
a news report, Alternative Energy Development Board (AEDB) has identified
72 wind corridors with a total estimated output of over 100,000 mega
watts. This avenue alone can
generate power that shall be enough for national requirements for over
three decades. Similarly, the wastes from sugar production alone have the
capability to produce electricity up to 2000 mega watts. Contribution of wastes
from other crops can further add value to this figure. Large urban centres
generate high amounts of municipal solid waste. In Karachi alone, more
than 10,000 tonnes of solid waste is generated. Many developed and
developing countries have resorted to ‘waste to energy’ technologies
with multiple outputs. The waste is totally utilised while sizable amount
of energy is generated. If strategic technologies are adopted,
desalination of sea water up to desirable standards can also be acquired. It goes without saying
that low cost optimum supply of energy is the foremost ingredient for cost
efficient manufacturing of goods and services. If our people have to
collectively attain improved life styles and employment, access to cheap
and reliable sources of electric power will have to be ensured. Development
administration should not be limited to sanctioning projects or baseline
monitoring of the progress. It has to be done through long term planning
in a visionary manner. To make this planning effectively deliver, several
pre-requisites have to be fulfilled in this respect. A facilities audit must
be conducted to ascertain the degree of utilisation of the buildings and
other hardware outlays. It has been found that development of buildings
alone is confused with progress. It is deplorable to note
that many facilities constructed with expenditure of billions of rupees
lie unutilised. The large number of auditoriums built by different pubic
departments is an example. These buildings need to be utilised on sharing
basis. Multiple benefits of
single investment can make one of the approaches to development. If a
project or development input provides partial benefit to a sector or
target population, its approval needs serious consideration. Utilisation
of local expertise and indigenous contracting enterprises must be given
priority. A development work that
impoverishes majority of folks at the benefit of a few must be avoided.
And operational sustainability of the projects as well as impacts on the
environment must be given appropriate consideration.
Going
unnoticed Indigenous leather
industry is playing an imperative role in boosting the economic growth of
Pakistan with its sizable contribution in exports. The tanning of animal
skin and hides aims at transforming them into a robust and commercially
acceptable leather. Over the last decade or
so, the chromium-based tanning industry has shown brisk growth in our
region because of low cost, light colour and excellent stability of the
product. Leather takes up only
60-80 percent of applied chromium while the rest is released into the
sewage system causing serious environmental hazards. However, the rule and
regulations promulgated by the government are not strictly followed for
the processing of effluents discharged by the domestic tanneries. Consequently, these
effluents have become a massive source of pollution in the surrounding
area of Kasur. The main objective of our research project was the
evaluation of tannery effluent’s perilous impacts through use of various
bio-assays. The composition of
wastewater samples was determined by PIXE (Proton Induced X-ray Emission)
analysis in the CASP, Government College University, Lahore. PIXE is a
versatile, non-destructive and fast multi-elemental analysis technique
which requires minimal sample preparation. The ground water of
shallow tubewells (100-275ft, implanted within the domestic tanneries) in
the study area has presented very high levels of chromium than WHO
recommended limits. While the ground water from the deeper tubewells
(300ft or more, Municipal Corporation implanted tubewells) generally does
not contain the toxic elements except for one outlet. Besides this, microbial
load was determined by viable count method. The detected viable count was
7.5 X 104 to 3.0 X 107CFU/ml. Various strains of chromium tolerant bacilli
were isolated and they were found tolerant up to 2600µg/ml of
supplemented chromium salts. Dilutions of tannery
effluent wastewater were evaluated for their effects on angiogenesis
(development of new blood vessels) using chorioallantoic membrane (CAM)
assay in the Department of Pharmacology and Toxicology, University of
Veterinary and Animal Sciences, Lahore. The effluent samples
were found highly antiangiogenic. Moreover, dilutions of tannery
wastewater have also demonstrated significant toxicity when assessed
through Marine Shrimps (Artemia salina) mortality and Phytotoxiciy assay (Zea
Mays). Six months chronic
exposure of tannery effluent samples to Wistar rats led to the development
various lesions in lung, liver, kidney and heart of rats. Sectioning of
brain was done at department of Clinical Neurosciences, Neurology Unit,
Addenbrookes Hospital, University of Cambridge UK and no neuronal loss was
observed. So, it may be concluded
that tannery effluent wastewater and contaminated ground water of Kasur is
imposing a great threat not only to local inhabitants of Kasur but also to
the population residing at greater distances. Contributed by Lubna
Shakir, a Ph D scholar, and Prof Dr Muhammad Ashraf from the Department of
Pharmacology and Toxicology, University of Veterinary and Animal Sciences,
Lahore.
policy While driving past the
newly-constructed building of a school, I saw a scrawny boy, a khes draped
around his shoulders, looking intently at the cars whizzing past him while
blaring loud horns and raising whirls of dust in the air. In my
imagination, I could see the boy ruminating about the contrast about his
present condition, where he would be studying religious books in an
austere setting, with no time to play on the campus, and, the smartly
dressed boys, who would be reading and writing and playing football and
basketball on the playgrounds of their school. The image is ingrained
in my sub consciousness, from where it floats on the surface, distracting
me now and then. A number of difficult
questions come to the mind: Do Madrassahs only operate on the fringes of
society, catering to the educational needs of poorest of the poor? Do
these religious institutions pose danger to the political cohesion of
Pakistan? How can these madrassahs be integrated into the mainstream
education system? As these questions are hard, so they evoke emotive
answers and responses. The 9/11 attacks brought
a sea change in perceptions about madrassahs. Now the religious seminaries
were portrayed as “incubators” of violence in the Western as well as
Pakistani media. Many commentators argued madrassahs were spreading
religious extremism by instilling bigoted and sectarian views in their
students through their outdated curricula and teaching methodologies.
Colin Powell, former US Secretary of State, said that madrassahs “do
nothing but prepare youngsters to be fundamentalists and to be
terrorists.” As a result of
international furor over the role of madrassahs in promoting militancy in
Pakistan, the Government of Pakistan passed (Voluntary Registration and
Regulation) Ordinance 2002. The Ordinance proposed a number of measures in
the areas of registration, curricula rationalisation and teacher training
and financial control. The Ordinance proposed voluntary registration of
madrassahs; setting up of Boards
for Secondary School Certificates (SSC) at par with the government boards
where students appear from both public and private schools; employment of
teachers in accordance with government standardised scales; and submission
of report on annual
activities and audited accounts. However, the measures
could not be implemented due to opposition of Ulema to registration and
setting up of separate boards. Ittehad-i-Tanzeemat-i-Madaris Pakistan (
ITMP) — an umbrella organisation of different schools of thought of
Islam in Pakistan — wanted the recognition of five wafaq as
fully-fledged boards. The present government has accepted the demand of
ITMP for recognition of wafaq as boards on the lines of Higher Secondary
School Boards. The government’s rationale for acceding to this demand of
ITMP is that it will pave the way for reorientation of curricula as well
as registration of madrassahs because madrassahs would have to register
with the boards for purposes of exams and award of certificates and they
would also have to revise the curricula to suit the need of exams. However, a regulatory
authority has been set up to supervise the working of these boards. To understand the
dynamics for mainstreaming of madrassahs in Pakistan and the attitudes of
madrassah students on jihad, I visited five major madrassahs belonging to
different schools of thought in Lahore. As I entered the first madrassah,
a large board nailed on the wall of main corridor confirmed the
stereotypical representation of the seminaries in media. The board was a
kind of medieval edict pillar, containing a list of forbidden activities
for boys, which included amongst others, keeping an English hair cut,
laughing loudly and listening to music. However, visits to other
madrassahs and discussions with administrators and students brought out a
complex picture. These seminaries are not monolithic institutions but
belong to different sub-sects (maslak) and are governed by their own wafaq.
These wafaq are: Wafaq-al Madaris-al Arabiyah;
Wafaq-ul-Madaris-al-Salafiah; Rabita-ul-Madaris; Wafaq-ul-Madaris-al- Shia;
and Tanzim-ul-Madaris-al- Arabiyah. Further, madrassahs
provide Islamic education at different levels. Main
levels of education with their corresponding levels of state
regulated education are
Darjah-i-Ullah (middle); Darjah-i-SanwiiyahAamah (Matriculation)
Darjah-i-Sanwiyah khasa (Intermediate); Aaliyah ( Bachelor of Arts); and
Aalmiyah ( Masters of Arts). Madrassah students
belong to poor as well as lower middle classes; however, school enrollment
is skewed towards rural areas. According to one madrassah administrator,
80 per cent of the students come from small towns and villages of Punjab.
This fact has been reiterated by other madrassahs and the ratio of rural
enrollment in the visited madrassahs varies from 60 per cent to 80 per
cent. According to the
administrators, poor students enroll into madrassahs because they are
provided with free education, boarding, food, books, clothes and basic
medical facilities. Stipend is also provided to students and the amount of
stipend varies according to levels of education. Another important reason
for enrollment of poor students into madrassahs is that they are able to
get jobs in the public and private schools. One madrassah administrator
said their “graduates are in demand and more vacancies are available for
teachers in madrassahs and fewer teachers are passing out to fill the
slots.” Madrassahs depend for
their finances on the philanthropy and charity of society and their main
sources of funds are zakat, sadqah and khams. They get donations from
affluent as well as poor people. Interestingly, all schools begin their
financial year with the onset of the Muslim holy month of Ramadan as
Muslims donate generously during the month of Ramadan. These madrassahs teach a
modified form of Dars-i-Nizami which is approved by their respective wafaq.
The madrassahs are oriented towards transmitted sciences and opposition to
rational sciences, which began in Delhi madrassahs in the 18th century and
became institutionalized in the 19th century, has continued to this day.
The medium of instruction in these madrassahs is Urdu, however, students
are informally taught in vernaculars like Punjabi and Seraiki. When
questioned about the relevance of subjects like Economics, Politics and
World History for education, madrassah administrators were unequivocal in
their assertion that understanding of Quran, Sunnah and Fiqh would help
students to understand contemporary issues. The views of madrassahs
on religious extremism, suicide bombings, US war on terror and the form of
government suitable for Pakistan are not in tandem with official narrative
and popular opinion. Madrassah administrators opined that suicide bombings
are handiwork of foreign powers; US war on terrorism is aimed at
establishing stranglehold of West over Muslim lands; and only caliphate is
the requisite mode of organising the polity in Pakistan. A number of deductions
can be made from the interviews conducted with madrassah administrators
and students. These generalisations answer some of the questions raised in
the beginning of the article. Madrassahs are able to attract poor students
into their hallowed vaults because these students cannot find space in
public sector educational institutions. Then, the skills gained at public
schools do not prepare students to acquire jobs. Therefore, poorest of the
poor send their kids to madrassahs where they can be fed, clothed and also
taught religious studies to gain jobs as khateebs , Imams and teachers. However, madrassah
education perpetuates the cycle of poverty, and talented kids for lack of
better educational opportunities cannot gain entry into socially
prestigious careers such as medicine, law, civil service and armed forces. The rhetoric of
madrassah administrators against Western imperialism and colonisation
supports the thesis that madrassahs spin a narrative that promotes hatred
of the West particularly anti-Americanism. Further, their views on war
against militancy exhibit poor understanding of present circumstances.
According to media reports, Pakistan has lost more than 3000 soldiers in
battles against militants. This number is more than deaths of all foreign
deaths since war began in Afghanistan in 2001. Therefore, madrassahs are
seemingly disconnected with the facts that suicide bombers, terrorising
local populace and creating mayhem in Pakistan, are originating from its
soil and that the armed forces of Pakistan are waging a bloody war against
militants in the North western parts of the country. The opinion of the
madrassah administrators that ruling class consisting of politicians,
bureaucrats and industrialists is corrupt and must be transplanted with
rulers which follow principles of shariah and act like four righteously
guided khalifahs is potentially inflammatory: this contention
simplifies complex factors behind poor governance and reduces them
into a single variable
of a ‘corrupt ruling class responsible for bad governance.’ Administrators remained
silent on many important questions: How can a Caliphate — a golden
period of Islam when rulers exhibited exemplary conduct — can be
established? Is it to be set up through electoral means? Or is this goal
to be achieved through overthrow of elected or unelected government?
Madrassah administrators
argue that their teachers and students do not engage in political
activities and the environment at madrassahs is apolitical. However, major
madrassahs and their affiliates are networked with religious political
parties that also shoot out into other sub-bodies. Jamaat-e-Islami, a
major political party headed by Munawwar Hassan, has a chain of madrassahs
all over Pakistan. Similarly, Maulana Sami-ul-Haq, head of Jamiat
Ulema-i-Islam (S) is chancellor of the Darul Uloom Haqqania, a Deobandi
seminary. Empirical evidence shows
that a typical religious organisation has at least two wings: political
and intellectual. In fact, intellectual input of religious parties,
comprising of madrassahs and publishing houses, is significant as it fires
the political imagination of religious parties and leads to political
action. Political activities can range from taking part in elections,
mobilising charity campaigns, and holding protest demonstrations. Often, a
religious party might also branch out into a philanthropic organisation.
For instance, Jamait-i-Islami engages in charitable activities through two
organisations: Shahab-i-Milli and Pasban. Indeed, nucleus of a
religious organisation that engages in multifarious activities, ranging
from political to philanthropic and from intellectual to instructional, is
made up of a particular doctrinal dispensation that feeds and nourishes
all streams. The doctrinal preference is intellectualised and vetted at
madrassahs; therefore, this institution is at the core of whole network of
religious organisation. Madrassahs enjoy
societal legitimacy and have managed to tap into the generosity of people
to provide religious education and support to poor kids. Second,
madrassahs are networked with other religious bodies — political, social
— and that diffuses their influence in society. The societal legitimacy
and diffusion of power of Ulema has increased their clout that gives them
an upper hand in negotiations with government.
Bridging
the trust gap It happened to
be a sunny morning in Kathmandu when all the participants from three
countries — Pakistan, Nepal and Bangladesh greeted and exchanged
possible doable ideas on inclusion of citizens into the budget making
process ahead of the regional workshop. Similar feelings were
also expressed at the start of the workshop by the World Bank Institute,
Washington, ANSA-SAR, Bangladesh (A regional network on Social
Accountability in South Asia) and PRAN, Nepal to find commonalities and
entry points for effective participation of citizens into the public
financial management cycle. The workshop was unique
as it brought together representatives of different tiers of governments
and civil society organisations on a common platform. Public financial
management process is complex and tedious to understand requiring special
skills to de-codify and de-mystify the whole process. It comprises of four
stages of budget formulation, enactment, execution and monitoring.
The formulation and
planning stage is mostly performed by the executive class of the country
and provided the legislature with estimates of the revenues and
expenditures. This stage results in a
proposed budget to be presented to the parliamentarians. The participation
deficit starts from the formulation and planning stage as one can see
minimal participation from the citizens for whom the budget targets at
different priorities without any consultation. The practitioners
usually term it as “allocation problem” which is observed in the South
Asian countries and especially in Pakistan. The recent budget formulation
process in Pakistan which was kept so secretive that only few finance
officials knew the estimates while maintaining it in a USB stick till
printing. The enactment stage is
where the parliamentarians discuss the estimates prepared by the executive
and proposed different cut motions for realignment of the budgetary
priorities. It is a high forum on which the elected representatives have
to perform effective role through discussions in the parliamentary
committees and parliament in the budget session. This is a presumed role
of the parliamentarians to echo the people voices in the budget debate
which seems avoidable by the representatives. The role of parliamentary
committees is also of optical nature due to its capacity constraints and
lack of interest. In South Asia, except
India where the parliamentarians involved in marathon discussions see
smooth passing of budget by the legislature. Recently, the federal budget
in Pakistan was presented on the first of June which is now debated by the
parliamentarians in a special budget session. By the end of this
month, this proposed budget will shape up as “Finance Bill’ without
much discussion and deliberations by the parliamentarians. PILDAT, a think
tank based in Islamabad and Lahore often comes out with representative
participation in the discussions which is very poor and dismal while
comparing it with countries in and outside the region. The execution requires
strict scrutiny of the expenditures meant for the intended outcomes of the
programmes. The governments make promises and fulfill those in the budget
by allocating large chunks, but interestingly the actual expenditures
always fall behind. However, the allocations for Chief Minister, Governors
and many other political notables always exceed their allocable limits. Recently, Punjab budget
presented in the assembly shows the intention of the government to spend
generously on the energy generation for people. But, the last year
allocated amount of PKR 9.0 billion was redirected by the special
directives of Chief Minister and not a single rupee was spent on energy
projects. So, what people can expect from this government to spend on
energy this year if the honourable CM uses his discretionary powers again
for the good of people. Budget monitoring is
minimal as it requires information on the ongoing programmes which can
only be accessed by the citizens and Civil Society Organisations (CSOs)
while using the Right to Information (RTi). Although governments claim to
install strict monitoring and evaluation system to assess the progress
towards desired achievements. The integration of
social accountability tools into the whole cycle of PFM is not new in
development discourse as these are tested around the globe, especially in
developing countries and brought substantial improvements in the lives of
the poor and marginalized. The consultation provides food for thoughts for
all the stakeholders as a common agenda has reached upon in South Asia,
including Pakistan. I would like to focus more on the agreed action plan
by both, government and CSOs on citizens’ inclusion into the Public
Financial Management (PFM) cycle. Firstly, RTi can be an
effective tool to elicit information on the public agencies as its prowess
has proved its nuance across the globe and especially in India, South
Asia. In Pakistan, this has become a constitutional right as granted under
the recently approved 19th amendment. Now, it is binding upon state to
grant this right to every citizen without any discrimination. A Already, the RTi law is
drafted and yet to be presented in the parliament for discussion. However,
the RTi law itself is not a guarantee to secure information by the
citizens but good law can provide enough space to ensure effective
implementation. In the coming days, use of RTi may be seen both by the
citizens and CSOs. Secondly, the local
level consultation can better solve the allocation problem which also
reinforces the notion of bottom-top development plan approach. It is
always desired to prioritize the local needs while maintaining the
regional and national macro-economic development framework and budgetary
resource envelope. Recently, the
consultation by Government of Khyber Pakhtunkhwa is one of the first steps
towards more participatory budgeting at regional level. However, it
requires more deepening for effective citizen participation. Thirdly, the
role of the parliamentarians at enactment stage is highly significant to
influence the development priorities. They should be engaged in an
effective debate on the budget which also requires research support to the
parliamentarians. Full time research staff should be engaged with the
parliamentary committees to brief on the ongoing development research at
local, regional and national levels. The concern on
allocations is excessive by both CSOs and media but few rather limited
deliberations are observed at execution level. This is a priority area for
future deliberations but strongly linked with the use of RTi for accessing
the information. The use of Information
Communications Technologies (ICTs) is in the PFM process is gaining
popularity around the globe and these are also tested in Punjab province
as well. The state of art (Geographic Information System (GIS) center at
The Urban Unit is in process of developing GIS based applications which
will help to transform the decision support system in the province. The
adoption of ICTs may be envisioned to bring revolution for both service
providers and users. Lastly, amendments in
the budget act and rules of the business of the parliamentary committees
should be made to ensure citizen participation and feedback on the budget
process. The writer is Honorary
Dy. Executive Director at Social Accountability Actions Pakistan (SAAP)
and can be reached at gulbazali@gmail.com
mechanism The dismal share of
income tax in overall collection of taxes during the last many decades
testifies to the lack of judicious balance between direct and indirect
taxes, resulting in declining tax-to-GDP ratio, huge budgetary gap and
above all pushing millions of Pakistanis below the poverty line. The little or no
collection of income tax from the rich is the root cause of many
distortions in our tax system. Over 70 percent share of indirect taxes in
overall collection of Federal Board of Revenue (FBR) proves beyond any
doubt that the very purpose of redistribution of wealth as the main object
of taxation is being defeated and nullified. The overwhelming
reliance on indirect taxation [even under the garb of income taxation
through presumptive tax regime on a number of transactions] without
evaluating its impact on the economy and life of the poor masses is a
serious cause for concern for independent analysts. According to official
figures, the contribution of income tax [although major portion of it is
now composed of indirect levies or expenditure taxes) as percentage of GDP
is continuously declining; it was merely 2.4 percent in 2010-11, 2.5
percent in 2009-10, 2.6 percent in 2008-09, 2.9 percent in 2007-08, 3.0
percent in 2006-07, 3.01 percent in 2005-2006, whereas in 2004-2005 it was
3.15 percent [YEAR BOOKS 2004-05 to 2010-11 of FBR and Economic Surveys]. In the face of declining
direct tax-to-GDP ratio, Mr. Hafeez Shaikh and FBR officials are making
tall claims about “impressive” 25 percent increase in taxes that was
mainly due to extraordinary surge in imports — contribution of POL
products alone stood at 43 percent. A brazen
misrepresentation of figures has been made in Economic Survey 2012,
concealing the real sources of tax collections. In budget documents as
well, taxes collected at source on goods, contracts, supplies and rent,
which being full and final discharge, have been shown as direct taxes. In
substance, these are indirect levies, even in some cases, amounting to
encroachment on the rights of provinces, e.g. sales tax on survives. There exists a mammoth
gap in collection of income tax in Pakistan. According to Pakistan
Telecommunication Authority (PTA), there were 118.3 million mobile users
as on 31 March 2012. A huge population, not less than 60 million (if we
exclude multiple and inactive subscribers), pays both 10 percent income
tax and 19.5 percent sales tax on mobile use, but only 1.3 million file
income tax returns — if statements filed for presumptive taxes are
excluded, the actual number is below 750,000. A majority of mobile
users may not have taxable income (Rs 350,000, raised to 400,000 from tax
year 2013) yet they are burdened with undue liability. On the contrary, a
majority of rich people just pay a fraction of income tax (withheld at
source) on actual taxable incomes without bothering to file even income
tax returns — in 2011 less than 250,000 non-salaried return filers
admitted that their annual income was more than Rs. one million. This is
what confirms and speaks volumes about the weakness and incompetence of
the tax administration. If out of total
population of 180 million, we have 10 million individuals having taxable
income of Rs 1.5 million (a very conservative estimate), total income tax
collection from them at the current rate for tax year 2012 should have
been Rs 3750 billion. If we add income tax collected from corporate
bodies, other non-individual taxpayers and individuals having income
between Rs 400,000 to Rs 100,000, the gross figure would be nearly Rs 5000
billion. FBR collected only Rs 560 billion as income tax plus Rs 20
billion as other direct taxes during fiscal year 2010-11, and figure for
the current fiscal year is expected to be around Rs 670 billion. This
shows a whopping gap of Rs 4330 billion in income tax alone. Similarly, in sales tax,
federal excise and custom duties, due to rampant corruption, the total
collection is only 20 percent of actual potential. In fiscal year 2010-11,
FBR collected Rs. 633.4 billion under the head sales tax, Rs 137.4 billion
under federal excise duty and Rs. 180.8 billion under custom duties. Total
indirect collection of Rs 951.6 billion was pathetically low. It should
have been at least Rs 3500 billion. If existing tax gap is
bridged, our revenue collection can reach Rs. 8500 billion (Rs 5000
billion direct taxes and Rs 3500 billion indirect taxes) which would
change the entire fiscal scene. We would have enough money for current
expenditure, development and public welfare outlays. The government would
be able to retire debts in just a few years and we can easily become a
self-reliant economy. However, this dream for Pakistan can never be
realised unless the mighty sections of society are taxed according to
their actual ability to pay and tax policy is used as a tool for rapid
industrialisation and creation of job opportunities. Determination of a tax
base capable of measuring an individual’s ability-to-pay is a major
problem of our tax system. This rule is incorporated in the form of
progressive rate schedule for personal income tax, estate duty, and
property tax in democratic countries. In Pakistan, we have gradually and
deliberately moved from progressive to regressive taxation. The mighty civil and
military bureaucrats (now an integral part of our landed aristocracy by
earning State lands as meritorious awards and rewards),
industrialist-turned-politicians and greedy businessmen are paying meagre
personal taxes whereas the poor people are subjected to pay sales tax and
federal excise duty of 16 percent. The incidence of regressive taxes on
the poor is making their lives a misery beyond imagination. The present tax policies
are detrimental for economy, social justice, business and industry. Those
who possess more economic power (income and wealth) should contribute more
to the public exchequer and vice versa. The ability-to-pay principle is
regarded as the most equitable and just method of taxation and emphasised
upon primarily for its redistributive role. In Pakistan, our rulers
have completely deviated from this principle, which is in fact, a
constitutional obligation of the government. The existing tax system
protects the rich and exploitative elements that have complete monopoly
over economic resources. There is no political will to tax the privileged
classes. Pakistan has been facing
a variety of challenges on economic front, namely, resource mobilisation,
reducing expenditures, curtail fiscal and trade deficits and
infrastructure development. The most ignored one in improvement in
tax-to-GDP ratio that can solve many problems. In 2004, according to
World Bank, tax-to-GDP ratio of Pakistan was 11.5 percent whereas India
had only 9.9 percent. In 2011 India’s tax-to-GDP ratio was 17.7 percent
whereas ours dipped to 8.5 percent. Both India and Pakistan were faced
with common problems like black money, benami (name-lending) assets, cash
transactions, vast exemptions and absence of voluntary compliance. Our policymakers need to
study how the Indians increased their tax-to-GDP ratio from 9.9 percent to
17.7 percent in seven years. Apart from many other successful initiatives,
India utilised third party information that increased the capacity of
Indian tax administration immensely and resulted in enormous revenue
growth. On the contrary, we came down from 12.5 percent to 8.5 percent in
the last ten years as the will to collect taxes, especially income tax
from the rich and mighty, has dwindled down to almost zero. The authors, tax
lawyers, are Adjunct Professors at Lahore University of Management
Sciences (LUMS)
Growing
concerns Whether the
government will be able to achieve its GDP growth rate target in fiscal
year 2012-2013 seems a little too early to judge. But it would certainly
be interesting to see what considerations and calculations might have gone
into setting the GDP growth target for 2012-2013. Did the government learn
any lessons from the energy-starved years in 2011 and before? Is there
still room for the economy to grow? On paper, the government
does not have much to show. For example, it failed to achieve its growth
target of the previous year — 3.7 percent. It had forecast 4.2 percent
growth for 2011-12. This time, the government has estimated GDP to be 4.3
percent. Given the political and
economic volatility at the moment, with foreign aid dwindling and
increased foreign investment looking a distant possibility besides the
energy crisis, the GDP target for this financial year does not seem to be
a realistic assessment. Last year, about half of
the industrial capacity in the country remained unutilised, mainly due to
power shortage. The Economic Survey
2011-2012 says budget deficit has crossed 4.3 percent of gross domestic
product (GDP) and the revised target will be difficult to achieve.
Therefore, it is very much clear that in the current fiscal year, the
growth outlook depends on a number of factors, including the revival of
the industry, which, in turn, hinges on the performance of energy sector. Looking at a broader
picture, the present economic situation under this government cannot be
de-linked from its immediate past — the year 2008 when the
democratically elected setup was sworn in. The government claims it
inherited a very unstable economy in 2008 when foreign exchange reserves
were down and the value of the rupee was falling speedily. The oil prices
in the international market had reached a historic peak of $145 in July
2008. In September that year, due to recession in the global economy, the
developed world was facing depression. The growth rate of developed
economies had on average fallen by 2.8 percent. But things began to
improve, the government claims, in the next couple of years. In 2011, an
unexpected improvement, according to the government estimates, was seen in
the foreign exchange account of Pakistan which provided some support to
the economy. Dr Hafeez Sheikh, in a
press conference recently, blamed it on the rising oil prices, a weak
global economy, poor security situation, and floods in the country as
major reasons for failure to achieve the targets. But now that the
previous years are a thing of the past, would the current fiscal year be
any different in terms of achievement of fiscal targets? Are unemployment
and slow growth related in any way? Economists see the issue
in a broader context. Dr Pervez Tahir, former Chief Economist, says,
“The important issue about growth in Pakistan is not that it is
increasing, but at which rate. An average annual growth of 2.9 percent in
the last four years is too low to match the labour force. It only adds to
the historical backlog of the unemployed for a predominantly young
population. Worse, this low growth is primarily sourced in services and
consumption.” Pervez tries to look
into what the planners in the government have in mind. “The contribution
of investment to growth in the past four years has been negative. So,
where will the targeted GDP growth of 4.3 percent come from? Planners’
hopes are based on the achievement of 3.7 percent in 2011-12 against 3
percent in the year before, despite tough external and internal economic
conditions.” He sees some hope in the
agriculture sector. “Except for wheat, the major crops did well. In
fact, their growth at 3.2 percent exceeded the target of 3 percent. As
wheat output is expected to revive next year with timely announcement of
procurement price, the target for major crops has been fixed at 3.8
percent.” But Pervez points to a
bad patch in the shape of the manufacturing sector. “The story for large
scale manufacturing is different. It failed to achieve even the low growth
target of 2 percent in 2011-12. In the absence of any change in the
business climate, it is unrealistic to expect 2.5 percent growth in this
sector.” Pervez sees a
silver-lining though, “Despite negative investment, there still is
considerable under-utilised capacity, especially in textiles, its largest
sub-sector. Energy, the main constraint, might ease somewhat as the
looming elections will force the government to beg, borrow or steal to
break the circle of debt in the energy sector.” He has his share of
skepticism. “But this is a script that has often produced a bad movie.
Elections will certainly help growth, but through lavish demand generated
by unprecedented government spending and dishoarding of private wealth to
woo voters. A growth of around 4 percent might be achieved, but at the
cost of inflation under-targeted at 9.5 percent.” Asad Saeed, a senior
economist, remains a bit optimistic about the achievement of growth rate
target. “I think there is plenty of possibilities for the growth rate to
pick up as we are starting from a very low base — on the back of less
than 4 percent growth for the last 5 years — provided certain
bottlenecks are overcome and the economy is not subjected to negative
shocks.” Asad points to the
energy crisis. “The most important bottleneck to overcome is the energy
crisis. A reversal in trend, i.e., reduction in a few hours of
loadshedding will go a long way in improving capacity utilisation and
provide a fillip to growth.” He also takes Indo-Pak
relations into account. “The other area which can provide a growth
impetus is improved relations with India. If the negative list is reduced
and the visa regime is liberalised, Pakistan’s trade deficit will
reduce, both by enhanced exports and cheaper imports, which will improve
capacity utilisation and thereby growth.” Asad does not rule out a
natural disaster, hike in oil prices, and bad foreign policy hampering
growth. “Unanticipated that can halt growth will be another round of
floods, a spike in international oil prices or foreign policy failures.
The last factor can also possibly trigger economic sanctions, which will
be an economic disaster.”
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