supervision
Cheating their
way to success?

Use of unfair means in examinations need to be strictly checked to improve credibility and standard of education
By Tahir Ali

Examination results show the ability and capability of students, teachers and institutions. Good results ensure admission to reputable institutions and eventual success in life. The problem of cheating during examinations has rendered Pakistan's examination system and its results invalid and unreliable. What is more dangerous is that some students think of it as their right.

Liberalism for Pakistan
A seminar in Germany sends back more questions about today’s world than answers
By Ammara Ahmad
A two-week scholarship was sponsored this May by Freidrich Naumann Foundation for a seminar in Theodor Heuss Akademie, Germany titled: “Liberalism Today: Freedom First”.
The International Academy of Leadership in Gummersbach has dark gray rectangular buildings with huge wall-size windows that allow a view of the green hills that surround the academy. The academy is perched on a hill that you can hike up to without any safety fears.

Low on priority
Despite verbal assurances of the policy-makers, education sector remains a neglected area
By Alauddin Masood
Some 14 schools in Punjab have shown zero percent results as none of their students who took-up the matriculation annual examination for 2011 could get through, according to Lahore Board of Secondary Education’s gazette notification.
The Lahore Board’s matriculation result indicates rapid decline in the education sector and also shows the pitfalls of political interference in a sector that is vital for human resource development and nation-building.

loadshedding
The missing spark
Energy projects must be looked into objectively to address massive power shortage
By Dr Noman Ahmed
Tall claims have fallen short in meeting the expectation of people. Before the commencement of Ramadan, the government had assured that load shedding shall be minimised. In contrast, many cities and locations across the country continue to suffer from unprecedented outages. Whereas more investments continue to pour in the energy sector, little benefit is experienced by the people.

Issues of
transparency
The FBR needs to tighten up its belt to correct the wrongs it is alleged of doing
By Huzaima Bukhari and Dr. Ikramul Haq
Federal Board of Revenue (FBR) is in the news for the last many days for incorrect reporting of figures, corruption, mismanagement, inter group animosities between officers.
This is a bad omen for an organisation that has to play a pivotal role in making Pakistan a self-reliant state by collecting taxes according to the real potential. Presently, FBR is collecting meagre amounts and that too overburdening those who pay honestly.
In these columns, it has been established that real tax potential of Pakistan is not less than Rs8 trillion, but FBR has failed to collect even Rs1588 billion for multiple reasons — the most significant being corruption.

analysis
Unexpected eruption
If humanity really is as civilised as it claims to be, it needs to stop pretending that capitalism
and liberal democracy are working pristinely
By Aasim Sajjad Akhtar
Like the US debt disaster last week, the largely unexpected eruption of unrest across England this week has relegated Pakistani news onto the proverbial back pages. The widespread protests across Sindh in the wake of the government’s decision to revive the Musharraf-created local bodies early in the week were by no means insignificant, and maybe the first obvious signs that President Zardari’s much talked about ‘reconciliation’ process is starting to fray — yet there can be no doubt that the fires raging in London and other English cities are the big news of the week. The unfolding of events in Britain needs to be analysed deeply, not only in that country but around the world.

overview
Our bad, bumpy economic journey
The situation demands a comprehensive review of Pakistan's economy, its failures and achievements
By Irfan Mufti
Pakistan has suffered from decades of internal political disputes and low levels of foreign investment. Between 2001-07, poverty levels decreased by 10 percent due to increase in development spending. During 2004-07, GDP growth rate oscillated in the 5-8 percent despite severe electricity crisis but growth slowed in 2008-09 and then in 2009-10 due to factors like floods, decline in foreign investment, and internal security situation.

The neglected factor
Pakistan needs to widen its industrial base and shore up its export competitiveness
By Hussain H Zaidi
For an economy characterised by growth recession and high inflation coupled with mounting fiscal deficit, it is good to see a marked improvement on the external account.
Making a break with preceding years, the economy registered current account surplus during FY11, courtesy robust growth of exports and remittances. This good performance on the external account notwithstanding, a word of caution is in order.
For one thing, the improvement in the current account is accompanied by deterioration in the fiscal account. For another, the improved current account performance is not based on strong fundamentals; hence, it is susceptible to shocks. The analysis that follows starts with the good news.

 

 

supervision
Cheating their
way to success?

Use of unfair means in examinations need to be strictly checked to improve credibility and standard of education
By Tahir Ali

Examination results show the ability and capability of students, teachers and institutions. Good results ensure admission to reputable institutions and eventual success in life. The problem of cheating during examinations has rendered Pakistan's examination system and its results invalid and unreliable. What is more dangerous is that some students think of it as their right.

The superintendent and other invigilators at a given examination centre have to confront pressure during examinations, ranging from requests by friends and family members to allow cheating to political pressure, and attacks and death threats from student groups. All these pressures are aimed at one thing - to allow students use of unfair means to get good grades.

These allegations of corruption are not restricted to the invigilating staff. There are complaints that invigilating staff of choice is appointed at the boards of intermediate and secondary education (BISEs), papers are leaked and even better grades are maneuvered with the help of BISEs staff and marking/checking personnel there, charges which are denied by BISE officials.

The National Accountability Bureau in collaboration with BISEs in Khyber Pakhtunkhwa recently organised a seminar on the issue where a strategy against the same was prepared. Cheating in the board examinations, in one way or the other, is in the knowledge of all and everyone wants to correct the situation, states an official document prepared by a local BISE.

"Parents' obsession with their child's future, private education sector's efforts to ensure good grades for their candidates, lack of required facilities, non availability of sufficient teachers, books and material in schools, paucity of female teachers and invigilators, absence of criteria and favouritism in teachers' selection for examination duties both at the department and the board levels, political interference, etc, are some of the problems in this regard," the document says.

According to a senior educationist, who wishes anonymity, negligible remuneration and daily allowance for invigilators for examination duties is another problem.

"Daily remuneration of Rs25, Rs37 and Rs60 for common invigilators, the deputy superintendent (grade 16 or 17) and superintendent (grade 17-18) respectively gets them around Rs225, Rs700 and Rs1080 for the full duration of the examination. Teachers also get a daily allowance of Rs280 and Rs500 respectively in the same order which is being given at this rate for years now. Earlier, it was given on the basis of running basic pay but now at lump-sum basis. Then there are mostly two papers a day but there is no extra remuneration or daily allowance for them for the double paper," he says.

The remuneration has remained unchanged for years though examination fees and prices have been increased manifold. "Do the board members, chairman, secretaries, controllers and the other officers at the BISEs draw the same level of remuneration and daily allowances for their examination related duties? It is not unnatural if, in this backdrop of meager remuneration by the BISEs, invigilators do not perform their duties on merit and impartially," he says.

Examination centres also face paucity of space. The students are to be seated at four meters distance from each other but it is hardly practised for space constraints in the halls. Congested seating, resorted primarily to accommodate the students for shortage of space, makes supervision difficult and makes inter-students communication and copying easy, especially when there is frequent power shutdown in the summer, the examination season in the country.

Students usually use mobile phones for unfair means in the examination. Despite warnings from the staff, they bring mobile set(s) along with them. Invigilators ask them to switch their sets off but they usually dodge. Then, in some cases, megaphones are also used by outsiders to help candidates answer the questions.

Number of staff is also a problem. An invigilator is appointed for 40 students. Though an extra invigilator is allowed for 11 more students but if there are less than 11 students, one invigilator may have to supervise upto 50 students, which makes his or her task very difficult.

In some papers, where the number of students increases from average (on the basis of which the staff is appointed) the superintendents are allowed to appoint extra invigilators but they usually avoid doing so as it requires lengthy procedures to take sanction for extra staff and then no one is ready to do the duty for a day or two.

The boards can punish the cheaters on a written complaint from the superintendents, by canceling the concerned paper(s) or ban him/her for a few years from taking examination. But the examiners usually avoid so for three reasons: One, to avoid lengthy paperwork required to prepare a tenable unfair-means case; two, this can ruin the victim's future beyond repair; and three, students often react violently at cases. Recently, a local BISE's controller of examinations narrowly escaped an attempt on his life.

Some invigilators also point out that if students resort to hooliganism, it is the examiners who are accused of not using ways to avoid such incidents. What this practically means is: allow the cheaters if stopping them can create problems.

All the stakeholders in the examination system - students, their parents, teachers, schools and BISEs, who are responsible, though in varying degrees, for rampant malpractices will have to make efforts to stop or minimise this scourge.

It requires a three-pronged strategy to guard against cheating in examination: before, during and after the examination. Teachers and students need to fully commit themselves to teaching/learning process. Students should revise notes at home. Schools with hostel facility usually show better performance. Competitive environment in classes and a proper mechanism for guidance and counseling students are also needed in schools.

To improve teaching at schools, a system of reward and punishment for teachers should be introduced. The performance report of all teachers for this purpose should be prepared on a quarterly basis by the departmental inspection teams from lower classes, rather than on annual basis and at Matric or intermediate levels as these days.

Increase in remuneration and daily allowances of staff and then appointment of honest invigilators should be ensured. This can be easily done by computerising the record and the process of invigilation staff selection. The education department should forward the lists.

Teachers' unions should not be allowed to interfere in the examination. Ruling political parties will have to take initiative by disowning their political wings in teachers and let the board administrators decide things on merit. Interference by outsiders can be prevented by police personnel and daily visits of inspectors to the examination centre. Moreover, fully enclosed examination halls could also help overcome the problem.

Through awareness campaigns in the print and electronic media and through functions and lectures, people should be convinced of the repercussions of using unfair-means in a students' career.

"Complete dependence on external examination in total disregard to internal examination for final result of the students is flawed. A comprehensive testing system, which takes into account the results shown by students in both the internal examination conducted by his institution and external one by BISEs, will greatly minimise corruption in the examination," adds the educationist.

[email protected]

 

Liberalism for Pakistan
A seminar in Germany sends back more questions about today’s world than answers
By Ammara Ahmad

A two-week scholarship was sponsored this May by Freidrich Naumann Foundation for a seminar in Theodor Heuss Akademie, Germany titled: “Liberalism Today: Freedom First”.

The International Academy of Leadership in Gummersbach has dark gray rectangular buildings with huge wall-size windows that allow a view of the green hills that surround the academy. The academy is perched on a hill that you can hike up to without any safety fears.

The first day was spent in understanding the institute. We introduced ourselves through a game called, “Which corner is ours?” in which each person goes to a corner reserved for him or her. The seminar had about thirty people from all over the world, including around a dozen from Latin American countries. There were also delegates from countries like Ghana, Serbia, Bulgaria, Philippines, Thailand, India and Israel.

The entire programme was bi-lingual (English and Spanish) and there were two translators simultaneously translating the two languages into each other. We all had wireless speakers which connected us to the translators, and we chose which translator to hear according to our linguistic preference.

Liberalism, contrary to its perception in Pakistan is a complex yet, deceptively simple at times, set of philosophical arguments and values that penetrate almost all sections of life and society — from economics, law, politics, to ethics, religion and individual rights.

We understood that liberalism is more a moral and political philosophy that governs the relation of man with man and state. It is not exclusively an agglomeration of personal attitudes towards the consummation of various relationships or the consumption of various substances. There are much weightier issues attached to liberalism — property rights, rule of law, secularism, and so on.

The session leaders were moderators who facilitated active and knowledgeable discussion. They did steer the debate at times but were content to not have the final word. Most of us from developing societies were not very liberal and, especially confused about the term socialism.

On the second day of the seminar we discussed the differences in political mainstreams, how they differ and why liberalism should be preferred as a philosophy. We made three working groups on property rights, rule of law and secularism.

Since I was part of the group discussing secularism, my position was precarious. Almost everything on the clause sheet, though liberal, seemed politically impossible to implement in present-day Pakistan, such as removing religious symbols from schools, and not mentioning “God” in the constitution. Ironically, it seemed the Israeli delegate understood and shared the ambiguity on secularism since Israel is the only other state created for the followers of a specific religion.

Important questions were asked and issues raised, for example, is free markets or economic planning the way forward? What is the relationship between democracy and development? and introduction to liberal democracy and its link with prosperity.

The next day the delegates focused on the major problems of developing countries, which included search for the definition of poverty — a definition that invariably varies across countries. Then, of course, how to combat poverty? The role of redistribution, deregulation, privatisation and the relationship between free markets, poverty and unemployment were looked into.

Next day was reserved for modern day challenges with a focus on energy policy. Questions like how to deal with accidents like Fukushima, climate change, and the political economy of the energy sector came up for discussion.

Each participant was assigned a role to start a debate on globalisation and terrorism and how liberals found different compromises on issues regarding national security, multiculturalism and civil liberties. The conclusion of the day was that globalisation is on the whole a benign force, global warming was an exaggerated fear, and terrorism was very difficult to combat with liberal policies because civil liberties and the conventional judicial system failed here.

The crucial role of the state, its relation with the civil society, government and the concept of federalism were also focused on. To what extent the state should intervene, regulate, tax and subsidise?

Later that week, we left for Rostok (North eastern German coast part of the East Germany before), Schwerin (the capital of the Mecklenburg-Vorpommern state) and Diepolz, a small town in Lower Saxony. We got to know that the latest president of their party was a Vietnamese-German, another encouraging sign of the relative openness of Western societies. In Rostok, we participated in the FDP annual convention. We met the Party Whip, Otto Fricke, the next day and took a guided boat trip to Warnemunde, a small city nearby.

The next day, we reviewed the working of the Schwerin Parliament, its economy and met Michael Roolf, the FDP chairman there. The last day before we reached Gummersbach, we met the mayor of Diepolz called Dr. Thomas Schulze who guided us on the city politics, governance and economics.

Petra Pabst, a FDP representative, lectured us on how policies in FDP are developed and their importance. Three working groups worked on what is policy and what it should be, how it should be developed and why it is important in a political party or pressure group. At the end of the day, we also discussed communication problems of liberal messages in the developing world and their solutions.

There were several exercises that we did. The first day we discussed statements and if they were liberal.

Liberals in Pakistan need to be far more calibrated and realistic, rather than utopian and inflexible. Most of the liberal ideas are defeated when starkly inserted into the Pakistani context. Nevertheless, I returned to Lahore with almost three dozen new friends from all over the world (including an Israeli who is now connected to me via facebook), life-long memories, and liberal questions that will take years to find answers to, if at all.

 

Low on priority
Despite verbal assurances of the policy-makers, education sector remains a neglected area
By Alauddin Masood

Some 14 schools in Punjab have shown zero percent results as none of their students who took-up the matriculation annual examination for 2011 could get through, according to Lahore Board of Secondary Education’s gazette notification.

The Lahore Board’s matriculation result indicates rapid decline in the education sector and also shows the pitfalls of political interference in a sector that is vital for human resource development and nation-building.

The education system in the country, according to experts, started to deteriorate in 1987-88 when Islamabad permitted the private sector to open schools and lend a helping hand to the government in its efforts to promote literacy.

The point can be best illustrated if we take the capital city of Islamabad as a case where till 1987-88 the government-run model schools catered to the education needs of all families, irrespective of their social status. Even children of Cabinet Ministers and top bureaucrats received education in public sector education institutions.

But, as things stand now, it seems that the education policy has been hijacked by the private sector. This brings to the fore, among other things, need for accountability of teachers as well as administrative staff of public sector educational institutions and strengthening education management in the country. This was stated by education experts during interaction with Prime Minister Syed Yousaf Raza Gilani at the Prime Minister’s Secretariat, in Islamabad on August 1.

The officials also called for purging the education sector of corruption which, unfortunately, has crept even in this noble profession. They demanded major changes and uniformity in the syllabus, in particular purging it of hate content and distortions in history books so that it could cater to the needs of a democratic, tolerant and peaceful society. They called for increasing budgetary allocations for education which were, presently, lowest in the entire South Asia region.

Some participants underlined the need for making school system child-friendly and also making co-curricular activities mandatory for all schools. If education is made fun for students they would love to go to schools. Besides, linkages should be developed between educational institutions and industry and the former should invariably cater to the current market needs.

If skills and vocational education is promoted, in particular in rural area schools, this might soften the resistance and force poor parents to change their opinion. For example, in Sialkot, students can be trained as manpower for sports and surgical instruments industry. Likewise, students of Gujrat can be trained for catering to the needs of pottery and fan industry, and so on.

The Prime Minister was happy to learn that dedicated people used household waste for launching literacy and community welfare programmes. For instance, a team of people running Aabro Educational Foundation Lahore used funds generated from recycling of household waste for providing education to 1800 students of less privileged families. The waste material of one household, on an average, can support year-long education expenses of one child, according to the foundation.

The Prime Minister announced a grant of one million rupees for Aabro Foundation’s educational projects. This amount was equal to one year’s education budget of the Foundation. In his third interaction with notables of various professions, Gilani was addressing educationists engaged in promoting education, including through media channels.

Though the subject of education has been devolved to the provinces after adoption of the 18th Amendment to the Constitution, the federal government would convene an education conference, in consultation with the provinces, to deliberate upon matters connected with education. In view of the serious internal and external challenges and to strengthen the federation, a meeting of the Council of Common Interests (CCI) would also be convened to discuss the possibility of having a uniform curriculum and syllabus across the country.

Illiteracy, the Prime Minister said, which gives rise to militancy, are the root causes of terrorism. The child who loses contact with the book might eventually become a tool in the hands of terrorists, who could exploit him.

Gilani expressed the hope that the suggestions of experts affiliated with the education sector, would help in curbing the ills of gun culture, extremism and terrorism. He said some important decisions have already been taken in keeping with the valuable suggestions of experts and these would be made public.

The writer is a freelance columnist based in Islamabad.

[email protected]

 

loadshedding
The missing spark
Energy projects must be looked into objectively to address massive power shortage
By Dr Noman Ahmed

Tall claims have fallen short in meeting the expectation of people. Before the commencement of Ramadan, the government had assured that load shedding shall be minimised. In contrast, many cities and locations across the country continue to suffer from unprecedented outages. Whereas more investments continue to pour in the energy sector, little benefit is experienced by the people.

In a meeting of Executive Committee of the National Economic Council (ECNEC) on July 29, 2011, the government approved seven power projects of various profiles. They include Allai Khwar Hydro Project (121 MW), transmission connection for the dispersal of power from Uch-II power installations, rehabilitation of Muzzaffargarh Thermal Power Station, improvement of National Transmission & Despatch Company (NTDC) system and other investments in Guddu as well as in renewable energy sector.

On an earlier occasion, the government had agreed to extend Rs900 million to Thar Coal Gassification works, spearheaded by Dr. Samar Mubarakmand, as a key initiative in that sector. Works are also underway towards the construction of Diamer Bhasha Dam which shall make the key recipient of public funding in the times to come. However, a number of key questions remain unanswered which are vital to be addressed to articulate energy supply to the national grids.

Cheap and environmentally friendly options of energy supply constitute the basic need of the country. They can only be achieved through a strategy dependent on multiple options and sources. For instance, acquisition of electricity from Iran through Balochistan and Tajikistan through Afghanistan are options worth-exploring.

The government has apparently kept a go-slow policy due to pressure from the Western allies on vital opportunities. It is time policymakers took into account important national interests and move ahead quickly along these two options. The fast-changing foreign policy environment may also serve as a catalyst in accelerating these key initiatives.

Iran-Pakistan gas pipeline is also a venture of strategic significance where the country can gain enormously if the right moves are taken at the right time. Needless to say, maintaining peace and a conducive environment in Balochistan is a major pre-requisite to enable these initiatives to attain success.

Controversy raged when main hydro-electric project was discussed on Indus River. The choice of Diamer Bhasha dam is not without apprehensions and doubts. It was chosen because successive regimes could not foster a consensus on Kalabagh Dam, which perhaps is the best available option from technical perspective.

Diamer Bhasha dam, which will have to be constructed in the difficult terrains of northern areas, has many problems. It is located in a difficult setting where the supply of essential construction materials and machinery will be a time-consuming and expensive enterprise. The dam site is perched upon a zone which is seismically active and has a high probability to be struck by a disaster. The construction of the dam shall cause destruction and consequent re-development of about 200 km section of Karakoram Highway.

Precious archaeological sites, few of which are also listed with World Monument Watch List, will be destroyed. One does not know about the delays which may certainly occur on account of difficulties in mobilisation, possible cost escalations, and natural barriers.

The country possesses enormous potential to capitalize on co-generation options from different types of waste. There are over 100 sugar mills across the country that utilize locally-grown sugarcane. All across the world, energy is produced by using bagasse, a by-product in sugar manufacturing.

This potential is presently utilised to a very limited extent. A useful pre-feasibility study by the Board of Investment, Punjab informs us that total potential of electricity generation from sugar mills is in the range of 3000 MW. The present output is only 700 MW. It needs a rigorous follow-up to utilise this enormous but dormant avenue of power generation.

Similarly, a pilot project is being conceived in the Landhi Cattle Colony in Karachi for generating about 25 MW of power from bio-gas. The facility has more than 400,000 cattle heads and produces more than 7200 tonnes of cow dung. This has all the potential to be utilised for power generation.

The country has many locations which have cattle concentrations. Each location can be transformed into a power-generation outlet through efficient bio-gas plants. Coal gasification is the next important avenue where progress is desirable.

It is expected that under the able leadership of Dr. Samar Mubarakmand, the project will complete its threshold phase of development. Several energy experts have termed Thar coal as the future powerhouse for Pakistan. However, some pre-requisites have to be instituted in order to reap full advantage of this strategic asset.

The project should be planned on a long term basis after keeping into view the cumulative benefits and outcomes. Utmost care should be taken to maintain transparency in the award of contracts, acquisition of supplies, and services. The best possible engineers from around the world should be engaged. Unless we learn to think out of the box and act in a timely manner, the power crisis shall continue to haunt us.

 

 

Issues of
transparency
The FBR needs to tighten up its belt to correct the wrongs it is alleged of doing
By Huzaima Bukhari and Dr. Ikramul Haq

Federal Board of Revenue (FBR) is in the news for the last many days for incorrect reporting of figures, corruption, mismanagement, inter group animosities between officers.

This is a bad omen for an organisation that has to play a pivotal role in making Pakistan a self-reliant state by collecting taxes according to the real potential. Presently, FBR is collecting meagre amounts and that too overburdening those who pay honestly.

In these columns, it has been established that real tax potential of Pakistan is not less than Rs8 trillion, but FBR has failed to collect even Rs1588 billion for multiple reasons — the most significant being corruption.

The Chief Commissioners’ Conference held on August 4, 2011 at FBR House in Islamabad, to devise strategy for collecting this year’s target of Rs1952 billon was a fiasco. It started and ended on bitter notes over the issues of misreporting of figures and withdrawal of powers of transfers postings from Member Inland Revenue.

It is alleged in the media that Chairman FBR, Salman Siddique, through a notification dated April 2, 2011, gave power of transfer and posting to his hand-picked Member Administration, another DMG officer, which were earlier available to line members. This resulted in internal fight within the ranks of the FBR.

This internal clash took a bizarre turn after the “budget exceeding” scandal. The Chairman and his “favourites” in the late hours of June 30, in a press conference claimed to surpass the target of Rs1588 billion by collecting Rs1590.4 billion. The media reported that claim was based on fraud and cheating.

As soon as the media exposed the fraud, the FBR high-ups conceded that the actual revenue collection was Rs. 1550 billion and “confusion between gross and net collection on sales tax side paved the way for presenting wrong revenue figures on June 30 night”.

This explanation was simply a cover-up. During the month of June FBR was collecting data on daily basis from field formations, knowing fully well the position of issued refunds. In fact, refund payments were stopped to show higher figures of collection. If throughout the year FBR was reporting “net collection” what motivated it in June to declare “gross collections” for the entire fiscal year?

If their clarification is accepted, it means that throughout the year they were reporting exaggerated figures by not taking into account the amount of refunds paid. An independent team of external auditors should be appointed to audit FBR’s reporting system and investigate how some zealous bureaucrats in the late hours of June 30, 2011 tried to hoodwink the entire nation.

According to news reports, the Chairman, instead of tendering resignation, started a blame game for holding someone responsible. The FBR took pre-dated cheques of billions from leading taxpayers, deposited the same in earlier dates with the connivance of some bankers and then returned the money as refunds in July. In any civilized countries, it could have led to registration of FIR and arrest of culprits.

In a report published in The News of August 6, 2011, it was claimed that on the issue of snatching powers of line members for transfer/postings, the Member Inland Revenue alleged that his office was rendered powerless and the situation was so miserable that he could not appoint even his personal staff. This shows the inner bleak situation prevailing in FBR. How can it collect taxes when the house is divided and faced with serious issues of governance?

According to another news item in The News of August 5, 2011 (FBR to revise revenue target for current fiscal year) “the conference also deliberated in detail on the flaws of Expeditious Refund System (ERS) and decided to accelerate the post-refund payment audit all over the country in order to plug leakages of billions of rupees in the form of bogus and illegal refunds”. FBR should be run by specialised men in the field of taxation. DMG officers have no locus standi to head FBR.

FBR, according to news reports, has declined a useful proposal of the Tax Administration Advisors of the United States Agency for International Development (USAID) to pre-announce audit parameters for the registered taxpayers. The Competitiveness Support Fund (CSF) Advisors some time back submitted a report on audit to the FBR. The CSF is a joint initiative of the Ministry of Finance and the United States Agency for International Development (USAID) established to reposition Pakistan’s economy on a more global competitive footing. The CSF Tax Administration Advisors are assisting FBR in the smooth implementation of tax administration reforms in Pakistan. The CSF advisors are also preparing different reports for the FBR on reforms in key areas, including audit.

The present set-up of FBR cannot understand what CSF is suggesting. Even if they understand, they are not going to accept it as it will end their discretionary powers. The report of the CSF Advisors on audit revealed that in all developed countries, the selection of cases for audit is based on risk assessment, which in turn is possible due to factors, including use of common identifier in all economic transactions; completeness of taxpayer’s profile; information sought from taxpayers in the declarations, completeness of the tax declarations; availability of third party information, and trade benchmarks. Despite millions FBR received from the World Bank and others under Tax Administration Reforms Programme (TARP) but have failed to develop a reliable data warehouse, what to talk of an effective Tax Intelligence System necessary for meaningful tax audit suggested by CSF.

The institution, if managed by competent people, can easily collect Rs4-5 billion by bringing all the rich persons in the tax net and passing provisional assessment orders against them under section 122C of the Income Tax Ordinance, 2001.

The fact is that there are 10 million people who have failed to file returns despite having taxable income. The data of such persons is available with FBR. If provisional assessments against these people are passed, FBR can easily raise demand of Rs5 billion during the current fiscal year and collect the same.

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

 

analysis
Unexpected eruption
If humanity really is as civilised as it claims to be, it needs to stop pretending that capitalism
and liberal democracy are working pristinely
By Aasim Sajjad Akhtar

Like the US debt disaster last week, the largely unexpected eruption of unrest across England this week has relegated Pakistani news onto the proverbial back pages. The widespread protests across Sindh in the wake of the government’s decision to revive the Musharraf-created local bodies early in the week were by no means insignificant, and maybe the first obvious signs that President Zardari’s much talked about ‘reconciliation’ process is starting to fray — yet there can be no doubt that the fires raging in London and other English cities are the big news of the week. The unfolding of events in Britain needs to be analysed deeply, not only in that country but around the world.

It is extremely rare to see first world cities turn into a riotous battleground as was the case with London from Monday onwards. The world’s media is fond of reinforcing stereotypes about the organised chaos that persists in countries such as Pakistan, Rwanda, and Somalia. It is from Peshawar and Mogadishu that live images of urban violence and staggering deprivation are usually beamed into the living rooms of citizens in the metropolises of the Western world. To see one of those very metropolises go up in smoke was, to be sure, quite surreal.

But go up in smoke London did. And the inquisitions started almost immediately. Serious observers of Western countries such as that of Britain are well aware of the various faultlines that run right across these societies. Racism — of a fairly institutionalized kind — has plagued British society for decades, particularly in the wake of mass immigration of unskilled South Asian labour in the 1950s and 1960s. The relatively small black population of Britain has also suffered from its fair share of discriminatory laws and practices.

Over the last couple of decades, however, there was a sense amongst most Britons that things had changed substantively, and that non-white populations were gaining ground, however slowly. Statistics do bear this out to a degree. Educational attainments of non-whites have improved significantly, home ownership is on the rise, and many second and third generation Britons of Asian and African descent are now found in professional occupations that suggest considerable social mobility.

This is why it is inaccurate to put what has happened in Britain over the past week down solely to ‘historic’ inequality of opportunity. This may be part of the explanation but there is something more insidious at work here, which calls attention to the pristine image of social order that is typically cultivated across the world with regard to Western societies.

My sense is that the tremendous material gains that have taken place in the aftermath of the information revolution of the past 10-15 years have given rise to an even more intense atomization than in the previous phase of capitalist development. In other words, one does not have to be dirt poor to feel alienated from the social ‘mainstream’. In fact, I am sure that a large number of rioters are very much part of the mainstream but have over time been increasingly consumed by a repressed desire to enjoy more and more of the consumer comforts that a growing number of people in society are beginning to take completely for granted.

This is very much a function of the kind of values that 21st century capitalist society engenders: we are bombarded with images of gadgets, sprawling luxury homes, cars, and other consumer items from a very early age. Children exposed to I-Phones and personal computers at early infancy start to believe that possessing ‘stuff’ is perfectly natural — in fact, more important than anything else. In poor societies such as ours, this commodity fetishism is incredibly destructive — it is increasingly common to see close to destitute individuals possessing and craving gadgets in lieu of education, health, housing and other basic necessities. The corporations that sell this ‘stuff’ are hardly concerned with the imperatives of building a healthy society; all they care about are healthy profits.

Of course, there is no chance that the British government will even contemplate a reappraisal of the broader notion of progress operative in that society. No government worth its name in today’s world — with the exception of the Latin American populist regimes — is even willing to question the orthodoxy that capitalism and liberal democracy equal progress. It does not matter that these twins — which have admittedly created amazing levels of prosperity — are facing innumerable contradictions, that the rhetoric of inclusiveness and freedom cannot disguise the exploited labour of billions, and that atomisation is leading to spectacular episodes of unrest.

Even if one overlooks what transpired in Britain over the past week, all is not well with capitalism. In case anyone forgot to notice, the world’s financial markets are yet again in free fall. More than a trillion dollars of stock value has been wiped out over the past couple of weeks. The Karachi Stock Exchange (KSE) recently joined the ‘party’, collapsing for the umpteenth time in the past four years or so. I suppose it would be naďve to expect any serious introspection about the KSE in particular and Pakistani-style neoliberalism more generally within the country. But how long will the world’s intellectual elite continue to skirt around the realities of capitalist modernity?

There can be no doubting that the unrest in London and other British cities will spark at least some meaningful debate within British society. What really needs to happen is for new political alternatives to be forged to Labour and the Tories, just as Americans need to move beyond the Democrats and Republicans, and so on and so forth in other ‘advanced’ countries of the West.

It is instructive that in the recent state polls in India the parliamentary communist parties who have traditionally represented an alternative to the centrist Congress and the Hindu right suffered their worst electoral outcome in three decades. The explanation seems to be not necessarily that they were too far left on the spectrum, but in fact that they had become too closely implicated in the unpopular policies of the mainstream parties. In Nepal too, the Maoists are struggling to come to terms with the demands of the international financial oligarchies and the needs of their people. I am not suggesting that it will be straightforward for political alternatives to emerge in the UK, US, India or Pakistan for that matter. All I am saying is that if humanity really is as civilised as it claims to be, it needs to stop pretending that capitalism and liberal democracy are working pristinely.

 

overview
Our bad, bumpy economic journey
The situation demands a comprehensive review of
Pakistan's economy, its failures and achievements
By Irfan Mufti

Pakistan has suffered from decades of internal political disputes and low levels of foreign investment. Between 2001-07, poverty levels decreased by 10 percent due to increase in development spending. During 2004-07, GDP growth rate oscillated in the 5-8 percent despite severe electricity crisis but growth slowed in 2008-09 and then in 2009-10 due to factors like floods, decline in foreign investment, and internal security situation.

Inflation remains top concern among the public, climbing from 7.7 percent in 2007 to more than 13 percent in 2010. In addition, Pakistani rupee has depreciated since 2007 as a result of political and economic instability. The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis, but during 2009-10 its current account strengthened and foreign exchange reserves stabilized, largely because of lower oil prices and record remittances from workers abroad.

Massive floods in July-August 2010 lowered agricultural output and contributed to a jump in inflation. Reconstruction cost is putting strain on the already limited resources of the government. Textiles account for most of Pakistan's export earnings, but Pakistan's failure to expand a viable export base for other manufactures has left the country vulnerable to shifts in world demand of cotton products. Other long-term challenges include expanding investment in education, healthcare, and electricity production and reducing dependence on foreign donors.

The situation demands a comprehensive review of Pakistan's economy, its failures and achievements, especially in the last one decade, since Pakistan became active and frontline country in global war against terror and also a period of intensive restructuring and reforms of the economy. Lessons learnt from the past and recent experience of Pakistan's economic management should be used for future economic planning. This review can then help lay down the contours of future directions of Pakistan's economy based on the lessons learnt.

Pakistan was one of the few developing countries that had achieved an average growth rate of over 5 percent over a four decade period ending 1988-89. Consequently, the incidence of poverty had declined from 40 percent to 18 percent by the end of the 1980s. The overall picture that emerges from a dispassionate examination of progress in these years is that of a country having made significant economic achievements but a disappointing record of social development.

These achievements in income, consumption, agriculture and industrial production were impressive and had lifted millions of people out of poverty levels. But these do pale into insignificance when looked against the missed opportunities. The largest setback to the country has been the neglect of human development.

Till 1960, Pakistan's manufactured exports were higher than those of Malaysia, Thailand, Philippines and Indonesia. Had investment in educating the population and upgrading training, skills, and health of the labour force been up to the level of East Asian Countries and a policy of openness to world market would have been maintained without any break, Pakistan's exports would have been at least $100 billion, instead of paltry $12 billion in recent years.

This neglect of human development was not enough, the country slacked in the 1990s and began to slip in growth, exports, revenues, and development spending and got entrapped into deep chaos of external and domestic indebtedness. As a result, incidence of poverty rose from 18 percent in 1988-89 to 33 percent by the end of the 1990s. This was due to both structural and institutional problems as well as poor governance and rapid changes in political regimes.

The external environment was also unfavorable as inability of successive governments to meet their commitments with international financial institutions (IFIs) led to a serious credibility gap among donors and intermittent withdrawal of assistance.

Some other significant lessons include outward-looking strategy that promoted exports and integrated Pakistan into the world economy. That is in the best interest of the country for accelerating growth and reducing poverty. Other key lessons from decades of economic growth include policies like tariff reductions; focus on private sector as the main vehicle for producing and exchanging goods and services for domestic economy as well as the rest of the world; role of the state in providing security of life and property, independent judiciary that arbitrated disputes and enforced contracts, etc.

Empirical evidence from the past also suggests that there was a direct relationship between rapid economic growth and poverty reduction. After the annual economic growth rate crosses the threshold of 6 percent or more on a sustained basis there is a strong probability that incidence of poverty will begin to decline.

There is little doubt that GDP growth rate can recover to the historic levels of an average 6 percent and more provided structural reforms are continued and further deepened, productivity gains in agriculture sector are achieved and a set of non-economic factors, including governance and devolution are put in place. This will not only reduce the incidence of poverty but also unemployment and to some extent regional disparities.

What is the agenda for getting back on this trajectory? The realisation of the projections outlined above will depend upon the interplay of evolution in political and social developments, economic policies to be pursued, the quality of governance and institutions, and investment in human development. It has become quite obvious from both Pakistan's own history and the experience of other developing countries that sustained economic growth and poverty reduction cannot take place merely on the strength of good economic policies. Political stability, social cohesion, and good governance are equally important ingredients coupled with a positive environment for achieving economic success.

Pakistan's uneven record of political instability and lack of democracy has deprived the country of a long-term vision and continuity of economic policies. The rapid change of governments and the imminent threat of dismissal of governments through extra-constitutional means have certainly proved to be an inhibitor to investment and institutional development.

Democracy in Pakistan is still interpreted in a fairly narrow sense. While this is necessary, other pre-requisites of a well-functioning democracy, i.e., rule of law, civil liberties, freedom of expression, checks and balances on organs of state and religious and ethnic tolerance are not in sight.

Empirical evidence and common sense strongly suggest that sound economic policies cannot make any difference to the lives of common citizens if the country does not have strong institutions to implement those policies. Pakistan had inherited a strong civil service, judiciary, and police, which could meet the demands of thirty million people. But as population expanded and the nature of problems became more complex, the capacity of these institutions did not keep pace with the emerging demands of the economy. On the contrary, these institutions were politicised and captured by a small elite group to serve their own interests.

Estimates suggest that if institutions and legal system were working well Pakistan's GDP would grow at least by two percentage points faster. If tax assessment, tax code and tax collection methods were simplified, made less arbitrary and free from discretion of tax officials, the tax base would be much wider and Tax-GDP ratio much higher; if the justice system is clear the enforcement of contracts would be quicker and reduce transaction costs substantially.

The other pillar is good governance. There is an overlap between the other three pillars described above and good governance. Rule of law, transparency, predictability are the essential elements of good governance. Authoritarian governments have relatively better record of governance in Pakistan, but these gains have proved to be short lived.

Only democratic governments with clear rules of transition and strong functioning institutions can provide a platform for good governance. Democracy and good governance are not mutually incompatible and that a democratically elected government can also serve collective interests in contrast to their personal interests. The interplay of accountability, civil liberties and free media, which form the core of democracy, reinforce quality of governance and ensure economic prosperity.

 

The writer is Deputy Chief of South Asia Partnership Pakistan and Global Campaigner

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The neglected factor
Pakistan needs to widen its industrial base and shore up its export competitiveness
By Hussain H Zaidi

For an economy characterised by growth recession and high inflation coupled with mounting fiscal deficit, it is good to see a marked improvement on the external account.

Making a break with preceding years, the economy registered current account surplus during FY11, courtesy robust growth of exports and remittances. This good performance on the external account notwithstanding, a word of caution is in order.

For one thing, the improvement in the current account is accompanied by deterioration in the fiscal account. For another, the improved current account performance is not based on strong fundamentals; hence, it is susceptible to shocks. The analysis that follows starts with the good news.

During FY08, the current account deficit had jumped to the record level of $13.87 billion. It was brought down to $9.26 billion in FY09 and further to $3.94 billion in FY10. The first quarter of FY11 saw current account deficit of $597 million. However, in the next two quarters the deficit turned into surplus ($483 million and $186 million respectively), reaching $542 million for the full year.

Trade deficit, the major item on the current account, had reached $14.97 billion in FY08 but came down to $12.62 billion in FY09 and to $11.53 billion in FY10. In FY11, trade deficit was reduced to $10.17 billion.

The fall in trade deficit during FY09 and FY10 had less to do with increase in exports and more to do with decrease in imports: FY09 saw 6.4 percent negative growth in exports, while FY10 saw a modest 2.9 percent export growth compared with negative growth in imports of 10.3 percent and 1.7 percent respectively.

In FY11, exports grew at a healthy rate of 29 percent to reach the highest ever level of $25.46 billion. Imports grew by 14 percent to reach $35.63 billion. The much higher growth of exports compared with that of imports contributed to taking current account surplus to 0.3 percent of GDP compared with current account deficit of 2.2 percent of GDP.

Remittances is one of the few economic indicators which has maintained consistently high growth during the last one decade or so. In FY08, the country received remittances of $6.4 billion, which went up to US$7.8 billion in FY09 and $8.9 billion in FY10. In FY11, the remittances rose to $11.2 billion — an increase of nearly 26 percent.

The good performance on the current account is not matched by that on the fiscal account — the other side of the balance of payment (BoP). Foreign direct investment (FDI) inflows continued to decline. In FY08, Pakistan received $5.4 billion FDI, which went down to $3.7 billion in FY09 and further to $2.1 billion in FY10. In FY11, FDI fell to $1.6 billion by 31 percent.

Cumulatively, during the last four years (FY08-FY11), FDI inflows have gone down by staggering 237 percent. The drying up of FDI inflows is a cause for concern, as the beleaguered economy of Pakistan is in dire need of external capital inflows to generate jobs and drive up the growth rate.

Pakistan has one of the most liberal investment regimes in the region. However, the problem lies with the political and economic environment. During last four years, the country has suffered from political uncertainty. More than that, it is the wave of suicide terrorism, add to it the ethnic violence in Karachi which has increased the risk of doing business in Pakistan as well as impaired the national image.

Coming back to the current account, the important question is whether the current export growth has strong fundamentals and therefore sustainable. To answer this question let us begin by looking at the composition of exports. Textiles continue to be the major item in Pakistan’s export basket.

In FY11, textiles export reached $13.1 billion accounting for 51.4 percent of the total exports. The other major exports were of food items ($4.1 billion), petroleum products ($1.7 billion), chemicals and pharmaceuticals ($1.1 billion), leather and footwear ($987.1 million), sports goods ($464.2 million), engineering goods ($425.3 million), cement ($495.8 million), and medical equipment ($316.6 million).

A similar pattern has been observed over the years. For instance, during FY10, out of total exports of $19.67 billion, the share of textiles was $10.2 billion, which was 52 percent. The other major exports were of food items ($3.3 billion), petroleum products ($1.2 billion), leather and footwear ($781.3 million), sports goods ($389.8 million), chemicals and pharmaceuticals ($855.2 million), engineering goods ($300.8 million), cement ($511.1 million), and medical equipment ($276.8 million).

Pakistan is thus an exporter of primary or low-value added, low-technology products. Its export pattern continues to be diametrically opposed to the world’s. Engineering goods make up nearly 60 percent of the global trade, while textile and garments constitute only 5.8 percent of the global trade. In contrast, engineering goods have a very low share in Pakistan’s exports —only 1.7 percent.

The robust export increase during the last financial year is mainly due to significant rise in international commodity prices and partly due to increase in aggregate demand in the major export markets as economic activity picked up after two years of global recession.

Based on data for July-April FY11 (SBP’s Third Quarterly Report FY11), export quantity of some textiles products went down though their export value went up due to higher per unit price. For instance, export quantity of raw cotton, yarn and fabrics declined by 86, 253 and 6 percent respectively while their price increased by 129, 646 and 360 percent respectively. However, exports of value added textiles, such as readymade garments, knitwear and bed wear, increased by both quantity and prices because of a bigger international demand.

Export performance of a country depends on its industrial performance. Pakistan exports primary products or low-technology and low value-added manufactures, such as textiles, garments, leather articles and sports goods and is effectively excluded from global value chains. The export base is narrow and the textiles sector, the linchpin of the country’s export performance, is marred by low productivity, obsolete machinery, lack of innovation and deficiency of skilled labour force.

Pakistan needs foreign investment in the manufacturing sector to expand and upgrade its industrial base. Unfortunately, though during the last one decade, Pakistan has received a lot of investment in the services sector, such as financial services and telecommunications, there have been meager FDI inflows into the manufacturing sector, particularly the textiles sector.

Industrial and export constraints of Pakistan are well brought out by its persistent low-ranking on global competitiveness index — 91 in 2005, 94 in 2006, 92 in 2007-08, 101 in 2009-10 and 123 — among 139 nations for 2010-11.

The country’s ranking fell from 81st in 2007-08 to 104th in 2009-2010; on infrastructure, from 72nd to 89th; on macroeconomic stability from 101 to 114; on health and primary education from 115th to 113th; on labour market efficiency from 113th to 124th; on technological readiness from 89th to 104th; and on innovation from 69th to 79th. The only indicator on which GCI ranking has slightly improved, though still low, is higher education (from 116th to 118th).

In order to achieve sustained increase in exports Pakistan needs to widen its industrial base and shore up its export competitiveness. If we continue to rely on export of commodities we will remain vulnerable to price fluctuations in the world market.

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