The provincial government in Sindh has fixed October 1, 2006 as the date for starting sugarcane crushing season in the province but people related to the business doubt if the crushing can start even weeks after the official date. The sugar millers appear set to keep their burners cold till November, defying the directives of the provincial government, which sugarcane growers in the province see as something hurting them financially, yet again.

The situation is all set to replicate what happened last year when the chief minister had to take back several of his decisions on the price of sugarcane and the start of the crushing season under pressure from the powerful millers. The sugarcane growers had then felt being left in the lurch because they had to sell their crop at a time of someone else's choosing.

This year, too, the pricing and the start of the crushing season are highly likely to become controversial issues but no one is making serious efforts to resolve them.

A high level meeting last week in Hyderabad of sugarcane growers in Sindh and the sugar millers of the province with the provincial cane commissioner failed to set the sugarcane price for the coming season because of the differences between the growers and the millers. The meeting then decided that the price and crushing date would be announced by the chief minister.

The growers demanded during the meeting that the sugarcane price should be fixed at 10 per cent more than its price in Punjab and crushing season should begin on November 1. But Pakistan Sugar Mills Association (PSMA) Sindh Zone did not accept these demands.

The difference of opinion between the growers and the millers left Cane Commissioner Nazar Mohammed Baloch with no option but to refer the matter to the chief minister for taking the final decision.

Sources present in the meeting reveal that the growers were of the view that a timely start of the crushing season would allow them to sow other crops after harvesting the sugarcane. The growers are also said to have demanded that this year the sugarcane price per maund of the crop should be fixed at RS 100. If that's not possible it should be fixed at 10 per cent higher than what it is in Punjab because water charges are higher in Sindh than in Punjab and also because the sugar content in Sindh's crop is 10 per cent more than what it is in Punjab, the growers told the meeting.

The cane commissioner later said the participants of the meeting had agreed to start the crushing season after Eidul Fitr, though the final date was to be announced by the chief minister.

Now the chief minister has announced the date for the start of the crushing season -- October 1, 2006 -- but there has been no fixing the price of crop so far.

Sindh Chamber of Agriculture (SCA) President Syed Qamar-uz-Zaman Shah says the growers will not sell their crop below RS 100 per maund this year.

The PSMA Sindh Zone Chairman Abdul Wajid Arain says the millers couldn't start running their mills even on November 1 -- let alone October 1, the official date for the start of the crushing season -- because the sugarcane in Sindh does not mature before November. He says PSMA will try to fire the boilers from November 15, which means the crushing will likely begin on November 20 or November 25. He also says that the price of sugarcane should be fixed at RS 60 per maund.

The sugar industry in Sindh had plunged into a crisis last year when difference arose between the growers and the millers on a system of land zoning for the cultivation and sale of the crop. Under the zoning system, sugar millers association in the province allegedly disallows its member mills to purchase sugarcane from areas outside their own zone.

It took President General Pervez Musharraf and Chief Minister Dr Arbab Rahim to end the month-long row that continued well into early 2006. The row ended with the mutual understanding between the stakeholders and after the price of a maund of sugarcane was fixed at Rs 58, though an earlier official notification had put it at Rs 60.

The sugarcane growers last year claimed that the sugar millers, disobeying the writ and the directives of the provincial government, had set up checkposts to check the movement of sugarcane and to stop the transportation of sugarcane of one zone to another. The growers condemned the act of the millers, calling it a violation of the sugar factories control act of 1950.

The Pakistan Sugar Mills Association (PSMA), however, denied the charges saying the zoning system was not started by the millers.

The federal government then appointed a committee headed by state minister for food and agriculture Mohammed Ali Malkani to come up with a permanent solution to the row over zoning as well as pricing and other issues related to sugarcane. But this committee has failed to come up with any solutions, though many months have passed after it was set up.

As a result of the crisis last year the price of sugarcane reached its peak all over the province as millers paid an average amount of Rs 75 to Rs 85 per 40 kilogram of the crop.

According to yet another complaint by the cultivators of sugarcane in Sindh, most of the sugar millers in the province -- 25 out of 28 -- closed on their own twenty days before the crushing season should have officially ended, in clear violation of sugar factories control act of 1950, causing big losses to the growers.

The growers' representative body, Sindh Abadgar Board, says the government had to spend a huge amount of Rs 42 billion to import sugar last year, mainly as a result of the crisis in Sindh. The board also complains that inordinate delay in the start of the crushing season last year, the wheat sowing got delayed, causing a loss worth Rs 6.3 billion to the total production of the crop in the country.

Pakistan's total sugarcane production has been estimated at 41 million tons. The country's sugar mills on average process 30 million tons of the crop every year though they have their crushing capacity is 60 million tons. The sugarcane is planted on about one million hectares of land across the country and the total value of the crop stands something between Rs 62 billion to Rs 71 Billion. Being a tropical crop, sugarcane is the only crop cultivatable in southern Sindh.

The growers say the sugarcane crisis is persisting due to the wrong policies of the government and the obduracy of the sugar mill owners. It is the result of these factors that the prices of sugar has increased to such an extent that it has gone beyond the purchasing power of 60 per cent of the population of the country, they add.

They also allege that the mill owners have repeatedly violated the government notifications to delay the payment of money to sugarcane growers during the past few years. This has discouraged the growers from cultivating sugarcane, resulting in the reduction of crop production by 36.84 per cent throughout the country and by 54.76 per cent in Sindh, they argue.

To overcome all these problems, the Sindh government is working on a new law to regulate the sugar factories in the province. The law was supposed to come into effect from the coming crushing season but the official inefficiency has delayed its promulgation though the crushing season is set to start in the next couple of months.

The Frontier government, in line with the directives of the federal government, has delegated powers of special magistrates to various district functionaries. The step is aimed at controlling the escalating prices of daily-use items, especially food, during the holy month of Ramzan.

The NWFP Home and Tribal Affairs Department, through a notification on September 4, delegated these powers to district officers to enable them to check the prices of food under Section 14-A of the Criminal Procedure Code, 1898.

The powers are being transferred in accordance with the amendments in the Finance Bill-2006-07 to counter the unprecedented increase in the prices of edible commodities. But the Frontier is not the only province to do so. All the four provinces have authorised their district functionaries to exercise these powers, which used to rest with magistrates and assistant commissioners before the devolution of power in 2001.

Under the new arrangement, some district officers have been given the powers of a First Class Magistrate for the sole purpose of trying people on offences related to price control. The designated officers now are authorised to conduct raids and hold on spot trials in their respective areas of assigned jurisdiction in addition to the duties they are already performing.

In NWFP, the officers who have been given these powers included all district coordination officers (DCOs), assistant coordination officers, district officers (revenue & estate), district food controllers, rationing controller Peshawar and tehsil municipal officers.

With the inclusion of 38 essential items in the Price Control and Prevention of Profiteering and Hoarding Act, 1977 and the amendment in the Code of Criminal Procedure, 1898 that provide price magistrates with legal powers to punish the violators summarily, the provincial governments now have an effective tool to act against hoarding and price manipulations.

This is what Prime Minister Shaukat Aziz said a few days ago when he asked the four chief ministers to play a proactive role in activating mechanisms for price checks.

Controlling prices of daily use items and keeping vigilance over markets were key obligations of the district administration before the introduction of National Reconstruction Bureau's (NRB) devolution of power plan. The latest measures are in fact a way to rectify one of the most glaring flaws left in the devolution plan. In the pre-devolution days, deputy commissioners, assistant commissioners and magistrates would visit markets and try offences related to hoarding, profiteering and overcharging on spot, giving consumers instant relief.

But the chaotic implementation of the new system of governance at the grassroots level diminished the role of the district administration in maintaining its control over the markets. This subsequently ended official check over demand and supply mechanisms, leaving local officials in no position to keep prices within a justifiable limit.

It's a sad commentary on our state of affairs that a country of 150 million was running almost six years without any legal mechanism for controlling prices of daily use items, only because the architects of devolution of power plan failed to provide any alternative for the old magistracy system. With the September 4 measures, the government is now forced to revive the same system dismantled by NRB after being termed 'inefficient'.

The absence of an effective and permanent system of price control has caused record rise in the prices of commodities during last couple of years particularly ahead of and during the current month of Ramzan.

It is mainly because of this flaw that food prices have lately registered a huge increase. According to market sources, the prices of food items including vegetables and fruits in various parts of the NWFP have increased by 20 per cent to 50 per cent in the wake of Ramzan. For example, tomato, potato and onion are being soled at Rs 40, Rs 30 and Rs 20 per kg respectively against their prices of Rs 30, Rs 20 and Rs 14 per kg respectively before the start of Ramzan. Tea is selling at Rs 280 per kg while its earlier price was Rs 230 per kg. Beef is available at Rs 120 to Rs 130 per kg against its earlier price of Rs 100. Mutton is selling at Rs 220 to Rs 230 per kg against its previous price of Rs 200. Milk's price has meanwhile increased from Rs 26 to Rs 30. The prices of fruits have also recorded almost 30 per cent to 50 per cent rise during the last week.

Nasreen Khattak, a member of the Provincial Assembly, confirms this point of view when she says food prices have gone the purchasing power of most people only because of the official failure to come up with an alternative system after the old system was demolished. She believes the previous system of magistracy was also unable to satisfy the consumers in terms of controlling prices and provided only partial relief to the consumers. "The government was supposed to strengthen the system. It rather abolished it with a single stroke of the pen," she says.

The absence of an effective system, according to her, gave an open hand to the hoarders and profiteers to manipulate the market according to their will. She suggests that special magistrates should also focus on hoarders and profiteers apart from taking action against retailers. They should also take steps to increase awareness about consumers' rights to improve the situation, she adds.

Some traders are also not very optimistic about the outcome of the latest measures. They see the transfer of power to check prices as a mere eyewash.

Sharafat Ali Mubarik, former senior vice-president of the Sarhad Chamber of Commerce and Industry (SCCI), says price checking should not be confined to Ramzan only. "Rather it should be made a permanent exercise." Under the price control campaign, he claims, only small retailers are being targeted while those supplying them with food items at inflated rates are being ignored. He laments the fact that there has been no price review committee in a big city like Peshawar for the last eighteen months. Sharafat suggests making price review committees effective, with the inclusion of genuine traders as their members.

Many in official circles also believe the new price control mechanism is unlikely to produce any significant results because of the governance structure of the district governments. They say the Local Government Ordinance, which underwent significant amendments in 2005, is still silent over the role of local bodies on price control, though it is one of the foremost duties of the district administration.

"Before the introduction of the devolution plan, the deputy commissioners used to have multiple roles, with powers to head revenue, executive and judicial activities in their jurisdiction. That's why district administrations were able to control price hike, though it was not a system devoid of deficiencies. Now, a power-less DCO and his district administration cannot be as effective as they were in the past," remarks a senior NWFP government official wishing not to be named.

The untidy implementation, according to him, of local government system has increased confusions at the institutional level. For example, tehsil municipal officers (TMOs) are not trained to exercise executive and judicial duties because most of them are the staffers of the Local Council Board (LCB) which can handle only municipal functions. In this scenario, only officials with experience of serving in some executive capacity can deliver and that too not in a big way.

Officials suggest that amendments should be made in the Local Government Ordinance to make the district administrations responsible for price control. These amendments should give executive and magistracy powers to only those officers who have a previous experience of working at administrative posts, they add.

Trade distorting subsidies provided by developed countries to their agricultural sector have proved to be the main obstacle to the completion of the Doha Round of multilateral trade negotiations. The reluctance of developed countries to eliminate their trade distorting subsidies is a classic example of how political interests dictate economic policies.

A subsidy is regarded as an unfair trade practice, because it distorts trade. In the context of the WTO, distortion occurs if the quantities of goods produced and exchanged or their prices are higher or lower than they would be if conditions of competition prevailed. Government support or subsidisation ensures higher prices to producers than they would get otherwise. The higher prices, according to the law of supply, stimulate higher production. Since the prices of subsidized products are higher than those prevailing in the international market, subsidized products cannot face competition from imported products. In order to ward off such a threat, the subsidizing country imposes high and in some cases prohibitive tariffs on imports which make them more expensive than domestic products

Domestic subsidies supported by higher tariffs lead to surplus production, that is the level of domestic supply is higher than domestic demand. In order to dispose of or dump the surplus production in foreign markets, the government provides export subsidies. Export subsidies are the subsidies which are contingent upon export performance. More an enterprise exports, the more subsidies it gets. Export subsidies bring down the prices of products in international market and make them more price competitive than they would be otherwise. Cheaper exports depress international market prices and price out producers/exporters of those countries which do not provide export subsidies. It is in this way that subsidies distort international trade.

Subsidies have winners and losers. The winners obviously are the producers in the subsidizing country, and losers are their counterparts in other countries which do not subsidize. This victory or loss takes three forms. In the first place, higher tariffs, which are usually accompanied by subsidisation, make it difficult for foreign producers to compete in the market of the subsidizing country. In the second place, subsidized products being cheaper are difficult to compete with in foreign markets. In the third place, subsidies have the effect of driving down prices in international market and thus causing price depression.

Consumers are also winners or losers depending on which side they are. Consumers in the subsidizing country are losers, as they have to pay higher price than they would give otherwise. Conversely, consumers in the markets where subsidized products are exported are winners, because they get cheaper products than they would get otherwise.

It is with a view to minimising these trade distorting effects of subsidies that multilateral rules were designed. However, for reasons political and economic, which we will see later, agriculture has been treated as a special subject when it comes to the application of multilateral trade disciplines. The following are some examples:

• Whereas quantitative restrictions on the import of industrial products were prohibited in principle, the same were permitted on the import of agricultural products (subject to certain conditions which were not complied with in practice).

• Whereas export subsidies on industrial products were prohibited, the same have been allowed on agricultural products.

• The Agreement on Agriculture (AoA) of the WTO (World Trade Organisation) provides for special safeguards for agricultural products which can be invoked more easily than those for industrial products. Safeguards refer to measures that a country can take to restrict imports temporarily in special circumstances. In case of industrial products, in order to take safeguards action, there is the need to prove injury to the domestic industry of the importing country. But in case of agricultural products, there is no need to prove injury.

• In case of industrial products, if a country uses subsidies the importing country can levy countervailing duty to offset the effect of subsidized imports. However, Article 13 of AoA effectively suspended the application of such measures in case of agricultural products until 2004. The WTO members had to exercise due restraint in initiating countervailing action against an allegedly injurious or threatening subsidy. This provision was called the Peace Clause and expired in 2004.

It may be asked why agriculture has been treated as a special subject, despite the fact that trade in agriculture accounts for less than 6% of global merchandise trade and agricultural output accounts for 4% of global output. The reasons are more political than economic.

One, food being the primary human need, every country wants food safety. Food deficiency can have serious social and political consequences. Two, being a labour intensive sector, agriculture is a major source of employment. Three, in developed countries the landed class is politically very influential. It is in large measures the need to protect the interests of this class that accounts for the high level of protectionism that characterizes the agricultural policies of developed countries. Nothing probably illustrates this better than the common agricultural policy (CAP) of the European Union (EU).

The CAP had its beginnings in the post world war II period. Partly the need to ensure food safety and chiefly the interests of the influential landed class forced the then European Economic Community (EEC) to provide support to farmers. Initially the support was in the form of price guarantees whereby the government would buy farm produce whenever the market price fell below a certain level. Thus farmers would often get price above the market price. The domestic support had a two-fold effect upon farmers. One, it made them produce more. Two, the guarantee that they would always get a certain price for their output made them inefficient and thus more dependent on domestic support.

The result was that both the quantity and price of farm produce went up more than what the market forces would dictate. It is a fundamental principle of economics, that when quantity supply goes up, the price comes down. And this happens only when market forces are allowed to work. But in the EEC case, thanks to government intervention, both the price and the level of output went up. The EEC was not a closed economy and therefore, the fundamental problem before the policy makers was how to deal with imports from other countries where prices of agricultural produce were lower than those in the EEC. If imports were allowed, they would price out the local farm produce. For the policy makers, the solution to the problem was simple: Impose exceedingly high tariffs on agricultural imports so that when they are in the EC market after paying customs duties, they are as expensive, if not more, as the domestic commodities.

High tariffs were one solution but not the panacea for the problem. High tariffs would help ward off competition with imports, but they would not solve the problem of surplus production. The only way to get rid of the surplus was to export it. But who will buy expensive products when cheaper products were available from elsewhere? The only way the surplus could be sold in foreign markets was to bring down the price. To induce producers to bring down their price it was necessary to provide them subsidies that were contingent upon export performance-export subsidies. The more they exported, they more subsidies they would get. This policy of high tariffs and subsidisation has characterized the CAP to date. The EU provides on average more than $800 subsidies per cow to its farmers. Expenditure on farm subsidies accounts for 45 per cent of total EU budget. France is the major beneficiary. What is important here is who benefits from these subsidies. Subsidies are granted on the basis of the amount of land and number of animals farmed. With such criterion, not surprisingly it is the wealthy landowners and mega agribusinesses who have been the major beneficiaries. Thus subsidies have re-distributed wealth from the ordinary taxpayer to the rich landowners making them richer. It is the political need to safeguard the interests of this influential class that is the major obstacle to the removal of trade distorting farm subsidies.

The EU is not the only developed economy that does this. Countries like USA and Japan also dole out huge amounts in subsidies to their farmers. About Japan it is said that removal of subsidies will be too bold a political decision which no political party is willing to commit itself to.

Subsidies are not the only instrument of protection. They are used in conjunction with high tariffs. Developed countries continue to have high tariffs on agricultural products. High tariffs reduce market access for developing countries' exports. During the Uruguay Round, which led to the creation of the WTO, developed countries were required to reduce their farm tariffs by 36 per cent on average during six years starting from January 1, 1995. Since the reduction had to be on average, the tariff reduction formula did not ensure that higher tariffs were reduced. A better approach would have provided for tariff ceilings, that is the maximum tariffs that could be maintained. But due to political sensitivity of the matter, the average reduction approach was used.

Under Article 20 of the AoA, the members committed themselves to fundamental reforms for establishing 'a fair and market-oriented' agricultural trading system. Such a system is difficult to establish unless trade distorting farm subsidies are removed and agricultural tariffs slashed. But political factors have so far impeded the achievement of these objectives.

E-mail: hussainhzaidi@yahoo.com

The Economic Coordination Committee of the Cabinet on Wednesday, September 27, decided to allow foreign companies to invest in the insurance business in Pakistan. Apparently the decision is made on the premise that it will help attract Foreign Direct Investment (FDI). There can be no two opinions about this being a right assumption if the necessary regulatory environment is secured. The other important factor critical to the success of this approach has to do with the issue of demand, which depends on the real disposable income of the prospective policy holders as well as the individuals' perceptions about the need for financial security. In Pakistan's case where 67 per cent of the population lives in the rural areas and given the low per capita income -- the recent increases notwithstanding -- the question of demand is all the more relevant and one that needs to be factored into expectations.

Then again to put things in context, FDI assumes importance because it can impact macroeconomic indicators, and again there is no arguing about the importance of the latter. But what is also of significance in this case is that inviting foreign companies to come and invest makes a case for a regulatory intervention which has a bearing on social sector outcomes, particularly with reference to the role that can be played by insurance companies in health insurance. In tandem with the government's policy of augmenting FDIs, therefore, attention must also be paid to other regulatory and overarching structural changes which can, on the one hand, assist in achieving a range of social sector outcomes whereas on the other, make it viable for insurance companies to invest in Pakistan. Clearly with reference to the social sector, opening up the market to foreign insurance companies cannot be seen as an end in itself.

The case of health insurance, which is classed in the non-life insurance category, can be used to illustrate this point. Here a distinction should be made between Social Health Insurance and Private Health Insurance in order to clarify that Private Health Insurance has a capacity to mobilise funds from people who can pay and wish to be ensued. But it cannot provide financing for the poor. Health insurance arrangements for the poor come within the ambit of Social Health Insurance which, though more important, is not the subject of discussion in this article.

In the first place, why do we actually need to think in terms of health insurance? The answer to this is embedded in the health financing landscape of Pakistan. The total health expenditure for the country is estimated at $ 16 per capita. Of this, $ 6.3 is contributed by the public sector largely through general revenues and the rest by the private sector through out-of-pocket payments. When viewed against global recommendations, which put public sector health expenditure to be at least $ 34 in order to deliver essential health interventions so that the Million Development Goals can be met by 2015, a huge gap is clearly evident. And it is here that the role of alternative health financing options becomes important.

Private health insurance certainly has a place -- albeit small -- in bridging the mismatch between the current health financing strategies and the nation's health sector financing goals.

The second question: Who benefits when private insurance companies operate in the health sector and why? Here it must be understood that private insurance industry largely acts as a source of financing health in individual or group settings and with reference the latter, through employers, in particular.

The third question: What are the impediments which need to be removed?

This is a particularly relevant question given that after the passage of the Insurance Ordinance 2000 certain areas in non-life insurance such as motor insurance did quite well but the social sector was unable to reap the benefits of policy change. There are several reasons for this. Firstly, there is lack of demand for health insurance owing to high cost of service. Secondly, the major bulk of Pakistan's workforce is in the informally employed sector and the absence of financial guarantees to the insurer results in limited incentives for health insurance companies to cover the informal sector. Thirdly, there are issues at the end of health providers with the market being fragmented and professional practices not being accredited. Health care providers also do not 'buy into' health insurance given that this has tax-related implications. These considerations underscore the need for building appropriate incentives at several levels.

The fourth question: What are these incentives, where are the handles and what are the solutions? The solutions lie in carefully balancing incentives for the three key players in this arrangement -- insurance companies, providers and employers -- through appropriate policy interventions.

As far as the first stakeholder is concerned -- that is Insurance companies -- it is important to attract companies that can draw a large number of people in a pool. This is, however, dependent on the capacity of the insurance company and only those with large institutional bases, investment capacities, and a rich domain experience are able to create such incentives. An analogy can be made with the growth of mobile phone industry in the developing countries and indeed in Pakistan where companies have benefited from their domain experience in the developed world. Appropriate incentives can be given through the FDI policy of the government of Pakistan and the regulatory environment which the government provides to regulate financial practices of health insurance industry. For example, insurance regulations can be eased, tax rebates can be given and a certain level of financial protection can be provided to attract appropriate insurance companies. But these conducive measures should be balanced with careful regulation of the financial practices of health insurance industry, patient centered standards and norms, transaction standards, health service providers' privacy rules, procedures for claims processing and modes of payment, accountability procedures and other administrative back office procedures -- clearly pointing to significant institutional capacity which will be required at Pakistan's end to regulate this market. Then there are concerns that easing of insurance regulations and opening up of a new sector may happen at the cost of the local industry's interest. There may be ways of obviating this concern through measures such as cap on equity etc. Useful lessons can be learned from other countries that have developed similar policies.

The second stakeholder is the employer. This is essentially the single largest factor which determines the growth of the insurance industry in Pakistan. A review of the growth of private insurance companies in the developing countries shows that growth is generally paralleled with economic growth in general and growth of the formally employed sector, in particular. In some developing countries, rise in business process outsourcing created opportunities for global employment practices thereby creating an environment where employers subscribed to health benefits. For a start, the government of Pakistan can offer tax rebates and other incentives to employers for introducing/mainstreaming the health insurance approach in order to financing health in institutional settings.

The third stakeholder is the provider, to whom appropriate incentives should also be given. One way of doing this would be through underwriting a large number of people in a pool -- an opportunity providers would wish to avail and may compete for, hence brining down costs. Only insurance companies with the right capacity will be able to do that, as already discussed. On the supply side, the provider market should be consolidated. As opposed to preventive healthcare where the state mandated healthcare agencies play a pre-dominant role, a number of actors within the healthcare system other than the state play a role in providing personalised curative healthcare which is what private insurance industry generally works around.

The sector constitutes a set of diverse groups of unregulated health care providers. Clearly the regulatory side of credentialing of doctors, licensing and accreditation of service delivery facilities, continuing medical education, performance assessment, quality assurance mechanisms and the monitoring of errors are important regulatory imperatives in order to institutionalise health insurance. And it is within the framework of these regulatory interventions that appropriate incentives for enhancing the use of insurance as a health financing option can be built. There is evidence available that the right policy interventions do work. For example, motor insurance showed growth over the last decade. In many ways, it may not be fair to compare this with health insurance due to the differences in the nature and frequencies of risks involved -- people get sick more often than they lose cars to accidents and robberies. Notwithstanding, conducive measures need to be explored for the health sector and the handles on the impediments need to be understood.

Over the last few decades, of the 54 private insurance companies operating in Pakistan, group health insurance is offered by seven insurance companies and individual health insurance by only one company -- Allianz EFU. Clearly we are not a conducive market for private and group health insurance. However, with economic growth and consequently and hopefully, the adoption of global employment practices, it is expected that employers will increasingly subscribe to health benefits. The health sector can only tap the potential within such arrangements if they know where to intervene through normative and regulatory interventions on the health side to capitalise on this specific health financing opportunity. The health sector will, it seems, have an opportunity to ride a wave. But it must know how to do it well.

Karachi's city nazim, while briefing a group of civil servants on September 7, 2006 expressed his resolve to focus on the mega projects as a means for developing the city. A 46-storeyed IT tower, a 24-km long elevated expressway on top of existing Shahrah-e-Faisal, Karachi Mass Transit Programme and several similar schemes were referred to as proposed instances of this model of development. But all these projects were mentioned without any financial feasibility or allocation of money for them. Also, there was no justification or technical relevance provided for any of the projects mentioned above.

In a separate meeting, Sindh chief secretary decided to set up a venture called Karachi Urban Transport Company to facilitate the revival of Karachi Circular Railways (KCR). Attempts are underway to attract Japanese investment to the tune of $ 800 million for this project, though no reason was given by the top bureaucrat of the province for resorting to the option of foreign funding. He also chose to ignore references to the past attempts for reviving KCR as well as problems the project has faced in the past.

In yet another meeting, advisor Sindh chief minister on financial affairs, informed the participants that the present government was diligently pursuing an policy to develop mega projects. Planning to that effect has already begun, he is reported to have said. Few weeks ago, Prime Minister Shaukat Aziz announced the approval of a mega sewerage treatment plant for Karachi.

It appears that talking about development has become fashionable among politicians in power. This rhetoric, which has no connection with the actions on the ground, is often repeated in front of a disenchanted audience that has become used to it. It is also followed eagerly by government officials who seldom bother to check the veracity of the official claims. Talking about development without any relevance to the urban needs of Karachi is an established fad. The unfortunate city, which is grappling with problems of very basic nature, requires serious input in a professional and low profile manner to transform itself into a livable metropolis.

Transportation, mobility and commuting are among the most important issues that Karachi is confronted with. Traffic congestion has increased exponentially, leaving the city streets clogged. Commuting by any mode of transport has become problematic due to increased travel time, inconvenience, pollution and rise in stress levels. Organised public transport does not exist. Pedestrians and non-motorised transport, including bicycles, have been elbowed out from the city. Rising number of private cars and motorcycles make city roads non-navigable during peak hours. Fuel efficiency is greatly compromised in this scenario. Scores of research studies -- conducted by academic institutions -- have very clearly identified core reasons for these ailments. Inappropriate choice of mega projects, such as the Lyari Expressway, is one key reason. Despite the fact that this project displaced more than 150,000 people and consumed funds to the tune of six billion rupees, its completion and expected benefits are still very far from being realised.

It is important to note that passenger transit is a public service which cannot be geared towards generating profits. This is valid for most of the cities even in the first world countries. In some cases, public transport does not even possess the capacity to pay back its own capital cost, therefore almost always requiring some appropriate measure of subsidy. The investment in subsidising public transport is basically accounted as a catalyst for raising productivity of human resources. It is, however, disappointing to find that most of the transportation projects that are being conceptualised or are under implementation in Pakistan in general and in Karachi in particular, do not relate to core problems. For example, underpasses do not prove useful if vehicle numbers continue to rise in geometric progression on the same road corridor. Transportation planning and management is in need of some bold approaches that could address the pressing problems in an effective manner.

The creation of appropriately located inter- and intra-city bus terminals; timely completion of Karachi Northern Bypass; re-location of warehouses and inner-city wholesale markets; route re-alignment and consequent management of public buses and mini-buses; introduction of cheap and affordable options of para-transit modes and signalisation of major intersection/junctions must be carried out on urgent basis as the first steps towards resolving Karachi's transport problems. Long term planning must include the creation of a ring road around Karachi's metropolitan limits; intelligent utilisation and expansion of KCR; creation of new north-south and east-west connector roads; vehicle registration control regime and incentives for using public transport for work journeys.

The tendency to opt for 'joint ventures' with foreign consortia and investment agencies are misplaced because these ventures function when the partnering agencies have common objectives and equal financial and managerial strengths. But they keep emerging because the capacity for generating local finances and municipal capital is almost negligible.

The civilized societies across the world focus on creating the capacity of local institutions to generate finances both in terms of recurring budgets and development works. The task begins with conventional tax measures, most important of which is the levying of property tax. But the problem in Pakistani cities like Karachi is that the number of properties formally registered for this purpose is below the number of properties that actually exist. The rates at which the tax is charged is also very low, especially in areas where spiraling speculation is generating high profits. Many influential investors are able to obtain considerable concession in the taxation rates. The excise and taxation department of Sindh government collects this tax on behalf of the city district government but the department is not able to exercise its jurisdiction on several neighbourhoods including cantonments. Anomalies of various kinds exist in the jurisdiction of military agencies, port authorities and other autonomous bodies. There is no system of real estate indexation to create a verifiable and authentic premise for establishment and enforcement of taxation. According to empirical assessments, if a fresh survey is conducted to update the currently developed properties and a suitable rate schedule is worked out, it will be very instrumental in shoring up the municipal finances. Other taxation options that need re-working include capital gains tax on real estate, utility charges, especially on water and sanitation, advertisement tax, motor vehicle tax and levies on enterprises. It must be understood that without bolstering domestic capacity for capital generation, no significant achievement in urban development can be made. It may amount to an unpopular move from the political standpoint, but responsible governments cannot shy away from its significance.

In terms of approach to development, the city government will have to separate short term ad hocist moves from carefully drawn long term development options. This cannot happen without a sound urban planning mechanism. The prevailing planning practices follow market mechanisms which dominate current urban decision making. The promulgation of new commercialisation policy and bylaws by the city district government in January 2004 and afterwards is a glaring example of this market-driven policy making. Six major corridors of the city have been declared administratively valid sites for commercial development with the onset of this policy, with 11 more roads being added to them now. The decision obviously came from the city council, marking a success for the unscrupulous but all powerful lobby of real estate builders and developers who have been vying for the council to approve these actions since long.

Departmental sources reveal that the only studies or base work undertaken before declaring the city roads as commercial is the estimated distribution of commercial gains and revenue sharing. The intensity of load on various components of infrastructure such as water supply, electricity, sanitation, transportation and parking space were not taken into consideration. It was assumed that by earning revenue in cash, all other vices of development will automatically go away. Multiple jurisdiction, lack of motivation to enforce the writ of law and the absence of political will to rationalise between short term revenue gains and sustainability in development are common issues found in such cases. According to an empirical calculation, it was found that developers will be able to maximise their profits to an exorbitant scale of over 200 per cent as a result of this commercialisation.

Internal capacity for undertaking urban and regional planning is a pre-requisite for any local government to do it successfully. A technically sound and professionally equipped planning agency needs to be created to achieve this end. Without potent institutions, sustainable development remain a remote reality. This agency will provide the minimum institutional set-up to carry out planning as a professional activity. It will lay down proper guidelines for urban management as well as develop scenarios to ensure social justice in space allocation and utilisation pattern. This agency will possess the capacity to acquire, process, store, organise and disseminate information according to the needs of various assignments. It will develop its capacity to coordinate with different stakeholders on a neutral ground and will also listen to and take into account voices, concerns and aspirations of people of all kinds including interest groups. It will also undertake development control and enforcement of plans through building control process. The idea of this institution is not new. It has been categorically recommended in the successive planning exercises so far undertaken for Karachi. What it requires is serious thought, review and concurrent implementation.

Soaring inflation and growing gap in the balance of trade are causing the balance of payment to move in a direction which does not favour Pakistan. All the factors together are posing a great challenge to the economic managers of the government, who expect a growth of 7 per cent in the overall economy of the country during the current fiscal year (2006-07).

Though the government is hopeful about the health of the economy because it expects improved economic activities and good crops, crucial economic factors, mentioned above, may make an adverse impact on the economic growth. Already the economy experienced a setback during the last year due to increase in oil prices and devastating earthquake in the northern regions of the country.

It was due to the combined effect of factors like these that economic growth rate last year remained at 6.6 per cent, though only a year ago it was at an all time high rate of 8.4 per cent of the Gross Domestic Product (GDP). The growth figures for the last year also fell short of the target of 7 per cent set during the previous budget.

The less-than-target growth rate may get repeated this year if inflation and the widening gap in trade balance are not tackled seriously. Even international financial institutions including the International Monetary Fund, the World Bank and the Asian Development Bank have warned the government to control inflation and do something about the trade imbalance. Otherwise it will be difficult to maintain the pace of the economy and achieve ambitious growth targets, they warn.

Pakistan's trade deficit had soared to $12.12 billion at the end of the last fiscal year against a trade deficit of $6.21 billion in 2004-05. This wide gap is attributed to domestic investment-driven imports and rising energy import bill.

Despite these ominous statistics and warning signals from the international financial institutions, the government is quite optimistic. It sees the growing gap between imports and exports as a healthy sign because it is interpreting the gap as another indicator of economic growth.

"Growing balance of trade shows growth in the size of the economy," says Dr Ashfaque Hassan Khan, Adviser to the Finance Ministry.

Talking to The News on Sunday by telephone from Islamabad, Dr Khan says Pakistan's total trade -- imports and exports -- was less than $18 billion a few years ago. The figures has now crossed the $40 billion mark with exports alone standing at more than $18 billion. This reflects that the economy is growing at a faster pace. "Also, Pakistan is not the only country facing balance of trade problem. Other countries in Asia, including India, are also facing the same situation," he adds.

Pakistan's main imports are oil, machinery and industrial raw material, and the country's main items of exports are textiles and apparel. Dr Ashfaque Khan says industries require capital goods, including imported machinery, raw material and imported energy to produce exportable surplus. Last year, he says, was very difficult for trade and economy because of soaring oil prices, sugar crisis, wheat imports, shortage of industrial raw material including iron and steel due to decline in production of Pakistan Steel from 100 per cent to only 32 per cent and many other unusual imports. "This year the situation is much better because oil prices are falling in the international market, there is no shortage of sugar in the country and steel mill has resumed its production at its normal capacity." This year agriculture crops' yield is also expected to be sufficient for the country's needs, requiring no imports of commodities like wheat. Dr Ashfaque Khan hopes the balance of trade will remain at least at the same level during the current fiscal year as it was last year, instead of deteriorating further. "In fact, the trade gap will further narrow down because there will be an increase in exports."

He says Pakistan will also be able to save its foreign exchanges in the current fiscal year because oil prices have decreased by 6 per cent to 7 per cent compared to what they were last year. The country had paid $6.6 billion to import oil in 2005-06. "Last year, we paid half a billion to import sugar, which will not be the case this year because surplus stocks of the sugar are available in the country."

Some of his observations are backed up by the findings of the observers of Pakistan's economy. According to the 'Economic Outlook 2006', issued by the Asian Development Bank (ADB), high oil prices added more than $1.4 billion to Pakistan's import bill in the first seven months of the fiscal year 2006.

But official figures released about the economic performance of the country during the first two months of the current fiscal year show the situation is not as rosy as Dr Khan projects it. According to the Federal Bureau of Statistics, trade deficit has further enlarged by 36.66 per cent in the first two months of current fiscal year (July and August) to $2.132 billion as compared to $1.56 billion in the corresponding period in the last fiscal year.

In the two months, imports soared by 17.86 per cent to $4.885 billion against $4.23 billion in the same period during the previous year but increase in exports is just 6.87 per cent -- $2.853 billion as against $2.67 billion in the two months last year. Though oil and capital goods remain main import items, Pakistan is also importing wheat, pulses and fruits from neighbouring countries.

It is in the light of figures like these that independent economists and research analysts fail to share the government's optimism. They believe that widening gap between imports and exports will ultimately put pressure on the country's foreign exchange reserves, forcing the government to resort to speedy privatisation of state owned enterprises to bridge the gap.

"Last year Pakistan raised funds by issuing Euro bonds and this year the government plans to offer shares of key state-owned enterprises through global depository receipt (GDR) to finance its trade gap while keeping its foreign exchange reserves intact," says Mohammad Imran Khan, a research analyst at the Jehangir Siddiqui Securities in Karachi.

Key enterprises which are being offered at the international equity market through GDR include Oil and Gas Development Corporation (OGDC), United Bank Limited (UBL), Habib Bank Limited. (HBL), National Bank of Pakistan (NBP) and Kot Addu Power Plant (Kapco).

Imran Khan expects balance of trade gap to further widen to $14 billion by the end of this fiscal year because he projects the country's exports to remain at $18 billion while the imports to balloon to $32 billion. Oil, according to him, will remain the main foreign exchange consumer because its demand is increasing despite a decline in its prices.

Pakistan is importing about 16.8 million tons of oil every year but demand for the commodity is growing with increase in industrialisation and the setting up of new plants for power generation.

If Imran's predictions come true, growing trade gap will further increase the gap in the balance of payment, which had already touched an alarmingly high level of $5.7 billion during the last fiscal year (2005-06). This is another factor which has the economists worrying.

"The rising trade deficit will have serious impact on the balance of payments and may cause depreciation of Pakistani rupee," says Dr Shahid Hassan Siddiqui who heads the Research Institute of Islamic Banking and Finance.

"The government is financing its current account deficit through sale of profitable strategic national assets under its aggressive privatisation programme, remittances of money from expatriate Pakistanis standing at a staggering 4.6 billion per year and by securing fresh loans from international financial institutions in the name of development," Dr Siddiqui tells TNS in an interview.

If serious measures are not taken to control the widening gap between imports and exports, the economy will experience a negative impact, he says and adds that the policy adopted by the government for the acceleration of growth rate is consumption-oriented rather than production oriented.

"The government policies have created an artificial demand of consumer goods, particularly imported cars, electronic goods like TVs and airconditioners etc. Demand of these consumer goods has also increased due to liberal loans being extended by commercial banks under consumer financing schemes."

Dr Siddiqui points out that it is estimated that banks have already extended Rs 300 billion in loans to consumers under consumer financing schemes during the last three years. "This has caused economic pressures on borrowers whose paying capacity has declined due to growing inflation as well as an increase in the cost of their loans."

Economists also believe there should be a limit to trade deficit. When exports are not increasing, growing imports will certainly put pressure on foreign exchange reserves. Already, this pressure is being felt. Foreign exchange reserves, that had crossed $13 billion mark during the last fiscal year, have dropped to $12.6 billion by September 16, 2006.

Though the government remains stubbornly optimistic, signs are that it will have to do something more than mere harping on the health and growth of the economy to buck these negative trends.

Despite providing full support to international community in war against terror, Pakistan has failed to gain the confidence of businessmen belonging to its allies. A recent survey by The American Business Council (ABC), a group of 60 American companies which have investment in Pakistan, is an evidence of the mistrust American businesspeople have in the provincial as well as selected city district governments in Pakistan.

The share of American companies in the Foreign Direct Investment (FDI) made in Pakistan is around 30 per cent. And it is for the first time that ABC has included an assessment of the provincial governments as well as those of selected cities in its survey.

Though the survey showed overall satisfaction over investment environment in Pakistan, its response to the administration of Karachi, known as the economic hub of the country, is quite negative. Out of 57 member companies of ABC surveyed, only eight have given a good rating to Karachi city government whereas just 16 of them see Lahore in a positive light. The Sindh government received positive response merely from three companies while 11 companies have positive views about the role of the Punjab government.

These stark figures are in sharp contrast to the American companies view about business environment in Pakistan. Almost all member companies of the ABC consider the environment positive. In 2000, 96 per cent of them thought so.

ABC is a forum of US business in Pakistan and represents the largest group of single country investors. It conducts annual survey on members' perception of business and economic climate in Pakistan and assesses the performance of relevant government departments. In its survey for the 2005, released recently, majority of the members highly rated the responsiveness of State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), Central Bureau of Revenue (CBR) and Income Tax and Customs Department. But their rating for the responsiveness for Ministry of Industries, Ministry of Health, Ministry of Labour and Manpower and Export Promotion Bureau declined in 2005. Many members consider law and order situation has improved in the year but Pakistan's perception abroad is still not positive.

A high level American official, the United States Trade Representative (USTR), recently told The News on Sunday in Washington DC that corruption in the public sector in Pakistan was one of the major barriers for the US investors to operate in the country. He said Pakistan had invited US investors to work jointly with Pakistani companies but weakness of the institutions including judiciary were top barriers hampering American companies from doing so. "Where will US investors go if they have any disputes with Pakistani partners?" he asked and said Pakistan government was reluctant to provide full guarantee if disputes occurred with the Pakistani partners.

This puts a Bilateral Investment Treaty (BIT) into a proper context that Pakistan is seeking to do with the United States. The two countries have had around four rounds of negotiations so far on the treaty but they are still waiting to reach at a final agreement. The latest ABC survey may have negative repercussions on the future talks on BIT because its report on provincial governments as well as city governments is not attractive for foreign investors. Pakistan so far has signed 48 Bilateral Investment Agreements (BIAs), some of them with strategically important countries. While Pakistan's investment partners include Germany, France, China, Singapore, Spain, United Kingdom, Switzerland, UAE and Indonesia, this list still does not include countries like US, India and Saudi Arabia.

Foreign Direct Investment (FDI) in Pakistan remained around only $ 3.50 billion in 2005-2006, which is more than 100 per cent higher than $ 1.50 billion, the figure for 2004-05. This increase in investment in a single year does not surprise many people in the field because around $ 2 billion of it were realised through privatisation of public sector business concerns. If the proceeds of privatisation are excluded, the increase in FDI is reduced to no more than $0.5 billion.

During the last financial year, UAE remained the single largest investor in Pakistan with the investment of around $ 1.50 billion -- more than double the investment of the United States which stood at $ 0.53 billion. Saudi Arabia was the third largest investor with around $ 0.28 billion. An increase in the investment from UAE and Saudi Arabia was the result of large-scale privatisation of government-owned companies like Pakistan Telecommunication Company and Karachi Electricity Supply Corporation. The two countries had invested around $367.5 million and $18.5 million respectively in 2004-05.

After telecommunications, oil and gas exploration and thermal power sectors received the largest foreign investment. Meagre investment was recorded in information technology. Same was true for the textile sector. In order to invite more investment in textile sector, Pakistan's embassy in Washington had offered US textile companies to jointly invest with Pakistani companies but there has been no satisfactory response so far.

Despite the fact that UAE and Saudi Arabia remain largest direct investors in Pakistan, US still remains Pakistan's most important strategic partner. "We want trade not aid," said Commerce Minister Humayun Akhtar in his recent talk with American media in Washington DC.

Pakistan in the meanwhile is showing a lot of flexibility in its policy towards foreign investors. No permission is required for them to start any manufacturing company in Pakistan, except in four sectors -- that is arms and ammunitions, high explosives, radioactive substances, currency printing and coin minting. In manufacturing sector, Pakistan has allowed an upper limit of 100 per cent foreign equity. There is no minimum investment amount requirement for foreign companies. Still, the foreign investment remains a trickle. Analysts mostly attribute it to bad law and order, corruption and weakness of institutions which remain major hurdles in the way of foreign investors.

Dr Mirza Akhtiar Baig, a leading industrialist of Karachi and a former president SITE Association of Trade and Industry, in his recent newspaper article highlighted some other sectors where big investment opportunities lie. These include construction, livestock, dairy farming, processing of fruits and vegetables, tourism, engineering and information technology. He argued these sectors have potential to generate employment at a larger scale in the country if they are able to attract right kind of investment.

Baig is of the view that business environment and infrastructure would be helpful in attracting foreign business, besides providing safety to investors. "In order to make investment attractive, it is necessary to reduce the cost of doing business," he wrote and added that affordable and high-quality infrastructure -- including land, electricity, gas etc -- should be provided to foreign as well as domestic investors.

There may be many other sectors including fisheries where investment opportunities exist in abundance but to realise their potential the question of business climate needs to be addressed. Positive rating from only six per cent companies for the Sindh government and from 15 per cent of them for Karachi' city government only shows that things are not moving in the right direction for the time being.

The US House of Representatives on Wednesday passed a military tribunal bill that was drafted in response to a Supreme Court ruling in June that struck down the Bush administration's earlier rules for trying accused terrorist suspects before military commissions.

The issue has been hotly debated since then, but legislation didn't fall into place until recently and then moved quickly through Congress.

The mostly party-line 253-168 vote in the Republican-run House prompted bitter assertions later by House Speaker Dennis Hassert, Republican-Illinois, that opposition Democrats were coddling terrorists, perhaps foreshadowing campaign ads to come in the weeks leading up to the November mid-term House and Senate elections.

The Senate was expected to approve its own version of the bill on Thursday. The bill is a compromise forged between Senate Republicans and the White House.

The chairman of the Senate Armed Services Committee, Republican Senator John Warner of Virginia, who helped negotiate the agreement, urged his colleagues to swiftly approve it. He said the bill would allow "terrorists to be brought to justice" in accordance with America's "founding principles and values".

But many Senate Democrats, civil rights groups and judicial activists see it differently. They argue that provisions in the measure would allow for unfair trials and abusive interrogations of some 450 detainees who have been held without trial for nearly five years at the US naval base at Guantanamo Bay, Cuba.

Nearly all the detainees are Muslims who were arrested in Afghanistan, Pakistan's NWFP border areas and some other parts of Pakistan following the US's invasion and occupation of Afghanistan in November 2001.

Their indefinite detention has outraged civil rights groups and the families of the men who are being held virtually incommunicado in wire cages for the last nearly five years, despite the fact that they have not been charged with any crime. The case could bring two powerful branches of government -- the judiciary and the executive -- into direct conflict.

In court briefings, US Solicitor General Theodore Olson, representing the executive branch (the Bush administration), argued that the Supreme Court did not have jurisdiction to hear the case, because the detainees are foreign nationals, whom the administration calls 'enemy combatants', in military custody outside the nation's borders.

But critics termed this argument a legal fig-leaf designed to allow the Bush administration to hold the detainees indefinitely without putting them on trial. Agreeing with this view, the US Supreme Court in June this year ruled that it certainly did have authority over the case and struck down the administration's rules for trying the detainees before military tribunals.

The tribunal bill passed by the House of Representatives on Wednesday, and the version that was expected to be passed by the Senate on Thursday, would preserve tough interrogation tactics (the administration's euphemism for torture) that the White House credits for helping thwart 'terrorist plots'. It also would pave the way for trials of at least two dozen suspected 'terrorists', including alleged 9/11 planner Khalid Sheikh Muhammed, held at the US military prison at Guantanamo Bay.

But Senator Carl Levin, the top Democrat on the Senate Armed Services Committee, objected that the measure would be used by America's "terrorist enemies as evidence of US hypocrisy when it comes to proclamations of human rights."

The Los Angeles Times reported that human rights groups had "warned that provisions such as prohibiting detainees from challenging their imprisonment in court and permitting the use of coerced evidence in trials under certain circumstances puts the bill on a dubious legal footing."

Human rights groups also objected to the bill, saying that the measure could subject detainees to brutal treatment by the US military personnel and intelligence interrogators at the Guantanamo Bay prison.

Press reports said that Democrats accused Republicans of rushing to pass a legally suspect bill to score political points before the US November elections. Opinion polls suggest that the Republicans may lose enough seats in the November elections to shift control of the House and Senate to the opposition Democrats.

A Democrat-controlled Congress could open the way for the initiation of impeachment proceedings against President George W Bush. The political stakes, therefore, are very high for both the Republicans and the Democrats, as well as for the White House and the future of the Bush presidency.

It remains to be seen how the US Supreme Court will react to the passage of the military tribunal bill. Will it strike down the bill as unconstitutional, or will it -- under its Bush-nominated new chief justice, Justice Roberts -- evade its own recent rulings and let the bill stand? The Court is set to open its new term on Monday, October 2.

In a statement issued on September 20, the American Civil Liberties Union (ACLU) said: "It is a critical institutional moment for the new Roberts Court. Neither Congress nor the President should be seeking ways to evade the Court's historic decision in Hamdi v Rumsfeld, and the Court should not be seeking to evade its own recent rulings..."

In what has become a ritualistic exercise, each Supreme Court nominee is now routinely questioned by the Senate Judiciary Committee on his or her views regarding 'stare decisis' -- the legal principle that courts are generally bound to follow their prior decisions.

In their confirmation hearings last year, Justice Roberts and Justice Alito each gave what has also become a ritualistic response. Both agreed that prior decisions should not be overruled merely because newly appointed Justices might have reached a different result had they been on the Court at the time. That principle will be put to the test this term.

As Larry Berman and Bruce Allen Murphy note in their 1996 study 'Institutions of American Democracy,' judges throughout the entire US legal system often decide cases on the basis of the doctrine of 'stare decisis,' which means "to let the decision stand" or to adhere if at all possible to previously decided cases, or precedents, on the same issue. American federal and state courts, for example, are supposed to follow Supreme Court precedents in making their own decisions.

The Supreme Court often rules based on its own precedents. By following the rulings of their predecessors, all US courts, including the Supreme Court, seem to be non-political, impartial arbiters, making incremental changes based on past decisions.

But following precedent is not as restrictive as it sounds. Since in practice, precedents need reinterpretation, judges can argue about the meaning of an earlier case, or whether the facts of the current case differ substantially from those of past cases, thus requiring a different ruling. On some occasions, US justices will give the appearance of upholding precedent when in fact they are consciously reinterpreting it to reach a different result.

In actuality, however, the Court rarely overrules its own precedents. Of the tens of thousands of decisions issued by the Court over the last two centuries, it has overruled its own precedents in less than 300 cases.

Dr Abdul Hayee Baloch, a veteran Baloch leader, has been active in politics since his student days. In 1964, when he was a student of the Dow Medical College, Karachi, he founded Balochistan Student Organisation and was chosen as its chairman.

In Balochistan in particular and Pakistan in general, Dr Hayee is the odd man out of politics. He is one of those rare politicians who don't have a privileged background. Born to a small farmer, Pir Bukhsh, in the small village of Chhalgari in Balochistan's Bolan district, he made history in 1970 elections when he defeated the son of the Khan of Kalat for a National Assembly seat. Dr Hayee contested those elections from platform of National Awami Party (NAP).

During 1974 military operation in Balochistan, he was sent behind the bars. In 1987, he formed Balochistan National Youth Movement that was renamed as Balochistan National Movement in 1988 elections. He was also founder chairman of both these parties.

Although he failed to win elections in 1988, his party succeed in getting two national assembly seats and four provincial assembly seats, becoming a part of Akbar Bugti-led Balochistan National Alliance government in Balochistan. In 1994, he was elected as a senator from platform of Balochistan National Movement.

Recently he has been appointed as the president of National Party, a party which, according to him, comprises of common people like him. He believes that the room for a genuinely secular political party led by common people has always existed in Pakistan despite the fact that the country is awash with political organisation of every hue and stripe.

Dr Hayee stands out among Pakistani politicians for one more reason: He can proudly claim that he has not been involved in the corruption of a single penny during his whole political career, though his party has also remained in power.

Last week, he was in Lahore on a political tour. The News on Sunday had the opportunity to sit with him to know his views about the the problems facing Balochistan and their possible solution. The excerpts of the conversation follow:

The News on Sunday: What do you think are the reasons for the recent killing of veteran Baloch leader and the chief of Bugti tribe, Nawab Akbar Bugti?

Dr Abdul Hayee Baloch: Before we discuss the killing, its reasons and repercussions, I think it's necessary that we have a look at the history of Balochistan to understand the issues the province is facing.

It's a historical fact that both Balochistan and Kashmir enjoyed a special status during British rule, even before Pakistan came into being. Balochistan as a whole had never gone under the British Crown. When the British needed to contain tzars of Russia, they had the Bolan area of Balochistan on lease under a treaty with the Khan of Kalat, the then ruler of the most of most areas now falling in Balochistan. They had to take Bolan on lease because they knew they could not get it militarily. It was in this leased area that Quetta was set up as a cantonment. The British annexed some area from Afghanistan and added it to Bolan to create what was latter known as the British Balochistan. The British Balochistan was governed by an agent of the governor general of India. The rest of Balochistan was known as the State of Kalat and it was a sovereign state.

Before the partition of the subcontinent, even the British Balochistan was remerged with the State of Kalat under an agreement in 1946. Like all other (princely) states in India, it had the right to accede to either any of the two new nations that the partition would create or to remain independent. It is on record that Balochistan remained a state on its own for 227 days (between 1946 and 1947). It was free to handle all its affairs under rule of the Khan of Kalat. The Khan had two chambers (divans) to run the affairs of his state. One was called divn-e-Khas, and consisted of tribal leaders and the other was Divan-e-Aam which comprised intellectuals, political workers and the representatives of common people of Balochistan. Both these chambers opposed Balochistan's accession to Pakistan. This, however, did not deter the Khan of Kalat. After he showed his willingness to join Pakistan, he entered an agreement with Quaid-e-Azam Muhammad Ali Jinnah (on the accession of Balochistan to Pakistan). But this treaty was violated as soon as it was signed and it was as early as 1948 that the first military operation was launched in Balochistan. The Khan of Kalat's younger brother Agha Abdul Karim revolted against the operation. He was arrested and jailed and then he went into exile to Afghanistan.

Since then, the situation in Balochistan has been moving from bad to worse. It was because of (many subsequent steps) including the creation of one-unit which created an artificial parity between the more populous East Pakistan and the less populous West Pakistan. (Another important event was) that the general elections to be held under 1956 elections were not allowed to take place. Soon Martial Law followed in 1958. Under the Martial Law regime of Ayub Khan Balochistan suffered another military operation in 1962-63. This was another blow to the Baloch people. In the Zulfikar Ali Bhutto's government in 1970, yet another military operation was done in Balochistan in 1974. And now there has been an operation going on since March 2005. After rockets were fired on a rally being addressed by President Pervez Musharraf in Kohlu, though nobody knows where those rockets came from, Dera Bugti town was attacked by the military in December that year. An earlier attack on the town on March 17, 2005, was meant to kill Akbar Bugti. Though he had a very narrow escape his guards were killed in that attack. Even then he talked to the representatives of a Balochistan committee, formed by the government. He did not not shift to mountains out of his own choice. He was forced to do that. President (Pervez Musharraf) was also attacked in Karachi and Rawalpindi. Why didn't the army target these cities to respond to these attacks?

The military operation in Balochistan has forced thousands out of their houses, rendering them homeless and depriving them of their sources of livelihood. Hundreds of innocent people have been killed through the use of modern weapons. People are being attacked with gunship helicopters. How can they identify with the army as their own if it fires at them? Bullets can never generate love. Thousands of people in Balochistan have been arrested, hundreds have disappeared without a trace only because they have raised their voices against all this.

TNS: Why is there so much turbulence in Balochistan? Is it because of political reasons like the denial of