analysis Data-based
decision Take
on the tax havens! participation Uneasy
relationship An
evening with Chomsky
Politics
of governance
analysis So whether or not the
President has truly been laid low by a ‘minor heart attack’ or an
‘in-house coup’, the Zardari-haters are suddenly feeling a lot better
about life. For the best part of four years Benazir Bhutto’s widower has
been the most detested man in Pakistan, in large part because he occupies
the presidency (he would be less hated, but hated nonetheless, even if he
were still in Adiala Jail). Constituencies as diverse as big media houses,
the liberal intelligentsia, General Headquarters (GHQ), the Chief Justice
and opposition politicians have been clamouring since soon after Zardari
entered the President’s House to put together a viable ‘minus-one’
formula. Could it be that their tireless efforts have finally borne fruit? Somehow I doubt it. One
can say what one wants about Asif Zardari — and I am hardly a Zardari
jiyala — but the fact is that he has proven to be a political survivor.
Indeed, if one compares the present democratic experiment to those during
the fated 1988-99 interregnum, Zardari has proven that he has the tactical
nous to thrive in the cynical and opaque game of power politics. That the
so-called ‘politics of reconciliation’ is riddled with contradictions
is by the by — Zardari has kept himself and his party in power, and both
the parliament and president are actually threatening to complete their
full terms. The present Dubai
retreat is not the first of its kind, and likely not the last. We
consumers of the mass media’s stories have been convinced umpteen times
that Zardari is on his way out, and found each time that the show is not
quite over yet. The constant sensation has contributed greatly to the
feeling that pervades most urban middle-class homes about Zardari being
the primary reason for everything that is wrong in Pakistan, and the
attendant belief that all will suddenly be well if Zardari is kicked out.
Of course, this is exactly what many people thought vis a vis Musharraf
(the mirror image of which was the conviction that the country would be
resuscitated dramatically with the restoration of the Chief Justice and
the implementation of ‘rule of law’). More generally, most incumbent
governments throughout Pakistan’s history have been decried as
incompetent and corrupt, although there is a distinct lack of patience
when it comes to elected regimes in comparison to military ones. In fact, Pakistan’s
problems are neither Zardari’s creations nor would it be reasonable to
expect him to fix them with the wave of a magic wand (assuming he wanted
to). At most, it can be argued that Zardari hails from the small class
that rules Pakistan — a class which, many experts tend not to
acknowledge, has changed considerably over the decades. This does not mean
that Zardari, or any other constituent member of the ruling class, has no
contradictions with other members of this class. Indeed, arguably the
primary political contradiction in Pakistan remains the civil-military
divide. It is in this complex context of class and institutional conflict
that Zardari’s political role should be understood (and appraised). As I have argued on
these pages numerous times in the past, it is shocking that purportedly
‘alternative’ models of politics are premised upon the simplistic
notion that the solution to Pakistan’s problems is to get rid of Zardari.
Let alone the newest contenders for power, Nawaz Sharif’s politics
appears to have once again degenerated into sloganeering and petty
personal slander, which is a disappointment after all of the talk of
friendship with India, military accountability and the like in recent
months. Even if one is to look
beyond the thorny and incredibly complex question of relations with big
powers — including India and the US — none of our mainstream parties
is likely to better Zardari’s stance on other important policy matters
(which is hardly saying much given that the present government has tried
not to rock the boat on many fronts). Take, for example, the Baloch
‘problem’. I cannot see the Pakistan Muslim League or Pakistan
Tehrik-e-Insaf (PTI) suddenly acquiring meaningful decision-making power
vis a vis Balochistan and undoing the decades-old carrot-and-stick policy
of the ‘centre’ (read: GHQ). Indeed, I even doubt that Nawaz Sharif or
Imran Khan would go to Quetta and apologise to the Baloch people. And what
of our economy? Is there any prospect of the prospective economic managers
of the PML and PTI extricating the Pakistani economy from the clutches of
the international financial institutions (IFIs)? Will they suddenly be
able to start taxing the rich, let alone the military’s corporate
empire? Will they be able to magically produce more power than is possible
given existing infrastructure? Will they enforce restrictions on the wave
after wave of cheap Chinese consumer durables that continue to flood our
domestic markets? The mostly hollow
sloganeering of opposition parties aside, one cannot help but wonder what
disease afflicts our hallowed intelligentsia. Why are they able to see
only Zardari’s apparently unprecedented corruption and not the
systematic pilfering that takes place at all levels of state and society
which is so substantial that it cannot even be quantified? How is it that
Zardari can be accused of surrendering all sovereignty to the US — or
whoever else, for that matter — while the military remains the
principled ‘guardian of the state’ even though it has greedily
accepted tens of billions of dollars of American military hardware since
9/11? The point, as I have
already noted above, is that Zardari is just one individual actor within a
structure of power that implicates many, many more such individuals and
institutions. To even suggest that he exercises as much power as the
Zardari-haters suggest, or worse that he is only thing separating Pakistan
from peace and prosperity is nothing less than a blatant obfuscation of
reality. It hardly needs saying that such blatant lies do not just happen
to become part of the public discourse — they are deliberately
propagated. Unfortunately, for those trying to lay all blame on the man,
it is more likely than not that he will soon be back to haunt them. If and
when the people of Pakistan send someone else to the presidency, we can
all move on from the acrimony that Zardari’s person engenders. I doubt,
however, that we will move as quickly beyond our many structural crises.
Data-based
decision It is alarming to note
that household census, which is the basis of population head count, will
be outdated, if the population census does not commence by December, 2011.
The most likely scenario is that census process is likely to suffer delays
and may not take place this year due to resource constraints and attention
being diverted to the preparation required to hold forthcoming national
election in 2013. The financial resources
required for authentic and transparent census operations can be partially
met nationally and international donor support and private sector
investments must be provided to the government. Although conducted by
the federal government, the provincial government plays a critical role by
coordinating and supervising the activity and providing the field staff.
The task of door to door verification of voter lists by Election
Commission of Pakistan and NADRA is performed by the same set of field
staff in the provinces who are to undertake the population census. On a positive note, the
Census Ordinance of 1959, which formed the basis of statistical management
in Pakistan and under which the past five censuses were conducted has been
revised and expanded this year under the Eighteenth Amendment. According to the
decision of Implementation Commission, 11 subjects related to collection,
compilation and management of statistical data — earlier being managed
by the abolished 17 ministries — have been re-allocated to the Federal
Bureau of Statistics. As a follow-up
legislation to the 18thConstitutional Amendment, the Parliament has passed
the General Statistics Act 2011. The General Statistics Act 2011, for the reorganization of
statisticalsystems in Pakistan, provides a fresh opportunity for
reviewing the instruments of census, methodology, and institutional
mechanisms for producing timely, reliable authentic and transparent data. Surprisingly, the Act
does not subscribe any role to NADRA, a federal body for civil
registration, for negotiating with thereorganization of statistical
regimes in Pakistan. The linkages between various institutions of
statistical management are not clearly spelled out in the revised Act. The alleged use of fake,
duplicate, and unauthorised Identity Cards (Ids) during the voting on
polling stations is repeatedly cited as one of the most common instruments
of rigging and proxy representation in Pakistani elections. Currently,
NADRA and Election Commission of Pakistan are working jointly to bring
about the regime of transparent data management of electoral roles for
next election. The population increase
would lead to increase the number of voters requiring updated electoral
role for next election. A new strategy of One CNIC, One Vote is being
introduced by NADRA and the Election Commission of Pakistan. It is important to note
that NADRA has increased the registration of population from 55 percent to
91 percent in last three years. Official data indicates following
provincial breakdown of registration: 98 percent of the population of
Khyber Pakhtunkhwa, 82 percent of Federally Administered Tribal Areas, 92
percent of Punjab, 85 percent of Sindh, 73 percent of Balochistan, 99
percent of Islamabad and Azad Jammu and Kashmir. “In Sindh and
Balochistan, the ratio of women’s registration has increased to 78
percent as compared to the previous ratio of 28 percent. The 7th NFC Award
indicates a radical shift in the process of resource distribution between
federation and the federating units. The Award has adopted by consensus a
set of multiple criteria for determining horizontal distribution of
resources against a historical trend of using a single criterion of
Population. Multiple criteria for
distribution of revenues amongst the provincial governments was used for
the first time in the history of Pakistan. The four point criteria
include: population, poverty or backwardness, revenue collection, or
generation and inverse population density with the ratio of 82 percent,
10.3 percent, 5.0 percent and 2.7 percent respectively. Evidently, the mechanism
of resource distribution from federation to provinces and between
provinces is based on four indicators mentioned in the 7th NFC.
Inevitably, that necessitates developing disaggregated data on all four
indicators as basis for accurate and predictable resource distribution.
However, apart from outdated population data, other three indicators do
not have any credible data generated by provinces or the federation. This
has critical implication on the implementation of 7th NFC as
pre-requisites of fiscal decision-making will remain missing unless
authentic and accurate data is not generated, collated and interpreted for
the fiscal management at federal and provincial levels. The turbulent history of
census in Pakistan, especially in Balochistan and Sindh indicates the over
politicization of census in Pakistan, which has jeopardised the national
planning process. Without reliable census figures, macroeconomic
management is bound to fail and so is the forthcoming electoral process
based oncensus figures fraught with the duplicity. The accuracy and
authenticity of the census figures are critical for transparent, free and
fair elections. Given the rapid changes in the demographic profile of
Pakistan due to urbanisation, migration, displacements and changes in the
federal structure of the state, it is imperative to review the changes in
the statistical management regime of Pakistan and suggest measures to
reform the traditional censuses with exhaustive information. To democratise the
process of census undertaking, data generation and statistics management,
the Council of Common Interest (CCI) should convene a special session to
iron out some appropriate framework. Governments should raise awareness
about the importance of the census for socio-economic development. It should highlight the
linkages between the reliable statistic and equitable resource allocation
and just political representation. Women’s involvement in the census
process should be enhanced. No systematic attempt has been made by the
government to involve women in planning, designing and implementing census
data collection. To enhance public
participation in the census, publicity campaign should be conducted
through panel discussions on television and radio, and to a lesser extent
display of some posters, jingles and songs carrying census messages on TV,
and quiz programmes, jingles and songs on radio. The effort to improve
public participation in the census activities and the census data on
gender sensitive issues should be broadcasted on television and radio.
Using television is the most effective way to have census messages trickle
down to the general public, respondents and enumerators in order to elicit
their cooperation. The involvement of NGOs
in the census taking process should be enhanced. All census data users and
stakeholders should be consulted on the census questionnaires. All
concerned departments of the public sector, including research
organisations, universities, NGOs dealing with population and housing data
and relevant international agencies were invited to put forward their
requests for questions to be incorporated into the census. Women’s organisations
dealing with population should also be contacted. The mirage of electoral
democracy that holds the country together will be in jeopardy if the plans
for decennial census are poorly accomplished. (Concluded) (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.)
Take
on the tax havens! Half the world’s trade
passes through tax havens. They are hiding trillions of dollars on behalf
of criminals, dictators, wealthy individuals and multinationals. —
http://www.tackletaxhavens.com Tax Justice Network (TJN),
an international body, promotes transparency in international finance and
opposes secrecy. It supports a level-playing field on tax and opposes
loopholes and distortions in tax and regulations, and the abuses that flow
from them. It campaigns for tax
compliance and opposes tax evasion, tax avoidance, and all the mechanisms
that enable owners and controllers of wealth to escape their
responsibilities to the societies on which they and their wealth depend.
Tax havens, or secrecy jurisdictions as TJN prefers to call them, lie at
the centre of their concern. Recently, TJN has
launched a worldwide campaign called ‘Tackle Tax Havens’ (www.tackletaxhavens.com)
which must be joined by Pakistan as well. We are victim of tax evasion,
money laundering, loot and plunder of national wealth. The campaign can
help educating the general public—creating awareness about problems
caused by the offshore finance system. The campaign describes
how offshore centres are used by “criminals, dictators, wealthy
individuals and multinationals to salt away money illegally withdrawn from
countries where law-abiding residents are left to foot the bill”. The
campaign outlines the following three simple measures which, if taken, can
eradicate tax evasion and make the single biggest contribution to solving
the world’s financial crisis: All tax havens should
give details of the ownership of all companies and trusts located there,
and the accounts of those organisations. All multinational
companies publish accounts that reveal their use of tax havens. All tax havens should be
required to exchange information each year on the income recorded within
them belonging to the citizens of other countries with the places where
those people really live. The above measures, the
campaign pleads, would shatter the secrecy of tax havens for good, and
that means those committing tax crimes will no longer have places to hide
the proceeds of their crimes. “Nothing could make a bigger contribution
than this to solving the world’s financial crisis right now”, it adds. Economists, tax and
financial professionals, accountants, lawyers, academics and writers of
the world have a consensus that tax is the foundation of good government
and key to the wealth or poverty of nations. But this foundation is under
threat by tax havens. Tax havens offer not
only low or zero taxes, but something broader. What they actually do is to
provide facilities for people or entities to get around the rules, laws
and regulations of other jurisdictions, using secrecy as their prime tool.
TJN, therefore, prefers the term “secrecy jurisdiction” instead of the
more popular “tax haven” and highlights following serious problems: Tax havens help rich
people hide money that should be spent on schools, hospitals, roads and
other public services Tax havens force poor
people to pay taxes due from the rich Tax havens help
criminals hide their loot Tax havens help
dictators and their cronies plunder resources of developing countries Tax havens allow banks
to dodge financial rules and regulations Tax havens corrupt
markets, concealing insider dealing and supporting aggressive tax dodging
by multinational companies Tax havens create a
private world of secrecy, impunity and power for rich elite Tax havens widen the gap
between the rich and poor people Tax havens make laws in
secret which affect us all Tax havens degrade our
faith in democracy According to TJN, “the
corrupted international infrastructure allowing élites to escape tax and
regulations is also widely used by criminals and terrorists”. As a
result, tax havens are heightening inequality and poverty, corroding
democracy, distorting markets, undermining financial and other regulation
and curbing economic growth, accelerating capital flight from poor
countries, and promoting corruption and crime around the world. The offshore system is a
blind spot in international economics as it blurs our understanding of the
world. The issues are multi-faceted, and tax havens are steeped in secrecy
and complexity, which helps explain why so few people have woken up to
this scandal and why civil society has been almost silent for so long. Now many government and
non-governmental bodies are seeking or supplying expertise to help open up
tax havens to proper scrutiny at last, and to make the issues
understandable by all. The fight against tax
havens is one of the great challenges of present day world. It challenges
basic tenets of traditional economic theory and opens new fields of
analysis on a diverse array of important issues such as foreign aid,
capital flight, corruption, climate change, corporate responsibility,
political governance, hedging funds, inequality, morality — and much
more. Assets held offshore,
beyond the reach of effective taxation, are equal to about a third of
total global assets. Over half of all world trade passes through tax
havens. Developing countries lose revenues far greater than annual aid
inflows. According to studies
conducted by TJN, the amount of funds held offshore by individuals is
about $11.5 trillion — with a resulting annual loss of tax revenue on
the income from these assets of about 250 billion dollars. This is five
times what the World Bank estimated in 2002 was needed to
address the UN Millennium Development Goal of halving world poverty by
2015. This much money could
also pay to transform the world’s energy infrastructure to tackle
climate change. In 2007 the World Bank endorsed estimates by Global
Financial Integrity (GFI) that the cross-border flow of the global
proceeds from criminal activities, corruption, and tax evasion at US$1-1.6
trillion per year, half from developing and transitional economies. In
2009 GFI’s updated research estimated that the annual cross-border flows
from developing countries alone amounts to approximately US$850 billion
— US$1.1 trillion per year. Offshore finance is not
only based in islands and small states, it has become an insidious growth
within the entire global system of finance. The largest financial centres
such as London and New York, and countries like Switzerland and Singapore,
offer secrecy and other special advantages to attract foreign capital
flows. As corrupt dictators and
other élites strip their countries’ financial assets and relocate them
to these financial centres, developing countries’ economies are deprived
of local investment capital and their governments are denied desperately
needed tax revenues. This helps capital flow not from capital-rich
countries to poor ones, as traditional economic theories might predict,
but, perversely, in the other direction. Countries that lose tax
revenues become more dependent on foreign aid. Recent research has shown,
for example, that sub-Saharan Africa is a net creditor to the rest of the
world in the sense that external assets, measured by the stock of capital
flight, exceed external liabilities, as measured by the stock of external
debt. The difference is that while the assets are in private hands, the
liabilities are the public debts of African governments and their people. Of late, globalisation,
international trade and finance have earned a bad name. Each brings
opportunities and risks. It is time that international community addresses
seriously what may be the biggest risk of all: tax abuse, and tax havens
and everything they stand for. The
writers, tax lawyers and authors of many books on Pakistani tax laws, are
Adjunct Professors at Lahore University of Management Sciences (LUMS).
participation The fruits of 18th
Amendment are yet to be reaped by the common man as the provinces are
reluctant to devolve their powers to the local tiers. The evidence has
proved that local service delivery is efficiently and effectively achieved
through the people-centered and controlled governments. The need for local
governments in our country has now got immense importance due to the
recent wave of youth movements observed in the political parties’
activities in large urban centers across the country. Experts also expect
change in the upcoming elections due to the large presence of youth in the
current population structure of the country. The petition by one of
the political party in the Supreme Court and consequent actions by the
Election Commission of Pakistan to re-enumerate the current ballot sheets
will also result in inclusion of large majority of unregistered youth
voters. The recently held
general assembly of Civil Society Organisations (CSOs) and citizen groups
in Dar-es-Salaam, Tanzania on November 18 and 19, 2011 called for open,
transparent and inclusive budgets which will ensure full human rights —
civil, social, political, economic, cultural, and environmental. It is also accepted
across the globe that citizen’s engagements in the budget process can
enhance improved outcomes of public spending for the poor and marginalised
segments of society. The general assembly also calls upon governments to
ensure budget openness and transparency at local level and engage with
CSOs for bringing social equity. The recent political
turmoil has undermined the need for developing this country into a livable
place for citizens, which is only possible if the provinces are ready to
devolve their powers to the local people. It seems unacceptable to all the
political parties. The provinces want to
drive the local tiers through the strong hand of bureaucracy rather than
involving people into the development process. The countries on the globe
adopt such systems in which the local people are involved in the planning,
implementation and monitoring process, which really makes difference in
the lives of common people. Porto-Alegre, city of
Brazil adopted participatory budgeting process way back in 1990s and
became one of the success stories around the world. At the grass root
level, it involves people into the local budgetary planning process and
prioritized the key development sectors which not only enhances
effectiveness of the development-spending but also enhances the tax
revenues due to citizen engagement. The successful Porto-Alegre model was
adopted by more many cities in Brazil. Do we really need the
system, if yes, what type? Where the executive has unlimited powers to
control, spend and monitor the public money, to which they do not belong
to? Do we need citizens’ engagement at the local level to plan,
implement and monitor development projects? The answers to these questions
must be sought from four chief ministers to whom this responsibility rests
with under the federal devolution plan. In the past, chief
ministers did not seem interested in local government system and wanted to
control districts through appointed representatives to whom they can send
orders within to overturn any policy or document. However, the current
provincial governments are heading towards local systems but at a
snail’s pace. Consultation processes are going on and on only with the
political parties, Government and political parties do not consult CSOs
and ordinary citizens. The question arises
about these local systems which will be presented in the provincial
assemblies without consultation of ordinary citizens. Will it be
acceptable to the people they govern? Or will they include ordinary
citizens into the local government in such a way that it enhances
oversight on implementation and monitoring of public spending? Poor participation of
citizens will lead to greater leakage of public money, weak ownership of
public infrastructure, weak accountability and transparency. The current
state of mal-governance will exacerbate as public oversight and
accountability mechanism could not deliver. This has really pushed forward
the need of demand side of governance and social accountability
mechanisms. The current system lacks citizens’ voice in the supply side
accountability mechanisms. The local government
system in the provinces must be people-centered with maximum inclusion of
local people. The provincial government must take affirmative actions for
more participatory approach towards drafting the local government system
that includes the concerned citizen groups, CSOs and ordinary people. Once
the draft is prepared, it must be consulted at the local levels before
presenting it to the assembly for any discussion. This system should have
inbuilt mechanisms to solicit feedback from the citizens on periodic basis
such as the “Citizen Report Card” on delivery of key services by the
district governments. The
writer is a researcher and can be contacted at gulbazali@gmail.com
Uneasy
relationship Is there going to be some change in Pak-US relations or will it revolve around the same give-and-take policy? Although military leadership and political parties, both inside and outside the parliament, had come out with a clear policy framework after the All Parties Conference (APC) yet results are still awaited. It is unfortunate that slogans of no compromise on national security and national interest have lost charm. The reason behind this is the fact that our government takes diplomatic pressure of America. At the same time, the element of public sentiment is successfully used as a tool by the Pakistani leadership. Same is the situation we have at hand on national political scene, particularly the recent NATO air raid on military checkpost in Mohmand Agency near Pak-Afghan border. Again, it has put so many question marks on Pak-US relations. We have to see what happens now since Prime Minister Yousaf Raza Gillani has vowed to review agreements made by Musharraf with US, ISAF and United Nations. He said the government has talked to all stakeholders, including the military and political leadership. The first act of defiance came in the shape of boycotting the Bonn conference in order to make the world realize that Pakistan had an important role in the war against terrorism. It is interesting to see how for first time in Pakistan the political and military leadership saw the Nato strike as an opportunity to revise the entire terms of business on national and international issues made by the Musharraf government. The government has assigned the national security committee of the parliament to prepare its recommendations over all important matters and submit these to the next joint session of the parliament. If we have a look at Pak-US relations we find two divergent dimensions at the same time. First, in this war both of them are allies and strategic partners. Conversely, they have considerable amount of mistrust and confrontation in their relationship. A few days ago, US Foreign Secretary Hillary Clinton said the two countries have consensus over 90 to 95 percent issues. But the recent NATO strike in Mohmand shows that something is creating misunderstandings between the two countries. Understandably, that is why the US political and military leadership is putting great stress on formulating an aggressive policy against Pakistan. A number of US congressmen have been demanding that pressure on Pakistan be increased by putting a ban on civil and military aid or its terms be tightened. We should also admit the fact that the war against terrorism lacked cooperation, coordination, and mutual trust, joint information sharing and understanding of its allies. All these bad developments seem to be pushing the US and its allies to the blind alley. It is upto the US if it revises its foreign and diplomatic policies in the light of the changing realities. The US should adopt a policy of creating amity on the regional level and avoid animosity among allies by ensuring that incidents like May 2 and NATO strike will never take place in the time to come. We know the US withdrawal from Afghanistan in 2014 is a great challenge indeed. Because US and its allies are bent upon carrying out decisions that would strengthen their interest and ensure political and administrative arrangements of their own choice. Seemingly, the US contradicted itself as it engaged in dialogue with the forces against whom it has been fighting since long. But the Americans require full-fledged support of Pakistan military leadership and vice versa. Now the issue is how long the stance taken by our political and military elite against US policies will last? Secondly, has Pakistan become strong enough to show reluctance to accept US policies? At present, our political and military leadership show their resolve of saying no to further compromises. Undoubtedly, the US action on May 2 was more significant than the NATO strike on Mohmand agency. The entire episode shows that, as some critics say, we may one day accept a bitter reality that the only centre of power in Pakistan is the military institution. We should stop moving towards war phobia because of two things: the war is the failure of diplomacy and, secondly, we are not in a position and capacity to wage a war. It is sensible and advisable for both military and civilian leadership in Pakistan to revisit foreign policy and make it diplomacy-perfect. It is unwise to boycott the Bonn conference, the only result we can have is more political isolation of Pakistan. We spoiled a grand opportunity of lodging a serious complaint against US and NATO strikes before representatives of countries at the Bonn conference. We should have been able to file a powerful case of our efforts and sacrifices of forty thousand causalities and RS3.5 billion losses to our national exchequer in the war against terrorism. A policy cannot work in which civilian leadership and military establishment is dealing with Americans for their ‘gains’. Any review of the security policy, which has several aspects, should start with the nature of the threat emanating from within the country such as religious militancy. More importantly, Americans are not the only complainant against militancy within Pakistan. China, Iran, and India have got the same apprehensions. The decision to re-visit national security paradigm must be finalised and implemented keeping these challenges in mind. The
writer is a political analyst. He can be reached at salmanabidpk@gmail.com)
An
evening with Chomsky Noam Chomsky is one of the most revered intellectuals of the modern age. Trained as a computational linguist, the professor at the Massachusetts Institute of Technology is lauded for his incisive and maverick criticism of American foreign policy. He remains a favourite of passionate students of political science and law the world over. It was thus no surprise that an event revolving around him was planned recently by students of the Lahore University of Management Sciences Law and Politics Society. In a packed auditorium, scores of students had a chance to watch a recent interview of Chomsky and exchange views on political topics. The interview was conducted by an intellectual closer to our shores. Pervez Hoodbhoy is a leading Pakistani theoretical physicist and another one of those rare geniuses whose excellence extends far beyond his immediate area of expertise. He is a recent and valuable addition to the LUMS faculty and just this semester, he conceived and orchestrated a unique course on the rich but intricate interplay between science, the arts and society. Hoodbhoy availed an opportunity to interact with Chomsky earlier this year in his office at MIT and graciously shared the short video clip with the public at large to engender constructive discourse. The interview began with Chomsky’s views of contemporary America and he was very blunt in his assessment. He termed the Iraq war a catastrophic failure and demonstrated a pessimistic outlook for both the United States and Iraq in the aftermath of the effort. While Chomsky’s views on this matter are widely known, he stopped short of agreeing with Hoodbhoy’s assessment that this was the classical case of ‘imperial overstretch’ that had befallen many great empires of the past. Somewhat surprisingly, Chomsky shared the belief that the United States has been in decline for much longer than people realise. He suggested that the United States was at its zenith shortly after World War II when its investments in the military-industrial complex were paying rich dividends. But he feels that beyond that point the United States was not as dominant as people seem to think. He suggested the world has been tri-polar for extended periods with Germany and Japan being comparable to the United States in terms of economic clout. Chomsky traced the precipitous decline of the United States to critical decisions in the 1970s. He felt the decision to rapidly outsource manufacturing and production functions and shift towards an industry heavily predicated on financial tools was a major factor behind the nation’s undoing. Yet, Chomsky was not bullish at all on the prospects of China. While many commentators rhapsodise on the size of the Chinese market and the robustness of its growth debt, Chomsky felt that Sino power is vastly overstated. He pointed out that in terms of the human development index China ranked pitifully and its GDP on a per capita basis was still a fraction of that in the United States. He went so far as to suggest that the tools that measure conventional GDP are deeply flawed and felt that if more refined measures were used, the United States budget deficit relative to China would shrink while that relative to South Korea and Japan would widen. He bordered on the pejorative by defining China as the ‘assembly line’ of the world and pointing out that most of the innovation and real development was occurring in its neighbouring countries. His conclusion was that no one, including China, was really ready to step up and supplant the United States. Chomsky suggested what he feared most was power because of its tendency to be abused. On the subject of Pakistan, he termed the county as a dangerous place with immense challenges but ended on the sanguine note that just as Europe had emerged from an age of bloodshed amid religious conflict, Pakistan too could rise from the ashes. Students then engaged in an interactive question and answer session with Hoodbhoy. Predictably, they were most interested in discussing the relevance of this interview to Pakistan. Some students felt offended by the simplistic analysis of the situation in Pakistan and argued that the country was not as dangerous as it was perceived by outsiders. There was general agreement though that Pakistan had to look away from the United States for its future and Mr. Hoodbhoy described this process of disengagement as inevitable. The session dragged on for hours but the most avid students stayed back eager to learn more in one of those rare sessions that allow students to forget their books and discover the inspirations that reside in the ivory towers of the world.
follow-up There is an ongoing
debate in both countries on whether this favoured status will bring any
benefits to either side or would Pakistan be swamped by Indian trade
giants? A lot of myths and misperceptions on this point need to be
explored and analysed before making any judgment. Pakistan’s decision to
grant India the most favored nation (MFN) status opens up many potential
benefits for both countries. Existing trade arrangements will improve and
new opportunities will emerge as bilateral trade is normalised. India has
already given MFN status to Pakistan in 1997. The move will increase trade
activities between Pakistan and India according to WTO terms. The decision has come at
a time when terrorism in the region has strengthened its hold and
religious fundamentalists love to hate India. Similarly, within India,
Hindu fanatic organisations and their followers do not favour amicable
relations with Pakistan. In the wake of these possible reactions the
decision is bold and will have a far-reaching impact on the peace and
stability of the region and a good omen demonstrative of reconciliatory
relations between two nuclear power neighbours. It needs to be
understood what MFN means in trading terms. In international economic
relations and international politics, most favoured nation is a status or
level treatment accorded by one state to another in international trade.
The term means the country which is the recipient of this treatment must,
nominally, receive equal trade advantages as the “most favoured
nation” by the country granting such treatment. Trade advantages may
include low tariffs or high import quotas. At the same time, the
term doesn’t imply any special or preferential treatment but merely
absence of discrimination. In other words, in the multilateral framework,
it is akin to treating the country as a normal trading partner when it
comes to opening up trade in specified goods or providing tariff benefits.
At present, a great deal
of trade between India and Pakistan occurs via informal and back market
channels, including Dubai, a situation which is inefficient and fraught
with illegalities effectively functioning as behind-the-border barriers to
trade. Indian products that
arrive in Pakistan through this process include tyres, auto components,
pharmaceuticals, engineering products, pans, chemicals and some textiles.
These sectors will benefit immediately. On the Pakistani side, cement,
fruit and vegetables, cotton, some specialized textiles, and sports items
— also currently arriving via Dubai — will experience a rapid boost.
And these are only the existing sectors. India-Pakistan trade has
so far demonstrated that the relaxation of constraints in bilateral trade
would benefit both the countries as it will be a win-win situation for
both. India has a middle class of about 300 million people with rising
purchasing power that matches that of South Eastern Europe while
Pakistan’s middle class is approximately 30 million. A 10 percent access to
the Indian middle class market would double the market size for Pakistani
companies and businesses. If the empirical evidence is so strong why is
trade between the two countries less than one percent of Indian exports
and less than five percent of Pakistani imports? The volume of bilateral
trade has not exceeded two billion dollars per annum (the total volume of
Indian and Pakistani exports is around $200 billion). These questions need
to be discussed and answered at various levels. A State Bank of
Pakistan’s study in 2005 estimated that the volume of trade could rise
five times from the actual one billion dollars. An ICRIER study showed a
much higher volume — about $10-11 billion (Pakistan 55 percent textiles;
India 90 percent non-textiles). There are 2,646 common
items of Pakistan’s imports that India exports worth over $15 billion.
For half of these items, the unit value of Pakistani imports is more than
the unit value of Indian exports. Pakistan can import these items cheaply
from India. At the same time, 1,181 items worth $3.9 billion are common
between India’s imports and Pakistan’s exports. About 70 percent of
these common items have unit values less or equal to the Indian import
unit value. On the industrial side
intra-industry trade will also increase as the MFN agreement takes effect,
and a large number of multinational corporations will likely set up their
plants to serve both markets. At present, there are
some concerns in the country that our local industries will be adversely
affected by a surge in exports from India. But in the case of MFN
agreements, Pakistan can choose to formulate an exclusion list; it may
prohibit imports of some particular products to begin with until the
agreement’s impact becomes clear. It should also be kept
in mind that bilateral trade balance with any particular country does not
have to be positive. There would be no trade in that case. Pakistan would
run a trade deficit with India just as it does with China and surpluses
with others. Economic theory and
empirical evidence have clearly established the links between trade,
productivity and economic growth. Countries that have large internal
markets have also benefited from integrating into the world economy and
opening up their economies. World trade in 2009
amounted to $12 trillion. The size of Pakistan’s domestic market is only
$180 billion. Even a 0.5 percent share in the global export market implies
that our exports could rise to $60 billion. Jobs will be created directly
or indirectly as a result of expansion in the production of exportable
items. Imports bring into the country transfer of technology embedded in
imported goods and services and raise the country’s production
possibility frontier. China and India are
projected to be the two fastest growing economies of the world over the
next several decades. Pakistan is blessed by its location being neighbor
to both these large economies. Our national economic interests dictate
that we should expand our trading relations with both these countries. There are three main
reasons that have impeded the growth of trading relations: (1) political
relations between the two countries have remained contentious. Trust
deficit does not allow stability, (2) both countries have, until recently,
pursued import substitution policies that protected local industry behind
protective barriers, (3) the commitment to regional economic integration
in South Asia has remained quite weak. Countries with adverse
political relationships, without giving up their principled stand on
disputes and differences, have engaged in cross border investment, trade
and movement of people. Over time these activities have helped in
fostering better understanding of each other’s view points. Confidence
building measures and creation of stakeholders in the countries can
eventually defuse the tension and soften the ground for peaceful
resolution of disputes. It is, therefore, not
right to wait for resumption of economic relations until the bilateral
political disputes are resolved. If economic engagement is fierce, it is
most likely that the hawks in each country will be confronted by the new
stakeholders who are benefiting from such engagement and without giving up
their respective positions while carrying out the composite dialogue.
Resumption of economic relations should be allowed without any
pre-conditions and without the countries giving up their respective
positions. Composite dialogue should carry on at the same time to resolve
the disputes and disagreements. As a pre-requisites for
trade relations to be transformed into concrete economic gains both
countries must liberalize visa regimes, especially for business people. Both India and Pakistan
have opened up their economies, abandoned the old Import Substitution
policies and embarked upon a process of integration with the world
economy. The reforms they have carried out, such as cutting tariff rates,
regulating duties, para-tariffs leave them in a much better position to
pursue preferential liberalisation. Public and governments
on both sides should now reject the culture of hate, blame game and stand
united for the sake of regional peace and security. It is high time that
this region is subjected to the much-needed. The
writer is Deputy Chief of South Asia Partnership Pakistan and Global
Campaigner irfanmufti@gmail.com
Politics
of governance During the past few weeks, we observed various types of street protesters trying to win over the government around their stated positions. Protests around power outages and load shedding, for instance, made the federal government immediately kneel down. It released eleven billion rupees to oil companies and other entities to ease the fuel supply which led to some improvement in power sector. The railway staff resorted to a nationwide strike and protests and earned instant dividend in the form of payment of salaries. Students of higher secondary school in Gujranwala took law in their hands and destroyed assets of the board worth millions of rupees to press for cancellation of error-ridden results. They too came out victorious. Instead of admonishing the miscreants, the Punjab government instantly rolled back the announced results. A judicial commission has been formed to investigate the matter, fix responsibility and formulate recommendations. Lady health workers in Punjab and Khyber Pakhtunkhwa have been organising marches, rallies, protests and sit-ins of sorts to make the regime buckle under their demands. The judge who authored and pronounced verdict in Salman Taseer murder case is reported to have left the country under pressure of protests, vigilantism and mob threats. PEPCO and WAPDA employees took to streets after sensing possible privatisation of their enterprises. The president is reported to have rolled back the decision as a consequence. These and many similar incidents refer to a very dangerous trend in state to polity relationship which can lead to many adverse consequences. Pakistan is already in the grip of social unrest which has attained alarming dimensions recently. Many parts of Balochistan, Punjab, Khyber Pakhtunkhwa and Karachi have been constantly affected by rising tides of protests and agitation. Ironically, reasons for street action trickle down to the most basic functions of governance. People now routinely come down on the street to register an FIR in a thana. It seems that the government considers it as a valid approach and mostly responds in the affirmative. Street agitators go back successful. These spot gains serve as a natural incentive for potential agitators from spread out ranks and profile. The regime is unwilling to strictly deal with violators of law due to political considerations. The most glaring example is the episode of target killings in Karachi where the government only sprung into action after hundreds of people were ruthlessly exterminated. This inaction gives enormous encouragement to all law breakers with deep rooted ulterior motives. Local youth with bad company and criminal orientation now align with extensions of political and sectarian outfits. With the power of gun behind them, they carry out multiple functions for their protection providers. From extortion to fund-raising for political rallies, diverse tasks are performed by the aimless youth. With rising unemployment and limitation of formal income generation opportunities, the number of such wandering lads is on a steep rise. More young people are joining hands with brigades of political, religious and even banned outfits where a reasonable monetary compensation and patronage is guaranteed. Pakistan has failed to positively utilise demographic dividend which is manifested in the form of this capable young population. No strength and number of law agencies can bring order to our society when full patronage would be covertly extended by elements of the state itself. Impotence and inaction on the part of government functionaries is a key reason for agitation and subsequent mob action. The edifice of governance has been eroded progressively. Scores of new departments, commissions and public sector outfits are abounding. But either they do not deliver the tasks for which they have been enacted or people have very little faith in their sincerity and efficiency. Thus, mobs do not hand over robbers or murderers to police. They prefer to deal with them on their own. The local governments have been struck down on a nationwide basis. No acceptable alternative has been made available. People find it most difficult to register their grievances on valid counts at a responsible platform. Power outages, breakdown of law and order, petty internal disputes or dilapidated infrastructure are matters which are aggravated beyond respite. This country used to have public institutions facilitating linkage between potential employees and employers. Offices of the ombudsmen are indeed present but ordinary people are not always aware about their existence. Besides, the normal course of working of such offices is time-consuming. Most cases cannot wait. If a young boy returns home with the news that he has resolved his educational problems ‘on his own’ he is appreciated. This reinforces no respect for sound morals or an acceptable behavior code. If the basic tenets of state and arms of government continue to display inaction, it shall give rise to more street actions. For champions of democracy, this must come as a warning bell. Politics of lawlessness must be replaced with initiatives of good administration. Adhoc solutions like outsourcing or privatisation have already proved disastrous. We can take a cue from the success story of Indian Railways under Laloo Prasad which has posted billions of dollars of profits after dipping into financial turmoil a few years ago. Nothing will be as effective for the regime as common folk’s trust in the leadership that could ensure dependable governance.
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