analysis
The actually existing state

Institutionalised exploitation of the civil bureaucracy and the military is far greater in scale and scope than the ‘corruption’ of Zardari and his cohorts
By Aasim Sajjad Akhtar
One of the most enduring myths of the modern age is that of the state. By this I do not mean that the state is complete illusion, but that a particular popular conception of the state persists despite ordinary peoples’ very incongruent everyday experiences with state power. Benedict Anderson has written about the almost transcendental quality of modern nationalism, about its ability to make people who will never know one another feel as if they share some primordial bond. The state is the structure within which nationalism has been nurtured, and it is thus hardly surprising that it has come to acquire a larger-than-life quality.

institution
The right move
We need a greater commitment in the form of a parliamentary pledge that this country will never have a law that contravenes the rights of the people
By Peter Jacob
Finally, the bill that shall give birth to a National Human Rights Commission (NHRC) is on the National Assembly’s to-do List. Though it will still take some time to pass the bill in both houses, have approval of the President and put the Commission in place, yet it is good news. Many nations have found NHRCs useful for: strengthening norms and values based on human dignity and rights, reducing burden on the justice delivery system and dealing with rigidity of obsolete laws. As ‘The Statement of Object and Reasons’ attached to this bill explains, 56 countries have this arrangement in place recommended by several UN bodies and international treaties.

A small beginning
Banks must simplify and re-structure their lending mechanism 
By Tahir Ali  
Financial help of farmers is necessary for the modernisation of farming and farmers’ prosperity. But small farmers who, according to some estimates, constitute 85 percent of the total 6.6 million farmers in the country, have negligible share in the agriculture credit disbursed in the country in general and Khyber Pakhtunkhwa in particular. Those residing in the far-flung hilly and tribal areas are particularly affected by it.

Data-based 
decision making — I

There is a need to make structural changes in the census procedures as well as involvement of women in census enumeration
By Amjad Bhatti and Nadeem Omar  
A census is inevitably a blend of politics and science — politics because power and money are linked to how many people live where, science because the technically complex undertaking draws on many scientific disciplines. — Kenneth Prewitt, 2011.

Drowning in debt
If the government wants to bring the debt situation under control, reduction in fiscal deficit and stability in exchange rate are the main solutions 
By Muhammad Adnan  
Pakistan’s debt and liabilities has increased to a record mark of Rs. 11.9974 trillion (66.4 percent of GDP) including domestic debt and liabilities 6.8280 trillion rupees and external debt and liabilities 5.1694 trillion rupees (US $ 60.12 billion) at the end of first quarter FY2011-12, according to the State Bank of Pakistan (SBP).  

Rules of the market
By Ather Naqvi
A Study of World Trade Organization
By Dr. Kamal Mannoo
Published by Ferozsons 
Publications
Pages: 406
Price Rs: 895  
The book under review serves as a ready reference for not only a student of global economy seeking to understand how the WTO works but also for knowledgeable academics and writers.  

Politics of free trade
Bilateral and multilateral trade treaties are going to grow in importance
By Jazib Zahir
“Imagine the world were one unified country. What do you suppose it would look like?” challenged Adil Najam, new VC of LUMS in one of his first public appearances after taking over the office. The occasion was the annual gathering of alums of Harvard Business School in Pakistan held on November 24thand the topic under the scanner was, “The Economics and Politics of Free Trade Agreements made by Pakistan”.

firstperson
Most favoured alternative

The challenge in the MFN debate is that we have an emotive opposition, while the argument in its favour is based on facts and technical details
By Amir Zia  
Amin Hashwani is President of the Pakistan-India CEO’s Business Forum. Hashwani is one of the key advocates of enhancing Pakistan-India trade relations and has been active on various platforms, including ‘Aman ki Asha’ — a media-led civil society movement launched jointly by the Jang Group and The Times of India. The federal cabinet’s November 2 decision to grant the most favoured nation (MFN) status to India has its firm supporter as well as passionate detractors. Many businesses and industries see it as a step in the right direction which would not just benefit the economies of the two countries but help ease tensions between these nuclear-armed South Asian neighbours. The News on Sunday interviewed Amin Hashwani in this backdrop, focusing on issues of business and trade in the region.  

Saying “no more” to cartels
Calls are being made for developing countries across the world to strengthen their competition law enforcement processes to deal with cartelisation
By Pradeep S Mehta
“Our competitors are our friends, our customers are the enemy” is an actual statement made by an executive of Archer Daniel Midland, in the famous case of the lysine (a feed additive) cartel, which was caught on videotape by the FBI. As the international competition community once again gears up to observe the second World Competition Day on 5th of December this year dedicated to the theme, “Cartels and their harmful effects on consumer”, there is a need to reflect on measures to protect consumers from cartels, and sharpen such measures to the extent possible. 

 

analysis
The actually existing state
Institutionalised exploitation of the civil bureaucracy and the military is far greater in scale and scope than the ‘corruption’ of Zardari and his cohorts
By Aasim Sajjad Akhtar

One of the most enduring myths of the modern age is that of the state. By this I do not mean that the state is complete illusion, but that a particular popular conception of the state persists despite ordinary peoples’ very incongruent everyday experiences with state power. Benedict Anderson has written about the almost transcendental quality of modern nationalism, about its ability to make people who will never know one another feel as if they share some primordial bond. The state is the structure within which nationalism has been nurtured, and it is thus hardly surprising that it has come to acquire a larger-than-life quality.

Pakistanis in particular tend to be very ‘grateful’ for the fact that they have a state at all. The particular narrative of Muslim nationalism in British India that we are fed from an early age necessarily makes us feel like we would have been completely devoured by the spiteful Hindu if we had not carved out a separate state in 1947. This socialisation reifies the concept of both state and citizen in a way that has little to do with the actually existing state and the reality of Pakistani citizenship. Of course, those of us who have never been on the receiving end of state excess remain convinced of the pristine image of the Pakistani state — it is this particular group of ‘citizens’ that tends to be the most vigorous defenders of the guardian of the state itself, the Pakistani military.

On the other hand, in the eyes of ordinary Pakistanis, the myth of the Pakistani state is only sustained through a dualistic understanding of state power. The majority of ‘citizens’ in this country are routinely subject to excess on the part of state functionaries (thana, katcheri, etc.) and are thus hardly deluded about the character of the ‘local’ state with which they come into regular contact. At this level, it is a cruel joke to even suggest that any meaningful notion of citizenship exists; it would be not be incorrect to argue that state functionaries treat ordinary people more like ‘subjects’ than citizens.

However, many ‘subjects’ at the local level still remain convinced that they are ‘citizens’ of the state, thus reinforcing the eternal myth. In other words, ordinary people distinguish between the state functionaries that oppress them at the local level and the proverbial benevolent rulers with whom they will never come into contact. ‘If only they knew what their subordinates were doing to us, they would never allow things to come to this’, is not an uncommon refrain.

This is not to suggest that ordinary Pakistanis do not dwell on the self-aggrandisement of those in the corridors of power in Islamabad (due in large part to the prodding of the corporate media). These days there is incessant focus on a handful of individuals and their ‘corruption’, particularly President Zardari. But herein lies the primary obfuscation at the heart of the state myth — we go on and on about those currently in government, particularly if a Zardari-type ‘bad guy’ is in the mix, yet functionaries of the state at the highest echelons tend to be completely exempt from public scrutiny. And here I refer particularly to the men in khaki.

Most Pakistanis rarely come into contact with military personnel (although populations at the receiving end of brutal military operations are notable exceptions). Add to this the influence of formal education and the popular media and it is easily understood why the myth of the state is associated most closely with the ‘selfless’ defenders of our borders. To be sure, this myth of the military as the ‘only institution that works’ and the reason why we still maintain a modicum of ‘sovereignty’ has been cultivated for decades on end, and continues to be.

Popular perception of the ‘bureaucracy’, including its higher level, tends not to be as positive, presumably because ordinary people have plenty of contact with this bureaucracy at the lower level and recognize that individuals higher up the hierarchy are likely to be no less committed to personal gain. Nowithstanding ordinary people’s experiences, the bureaucracy is not targeted in the popular media in anything like the same way as politicians.

Thus a false binary of state versus government is constructed and maintained. Indeed, while there is, to an extent, a recognition amongst some ordinary people of the distinction between the permanent state institutions (like thanas and katcheris) and the elected government — let’s just say the distinction between ‘sarkar’ and ‘hukoomat’ — it is actually the (urban) middle class that tends to be largely silent about the structural dimensions of state power whilst constantly going on about the ‘corruption’ of ruling politicians.

An example will help illustrate the point: this past Thursday and Friday (1-2 December), around 3 dozen people from Muzzaffargarh district held a token hunger strike outside the office of the World Bank (WB) in Islamabad — not for the first time — to register their protest against the WB and the Punjab Irrigation Department for continuing to paper over the social and ecological fallouts of the WB-funded Taunsa Barrage Emergency Modernisation and Rehabilitation Project (TBEMRP). The protestors also demanded that the WB shelve its plans to dole out more money to the provincial bureaucracy to rehabilitate the Jinnah Barrage, seeing as the latter project suffers from the same basic design flaws as the TBEMRP.

For the record, the provincial irrigation bureaucracy — not only in Punjab — has been inflicting pain and suffering upon local communities under the guise of ‘development’, with the gracious support of the WB and Asian Development Bank, for the best part of four decades. In recent times the banks have been forced — due to pressure from activists across the world — to ensure that ‘development’ projects that they fund conform to basic environmental and social norms. So, for example, any WB or ADB project that causes involuntary displacement must be accompanied by workable plans for resettlement and compensation. Despite the haughty claims of social responsibility on the part of both the WB and Irrigation Department, affectees of the TBEMRP have spent at least half of the compensation money paying bribes to officials of the said department.

In this case, and many others like it, there are no politicians fleecing ordinary people. It is the bureaucracy (and donors) doing their bidding at the cost of local communities. I believe that the institutionalized exploitation of the actually existing state — the civil bureaucracy and the military — is far greater in scale and scope than the ‘corruption’ of Zardari and his cohorts (or whoever else is in power, for that matter). Yet the popular myths that project the permanent state apparatus as the epitome of everything good about Pakistan persist. It is clear that some Pakistanis believe that it is necessary to maintain the myth of an omnipotent and inclusive state in the face of ‘external threats’ to our ‘sovereignty’. What about the sovereignty of the tens of millions of ordinary Pakistanis whose basic rights — including the basic right to life — are violated on an everyday basis by the very state of which we are ostensibly proud? Is this ‘internal threat’ — posed by the state itself — not bigger and more urgent than the abstract ‘external threat’ that apparently brings us all together in an ode of deference to our ‘guardians’?

 

institution
The right move
We need a greater commitment in the form of a parliamentary pledge that this country will never have a law that contravenes the rights of the people
By Peter Jacob

Finally, the bill that shall give birth to a National Human Rights Commission (NHRC) is on the National Assembly’s to-do List. Though it will still take some time to pass the bill in both houses, have approval of the President and put the Commission in place, yet it is good news. Many nations have found NHRCs useful for: strengthening norms and values based on human dignity and rights, reducing burden on the justice delivery system and dealing with rigidity of obsolete laws. As ‘The Statement of Object and Reasons’ attached to this bill explains, 56 countries have this arrangement in place recommended by several UN bodies and international treaties.

Besides the significance of reporting this development to the UN Human Rights Council’s session in October 2012 that shall review human rights situation of Pakistan (second time during the incumbency of this government), forming a human rights institution will have an added value in the present circumstances of Pakistan. There is a tremendous potential in this proposition as it seeks to build an institution over universally agreed upon standards of rights and liberties. Minus any expediencies and bureaucratic hurdles, a truly independent and effective NHRC can give new life to the dream for a democratic and autonomous Pakistan, much beyond the political rhetoric.

Nevertheless, it would be a big challenge for the NHRC to function and deliver in the midst of feeble government machinery, massive human rights abuses and high expectations. Just imagine the flood of complaints that is bound to pour in the good offices of the proposed Commission, with given misunderstanding among the citizens on the difference between rights and charity.

The 11 member body is going to need an elaborate arrangement and mechanism to process and respond to a huge number of complaints of human rights violations. While an adequate number of motivated and skilled staff is a must, the provincial governments must either be required to provide an outreach infrastructure to match the needs of a large demographic and geographic spread as Pakistan or legislate to form such Commissions at provincial levels as well. India, for instance, has one for each of its States besides a NHRC. The Provincial autonomy will have to be given a due regard, however, parochial approaches will have to be discouraged. The South Korean NHRC model would be also good to look at that dealt with the aftermath of prolonged autocratic rules in their country. 

The impact of this initiative will largely depend on the role assigned to this institution, its formation and autonomy with regard to rules of business. A clause in the bill that requires NHRC to report to the government, which would be some ministry, looks an impediment as far as autonomy of the new entity. It would serve the purpose well if the proposed Commission should only report to the Parliamentary Standing Committee on Human Rights once a year, in collaboration with but without the approval of any ministry.

With the experiences at hand of such Committees and Commissions in the past that could deliver a little and met enormous difficulties owing to the lack of financial and legal autonomy, the parliament will have to abridge these gaps in the bill. Without restricting the mandate of NHRC in the area of human rights, choices will have to be made with regard to its terms of reference. A distinction in gross and systematic human rights violation will help the course of action and modes operandi of remedial as well as investigative work of the Commission. Bringing Directorate of Human Right under the NHRC would be logical. Apart from the logistics and modalities there are challenges regarding the conceptual issues and education of the citizens in human rights?

The biggest challenge is about building a culture for human rights in social, legal and political systems that have become averse to rights and freedoms. What plans the well-intentioned people in the government and in civil society have to go about this? If the political parties claim a commitment to peoples’ rights, this commitment needs to be reflected in serious and result oriented actions.

Along with the proposed NHRC, we need a greater commitment in the form of a parliamentary pledge that this country will never have a law that contravenes the rights of the people of Pakistan, that the country will get rid of discrimination in whatsoever form and manifestation. That equality of citizens is not going to be a bookish concept but it will become part of daily life.

Once the NHRC becomes a reality the two big political parties — PPP and PMLN — can congratulate themselves for having achieved another goal set out in the Charter of Democracy (CoD). As far as institutional reforms, Pakistan also needs to have a Truth and Reconciliation Commission, something that COD pledged to establish as well. Issues concerning transitional justice are a cause of lurching confusion; be it May 2nd incident or other tragic incidents in the life of the nation. There is a long way to go in structural, institutional and sectoral reforms, through reforming laws and policies. We better make a resolute start and catch up with time.

The writer is executive head of the National Commission for Justice and Peace established by the Catholic Church in Pakistan. He studied Law, Political Science and Rural Development and has been associated with human rights and peace building work for the past twenty four years. He can be reached [email protected]

   

A small beginning
Banks must simplify and re-structure their lending mechanism 
By Tahir Ali

Financial help of farmers is necessary for the modernisation of farming and farmers’ prosperity. But small farmers who, according to some estimates, constitute 85 percent of the total 6.6 million farmers in the country, have negligible share in the agriculture credit disbursed in the country in general and Khyber Pakhtunkhwa in particular. Those residing in the far-flung hilly and tribal areas are particularly affected by it.

Financial exclusion of the small farmers who have little resources to approach the research and extension systems, coupled with their illiteracy and poverty, keep away from commercial farming and expose themselves to low productivity, eventually adding to severe financial hardships.

They, in turn, have to rely on informal sector for their credit needs offered at higher rates, leaving them in a vicious debt-cycle and poverty trap.

Acknowledging that agricultural credit disbursement was worse in KP, the SBP launched some agriculture-credit schemes as part of its financial inclusion programme for KP but credit disbursement ratio couldn’t improve.

Countrywide, less than 2 million farmers of the total 6.6 million, get agriculture credit facility. The situation in KP, which accounts for less than 4 percent of the national agriculture credit disbursement and where over 90 percent are characterised as small farmers, is particularly dismal. Khyber Pakhtunkhwa accounted for Rs 7.9bn or only 3.4 percent of the total agriculture credit of Rs233bn in 2009. Only six percent of farmers in Khyber Pakhtunkhwa have access to agriculture credit against 21 percent for the country.

Various easy credit schemes, support price mechanism and subsidy regimes in the past were designed for small and medium scale farmers, but they scarcely benefited from the schemes and big landlords were the main beneficiaries.

One of the main reasons of small farmers’ financial exclusion is their inability to be bankable — to be able to provide collateral (the explicit or implicit guarantee against the possible risk associated with the loan) to banks as most of them are tenants, who don’t have any property registered in their names or own land below the required level.

Plenty of these farmers, especially those in villages, are also influenced and kept from applying for credit by the Riba-element, a necessary part of credit but avoided by most on religious grounds.

Small farmers have been practically neglected in the existing provincial agriculture policy developed in 2005. The policy has, however, yet to be updated to focus them despite several announcements.

As per the prudential regulations for agriculture financing, banks are required to ensure disbursement of working capital/short term loans within seven days but it is usually delayed. “The entire formalities for any agriculture loan require lengthy documentation and procedure and take around two to four months to get the loan,” says a bank manager on condition of anonymity, when asked about the process of loan delivery.

“Small farmers should be given loans on personal guarantee. Group-based credit schemes are being followed by small banks but needs to be taken up by the main private banks as well to improve credit disbursement ratio in the country. Crop and life insurance is the best way to decrease the risk of farming community against losses and of banks against non-repayment,” he adds.

Some farmers hold the banks responsible for low agriculture credit in the province. “The banks are risk-averse. They avoid lending loans to farmers for fear of default. Much has been said of the one-window operation but no bank as yet has come out with a fast track mechanism for credit disbursement. The banks must simplify and re-structure their agriculture lending mechanism and mobile credit officers should reach farmers at their doorsteps to boost credit delivery,” says Shahid Khan, a farmer in Mardan.

Last year, the KP government revived the erstwhile cooperative bank and promised to provide Rs1 billion seed money for easy farm and non-farm loans to small farmers from the bank but practically just Rs200mn were released. This year too, Rs400mn will be released. How can credit ratio be improved with this? 

Under agricultural loans scheme through the passbook system, banks are bound to allocate 70 percent of their loans to subsistence farmers but whether the law is followed is not clear.

In group-based lending, developed by the SBP, small farmer groups are formed by the lenders involving 5-10 members having identical needs and registered with the former. Collateral is generally not used and is replaced by personal guarantee —-a joint liability agreement/undertaking — takes its place wherein each member takes the responsibility of the outstanding debt of all group members. In case of any change in the group, a fresh guarantee would be signed by the members.

A group coordinator acts as facilitator of the group and agent of the bank. The bank ensure that group coordinator is executing the assigned tasks as prescribed like liaison with members, arrangement of meetings, etc, and if need be replace him, with the consensus of the group, in case he fails to deliver. Group members ensure that the bank receives timely repayments from individual borrower/group members. But if a borrower dies, liability lies to remaining group members. However life insurance is urged to safeguard the interests of both the borrowers and lenders.

Everyone who owns or is a tenant or lessee over up to12.5 acres of land or have more than 40 sheep, has computerised national identity card, residence in the village and membership in the village organisation, is eligible for crop or non-crop loans in the scheme. 

Though globally 12.5 acres of land is the threshold of subsistence farming but in Pakistan one having that much land is considered a rich person given the phenomenon of small land holding in the country. According to an estimate, cultivated land per person in Khyber Pakhtunkhwa stands at just at 0.2 acres. The benchmark needs to be brought down for bank credit if small farmers are to be benefited.

Repayment schedule for farm loans may be set as per production cycle of crops and for non-crop activities, like livestock farm establishment, it should be three to five years.

 

http://tahirkatlang.wordpress.com 

 

Data-based 
decision making — I

There is a need to make structural changes in the census procedures as well as involvement of women in census enumeration
By Amjad Bhatti and Nadeem Omar

A census is inevitably a blend of politics and science — politics because power and money are linked to how many people live where, science because the technically complex undertaking draws on many scientific disciplines. — Kenneth Prewitt, 2011.

These articles attempt to map out issues related to census and statistics management in Pakistan exploring cross linkages of data generation and management with politics of gender, ethnicity, elections and resource distribution in Pakistan.

Pakistan is among the 49 countries conducting census this year in 2011, which, rightly so, has been called as the ‘global census year’. Coincidentally, acknowledging the significance of demographic information that census generates, Pakistan has also declared 2011 as the ‘Population Year’.

Population and Housing censuses are essential tools for policy, development planning and monitoring purposes. Reliable, disaggregated data on socio-economic indicators derived from censuses are extensively used as inputs for result-based management and tracking of progress towards national goals and international goals such as Millennium Development Goals (MDGs). Most importantly, the census data has strong sectoral linkages with the constitutional provisions and administrative arrangements. Since its inception, the demographic profile of the population in Pakistan has been the basis of distribution of funds to the provinces, determination of seats in the parliament, recruitment and educational quota on civil posts and educational institutions.

Pakistan inherited a long history of census undertaking that provides valuable data for analysis, but it has unfortunately not been fully utilized. No serious attention has ever been devoted to study Pakistan’s diverse population and to explore the implications it holds for country’s development and politics and ultimate stability. Pakistan’s wide diversity in topography, weather and climate, language, ethnicity, culture, polity and distribution of resources presents a real challenge for the census undertaking. With the first census in 1951, Pakistan has inadequately deployed an integral tool of development planning by being able to conduct only five decennia lpopulation and housing census in 1951, 1961, 1972, 1981, and 1998 with increasing lapses of years. The 1998 Census puts Pakistan’s population at 132.4 million, with 48 percent females, making it the seventh most populous country in the world. In all five censuses information on the following ten topics was solicited: name, sex, age, marital status, religion, language, and literacy, employment and industry. Certain topics were added on to the list, because of their multiple uses for different socio-economic development policy and planning. These topics are: enrolment into educational institutions, field of education, duration of continuous residence of migrant population, and nature of visible disability from which a person is suffering.

For one hundred year from the inception of decennial census in 1881 to 1981, the census have been on the schedule. However, in the last thirty years, the census undertaking has become an irregular practice indicating a deepening crisis of governance. The census scheduled for 1991was delayed for seven years and could only be conducted in 1998, thereby pushing the date for next decennial census to 2008, which sadly still awaits completion. The delays in holding national census, points to weakening territorial writ of the state over its citizens but also reflects the contested nature of rights and privileges administered to the population on the basis of census. Every single census in Pakistan conducted under close military supervision, had led to storms of protests from the disenfranchised ethnic and religious groups, but without eliciting any changes in the census structure, categories and schedule. As a result, the struggle for power among various groups in the society draws on the imbalance between census figures and the situation on the ground.

The international organizations such as UNFPA, UNFIEM, and UN-Habitat contribute substantively to the effective planning, management and execution of the Pakistani censuses, while encouraging the use of population data for policy development. The donors have made efforts in training the enumerators, providing the logistic supports and technical capacity building of the Population Census Organization (PCO) for the Census in 2011, but their efforts have not brought to fruition due to lack of political consensus on the census. Inter-agency groups of UN have invested to jointly enhance and develop the capacity of the existing Geographic Information Systems for the statistic divisions of census offices in Islamabad, Karachi, Lahore, Peshawar and Quetta. They will also help train those using the systems in modern technology and the latest GIS software. The use of GIS will replace conventional maps with Google maps, and will minimize the chances of errors in house and building counts.

The statistics on urbanization in Pakistan are most unreliable, given the out-dateddefinition of urban population, and the challenges of urban enumeration, created by vested political interest groups in the cities. In Sindh, a coalition of political parties, has questioned the transparency of the census procedures and disputed the results of recent household census in Sindh, which is to provide a base for population census. The population and household survey has not yet begun at the scheduleddate in September.

As in other spheres of citizenship, Christian population is discriminated and under reported in the census. In the last census of 1998, the total Christian population was estimated to be 5m, whereas the Church records state them to be around 10 M. Most independent observers estimate it to be around 13m.

Attention needs to be placed on the census categories which form the basis of public policy planning and administration. In the past five censuses, there was no direct question as to ethnicity of Pakistani citizens. The ethnic identity is inferred indirectly through the question on language or mother tongue. In a large number of cases in all the provinces in Pakistan, due to a variety of reasons of upward mobility, migration and resettlement, the ethnic groups lose their vernaculars/ethnic languages and adopt other national or cosmopolitan languages. At the same time, they remain culturally aligned to their ethnic group and follow the customs and kinship practices and land tenure of their descent group. In other words, language is one of the determinants of the ethnicity, and cannot be reduced to it. With no question to document the claims to ethnic identity, irrespective of language, it will be a sociological error to subsume ethnic groups under the linguistic categories.

The gender biases in the census have not been addressed. To make women’s work visible, there is a need to make structural changes in the census procedures as well as involvement of women in census enumeration. Male enumerators have invariably been deployed in all of Pakistan’s censuses to collect information on the population and its characteristics, on the housing stock and associated facilities. The enumeration generally occurs during the day, so the enumerators usually face female respondents. As many women in Pakistan find it difficult to disclose personal information to men, even familiar ones, responding to the census enumerators is frequently extremely problematic, and women may provide incomplete, inadequate or erroneous information, or may simply refuse to cooperate.

Although, the scheduled census activities for census 2011 are underway, and the first stage in the census operations, the household listing launched on April 5 has been completed, amid controversies. The Council of Common Interests had already expressed concerns about the latter’s usability in August, 2011 and the census activities are suspended till the resolution of objections in the CCI, whose next meeting has still not been called. According to some reports, PML-N questioned the abnormal rate of urbanization in the house listing census, which saw 84 percent growth of households in Sindh between 1998-2011, in contrast to 32 percent growth in Punjab. Ironically, according to the house listing census, Hyderabad, Karachi, Jacobabad and Jamshoro districts recorded 129, 114, 111 and 102 percent increase while Lahore district showed only 0.94 growth in its households.

 

Amjad Bhatti is a development researcher, communication expert, and founding executive director, School of Political and Strategic Communications (SPSC), Islamabad. Dr Nadeem Omar Tarar is a development anthropologist based in Islamabad.

 

To be continued

Drowning in debt
If the government wants to bring the debt situation under control, reduction in fiscal deficit and stability in exchange rate are the main solutions 
By Muhammad Adnan

Pakistan’s debt and liabilities has increased to a record mark of Rs. 11.9974 trillion (66.4 percent of GDP) including domestic debt and liabilities 6.8280 trillion rupees and external debt and liabilities 5.1694 trillion rupees (US $ 60.12 billion) at the end of first quarter FY2011-12, according to the State Bank of Pakistan (SBP).

The debt directly owed by the government from domestic and external sources is called public debt. Debt is owed to manage expenditures for boosting productivity, alleviation of poverty, generating employment, social and economic development, and to increase economic growth. Increase in Public debt, due to sharp increase in domestic borrowing lead to inflationary pressures on the economy. Furthermore, debt servicing in the future hinder allocation of funds to other sectors of the economy.

Pakistan’s debt dynamics has undergone substantial changes in the last three-and-a-half years. At the end of March 2008 Pakistan’s outstanding public debt and liabilities were 6.159 trillion rupees (59 percent of GDP), including domestic debt and liabilities 3.267 trillion rupees and external debt and liabilities US $45.9 billion (Rs2.892 trillion), the present government has accumulated 5.8384 trillion rupees including 4.6154 from domestic sources and US $14.22 billion (Rs1.2230 trillion) International Financial Institutions (IFI’s) in between April 2008 to September 2011. Furthermore, the present government has borrowed 1.473 trillion rupees in between March to September this year, as Pakistan’s debt and liabilities till March 2011 were 10.524 trillion rupees including external debt and liabilities US $59.5 billion (Rs. 5.061 trillion).

Behind this gigantic debt accumulation by present government, there are two main reasons. The first and foremost is budget deficit on average has been 6 and 6.5 as percent of GDP over the last four years, the huge budget deficit occurred due to continuous policy of maintaining untargeted subsidies and to sustain the loss making public sector enterprises. The other main reason is sharp depreciation of exchange rate as Rupee is depreciated from 62 per dollar to 88 per dollar in the above said period. The sharp depreciation of exchange rate, contributed to the rise in public debt; this depreciation alone has contributed roughly, 1.3 trillion rupees of debt.

Saqib Sherani, former principal advisor to the government, is of the view that “if the same policy of borrowing money continues and the debt situation is not stabilised, the government will become even larger borrower in domestic markets. Two things will happen, firstly the private sector will be denied credit so there will be pressure on availability of credit and secondly the government will be biting up the price of the credit, so the interest rate will go up very sharply and for a very long time. What will happen is that both availability and pricing of credit will be affected for the private sector”.

Large debt always causes more interest payment and interest payment on Pakistan’s domestic and external debt and liabilities has increased to 806 billion rupees (4.46 percent of GDP). Debt servicing is also at very higher side and it stands at 1.4755 trillion rupees (8.2 percent of GDP), including above said interest payment at the end of first quarter FY 2011-12.

Debt-servicing and defence expenditures eat up the mainstay of Pakistan economy, i.e. revenues, leaving little space for development and social sector. Speaking at Lahore Chamber of Commerce and Industry in October, Chairman FBR Salman Siddique said, “the tax department’s almost whole revenue collections go to debt-servicing or defence expenditures, as out of total Rs1,558 billion revenue collected by the FBR during the last fiscal year, 750 billion rupees were used for debt-servicing and 441 billion rupees were used for defence expenditures”.

Talking about debt incurred from the IMF which is US $8.9 billion at the end of first quarter FY 2011-12, Pakistan paid about US $267.67 million (22.9 billion rupees) as debt-servicing, including US $174.16 (14.9 billion rupees) as interest payment on this debt to the IMF. Because of this serious repercussion, the aftershocks of the abstruse decision made by culpable former finance minister Shaukat Tareen will start coming from next year and Pakistan will be in a severe debt crisis in the next 2-3 years as the IMF debt payment will start from February 2012 and Pakistan will have to repay almost US $8 billion to the IMF in 3 years.

Curbing this situation and increasing efficacy, former economic advisor to the Finance Ministry, Dr. Ashfaq Hassan Khan suggests, “the only way to reduce the debt burden is maintaining fiscal discipline, meaning budget deficit should be brought down to 3 percent of GDP in the next three years. This will reduce the borrowing requirements of government and the pace of debt accumulation will also slow and debt as percent of GDP will keep on declining. Pakistan also has to maintain stability in exchange rate, as the depreciation of exchange rate that not only contributes to surge in public debt but it is also inflationary by definition.”

Therefore, if the government wants to bring this debt situation under control, reduction in fiscal deficit and stability in exchange rate are the main solutions.

Strolling debt management requires great aplomb for making onerous and pragmatic long term planning about repayment obligations, and to deplete the debt. If the country needs to borrow more, it should borrow prudently. On the other hand, FBR needs to make lucrative tax policy, and the government needs to develop such projects which further generate revenues, and also it needs to manage expenditures without leakages.

Lastly, if the trend of borrowing is not controlled by enhancing the ability to reduce debt through generating income from lucrative tax policy then Pakistan development spending and other necessary non-development expenditures will get squeezed and the inimical debt situation will have huge impact on inflation, growth, investment and fiscal stability and the country will stuck in stasis.

 

The writer is a consultant at SDPI and can be reached at [email protected] gmail.com

Rules of the market
By Ather Naqvi

A Study of World Trade Organization
By Dr. Kamal Mannoo
Published by Ferozsons 
Publications
Pages: 406
Price Rs: 895

The book under review serves as a ready reference for not only a student of global economy seeking to understand how the WTO works but also for knowledgeable academics and writers.

Not ignoring the criticism on the WTO by the third world countries, the book prefers to see the positive side of the world trade mechanism. It focuses on the rules being followed by the global markets and how the poor countries can become competitive in terms of bilateral trade. This shows that the author is mindful of the room for improvement in the rules of the organization and how the apprehensions of the third world countries can be adequately addressed.

The book encompasses the impact of the WTO rules and regulations on the world economy, with special reference to Pakistan’s textile and agriculture sectors. This makes it more relevant for the Pakistan reader.

Magnifying the link of the Doha Round of Talks with the WTO, the book points to the fact that Asia is also starting to have an influence on the WTO trade negotiations.

For the convenience of the reader, the book is divided into 11 chapters, each focusing on different aspect of the organization and Pakistan’s textile and agriculture sectors.

The author believes that we have to save “the very future of the WTO” which is a “trading regime which provides opportunities for the poor”.

While discussing tariff and quantitative barriers, the book takes into account non-tariff barriers, especially in the agriculture sector that hinder trade across the borders.

The book lays emphasis on the changing trends in governance to promote healthy trends in trade practices, culminating in the increased level of trade between and among countries. The book analyses the emerging economies of China and Brazil and their impact on the world markets.

The thesis also discusses the need of change and reforms in the current rules governing the world trade in an attempt to address concerns of the developing world. The book states that “the governing body of the WTO is also now simultaneously contemplating the changes it has to adopt”.

On the other hand, the book also makes it clear to the developing nations that they will have to bring in financial discipline to be able to realise the fruits of free trade. China figures prominently as a nation that has shaped its economic policies accordingly. The author also attempts to “assess the importance of WTO on our textile sector’s future”.

The research work is user-friendly as it provides a comprehensive introduction and a list of abbreviations and acronyms. The work also carries quite a few tables and graphs, amply illustrating import, export and other trends in the global economy, also focusing on Pakistan and the region at large. It also has a long list of reference which lends credence to the information and data given in the book.

The book succeeds in reviving a debate on the obligations of the developed and the developing world that have wasted precious time in pointing finger at each other instead of hurrying up to bring in the required financial changes. The problem emanates from the fact that the two sides are not ready to take the first step.

The work enumerates the options available for Pakistan to be a part of the WTO mechanism, which may also mean challenging the “role that has been acquired by Brazil, China, India, and South Africa”.

After the informative details given in some chapters of the book, the conclusion and postscript provide a thought-provoking analysis of the options Pakistan has to embrace the WTO rules and be more open to the global markets without compromising on its economic interests.

 

Politics of free trade
Bilateral and multilateral trade treaties are going to grow in importance
By Jazib Zahir

“Imagine the world were one unified country. What do you suppose it would look like?” challenged Adil Najam, new VC of LUMS in one of his first public appearances after taking over the office. The occasion was the annual gathering of alums of Harvard Business School in Pakistan held on November 24thand the topic under the scanner was, “The Economics and Politics of Free Trade Agreements made by Pakistan”.

In addition to graduates of the hallowed lawns of Harvard, there were noted academics, industrialists and other high profile guests. Seema Aziz of CARE foundation, former chairman of PCB Ijaz Butt and Nadeem Elahi of TRG were all seated around the dinner tables eager to hear authoritative opinions on the future of Pakistan’s trade relations.

Adil Najam posited that the globe as a whole had the likeness of a Third World Nation suffering from abject poverty and severe resource constraints. He thus claimed that strategic planning for global trade could learn more from the case study of a country like Pakistan than more developed nations around the world. He discussed the heritage of GATT and WTO and flashed colorful diagrams that showed how the inter-linkage arising from multi-lateral and bi-lateral treaties were making the world a more complicated place. His parting message was powerful: “We need trade for development. We need development for security.”

Adil Najam was followed on stage by Yusuf Shirazi, chairman of the Atlas Group. Yusuf identified under-invoicing and tax evasions as major banes of the country. But he expressed hope that the robust textile sectors and untapped mineral resources would prove key assets as Pakistan attempted to build on its trading tradition.

This was followed by a panel discussion. The team included noted industrialists and financiers like Razzaq Dawood and Mian Mansha, academics like Ishrat Hussain and ministers like Zafar Mahmood. The granting of MFN status on India remained in the backdrop of the analysis. All the speakers shared a positive view on trade and the belief that such trade treaties ultimately benefited all players in the market. But they differed in why they believed trade was important and the best way to approach it.

Razzaq Dawood was perhaps the most exuberant. He subscribed to Schumpeter’s ideology of creative destruction which suggests that resources must be periodically re-allocated to the most efficient producers, thus putting inefficient ones out of business. While this approach may seem clinical and ruthless, it is a key tenet of the modern market economy that is a survival of the fittest.

Dawood accepted that enhanced trade channels with India would mean that the most inefficient producers in both markets would be squeezed out. But he felt that this was in the best interest of both countries. He was extremely critical of the national tendency to lobby for subsidies and breaks that allowed inefficient actors to benefit. He urged businessmen to compete on a level playing field and attributed the current climate of power shortage to a misguided policy of lavish subsidies.

Mian Mansha, too, was excited about the opportunity for more trade with India. Like his peers, he was fascinated by the sheer scale of the Indian market. He pointed out that a cement factory in Pakistan priced a bag at Rs350 while one in East Punjab in India would price it at Rs500. He hoped more trade with India would eliminate such inefficiencies in the market. He and Mr. Dawood were keen for Pakistani and Indian setups to source their raw material at the same price so that inefficient producers would get exposed and be forced to exit the market.

While Zafar Mahmood shared this sanguine point of view, he chose to tread more cautiously. He gave the example of several countries which eliminated tariffs, quotas and barriers in a staggered manner spanning several years. He felt that such a staged process would ultimately benefit all the parties and mitigate some of the challenges of an abrupt change.

Mahmood also cited the example of the NAFTA trade agreement between the United States, Mexico and Canada. He suggested that while there were concerns over free trade with Mexico, the treaty ultimately helped improve the economic situation there and counter the specter of drug trade and illegal immigration that was plaguing its porous border with the United States. All the panelists shared the optimism that trade with India would enhance peace and stability.

During the interactive question and answer session, the audience adopted a more pessimistic stance on trade. Many cited personal difficulties of trading with India. Others suggested that even in the case of China, while trade relations were rosy on the surface, many traders had struggled to get the benefits they expected.

In conclusion, all the speakers accepted that bilateral and multilateral trade treaties were going to grow in importance and reiterated their belief that free trade activities were bountiful and more trade with India could only make things better.

 

firstperson
Most favoured alternative
The challenge in the MFN debate is that we have an emotive opposition, while the argument in its favour is based on facts and technical details
By Amir Zia

Amin Hashwani is President of the Pakistan-India CEO’s Business Forum. Hashwani is one of the key advocates of enhancing Pakistan-India trade relations and has been active on various platforms, including ‘Aman ki Asha’ — a media-led civil society movement launched jointly by the Jang Group and The Times of India. The federal cabinet’s November 2 decision to grant the most favoured nation (MFN) status to India has its firm supporter as well as passionate detractors. Many businesses and industries see it as a step in the right direction which would not just benefit the economies of the two countries but help ease tensions between these nuclear-armed South Asian neighbours. The News on Sunday interviewed Amin Hashwani in this backdrop, focusing on issues of business and trade in the region.

 

The News on Sunday (TNS): The cabinet announced granting India the MFN status, which created great hype in the two countries. But now it seems that its implementation phase is still not round the corner. What’s causing this delay?

Amin Hashwani (AH): The federal cabinet approved a road map, which is about normalising trade with India… and things are progressing the way commerce ministries (of the two countries) chalked-out step-by-step implementation plan. It is a trade normalisation process. Officials of both ministries are now scheduled to meet in February where Pakistan would come up with a negative list (banning certain imports from India), while New Delhi will identify the non-tariff barriers, which Islamabad wants removed on four or five items of Pakistani exports. Both sides will move forward if they feel that by February enough progress has been made on these fronts.

TNS: An impression is being generated in the media that not all the stakeholders are on board in the decision of improving trade and economic ties with India. What’s your analysis?

AH: I think that the ministry of commerce bent backwards to take all stakeholders on board, particularly the business community. The ministry sent letters to their representative bodies well in advance to get input and make them part of policy formulation process — particularly in identifying sectors, which might have a negative impact because of Indian imports and can be protected through a negative list regime.

TNS: Once a country grants the MFN status to another country, can certain goods still be barred from imports?

AH: Absolutely! There are several measures which a country can apply to protect its domestic market. India remains a classical example which despite giving Pakistan the MFN status prevented certain goods from entering its domestic market through non-tariff barriers.

TNS: There is an impression that the country’s armed forces remain unhappy about this development.

AH: To the best of my knowledge, the army is in favour of good relations between the two countries. Since trade is an integral part of this equation, I believe that the impression that the army is unhappy is incorrect. However, there can possibly be some reservations on some specific points, which I am not aware of. But in principle, there is little opposition to the MFN.

TNS: How granting MFN will benefit Pakistan which already suffers a huge trade deficit in its trade with India?

AH: Trade between any two neighbouring countries is perceived beneficial for their people. Consumers get cheaper goods, industries get cheaper raw material and through increase of exports and imports, they can realise better economies of scale. They can also create a better environment for their businesses through exchange of ideas and technology. In addition, whenever trade opens up between a large and a small country, it is the small country which benefits more because it gets access to a large market. The key, however, is of having a level playing field, where businesses on both sides exist in a healthy and competitive environment.

Yes, the status of trade regime between India-Pakistan is balanced in favour of India because of the non-tariff barriers. Right now Pakistan exports only 20 percent of what it imports from India. This status-quo does not benefit Pakistan. It must change. But I have yet to see an alternative solution on how to change this imbalance and create a level-playing field. MFN and removal of non-tariff barriers (NTB) is one way out of it.

TNS: Have you considered reservations of the manufacturers, who say the local industry will suffer as the Pakistani market will be swamped by cheaper Indian goods.

AH: A prime example is of pharmaceutical industry, which fears that granting MFN to India will hurt their products. But this industry is not opposing MFN in general. They have requested to put the Indian medicines on the negative list of imports. They just want to import the raw material from India which makes them competitive in the world for exports. The point is that the concerns of the industry can be addressed and are being addressed.

TNS: The agriculture sector is also unhappy on granting MFN to India. They say that the Indian agriculture sector is way too advanced. Indians manufacture most chemicals, inputs and machinery used in this sector, while we import. Indian farmers, who have a vast market, have already incorporated genetically-modified crops in their system, while Pakistan is still struggling with BT-Cotton.

AH: It’s a complicated issue. It is not possible to generalise about it in few lines. However, as I explained earlier safety measures can be taken to protect any sector. On the flip side, we can acquire a lot of know-how and technology from India, including about seeds, drip-irrigation, research and other farm practices to make our agriculture sector more productive and competitive.

TNS: For many people here, Pakistan-India relations are not just a matter of economy and profits. They see it in the larger historical and political context in which the two countries share a hostile past and have key issues which remain unsettled. How will the lobby advocating peace, better economic and people-to-people ties overcome this aspect?

AH: It is now an international norm that an increased trade and economic cooperation between the two countries increase chances of solving political and historical issues and disputes. China and Taiwan are a prime example. Despite the serious and a graver nature of their dispute, they still enjoy 50 billion dollar of trade and investment. Similarly, India and China still have border disputes, but yet they have 50 billion dollar plus trade. Israel and Turkey can also serve as another example. They have dispute over Palestinian issue, but they continue to trade.

TNS: Religious parties are again in the forefront in opposing the MFN status to India. Even the PML-N has voiced concerns. How do you see this? Do you think it is a blow to these efforts?

AH: A healthy debate about an issue is a positive sign for any society. However, it should be based on correct facts, which are in one’s national interest — and without challenging the patriotism of the other side. The challenge in the MFN debate is that we have an emotive opposition, while the argument in its favour is based on facts and technical details.

 

Saying “no more” to cartels
Calls are being made for developing countries across the world to strengthen their competition law enforcement processes to deal with cartelisation
By Pradeep S Mehta

“Our competitors are our friends, our customers are the enemy” is an actual statement made by an executive of Archer Daniel Midland, in the famous case of the lysine (a feed additive) cartel, which was caught on videotape by the FBI. As the international competition community once again gears up to observe the second World Competition Day on 5th of December this year dedicated to the theme, “Cartels and their harmful effects on consumer”, there is a need to reflect on measures to protect consumers from cartels, and sharpen such measures to the extent possible.

This would not only shake up entities that have flagrantly engaged in exploitative practices, but would also bring the average consumer closer to the process of competition reforms in the developing world.

There is need to appreciate that consumers in different countries are affected differently by cartels depending on the extent to which their economies have put institutions in place to protect them against such cartels. The World Competition Day (in response to a global call by CUTS) for this second year allows a scope for greater discussions and dissemination of the beneficial effects of competition on the average consumers — either directly or indirectly.

In effect, it is expected to result in greater public understanding and support on the issue. This year’s events should allow stakeholders to say out loud ‘No More’ to the perpetrators of cartel activities. This article urges countries, competition agencies to stand up and protect their consumers against the harmful effects of cartels.

Indications on the ground show that developing countries are very prone to cartels, because they often lack effective competition regimes. For example, the latest news is the cartelisation is in the cement sector. In India, recently the real estate developers body National Real Estate Development Council has approached the Competition Commission of India (CCI) seeking intervention against alleged cement cartelisation hitting real estate developers. One has to wait and watch how the same is handled by CCI.

In other jurisdictions too, the cement manufacturers association have been penalised along with the colluding firms. For example, the Pakistan Competition Commission imposed a fine of about $77 million on 20 cement companies found guilty of operating as a cartel and raising prices under mutual agreement. Actions were also taken by the Egyptian Competition Commission in order to break cartel activity by referring twenty executives from Egyptian cement firms to a criminal court for conspiring to fix prices.

Across the globe, cartel activities are being penalised. Record fines of more than $1.00bn have been levied by the UK, US and other competition authorities on airlines on cargo freight. There are other airlines too, such as Korean Airlines, etc. British Airlines is also facing action under the EU laws and other jurisdictions. Furthermore, the affected consumers in the US have also filed for class action damages against BA.

It is not difficult to understand why the developing countries are more prone to cartels. Firstly, firms have realised that there is a low possibility of being punished from being involved in cartel activities, given that even in countries with a competition law, sanctions are not too prohibitive. Cease and desist orders and fines that are often lower than profits from cartelisation cannot act as effective deterrents. Secondly, the probability of getting caught is very low in many other countries, given the absence of competition laws in them or limited provisions thereof.

We have been advocating for an International Competition Fund to be created out of fines levied by developed country authorities on international cartels, which have an impact on developing countries. For example, the global air cargo cartels have affected many developing countries but have not been prosecuted in any developing country, mainly because of a lack of capacity. Such a fund can be used to build capacity of competition agencies and advocacy groups in the developing world to be able to do better and more in arresting the malaise.

For many products, the elasticity of demand is very low, which gives cartels an opportunity to raise prices and gain more revenue. Many markets are highly concentrated due to both behavioural and structural factors and this is often aided by vested interest, resulting in higher prices due to limited options for consumers. Fourthly, consumers in developing countries rarely possess the bargaining buyer power needed to force suppliers to take them seriously. Consumers are seldom united, like in other parts of the developing world, which makes it difficult for them to fight against perpetrators of cartels.

Furthermore, across many developing countries, the business associations that have been formed across many sectors provide a platform for producers to meet and discuss viability strategies. Although these associations are prohibited from discussing pricing or common business arrangements in order to prevent cartels, their discussions are rarely monitored by competition authorities or other watchdogs. However, there are exceptions, in 2010 the Competition Commission of Pakistan (CCP) imposed a penalty of 50 million Pakistani rupees on the Pakistan Poultry Association for alleged cartelisation in the chicken and egg markets and also imposed a penalty of 23 million Pakistani rupees on the Pakistan Jute Mills Association and its ten-member mills on the charges of cartelised behaviour and other malpractices.

The prevalence of cartels in developing countries is also a cause of concern from the development and poverty alleviation perspective. The most critical sectors of the economy, such as food, health and transport are not spared, leaving consumers with no option but to pay large amounts of money for scarce goods and services.

It is within this context that calls are being made for developing countries across the world, through the World Competition Day, to strengthen their competition law enforcement processes to effectively deal with cartelisation. In countries without a competition law, consumer organisations need to team-up with parliamentarians, media and policy makers to spread the word around. Consumers have long being victims of exploitative practices of firms — and let’s say ‘No more’ this December 5th!

 

The writer is Secretary General, CUTS International

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