Nothing is agreed until all is agreed
WTO Doha round of multilateral trade talks will have important
implications on Pakistan
By Hussain H. Zaidi
Liberalisation of trade in agricultural and industrial products has remained the major item on the agenda of the Doha Round of multilateral trade negotiations since its initiation in November 2001. A successful conclusion of the Doha round will have important implications on Pakistan.

Two eids are most welcome
By Adnan Adil
Starting eid celebrations on different dates in various parts of the country, especially traditional divergence of Pakistan’s tribal North from the rest of the country, shows the plurality and diversity of our society and assertion of freedom by different communities. It should be a source of pride and rejoicing as it provides an opportunity to celebrate for longer and not be a cause for anxiety or shame as it has been portrayed for years.

One of the most typical caricatures of post-colonial societies is that they are unchanging, locked into an underdevelopment trap because of the inertia that is wrought by a ‘traditional’ way of life. So, for example, in Pakistan it is a common refrain that feudalism (read: large landed estates and medieval customs) is the biggest obstacle to progress. By implication Pakistan is depicted as a largely rural society in which the majority of working people simply lack the consciousness to break out of oppressive relationships.

That most Pakistanis are subject to exploitation is beyond doubt. That this number has grown consistently over time is also indisputable. However, to suggest that this state of affairs is due to a static economic, political and cultural system is not only counter-intuitive but just plain wrong. Indeed it is the inability to understand the deep changes that have taken place in society — and continue to do so — as well as the corresponding lack of change in the formal institutional structures of the state, which largely explains the intellectual, moral and political impasse that we collectively confront.

Among other things, Pakistan is no longer a rural society. Urbanisation is rife, albeit often haphazard; most urban settlements do not possess requisite public utilities, transport or employment opportunities. The peculiar social and cultural mores associated with urbanisation in Pakistan has led some scholars to suggest that the process of change can be thought of as the ‘ruralisation’ of urban life, and the ‘urbanisation’ of rural life. The main point is that the process of change is very complex and the established theoretical repertoire does not provide us with sufficient tools to explain this change.

Second large landlords are now one amongst many different social forces that compete and cooperate for power. Even in rural areas it is rare that large landlords have a complete monopoly over the economic, political and cultural choices people make. They may still be important players because of the land they own, the contacts they wield (particularly with state functionaries) and their deep cultural entrenchment, but they are increasingly having to adapt themselves to various changes, most obviously the fact that they can no longer rely on unwavering commitment from their dependents.

Third religious orthodoxy is on the rise, in large part because old symbols and ideologies cannot explain the changes that have taken place or provide justifications for new behavioural forms. The role of the state in facilitating the spread of religious orthodoxy is now well known but there are other factors that explain its rise, in particular the seasonal migration of millions of working-age males to the Gulf for work. An important sub-plot in this story is that the premium placed on overt commitment to religious ritual is not considered inconsistent with cynical accumulation and competition, to the point where the pursuit of individual gain at whatever cost has become something of a societal virtue.

A related point has to do with the steady erosion of a sense of nation — to the extent that it existed in the first place — and collective social interest more generally. This fragmentation is both a result of the intense social cleavages being created by capitalist expansion and the formal state’s continued commitment to a narrow nationalist project which is exclusive and often repressive.

Finally while many social barriers and customs are breaking down in the face of change, there are many more barriers being erected to replace them. Status and honour remain very important in our society, but they are increasingly being associated with cash and unconstrained power. This is a classic case of the most hierarchical norms of the ‘old’ order being consolidated by the most destructive values of the ‘new’ order.

There are silver linings, of course. But it is difficult to ignore the general trends. So, for example, whereas increasing urbanisation would be expected to be coeval with increased women’s participation in public life, a countervailing trend is observed instead, primarily because of growing religious orthodoxy. Where women do venture out of their homes, they are subject to lurid stares and hooting, a reflection of just how repressed society has become.

The problem of the environment is threatening to become the defining problems of the human race. Tremendous social changes have given rise to a disjunct between humanity and the natural world that is fast becoming unbridgeable. Our cities are the perfect example of the fallouts of capitalist modernity.

I want to reiterate the point that I raised at the outset. Regressive practices in society cannot simply be attributed to ‘feudalism’ or other catchphrases that imply inertia and an absence of dynamism. Such refrains are now the biggest impediments to understanding what is going on in our wider social world.

I do believe that there is some respite from the intense competition and individualism of capitalist modernity in the rural sphere. But this is not to romanticize the prototypical village or to suggest that the only way out from the present is to take refuge in the past. Instead I think it is important to bear in mind that challenging the consumerist and individualist values that capitalist modernity brings with it requires us to think about what is good in ‘tradition’, without necessarily reifying the latter (crucially tradition here does not mean religion, but rather the various cultural logics that we have inherited over the ages).

In the final analysis, the responsibility of those who are interested in understanding the human condition, ideally for the purposes of bettering it, is to reject dogma and provide the greatest possible insight into the objective world. Every self-proclaimed ‘moderniser’ that has ruled this country, and particularly the military usurpers, has insisted that ours is a society that needs to be shaken from the slumber of tradition, and he is best equipped to lead this ‘revolution’. In fact ours is a society that is far from static; those in power have typically attempted to impede the changes that threaten them while reinforcing the trends that run counter to working people’s interests.

Ultimately society outlasts all such ‘modernisers’, even if not the effects of their rule (Ziaul Haq being the most prominent example). Only time will tell whether or not we can create an alternative modernity that is produced organically by society and is enabled by an inclusive state that represents a genuinely popular vision of change. Before we can even start to conceive of such an alternative it is essential to do away with the myths to which we have remained enslaved for far too long.

The new national education policy makes a number of interesting observations about the role of the private sector in education and related issues. It categorically makes the point that the provision of educational services is a public function and that the relative failure of the governmental education system has resulted in the emergence of the alternative education provider i.e. the private sector. But, it goes on to argue, the assurance of uniformity remains the responsibility of the state and it can develop public-private partnerships to ensure that the "exigency of uniformity in standards and purpose of education is not compromised." The policy document then calls for bridging the public-private divide and points out that the public sector has failed to capitalise on the potential benefits and synergies from the growth in the private sector. This obviously amounts to missing a huge opportunity as far as the government is concerned for the document unambiguously asserts that the private sector can assist by way of almost "every possible educational input" from school construction to teacher education.

The above paragraph suggests the imperative of the government’s regulatory role with respect to the working of the private sector as well as its need for assistance and partnership with it. Leaving aside the issue of regulation for now, let us look at the other aspects of public-private partnership in education. Indeed synergies are possible. We already have examples of public sector foundations supporting low-fee charging private schools and the adoption of government schools by the private sector. Similarly, there are teacher education institutions in the private sector that also cater to government school teachers and NGOs that regularly carry out training workshops to enhance their pedagogical skills and brush up their content knowledge. None of this, however, can be an adequate response to the "relative" failure of the governmental education system. For while a section of the private sector is undoubtedly doing good work, the numbers reached as well as the impact is quite limited. The idea of synergy, in other words, should not be confused with that of a bail-out. The considerable emphasis on the role of the private sector in addressing what are essentially shortcomings of the public sector seems to suggest that the government is asking the private sector for a life-line rather than a partnership.

Different modes of partnership have been highlighted in the policy. To begin with there is the Adopt-A-School programme where NGOs, corporate sector and philanthropists adopt public sector schools and seek to improve them through a variety of means. Despite the merits of this initiative, the numbers are not very significant. The total is not likely to be much above a thousand out of over 150,000 public sector schools in the country. To add to this, for the most part adopted schools are limited to the urban areas where adopters are to be found. Another initiative is one whereby the private sector or NGOs upgrade a public sector school and use the premises to run a private school in the afternoon. Again evidence shows that this initiative has not been very successful in attracting partners to upgrade the school.

Alternatively, we have foundations such as the Punjab Education Foundation (PEF) and the Sindh Education Foundation (SEF) utilising public funds to support private schools catering to children from low-income families. Examples include the PEF’s Foundation Assisted Schools (FAS), where a per child per month subsidy is given to a school provided it passes a quality assurance test. Currently FAS caters to around 1100 schools, mostly in southern Punjab. PEF also supports the private sector through providing training to its teachers. PEF has sought to implement training through partnerships with NGOs to overcome its own capacity and outreach limitations. However, a recent evaluation found that PEF had to create a series of certification and re-certification procedures to ensure the capacity of its partners as well.

When looking at the issue of support to the private sector, one must look at what the sector itself offers. In a recent World Bank-supported study (Andrabi et al), while pointing to better performance by private sector schools, make three key points that should be kept in mind: (1) Rote learning is rife in both public and private sector schools, (2) Students in both private and public sector schools are performing below grade level, (3) For the most part, the private sector will not be interested in going to areas where there is a high level of poverty and this rules out much of rural Sindh and Balochistan. Educating children in all such areas, the report suggests, should be the concern and responsibility of the government. Reliance on the private sector, therefore, can only go so far, and no further.

In terms of quality, there is indeed a difference between the two sectors: a larger proportion of private sector schools deliver education conforming to some minimum standards compared to public sector schools. But, essentially, both the public and the private sector have one major problem in common: a capacity deficit. Nowhere is this more pronounced than in the realm of teachers. The issue really then becomes how does one ensure quality in education, on scale.

If the government is serious about taking the necessary steps to improve the quality of public sector schools then it will have to undertake the effort itself, primarily. The private sector has an important role to play in terms of supplementing the government’s efforts in delivering education. But it is in no position to carry out a rescue operation for a failing public sector. The point to keep in mind here is that despite the deficit the public sector still has a human resource core that can play a key role, given appropriate incentive and accountability mechanisms, in improving the state of government schools.

The Punjab government’s subsidy on wheat flour (aata) has made Shahbaz Sharif, the chief minister, very "popular" in Punjab and Pakistan. People are getting aata at 10 rupees per kilogram. PML-N is banking on this and other popular schemes introduced by their government in Punjab as the main strategy to end poverty. The other three provinces of Pakistan are also eager to move forward in the chief minister’s footsteps.

The Pakistan Peoples Party government has also started distributing cash up to Rs1000 a month to "poorest of the poor" in the name of the Benazir Income Support Scheme.

Throughout Punjab aata has been subsidised during the month of Ramzan. Normally the price is around 30 rupees a kilo. Another similar scheme is a two rupee chapati/roti from tandoor (oven). Commercial tandoors are provided aata at subsidised rates and sellers are asked to charge two rupees for a roti. The normal price is five rupees.

Hundreds of thousands of people have queued up to buy roti and aata at these bargain prices but more than ten died while standing in the long queue, felled by heart attacks or beaten by police.

During the last three weeks, most of the Punjab government machinery was focused on distribution of aata, checking to make sure that roti is being sold cheap and making sure the sasta (cheap) Ramzan bazaars are functioning. Most of the government offices were deserted and all the other government tasks put on hold to achieve this goal. The state machinery has been on alert everywhere as Chief Minister Shahbaz Sharif might unexpectedly visit. In fact several top bureaucrats have been suspended or have lost their jobs because of "negligence" in distributing aata.

These schemes will not end poverty. What Shahbaz Sharif has done is nothing new; in fact he has borrowed this idea from his brothers in India. By implementing such schemes, some of the chief ministers in India became popular; it has not alleviated poverty there. According to one report, over 70 percent of all Indian people live on less than one dollar a day. An adult earning 11.80 rupees a day in rural areas or Rs. 17.80 in urban areas live below the poverty line.

Let’s take the example of Y.S. Rajasekhara Ready, the Congress party’s deceased chief minister from Andhra Pradesh. He died in a helicopter crash on September 2, 2009. After hearing news of his death dozens of ordinary people committed suicide. Why? Because people were afraid subsidy on food items would end. Each month families below the poverty line were able to purchase 20 kg rice at Rs3.50 per kilogram. Subsidised edible oil, red lentil and a cylinder of cooking gas were also available. Further, for nearly five years farmers had been receiving an uninterrupted supply of electricity for free.

Yet when comparing Andhra Pradesh with other Indian states, it is clear that the state is the epicenter for suicides by farmers. In August 2009, the Andhra Pradesh government revealed that 20 farmers committed suicide over the previous 40 days. The families of those victims received 150,000 Indian rupees as compensation by the state government.

On June 10, the Tamil Nadu deputy Chief Minister M.K. Stalin declared that all those with ration cards would get free colour televisions during the fourth phase of distributing 41,62, 500 sets. The government allotted five billion rupees for the fifth phase of providing color televisions.

Under the newly introduced National Food Security Act 2009 at federal level, every family in India below poverty line will be legally entitled to a monthly allotment of 25 kg of rice or wheat at Rs3 a kilogram. Yet despite a number of schemes for subsidising the poorest section of the population, India holds the record for the absolute number of people suffering from chronic hunger and malnutrition. Mass poverty still flourishes.

Like India, Pakistan plans to reduce general food subsidies and has done to large extent, leaving subsidies in place only for the "poorest of the poor." This cuts down the number of people receiving subsidised food and ties them to politicians and their parties. The present tactic by the chief minister of Punjab is therefore in line with the "new" neo-liberal agenda. It helps governments privatise the distribution of food while building in a populist dimension among the poorest layer of the population.

Arising in the 1970s in response to an economic crisis, neo-liberalism sees free market policies as the solution. It asserts that social justice is best maintained by a minimum of government "interference". Neo-liberalism has negatively affected large number of people through retrenchments, degradation of work, misuse of environment, increased poverty and marginalisation of nationalities and households, particularly those in non-formal sectors of both the neo-colonial and developed world.

Subsidised prices are the neo-liberal answer for dealing with the poorest of the poor. Targeting only the poorest, these programmes are termed "social safety nets". But there is no promise of improving one’s condition. And as long as the country’s economy is shaped by privatisation, deregulation and trade liberalisation, significant change would be impossible.

But even expanding the social safety net will not decrease poverty unless political and economic security and basic human rights with dignity can be guaranteed.

Following the outburst of the developing anti-globalisation movement during the 1990s, the authors of the neo-liberal agenda had to adjust their rhetoric. They talk about supporting the promotion of sustainable livelihoods, social safety nets and poverty reduction. In developing economies, there has been a shift to accommodate popular participation and good governance along the lines of the Poverty Reduction Strategy Papers (PRSP) associated with the Highly-Indebted Poor Countries (HIPC) debt initiatives of Breton Woods Institutions.

Most of these schemes have increased governmental loans. For example, the former chief minister of Punjab, Chaudhry Pervaiz Elahi alleged that the present Punjab government is near bankruptcy. He states that they have used a loan of over 120 billion rupees for subsidising the poor. Of course, the former chief minister is simply using the issue to score a point against his opponents.

These state subsidies are used not to promote employment but only a food subsidy for some days. It helps the governments to divide the working class, where a section of the class becomes habitually dependent on state subsidies for survival. It promotes dependency. It takes away the self-dignity. It does not provide a tool for building a better life.

The chief ministers become popular by such schemes and it is perfect for building a loyal following. It is an advertisement for the next election, when the ministers stand on their ability to help those in most need. It conveniently teaches people to forget universal needs for employment, housing, transportation healthcare and free education.

The ideology behind the Shahbaz Sharif policy promotes dependence on rich politicians. The poor do not have to strive for justice, they should simply be grateful for the State’s handouts. The poor just need to make sure that the government continues to provide subsidies.

The policies of Mian Shahbaz Sharif have confused many intellectuals and Left circles. They have lost arguments against giving sasta aata and roti. There is nothing wrong in providing sasta aata and roti provided that these subsidies are part of a social reform package that includes measures to empower farmers and working people. The present scheme does none of that. The long queues symbolise the dependent situation the poor find themselves in. Rather such schemes are a continuation of the feudal tradition by the capitalist politicians.

We need to rebuild the movement against the neo-liberal agenda in its newest version. We need to build a Socialist alternative to counter the deceptive policies of capitalist politicians and demand a future in which workers and farmers set the agenda.

The writer is General Secretary Labour Party Pakistan.

The newly-announced education policy seems to have failed to take up the issue of madrassa reforms. The new plan, laid out in the policy, to set up a "madrassa education authority to bring them at par with mainstream education" under the ministry of interior. This is contradictory to the previously announced plans of Prime Minister Yousaf Raza Gilani in his maiden speech in March 2008 when he declared the setting up of a madrassa welfare authority under the ministry of education.

The 71-page Education Policy 2009 document shows that the issue of long overdue madrassa reforms now rests with interior ministry by stating that "the madrassa education authority shall be set up within Interior Ministry."

The policy further states that "religious seminaries shall be mainstreamed by introducing contemporary studies alongside the curriculum of madrassas to enhance prospects of their students to pursue higher studies, research and excellence and to ensure employment, recognition and equivalence."

The authority, as per policy, shall be established by the Interior Ministry with the mandate of providing an opportunity for all existing and future madrassas to excel and enhance the services they already provide — provide funds for education and socio-economic welfare of students; provide infrastructure and equipment for improvement of existing facilities; provide further training to enhance skills of teachers; provide support in vocational training to equip students to generate income; provide advice and assistance in streamlining policies, objectives and syllabi to give graduates a competitive edge in the job market and for placement in institutions of higher education.

The new policy, surprisingly, is contradictory to the project announced under the 100-days programme of the PM. The authority, which was supposed to be functional by July 9, 2008, has yet not been set up because the task is still to be divided between ministries of interior, religious affairs and education.

Under the plan, the responsibility to carry out the reforms rests with the ministry of education, which was to regulate more than 15,000 registered religious seminaries in the country catering to more than 1.5 million students and over 55,000 teachers. Before 2002, the number of registered madrassas in Pakistan was not more than 6,000, according to the figures provided by the religious affairs ministry. Around 13,000 seminaries were registered across the country till 2007. According to the March 2009 figures, to be exact, the number of registered madrassas in Pakistan has now reached 15,725.

According to the figures by education ministry, madrassas constitute only 4.9 percent of the total 231,289 educational institutions in the country.

The ministry, in the policy document, has included the religious seminaries in the private sector. The private sector, according to the document, contributes about 0.5 percent of the GDP to education — about 1/6th of total financial resources. The private sector institutions also include religious/missionary institutions. They offer mainstream education as well as religious education through religious seminaries. The public sector accounts for around 64 percent of all enrolments, while the overall share of the private sector in total enrolment is around 36 percent, its enrolment share is 42 percent in pre-primary education, primary stage 13 percent, middle stage 58 percent, high 45 percent and higher secondary 34 percent, technical/vocational (52 percent), Vocational/ Polytechnics (57 percent), Non-Formal Basic Education (61 percent) and religious seminaries (97 percent), all gradually expanding in recent years.

The madrassa reforms in Pakistan, which started with Pervez Musharraf in 2002 (he first announced to bring these schools in mainstream education system) have been failing for the past seven years because of succumbing to the pressure of Islamic clerics but primarily because of a lack of political will.

Rupees one billion funding was allocated during 2002-07 by the federal government for introducing other general subjects including English in their curriculum. But the funds were used for administrative expenditures instead. In total, Rs5.792 billion was allocated to introduce general subjects in madrassas but it too remained underutilised.

In 2003, the government allocated about $50 million annually to provide assistance, with the help of United States, to registered seminaries, especially by paying the salaries of teachers hired to teach non-religious subjects and start computer classes that remained underutilised too.

President Zardari in May 2009, during his visit to United States of America, also announced to "take over" seminaries but the current policy does not lead in that direction.

vaqargillani@gmail.com

US has been convulsing with a heated debate on healthcare reform since July. There was no let up in the ferocity of the debate even during the period of parliamentary recess. Both pro and anti reform faction sharpened their knives and hit the campaign trail during the recess period. It seems the whole country is split down the middle over this issue. From one town hall to another there were scenes of heated debate, with political right working up synthetic rage over President Obama’s healthcare reform proposals.

As president Obama himself has not put forward a bill of his own — he has merely asked the congress to put flesh on the bare bones of his reform ideas — he is being accused of not being specific on the issue. The upshot is the circulation of a number of health reform bills drafted in accordance with the viewpoint of the ideologically motivated legislators. Sensing criticism of his bare-bones reform bill that he touted during the recess period in town hall meetings, President Obama outlined his vision of a healthcare reform bill to the US congress on 7 September.

The urgency of reform came in the wake of the death of Senator Kennedy who was one of the long-standing proponents of healthcare reform. Though President Obama did not insist on public option (which means state-sponsored health insurance) as something written in stone, he hammered home the need of embracing health reform to cut down on spiralling health costs. Yet it is not going to be a smooth ride despite Obama’s inclination obtain bipartisan consensus on the contentious issue of health reform.

This only shows how the political rights and insurance and medical prescription industry have joined hands to muddy so straightforward an issue as universal healthcare reform. Neither the issue nor the sabotage tactics of medical insurance industry are new to the US public. Though the US is one of the highest spenders on health on per capita basis, yet 50 million Americans are outside the pale of health coverage. In any other western country, this would have constituted a scandal.

It is only in the US that healthcare crisis has been allowed to simmer unresolved over the past decade despite its scandalous nature. There have been many efforts at reforms stretching back to 1940. In more recent times, Hillary Clinton’s reforming healthcare bill was torpedoed by organised medical and conservative interests in the 1990s.

Obama’s stab at reforming the ailing healthcare system is the latest in a long series of such reforming measures. As President Obama made healthcare reform as his main electoral plank following late Ted Kennedy’s endorsement of Obama, he is bound to follow it through with urgency following the senator’s death (Ted Kennedy was one of the most persistent advocates of healthcare reform in the US). This has energised the President who has been in hustings since then. Despite this, he has found the going tough from the word go, with political right and medical prescription and insurance clubbing together and obfuscating the issue through deployment of unprecedented financial muscle power.

While the right sees in its socialisation of healthcare and big government control of health, organised industry interest sees in the public option a threat to its monopoly of medical insurance market. Together, these two entrenched interests have managed to confuse a straightforward issue of universal healthcare. As a result, we are witnessing a ceaseless stream of organised uproar and synthetic outrage over the issue. No wonder we are witness to large swathe of ordinary people tending to view the propaganda as truthful representation of the state of the healthcare in the US. This is happening despite the President bending over backwards to accommodate irrational fears and hysterics over the issues. Another bone of contention is the cost of reform. The projected cost of reform — $900 billion — is also a red rag to this interest who construes this cost to be coming from high taxes. President Obama, on the other hand, has maintained that extra cost is going to come from savings from within the current budget. But this is no explanation for the ideologically motivated sceptics of the reform.

The history of entrenched ills besting the present system goes way back. One of the big problems of current health system is its rancid commercialisation, unlike Europe and Atlantic. The current healthcare system is specialist-driven where visit-based fees are the norm. This tends to encourage over subscription of drugs which benefits pharmaceutical industry. Since specialist fees are high, insurance industry has made a killing out of private-based health system by doling out expensive insurance premiums. This leads to insurance industry either overcharging high premiums or refusing to pay for treatments arising out of pre-existing medial conditions not covered in the small print of insurance agreements.

A number of people are falling out of insurance coverage which is growing day by day (more noticeable in the aftermath of financial crisis). These factors cumulatively led to crisis-like situation in the US healthcare system which calls for radical option. Surprisingly, this crass commercialisation issued from US Supreme Court ruling that health can be operated like any other business much against the wisdom of some public spirited economist who contended that relationship between a doctor and patient cannot be treated as wholly market-based.

The upshot was crass commercialisation which saw the hold of insurance and pharmaceutical industry tightening over the healthcare market with every passing decade since the 1960. These commercial interests, joined by political right opposed to high taxes and big government, are at the heart of spirited opposition being mounted against a perfectly sensible plan. The stakes are too high for both sides. President Obama has staked his career on the issue. Fearing the growing organised interest opposition to the plan, President Obama has been mobilising his core base in the union and Democratic Party while putting out feelers of accommodating his opponents.

Those who are stoutly behind the reform agenda fear that a bipartisan health reform bill is going to a much watered-down version of the original intention of the bill. By caving in organised interest once in a life time opportunity would be lost.

Dr Arif Azad is chief executive of the Network For Consumer Protection. Arif.azad@thenetwork.org.pk

A critical review of World Bank and IMF tax proposals for Pakistan

By Huzaima Bukhari and Dr. Ikramul Haq

In recent days, the World Bank and International Monetary Fund (IMF) have suggested several changes in our tax statutes that are highly controversial and debatable — these intend to burden the less privileged segments of society whereas the rich will remain unaffected. Implementation of these proposals, without any public debate and assessing their impact on the poorer segments of society, will have ramifications destroying the cherished goals of self-reliance, social justice and equitable distribution of income and wealth. The prescriptions of IMF and World Bank for our ills are not based on correct diagnosis. Their sole stress is on enhancing regressive taxes that take small portion of the big income of the rich and very large slice of the scanty income of the poor.

In none of its studies prepared for Pakistan, the World Bank has bothered to assess the incidence of Value Added Tax (VAT) on various income groups of society. No critical evaluation is made about what impact VAT will have on our ailing economy. The only point highlighted is that VAT, levied across the board, will generate extra revenue of Rs. 400 billion. The so-called experts of IMF and World Bank have no idea about our real tax potential which is not less than Rs. 4000 billion. Instead of suggesting restoration of progressive taxes, wealth tax, capital gain tax, estate duty, gift tax etc that were once in existence in Pakistan, these institutions are supporting continuance of pro-rich tax policy. By levying fair and equitable taxes and withdrawing exemptions given to the rich, we can easily generate Rs. 4000 to 5000 billion per annum. But our ruling trio — crooked civil-military bureaucracy, shady politicians and greedy businessmen — resists any such move for obvious vested interests. Sadly, though understandably, the IMF and World Bank have also been working to further their cause.

World Bank-funded tax reform process (sic) has failed to yield any positive results. This is evident from the fact that after five years of Tax Administration Tax Reform Project (TARP), the basic ideas (e.g. introduction of VAT and formation of Inland Revenue Service) are still being discussed. It is strange that things that had to be done in 2004 when 5-year TARP was started are at discussion stage in 2009. It confirms that from 2004 to 2009, borrowed funds of millions of dollars have been wasted. This is the sordid story of tax reforms in Pakistan. Now with the establishment of Inland Revenue Service, they think wonders will be achieved. This is just a change of nomenclature — cosmetic change. Unless mindsets of officers change, nothing will change. Process of change requires change of minds and hearts, something which is completing missing in FBR — the officers are incompetent, inefficient and corrupt, both financially and intellectually. No suggestions have been made by IMF or World Bank for curing this malady. Skilled tax administration is not possible with the existing lot sitting in FBR.

In this milieu, the IMF and World Bank are insisting for enforcement of VAT that requires documentation at all levels. VAT is a specific turnover tax levied at each stage in the production and distribution process. Although VAT ultimately bears on the individual consumption of goods and services, liability for VAT is on the supplier of goods or services. VAT utilises a system of tax credits to place the ultimate and real burden of tax on the final consumer and to relieve the intermediaries of any final tax cost. VAT is calculated by applying the applicable rate at a taxable stage to the appropriate taxable base of goods or services; it is then reduced by the VAT (as indicated on the invoices delivered to the purchaser), which has directly affected the cost of the various elements constituting the price of goods or services.

We wrote in these columns in 2000, "in Pakistan there are substantial deviations from pure form of VAT (as in vogue in Europe and some other developed industrial societies), because of exercise of various tax rates, exemptions and concessions for certain goods and services and specific provisions governing importation and exportation. It is therefore not VAT but VAT-type tax in Pakistan". Now in 2009, the World Bank has just reiterated it in its "research study" — this is height of complacency. In its "research study" (sic), the World Bank did not tackle the most import issue: how VAT will be enforced in Pakistan where more than 50 per cent of economy is undocumented. IMF-World Bank experts say it will take us five years to enhance tax-to-GDP ratio to 15 percent [presently it is just 9 percent]. They are oblivious of the size of existing monstrous black economy, which if taxed at current rates, will enhance our tax-to-GDP ratio to 19 percent in just one year! Such taxation will expose the ruling trio that is the real owner and beneficiary of this black economy.

Why do IMF and World Bank not suggest asset-seizure legislation to bring entire undocumented economy in tax net? They know it will end their control over our affairs — resource mobilisation through these steps will make us self-reliant and end debt enslavement.

The issue in Pakistan is not that of lack of revenue resources as wrongly portrayed by IMF and World Bank, but documentation of economy — ending the culture of tax evasion and fiscal frauds. The forces representing bazaar [different associations of traders], unscrupulous industrialists, absentee landlords and corrupt civil-military bureaucrats are the impediment. These segments are not ready to pay personal taxes on their colossal wealth and income — in most cases created from undeclared sources. They are not worried about VAT knowing that they can pass its burden to consumers. As under sales tax regime, they will not record honestly each and every transaction under VAT. If they will do so, their personal incomes in the process will get documented. Resultantly, they would have to pay income tax from their own "pockets" — incidence of direct taxes cannot be passed on. There has been a perpetual policy of appeasement towards these forces by successive governments — military and civilian alike.

The IMF and World Bank want continuation of this policy. They have not suggested any measure to increase the share of direct taxes — presently dismally low at 23 percent in our total tax collection. In fact, they want that through VAT, the poor keep on paying taxes to fund the luxuries of the rulers.

The prescriptions given by the IMF and World Bank will not solve our problems rather further compound them. The rich and mighty segments, identified above, will pass on the burden of VAT on poor people and will still avoid personal taxation — they know how to grease the palms of the corrupt tax officials. In 1990s, IMF and World Bank caused a crushing deathblow to our industry when on their advice we introduced exorbitant sales tax rate of 21 per cent — within a short span of 2 years we had hundreds of sick industrial units. Later on rate was reduced to 18 percent, then 15 percent — again raised to 16 percent in 2009 — but the fact remains that heavy indirect taxation has pushed 45 million Pakistanis below the poverty line. IMF and World Bank, fully aware of this fact, are still insisting on VAT.

The agenda is obvious: destroy our industry and push more and more people below the poverty line. VAT will be a death pill for us. We can generate extra revenue of Rs800 billion by just taxing speculative transactions in shares, real estate and colossal income of absentee landlords. This taxation will also not involve any complicated enforcement issues that is the case with VAT due to constitutional distribution of taxation rights between the Centre and provinces.

The writers, tax lawyers, are visiting professors at Lahore University of Management Sciences (LUMS).

Liberalisation of trade in agricultural and industrial products has remained the major item on the agenda of the Doha Round of multilateral trade negotiations since its initiation in November 2001. A successful conclusion of the Doha round will have important implications on Pakistan.

The country has been an active player in these negotiations. However, for political reasons, Pakistan’s major emphasis has remained on agriculture. Further liberalisation of trade in agriculture is important but it will essentially benefits countries, such as Brazil, Argentina and Uruguay among developing countries and Australia and New Zealand among developed countries, which have a high potential for export of agricultural goods. On the other hand, Pakistan — a net food importer — has only a limited export potential in agriculture and thus is not likely to have appreciable gains from its liberalisation. Of the country’s major exports, only rice is an agricultural product, while the rest are industrial goods. Pakistan does export wheat and sugar but the result is often their acute shortage in the domestic market necessitating import of the commodities at a much higher price. The cotton we produce is needed by the domestic textile industry. The situation would have been different if we had large exportable surplus — the difference between domestic output and domestic demand — for these commodities and their export would not result in the escalation of prices in the domestic market.

The principal importance of farm trade negotiations for Pakistan is indirect and follows from the principle of a single undertaking. In WTO negotiations, nothing is agreed until all is agreed. Hence, consensus in one area cannot develop into an agreement until it is reached in other areas as well and the result is a final package agreed to by all members.

Pakistan’s real interest lies in liberalisation of trade in industrial goods also referred to as non-agricultural market access (Nama). Products of the country’s major export interest, such as textile and clothing, are subject to higher tariffs in the markets of developed countries. On the import side, Pakistan will be required to reduce its industrial tariffs which will affect public revenue as well as domestic industry — although being a developing country, Pakistan will have the flexibility to continue to protect some of its "sensitive" sectors, such as autos.

The major issues in the Nama negotiations are the level of tariff reduction, the timeframe, and flexibilities that may be available to developing countries. There is consensus that tariff reduction will be done through a formula, rather than through individual approach, and that the Swiss formula will be used. The advantage of the Swiss formula is that it cuts higher tariffs deeper than lower tariffs. For the benefit of the reader, the Swiss formula is reproduced below:

Final bound tariff = Coefficient x initial bound tariff

Coefficient + initial bound tariff

The lower the coefficient in the Swiss formula, the greater the reduction and the lower will be the final tariff. Understandably, disagreement in the main is on the value of the coefficient. According to the proposed modalities, developed countries will have the coefficient of 8, while developing economies may choose one of the three coefficients of 20, 22, and 25. A developing country choosing coefficient of 20 will have the flexibility to designate 14 percent of its industrial tariff lines as sensitive provided they do not exceed 16 percent of the total value of its non-agricultural imports. These sensitive tariff lines will be subject to tariff reduction equal to 50 percent of the agreed formula reduction. Alternately, the country can exclude 6.5 percent of its tariff lines from duty reduction.

In case a developing country employs a coefficient of 22, it can offer tariff cuts equal to 50 percent of its formula reduction on 10 percent of its tariff lines, or exclude 5 percent of the tariff lines from reduction. A member opting for coefficient of 25 will not be allowed to designate any of the products as sensitive, meaning that the agreed formula will be used for all tariff lines. Thus the basic principle of proposed modalities for developing economies is: the lower the coefficient, the greater the flexibility.

The proposed modalities are supposed to not only reduce tariffs but also address the problem of tariff peaks. In the wake of implementation of modalities, in developed countries, the average and maximum bound industrial tariff will be below 3 and 8 percent respectively. In case of developing countries, average bound tariffs will come down in the range of 11-12 percent and only a limited number of tariff lines — designated as sensitive and thus excluded from formula cuts — will have duties exceeding 15 percent. The implementation period for the proposed modalities will be five years for developed countries and 10 years for developing countries.

Since developing countries will have the flexibility to designate certain number of products as sensitive, they may be inclined to exclude entire sectors from tariff cuts at the expense of their trading partners. The proposed modalities address this problem through an "anti-concentration clause", which provides that while applying the Swiss formula, members will ensure that at least 20 percent of tariff lines in each tariff chapter are subject to full formula reduction.

The proposed modalities, if accepted, will have far-reaching implications for Pakistan on both import and export sides. Take the import side first. Being a developing country, Pakistan will have to choose one of the three coefficients. One can safely rule out the coefficient of 25 for Pakistan, because choosing this will mean that Pakistan will not be allowed to designate any sector as sensitive and will have to drastically reduce tariffs on all industrial products.

However, for different reasons, certain sectors, notably the auto-sector, are likely to remain highly protected. This means that Pakistan will choose the coefficient of either 20 or 22. In either case, tariffs will have to be drastically reduced on most of the industrial products, which means a substantial fall in import revenue, a major source of public finance. Though average applied industrial tariffs in Pakistan are 14 percent, bound tariffs are much higher — around 55 percent. Since the proposed modalities seek to reduce bound tariffs — applied tariffs will automatically be reduced once bound tariffs are reduced — the flexibility of increasing applied tariffs will no longer be available. The fall in customs duties will reduce the final price of imports. On the one hand, this will benefit both consumers and industrial buyers; on the other, it will increase pressures on the import competing domestic industry, which in most cases will largely be left on its own without the umbrella of protection. That may lead to de-industrialisation and loss of output and jobs as well as increased dependence on imports to meet domestic demand.

On the export side, there is a lot on the table for Pakistan. Textile and clothing are our major exports and these products carry high tariffs in developed countries. In case industrial tariffs are scaled down, Pakistan will be better placed to compete with other countries already enjoying zero or lower duty in the markets of developed countries under some unilateral or bilateral preferential trading arrangement. Increase in exports will create jobs and additional incomes leading to higher level of savings and investment. Export promotion will also help reduce Pakistan’s balance of payment problem. But mere fall in tariffs will not be enough for substantial increase in Pakistan’s exports as our exporters will still have to comply with the standards and technical requirements of their foreign customers.

email:hussainhzaidi@gmail.com

Starting eid celebrations on different dates in various parts of the country, especially traditional divergence of Pakistan’s tribal North from the rest of the country, shows the plurality and diversity of our society and assertion of freedom by different communities. It should be a source of pride and rejoicing as it provides an opportunity to celebrate for longer and not be a cause for anxiety or shame as it has been portrayed for years.

Exaggerated emphasis on homogenous and mass culture has emerged as a social phenomenon after industrialisation in the West. Mass produced ready-made things, one-size-fit-all and uniformity are notions that have emerged with the advent of mechanisation and market economy to benefit the business class. Homogeneity is neither something innate in human nature nor a sign of moral values. Diversity has existed and has been cherished in human societies throughout history.

Eid is not a product of modern Western culture, but a religious festival to express gratitude to Almighty Allah on the conclusion of a month of prayers and fasting. The Muslims calendar is not based on solar revolutions but on the movement of moon. In that respect the Muslim calendar is quite unique and sets them apart from major world religions. Since in the days of Prophet Muhammad (PBUH), astronomy was not as developed a science as it is today, he instructed Muslims to keep track of months and years in a manner that common people could understand.

The first sighting of moon, therefore, heralded the beginning of a new month in Islamic calendar. As few major clusters of human population existed at that time in the Arabian Peninsula, and there was no concept of nation state, people in each town (or village) would determine the beginning of a new month on sighting the new moon with their own eyes. Despite the development of astronomy that has taken place since, Muslims stuck to their original religious and cultural tradition.

As experts of astronomy tell us a new moon cannot be sighted with the naked human eye until it is at least 31 hours old. Therefore, it is possible for the people in Africa or Latin America to sight the moon a day earlier than people in the Middle East. People in Pakistan may have to wait for yet another day to see the same moon. So where is the harm in wanting to be absolutely certain before starting the festivity? Seeing is believing, after all.

If Muslims all over the world or even in different parts of the same country start celebrating Eid on two or three different consecutive days, it only prolongs the celebration and enhances happiness. Why must we follow a culture encouraged by entities that stand to benefit from mass consumption and homogenisation in the name of modernity? Muslims have proud tradition of accommodating plurality and accepting difference of opinion. Now, that’s not something to be ashamed of.