bad is a bad loan?
It has been rightly pointed out that the civilian government is not in charge of Balochistan policy
By Raza Rumi
There must be something terribly wrong with the state of Pakistan that in its largest province, state schools no longer recite the national anthem and are giving up on the Pakistani flag. Tragic that such alarming reports flashed in the national newspapers; and on the internet are a subject of little debate and introspection across the country. Either that nobody really cares as to what happens to the tribals in the southwest of Pakistan, or that there is soft censorship at play. Such is the level of self-censorship on the issue of Balochistan, that the ongoing insurgency finds scant mention in the otherwise hysterical electronic media of Pakistan. True, there are brave exceptions in the public arena, but the eerie silence on Balochistan is disturbing for any Pakistani who believes in the territorial and federal integrity of Pakistan.
Only in the last six months, dozens of Baloch political activists have been reported dead. It is difficult to ascertain exact numbers, given the lack of credible information. But palpable violence defines the state of Balochistan. On the one hand, there are Baloch activists, leaders and professionals who are being targeted by ‘unknown’ forces and on the other hand, thousands of ‘settlers’ (mostly Punjabis) who have been leaving the province, as their lives are no longer secure. A wide array of Baloch separatist groups exist in the province, whose source of funding is unknown and whose political agenda is vague, despite the overall banner of ‘independence’.
The history of Balochistan is stymied by the imposition of a national narrative and its symbolic manifestation remains the refusal of the Khan of Qalat to accede to the new state of Pakistan in 1947. Thus, the historical grievance has swollen to a degree where ‘Pakistan’, at least in the ‘Baloch’ districts, is now an imagined enemy to be countered with the narratives spun by the separatists. There is also the story of ‘exploitation’: from the inadequate (and perhaps misappropriated) Sui gas royalties, or that Gwadar port is not under of the Baloch control and the natural wealth of the province is being looted by ‘foreigners’.
Despite the turbulent history of the 1970s and the powerful nationalist sentiments, the Mengals and Bugtis attempted to engage with Islamabad to achieve a respectable quantum of autonomy in 1980s and 1990s. Unfortunately, Pakistan’s national politics and the ruling elites (largely from the Punjab and Khyber-Pakhtunkhwa) were busy with their own short-term agendas. Thus, the marginalisation of the province continued as Pakistan failed to develop a viable model of economic development hinged on trade and commerce which may have led to national integration of sorts.
Instead, our focus since the 1980s has been on the pursuit of bolstering a security state at the expense of people’s welfare and integration of marginalised communities into the mainstream development process. The Musharraf decade (1999-2008) reversed the earlier trends of Islamabad-Balochistan rapprochement and engagement. If anything, Pakistan Army’s ruthless modernisation project bypassed the Sardars, Baloch middle classes and instead, drummed up the bogey of ‘foreign intervention’. Worse, it bungled its prospects through the brutal murder of Nawab Bugti. It is an irony that Bugti was consistently a proponent of the Pakistani federation and had been an uneasy partner of Pakistan’s security establishment; however, his death signified the narrowing of the space available for dialogue, negotiation on autonomy and perhaps, reconciliation with a wounded territory.
It is also true that Balochistan is a playground for various external powers, including India and the United States to ‘punish’ Pakistan for its strategic adventurism in Kashmir and Afghanistan, respectively. Thus, the exiled tribal leaders from the Marri and Bugti clans may have found foreign benefactors in pursuing their separatist agenda. An unfriendly regime in Kabul sponsored by the US has not helped matters either, given the safe havens that exist for the separatist elements and their leadership. However, Pakistani state and its various spokespersons (many of them riding the media tiger these days) have been unable to inform and educate the public opinion on what sort of foreign intervention and financing networks exist in the Balochistan saga. In the absence of concrete evidence, many rational Pakistanis find it difficult to fully subscribe to the US or India ‘intervention-theory’, howsoever true it might be. Notwithstanding the challenges, blanket repression and targeting of Baloch activists is not going to lead us anywhere. Instead, such a strategy can only backfire as it is already paying no dividends to the country and its future.
The PPP-led coalition started off by tendering an unconditional apology to the Baloch. It even struggled to offer the ‘Aghaz-e-Huqooq-e-Balochistan’ package as an instrument. Three critical ingredients of this package were: a) recovery of ‘missing persons’ in the province; b) reducing the arbitrariness of the federal security agencies such as the rangers, etc.; and c) providing employment to all the graduates from the province. On all three fronts, the PPP-led coalition alas, has not delivered. The missing persons remained missing or worse, dead. The provincial government is a dummy mediator as Balochistan continues to be ruled from Islamabad and its security apparatus. Finally, the implementation of the employment package has been far slower than expected.
It has been rightly pointed out that the civilian government is not in charge of Balochistan policy, as the province and its affairs are inextricably linked to the national security paradigm. After all, it is India that the Pakistan Army has to resist in the barren tracts of the province; and the Evil Empire and its stooges in Afghanistan, which have to be ‘countered’ effectively. Conspiracy analysts have also cited a Chinese dimension to the whole affair. But it remains unclear to what extent China is interested or involved in the affairs of the province, except perhaps, its commercial interests and search for energy trade routes.
So what are the prospects for Balochistan’s secession? Unlike East Pakistan, Balochistan is not an ethnically homogenous region. Thanks to Afghan jihad and internal migrations in the region, the Pashtun population of the province has increased over the past three decades, almost rivaling the native Baloch. We cannot determine such facts in Pakistan, given the little respect for facts we have. A census is due for the past few years, but cannot be held for all sorts of reasons. However, if and when the census is held, we will exactly find out the ethnic composition of the province in precise terms. More importantly, secession would require foreign intervention of the 1971 variety. Pakistan’s nuclear status simply precludes that. Few in the region or across the globe would want more instability in Pakistan, beyond the current levels.
Therefore, Balochistan quagmire has now moved beyond the domain of a federal dysfunction to a contest of regional politics. India, Afghanistan and indirectly, the United States are now additional stakeholders in the contest, whether we like it or not. Islamabad will have to pursue a three-pronged strategy. First, it will need to engage with Baloch leaders at a political level after a ceasefire of sorts is achieved. There could be multiple options for working out a range of solutions to maximise political and economic autonomy for the province within the federal framework. The scale of such autonomy cannot be equivalent to the current framework of 1973 Constitution (amended umpteen times). It would need to be a national solution and hence, would require multi-party consensus on the type of autonomy for the Baloch people. This imperative cannot be further delayed and the PPP, PML-N should take the lead for their present and future governments will remain unstable if Balochistan cannot be governed constitutionally.
The second aspect of Islamabad’s strategy should be to resume dialogue with India and Afghanistan in the context of a regional settlement likely to occur in the short-term. The Baloch separatist leadership is not going to change its mind until the regional powers such as India and the US agree to find a solution to this conundrum and abandon the ‘fix-Pakistan’ policy. Of course, Islamabad will have to make concessions and rein in its non-state actors’ network.
Thirdly, while the above-stated strategies are implemented, the provincial government and its capacities need to be immediately fixed so that the perception of gross ineptitude, corruption and powerlessness is reduced. At present, the provincial government inspires little confidence among the provincial populace, let alone the angry Baloch.
Concurrent to what happens at the high-level strategic negotiations, Pakistani media and its civil society cannot abandon their duty to highlight the woes of all those Baloch who are being killed, tortured or abducted. We cannot remain insensitive sitting in Islamabad, Lahore or Karachi to what is happening in our own very country. Pakistan’s existentialist crisis is compounding, and the least we can do is to generate a healthy, informed debate on how to confront decades of marginalization and exploitation of a province that is our very own.
The writer is
policy adviser based in Lahore. He blogs at www.razarumi.com and manages
webzine pakteahouse.net. Email: [email protected]
“Pakistani media does not report on the brutal realities of Balochistan”
Ali Dayan Hasan -- Pakistan representative, Human Rights Watch
The News on Sunday (TNS) How does HRW view the current state of human rights in Balochistan?
Ali Dayan Hasan (ADH) The toxic mix of armed nationalist, sectarian and Taliban actors on the one hand and the trigger-happy military authorities on the other, makes Balochistan one of the most dangerous places in the world today. Illegal detention. torture, disappearances and targeted killings by the military are commonplace. Abuses by nationalist militants are also on the rise. It is an appalling situation and the great losers in this are the long-suffering people of the province.
TNS: Your report on attacks on education in Balochistan was criticised by the nationalists as focusing too much on the issues of settlers. What was the reason for highlighting that?
ADH: Human rights protections should be enjoyed by all. Abuses by the state do not allow others license to abuse in turn. It is our view that Baloch nationalists, sectarian militants and Taliban groups have all been involved in attacks on education sector personnel. Whoever targets civilians on the basis of ethnicity is in effect engaging in a policy of ethnic cleansing and this is unacceptable and criminal. Period. The notion that you can legitimately engage in such acts as “retaliation” is nonsense. Even if Baloch nationalists do not recognise the sovereignty of Pakistani state, they are still committing war crimes by attacking non-combatants and they should fully expect and receive censure and condemnation. And by perpetrating such atrocities, Baloch nationalists are harming Balochistan’s development instead of advancing it and destroying the future of their land and its people.
TNS: During insurgencies, human rights are at risk. Do you think that Pakistan government can carry out its anti-insurgency operations without use of force?
ADH: No one is suggesting that the writ of the state should be compromised. Rather, it should be enforced in a rights-respecting manner in accordance with laws and bearing in mind the constitutional protections that must extend to every Pakistani citizen regardless of political affiliation or ethnicity.
TNS: What is HRW’s assessment of external involvement, especially in terms of providing arms/financing to separatist groups who target civilians?
ADH: We understand that the government of Pakistan argues that external actors, especially India and Afghanistan, are involved in fomenting unrest and abuse in Balochistan. Even if that is the case, it does not mean that the Pakistani state can abuse the Baloch or violate their rights by way of retaliation. Besides, HRW and others have repeatedly asked the government to bring any evidence to back up these claims into the public domain. So far, nothing meaningful has been offered.
TNS: What is the HRW’s stance on missing persons in Pakistan, especially Balochistan?
ADH: Enforced disappearances remain a serious, widespread, and ongoing problem in Balochistan and HRW has documented such abuses by the intelligence agencies and the FC in the province. Those we interviewed for a forthcoming report on disappearances perpetrated by military authorities in the province live in extreme fear of the military. The interviews had to be conducted in secret locations outside the province. We will be releasing a detailed reported in the coming weeks on these disappearances and we expect answers from the government and a serious attempt to hold those guilty of these abuses accountable.
TNS: Is there sufficient international and domestic focus on human rights situation in Balochistan?
ADH: Unfortunately there is not. The Pakistani media does not report on the brutal realities of Balochistan in any meaningful manner. Despite the fact that the province is of great strategic interest to the world, its people suffer from persistent, systemic and widespread human rights abuse both by state authorities and at the hands of non-state actors. It is time Pakistanis and the world paid attention.
-- By Raza Rumi
Condition of village women is somewhat better but it is still a big fight
Roshan Dhunjibhoy, a women rights campaigner and an activist in her 80s, exudes passion and commitment as she talks to the News on Sunday in Lahore. Born in Calcutta, India in 1931, Roshan got her early education at Karachi, where she used to ride on a horse from Clifton Bridge to the Clifton Beach. Roshan received higher education from Emerson College, Boston USA and did her PhD from University of Paris, Sorbonne. After that she worked for several years as a journalist in France for UNESCO Radio. She also studied film-making in Paris and Rome. From 1962-78 she worked as TV Producer, Director and journalist at various institutions in Holland and Germany. Roshan produced about thirty political and cultural documentaries in Asia, Africa, Middle East and Latin America. She also taught documentary film-making at Berlin Academy for television and film. She worked for Friedrich Ebert Foundation from 1978-81. Roshan helped set up Department of Mass Communication at the University of West Indies, Mona Jamaica. She also taught mass communication in Zimbabwe, Sudan and Germany.
From 1993 until her retirement in 2001, Roshan was Regional Director for Asia of the Heinrich-Boll-Stiftung, (Foundation for Green Party of Germany). She organised a debate on Women and Religion, held eight symposiums and produced eight volumes over the years as an activist. In 2003, she founded the Lanna Dog Rescue with Thai and expatriate members. They work with local governments to better the lives of companion animals in the region and make Thailand rabies free by 2020. In her 80s, Roshan is active and full of spirits. She has dedicated her life for animal welfare. She was in Lahore the other day to attend a seminar on the 100th Anniversary of International Women’s Day International Conference on “Women, Religion, and Politics”.
The News on Sunday (TNS): What brings you to Pakistan?
Roshan Dhunjibhoy (RD): I was invited to a conference. When I was Director of South Asia of Heinrich Boll Stiftung, we started to look into the phenomenon of religion. In my view, women always take a back seat in all religions. When we started we worked for eight years, we did eight symposiums, and got eight books published. I think it was necessary in a state which is theocratic and which has religion as main reason of its existence.
TNS: Do you think you have covered some path and going into the right direction?
RD: Yes, I don’t think things should be mixed up. Religion is a private matter. I think the danger comes when you try to direct it through state or through institutionalised religion. It is interesting to see that the moment religion gets institutionalised how far away they come from the original idea. It is each individual’s choice and I think it should remain private.
TNS: How do you relate to feminism?
RD: Well, I call myself a feminist and that does not mean hating men. It just means that times have changed and the role of a mother or a wife should not interfere with the possibility of acquiring education or working as a career woman. Feminism is actually to remove certain set things. Why should the man always be the hunter? We have been treated more like a possession or like goods which you possess rather than as a normal self. I think that has to change.
TNS: Before you came to Pakistan, you were a film-maker, journalist, poet, and writer.
RD: I came to Pakistan because I left television once it was privatised. Privatisation resulted in the selling of German TV for which I used to work. It was one of the best in the world but later became one of the worst. It compromised on the quality and I could not take it and there was no room for people like us. I actually started Heinrich Boll Foundation with others and after that I opened the first foreign office of HBF which was in Asia. That is how I came in this part of the world.
TNS: And you then came to Lahore?
RD: I came to Lahore because we had the choice to set up our first office either in Bangkok or in Pakistan. And Pakistan offered us a very good opportunity than Bangkok did. So, we came here and instead of going to Islamabad we came to Lahore which is a city of culture and has a long tradition. I don’t think it was a wrong choice.
TNS: You stayed here for ten years at a stretch. Would you like to share some of your memories?
RD: Oh, there are so many. It was like a family and from the very beginning we were very closely knit. I am a great admirer of women in Pakistan because I think they are doing so much and they never give up. I really admire that.
TNS: Where do you place the Pakistani women of today?
RD: It is difficult to say. It depends on the class. Women have made great strides in politics. The condition of village women is somewhat better but it is still a big fight. I think this is why we went to villages. We used to teach them directly. It was a very different situation.
TNS: Don’t you think a ‘quiet women revolution’ has taken place here when you see them in every walk of life?
RD: They are. But the more visible they become, the more pressure is put on them.
TNS: Do you agree that despite the opposition women have asserted their role in society?
RD: Yes, you’re right. I come from Sindh. I grew up in Karachi. And from the time I was ten years old till I went to the university, it was most oppressive for women. Now there have been changes.
TNS: Some people call Pakistan a failed state, how do you look at future of Pakistan?
RD: I am rather pessimistic. You see, it is very difficult. Because the moment you say Pakistan is not a theocratic state it loses its reason for existence. Same is true for Iran at the moment, same is true for Israel.
TNS: Don’t you think the people of Indus civilization would continue to live as such without the clutches of religion?
RD: I hope so, yes, but the point is you have a constitution which makes minorities second class citizens. No one from a minority religion can become prime minister of Pakistan. And if you change all that then actually you will have to have another reason for Pakistan.
TNS: How do you look at your own life? Do you feel a satisfied person? RD: Not quite that, but I think I have been very privileged and I am very grateful for that because I have seen so much of this world seen as I have been a war correspondent and I have been in revolutions. I have been all over the places; I have been in so many countries, so many civilizations. The reason I am doing my work for animal welfare is because I try to give back. They are also treated so badly and they have no voice to protest against this treatment.
We need to allow the political process to play itself out and this alone will facilitate the emergence of more mature and representative political alternatives
By Aasim Sajjad Akhtar
That the protests and token strikes of trainee doctors in public sector hospitals across Punjab have continued in some shape of form for almost a month without interruption reflects very badly on the political leadership of this country. Our public health services are woefully inadequate at the best of times, and one expects our elected representatives to be more sensitive to the fact that large numbers of ordinary people have been deprived of even those (quite pathetic) services and, therefore, go out of their way to negotiate with the striking doctors and resolve the matter.
Of course, young doctors are not the only government employees to have resorted to protest action in recent times to demand better wages and improved working conditions. Lady Health Workers (LHWs), nurses, teachers, sanitary workers -- the list could go on. There are regular reports of student protests in both public and private colleges and universities against fee increases, and inadequate facilities.
In short, those who are employed by the state to provide basic services to the rest of the populace are up in arms, and more generally the state’s service delivery apparatus is failing. Arguably, just as importantly, the private sector is unable (and/or unwilling) to pick up the slack. As I noted at the outset, it would be incorrect to suggest that the situation was ever really that good, but the increasing burden of non-productive expenditures such as debt-servicing and defence has precluded even the upkeep of existing facilities. Add to this the exponential growth in population over the past couple of decades and it becomes clear just how deep the problem is.
At the heart of the matter is a lack of political will -- both in the short and long-run. In the immediate instance, the present government has demonstrated little interest in addressing the grievances of its own employees and, thereby, minimising the miseries of a long-suffering public. More importantly, successive governments virtually since the inception of the state have refused to reorient public policy towards people’s welfare, preferring instead to consolidate the state’s coercive capacity, on the basis of a zero sum foreign/strategic policy vision.
Those who feel somewhat sympathetic to the ‘plight’ of the present elected government will argue that the fiscal squeeze is now so acute that there is very little that can be done, especially given the almost daily threats issued by our ever so gracious Washington-based donors. President Zardari’s address to both houses of parliament reflected a certain desperation in the ruling party’s ranks -- the desire to evolve a ‘consensus’ on an economic revival plan indicates just how difficult it is for the Pakistan People’s Party (PPP), or any other mainstream party for that matter, to take the steps necessary to make the state viable and provide for the needs of its people at the same time.
For their part, opposition parties outside of the parliament such as the Tehrik-e-Insaf and Jamaa’t-e-Islami are even more deserving of criticism. They regularly spew out slogans about corruption, the foreign hand, and the decline in ‘Islamic’ values without ever providing evidence that they represent a viable alternative programme. Indeed, it is these right-of-center parties that continue to grant legitimacy to the obsolete national security ideology.
Other constituencies are similarly unable to articulate meaningful policy options. The highly-educated and privileged know that the state is not delivering but are hardly affected by its failure. They can pay for every service they need, and their insensitivity to the fact that most Pakistanis cannot pay for private services permits them to very simplistically project the ‘market’ as the panacea to all of Pakistan’s problems. Glamour capitalism has come to Pakistan, they say, and it is time to embrace it. It is the classic neo-liberal line replete with all the opaqueness becoming of a truly self-absorbed elite.
Then there is the ‘development community’, with the non-governmental organisations (NGOs) at its fore. The agenda of donors aside, the NGO model of development actually reinforces an incredibly dangerous public sector-market dichotomy by abstracting welfare work from the structural context that makes private welfare necessary. Money is provided to the ‘community’ to build schools, water supply schemes and basic health units on a ‘self-help basis’ without questioning why public education and health services are poor and political and economic structures unjust.
Most perversely, state institutions themselves have fully internalised the neo-liberal model and incessantly spew out useless reports that eulogise ‘public-private partnership’ and the need to create an ‘enabling environment’ for market forces to operate. This has not happened by accident, of course. World Bank and Asian Development Bank trainings have helped our bureaucrats along, while the practice of hiring foreign ‘technocrats’ who rake in thousands of dollars of public money is now well-established. ‘Good governance’ is now the desired outcome of all policy interventions, and if one spends enough time in the ivory towers of the technocrats it is possible to become convinced that the world really is becoming a better place on account of immaculately conceived policy.
And yet doctors, students, teachers, nurses, and employees of many government agencies continue to protest their pitiful working terms and conditions, while too many people continue to die of treatable diseases, and too many children remain out of school or in schools that make a mockery of their claim to be providing a modern education. Meanwhile, the primary association that most Pakistanis have with the state is one borne of fear and resentment. And this is true not only on the peripheries where state repression of the worst kind is commonplace. Even in the Punjabi heartland, the thana katchery culture dominates ordinary people’s lives, even though traditional relationships of power have been steadily eroded due largely to the deepening of capitalism within society.
In the midst of all of this, our mainstream parties remain mired in petty conflicts and perennial negotiations over a share of the political spoils. I have consistently advocated that we need to allow the political process to play itself out and that this alone will facilitate the emergence of more mature and representative political alternatives. It is a matter of conjecture whether or not things can be managed in the interim. All we can hope for is more urgency on the part of those who we vote to power on issues that really matter to the wretched people of this land.
On the receiving end
Not looking deeply into terms and conditions of loans at the time of applying leaves the government, and the people by extension, in trouble
By Irfan Mufti
Pakistan’s current economic predicament can be attributed to factors such as bad planning, wrong economic choices, and bad loan conditionalities. Governments do not seem to have taken loan negotiations seriously. Urgency of applying for loans, coupled with the anxiety to run the government, dominate loan negotiation processes. Economic managers, on behalf of elected or dictatorial regimes, endorse conditionalities without analysing affects of such conditions on the economy and lives of millions of people.
According to various reports, Pakistan’s internal and external debts have already crossed the figure of Rs10 trillion and there is no hope this loan will be reduced in the near future. Several papers and analyses have presented reasons of this accumulating debt but probably not much is said in public about reasons of the staggering loan burden on Pakistan’s economy and the already impoverished population.
Out-of-budget expenditures, on-going subsidies to government institutions that have no ability and capacity to meet their own expenditures are some key factors. For example, the grants to PEPCO, a state-run enterprise, has exceeded Rs183 billion annually. The treasury is also facing an additional burden of Rs14 billion per annum due to 12 percent increase in military pensions. It will not be unfair to say that most of these loans were taken for defense purposes and those amounts were on top of the huge share military gets in the annual budget.
Most of these loans were taken in the times of military and civil governments that never felt responsible to check terms and conditions before they signed.
This article analyses the conditionalities of $7.6 billion loan that Pakistan applied for to IMF in 2008 after failing to receive any economic bail-out package from Friends of Pakistan (FoP) and the impact of this loan on Pakistan’s economy during the last two and a half years. The purpose is to use this as an example to build a case about how such loans are applied, on what conditions, and how they impact the economy and lives of millions in this country.
Musharraf team hurriedly approached the IMF for the $7.6 billion loan to support its programme to stabilise and rebuild the economy while expanding its social safety net to protect the poor.
The conditions the IMF attached with loan to Pakistan have severely impacted on the economy, specially workers and farmers. The conditions eliminate all subsidies on energy, petroleum products, and fertilizer, slashing government spending, including “non-priority” development spending; and raising taxes.
In order to pave the way for the IMF loan, Pakistan’s Central Bank raised its bank lending rate in late 2008 by 2 percentage points to 15 percent and the government let it be known that a further 1.5 percentage point hike would be implemented in 2009.
The high-interest rate policy the IMF imposed on the State Bank of Pakistan caused consternation among large sections of Pakistan’s business elite, including various trade and industrial lobby groups. These measures were criticised by business community at that time and they predicted that with these stringent measures and drastic increases Pakistan’s industrial landscape will soon be marked with dead and sick units and there will be massive unemployment because of the devastating impact on businesses of the higher cost of bank loans arising from the interest rate increase.
The IMF demanded at that time that Pakistan must achieve fiscal adjustment primarily by phasing out energy subsidies, better prioritising development spending, and implementing strong tax policy and administration measures.
The achievement of these targets required dramatic spending and tax cuts -- all the more so given that economic growth in Pakistan that had already fallen off sharply and was expected to continue to contract due to the world recession. The IMF and World Bank themselves forecast that Pakistan’s economy would grow by only 3 percent in 2009 and 2010 as compared with 6 percent in 2007 and 2008 respectively.
The IMF made no demands for cuts to Pakistan’s massive military budget. The issue of defence spending was not discussed during the negotiations. For years, the US has had a close partnership with the Pakistani military, using it as an instrument of its predatory foreign policy, first again the Soviet Union and recently in expanding US influence in the oil-rich Central and West Asia. This has included support for a succession of Pakistani military dictatorships.
The Pakistani economy was already mired in crisis before the eruption in 2008 of what is conceded to be the worst financial crisis since the Great Depression. In the first eight months, Pakistan was roiled by rising oil and food prices, a sharp decline in the value of the rupee, a chronic shortage of electricity, recurring blackouts, and a slowdown in Pakistan’s real-estate and services-led economic expansion.
The financial crisis and continuing political instability dealt the economy another body blow. Not only foreign investors, but also large swathes of the Pakistani elite, pulled their money, or at least much of it, out of the country. By November 2008 the country’s foreign reserves had fallen by 75 percent to just $3.45 billion.
But the deteriorating economic situation left it with no choice. Under conditions of a global credit crunch, its closest allies -- the US, China, Saudi Arabia and the EU -- rebuffed Islamabad’s request for emergency financial aid, insisting that any aid would be conditional on Pakistan first obtaining IMF support.
According to the IMF itself, even after the $7.6 billion loan, Pakistan needed another $20 billion to get control over its imbalances. It was far from clear from whence these funds will come. The so-called Friends of Pakistan -- an inter-state group founded on the initiative of the US, Britain and Saudi Arabia, and including Germany, France, and China -- failed to commit any funds to Pakistan.
The reality is that Pakistan’s IMF-approved stabilisation programme aimed at making the country a better source of profit for international and domestic capital.
As for the claims of a “targeted social safety net,” not only 0.9 percent of GDP, constituted a pittance where more than 40 million people live in dire poverty. The IMF had devastating impact on the economy as a whole, and especially the most vulnerable layers of society. Already, there have been significant popular protests against the subsidy cuts.
Interest rates increase and government spending cuts lead to widespread job losses, thus further swelling the ranks of the poor in recent years. The other blow to the poverty-stricken came after widespread devastations from floods of 2010 that hit more than 20 million Pakistanis that were already impoverished.
These policies and natural disasters caused three million job cuts in various sectors and pushed another 5.6 million to 7.5 million Pakistanis into poverty. Presently, while ordinary Pakistanis are facing sever economic hardships, expecting more ‘sacrifices’ from them will be unrealistic and will increase anger and political temperature. Increasing electricity tariff for domestic consumers without any increase in income will be unrealistic.
Loans should be negotiated on the basis of future needs and possible impacts. What leaders and economic managers need to learn is that not every time a loan can bail out because while it solves a few problems it creates many others. Economic growth can only be guaranteed through policies that benefit the majority.
writer is Deputy Chief of South Asia Partnership Pakistan and Global
The money routed for debt servicing is five times higher than the federal development budget
By Zubair Faisal Abbasi
After looking at the debt liabilities of different countries, specially the ones which grew faster than others, many analysts argue that it is not the debt per se which matters. No doubt there is a school of thought which argues for a ‘sustainable debt’ as well. However, there is a synthesis that what matters most is the judicious use of resources and effectiveness of economic policy which allocates resources in different sections of the economy to generate streams of economic growth.
The argument is that if economy is growing and new sources of economic growth are being successfully experimented with, then an apparently large debt is manageable. If growth is not picking up momentum then the size of debt and the ability to pay back matters most. In the case of Pakistan, it appears that since the rate of growth has come down (around 3 percent) after FY07 and the debt situation has worsened from 55 percent of GDP to 62 percent of GDP, there are some areas in which the country needs to be vigilant.
For example, the issue of debt servicing (retiring the debt) requires attention because the money routed for debt servicing is five times higher than the federal development budget. Another worrisome factor is that the country has received around half of the committed US$ 1.4 billion from the Coalition Support Fund (CSF) while the expenditure on security has actually increased many folds during the last three years -- taking Pakistan in a very difficult financial situation. This needs to be addressed on a priority.
There has been a reported increase in debt-servicing by 43 percent during the last five years which is around US$ 3.112 billion while the total external debt has reached US$ 55 billion in June 2010. By September 2010, the total debt and liabilities were reported to stand at 73.3 percent of the GDP. A worrisome situation is that around 65 percent of the budget goes to debt retirement, defence related expenditures (total external debt is also contributed by defence related debt), and current expenditure of the government. At the same time, some analysts argue that around 60 percent of Pakistan’s economy is out of the tax net which makes our debt burdens more burdensome.
It has been argued that the government is pursuing the policy of taking more loans to retire the old ones. Where this state -- the state meaning the people and the government -- is failing? In fact, it is not being able to restructure the system of public finance and mobilize resource from domestic economic activity. Some analysts have claimed that the government has violated almost all of the provisions of ‘Fiscal Responsibility and Debt Limitation Act’.
It is important to mention that a certain section of economic policy experts have contradictory opinion on such Acts which have been enacted at the behest of International Financial Institutions (IFIs). They argue that such efforts for the so-called ‘stabilisation’ have resulted in erosion of financial capacity of the state to fuel the engine of economic growth through public investments in creation of new markets, human development expenditures, initiation of new production lines, and research and development capacity. In this line of argument, they conclude that public sector investment which thus ‘crowds in’ the private investment has been reduced in a number of countries. Pakistan also needs to undertake a serious analysis of such impacts of the Act.
On another account, the prescription of IMF to impose RGST and bring agriculture and services sector under tax net is not bad in itself but it is tricky to collect taxes and ask businessmen to contribute when economy is not showing signs of growth. However, a counter argument is that Pakistan’s economy has average natural rate of economic growth which is around 2-3 percent per annum and, currently, the economy is running along that curve. Therefore, the new taxes are needed to stabilise the economy in the first phase and generate growth momentum later.
At the same time, if the US$11.3 billion debt trap has to be escaped then Pakistan needs to seriously pursue a growth strategy which is rooted more in empirical evidences of successful growth strategies across the world and its own circumstances than being carved out of the text books of neo-liberal Chicago economics. However, in the short run, the country needs to balance its books so that not only the next US$ 1.7 billion tranche is released but also the stalled assistance from World Bank, Asian Development Bank and Islamic Development Bank, which is close to US$ 500 million, also joins the financial stream of Pakistan.
While the rate of growth is faltering, the issue of debt burden and needed economic growth is becoming complex, especially when slogan of ‘austerity’ allows governments to cut development budget without removing fat on wasteful expenditures. What is a ‘waste’ is a tricky question as well. For example, the Planning Commission has removed scholarships for Pakistani students who wanted to go abroad with a promise to come back and serve Pakistan. Such expenditures were thought to be a fat and removed. While providing a new vision for growth strategy based on innovation and research and development as argued by famous economist Paul Romer, the economic policy prescription on scholarships seems to be a significant contradiction which is a hallmark of the State of Pakistan in a number of ways.
Economic managers of Pakistan should know where the fat actually lies, where the social efficiency lies, and where the real waste and leakages have to be plugged so that they can manage debt while keeping Pakistan growing at a respectable rate.
writer is Principal Consultant with Impact Consulting
Faiz and ‘Anthems of Resistance’
By Beena Sarwar
I am no great expert on Faiz but his poetry speaks to me, touches my heart just as much as it does every other liberal, progressive, secular-minded person I know. Perhaps his poetry, with its universal messages about truth and justice, sorrows and joys that are just simply human messages, also touches some hearts that are not progressive and secular.
There’s also a personal connection that was put in context last weekend at a discussion on Faiz at panel organised at the Left Forum (formerly the Socialist Scholars Conference that became an annual event starting in 1981). I was roped into moderating it after the original moderator David Barsamian, the well-known radio producer and journalist (and fluent Urdu speaker), couldn’t make it at the last minute.
The conference was held at Pace University in downtown Manhattan, attended by some 3,000 leftists and socialists from around the world, including Egypt. The Faiz panel, organised by Brian Droulet of Deep Dish TV, aimed to provide a contemporary political context to Faiz at a time when the world is in an uproar and slogans of revolution rend the air from the ‘Mid-East to the Mid-West’ to quote from the news website Truthout.org.
The panel borrowed its title from ‘Anthems of Resistance’ (Roli Books, 2009), a definitive book on progressive Urdu poetry and the All India Progressive Writers’ Movement co-edited by the brothers Ali and Raza Mir from Hyderabad Deccan.
Ali Mir’s lyrical recitations of Faiz’s verses set the stage for the writer Andy McCord to talk about the political context of Faiz’s poetry. As he reminded us, Faiz was arrested 50 years ago, almost to the day, when it was spring in Pakistan -- March 9, 1951.
McCord cited de-classified papers that testify to how the American authorities’ fear of Faiz. Warwick Perkins, the US Counselor, said that an intellectual group is a much greater threat to security, and referred to Faiz as the ‘most dangerous Communist’ of his time’.
“The Americans may not have been behind Faiz’s arrest but they were certainly pleased by it,” added McCord.
Immediately afterwards the crackdown began mass arrests of all progressive writers, journalists, students, teachers and thinkers, including my father, Mohammad Sarwar, then a medical student and leader of the Democratic Students Federation.
When he was finally released from prison in 1958, many of Faiz’s old friends avoided meeting him but younger activists like Dr M. Sarwar, Saleem Asmi, Dr Haroon Ahmed made it a point to rally around him.
After initially being held incommunicado for three months, Faiz was taken on a special train to Hyderabad (Prisoner no. 13). The journey -- being able to see the fields and the sky, as the train made its way south was a source of great pleasure to him -- even the food was better (though he may have been sounding more cheerful to give hope to his wife Alys). McCord noted that his imprisonment actually pushed Faiz into resuming his productive poetry. He composed six poems in his head during that train ride, and sent to Alys who got them published. The pittance from the published poems helped sustain their family.
“Faiz always worked, as a editor, and as a poet,” as McCord noted, “to put food on the table.”
Alys too, got a job editing the children’s page of the Pakistan Times, owned by the progressive landlord Mian Iftikharuddin. Writing editorials under the pen name ‘Apa Jan’ on the children’s page, Alys Faiz greatly impacted and helped at least one lonely young girl who had left her home in Pratapgarh, India behind -- Zakia Hasan to whom Mrs Faiz became a lifelong mentor and friend (Zakia and Sarwar later met and married in Karachi; I was their first born).
Bilal Hashmi, a student of comparative literature of South Asia, put Faiz in a global context, pulling him out of his ‘national poet’ persona. “Faiz is a poet who transcends national boundaries,” as he put it.
He focused on Faiz’s deep interest and involvement in the struggles of newly independent nations -- from Palestine and Vietnam, to Chile and Africa -- “the struggles of my own people and people like me” as Faiz said in a lecture on the role of international exchange in cultural development, that Hashmi quoted from. His contribution to international peace discourse earned him the Lenin Peace Prize, the Soviet equivalent of a Nobel (My parent’s romance included a drive to see Faiz off when he left for Moscow via Karachi to receive the prize).
From 1978 till his death in 1984, as Hashmi reminded us, Faiz edited the Afro-Asian periodical ‘Lotus’, one of the most significant magazines of its time. Faiz’s interest in artistic expression as a form of resistance continues to inspire activists today.
For writer Naomi Lazard, who translated Faiz’s poetry into colloquial English after meeting him at a writers’ conference at the East West Center in Hawaii, Faiz was a “fellow laugher”, able to see the humour in the windowless rooms of the building they found themselves in. “Faiz told me he was a sufi and had been educated in sufism,” she said. The title of her book of translations The True Subject came from an insight Faiz gave her -- “the true subject of poetry is the loss of the beloved”.
“Iqbal didn’t create any new style of poetry,” noted Saiyid Ali Naqvi. “Faiz did -- an amalgam of lyricism and politics, classical and modernism.”
“Every government that came remained afraid of Faiz,” he mused, noting that even after Faiz was released, they kept tabs on him. On one occasion, after having taken over the government and the newspapers, Ayub Khan had summoned Faiz.
“I was working at my office (at Mangla, overseeing the building of the dam) when a fellow entered without knocking and asked if Faiz had stayed with me the previous night. I said yes, he was my guest. The man then wanted to know where he was. I told him that Faiz had left to meet President Ayub.
“‘Would you like me to call and find out if he’s there?’ I asked and reached for the phone. The fellow left rather hurriedly.”
Rafiq Kathwari talked briefly about his exposure to Faiz and Iqbal, that had sustained him during his nearly year long-imprisonment in jail as a student in Kashmir. He closed with a powerful recitation of Faiz’s Hum Dekhke.nge in translation.
What about Faiz’s ‘silence’ on the events of 1971, asked Pakistani journalist Hasan Mujtaba during the discussion later.
“A poet’s first responsibility lies in his poetry,” McCord responded. “It was very controversial to speak out at that time. He didn’t sign Tahira Mazhar Ali’s petition in support of East Pakistan -- but he was in Karachi at the time. But he did address 1971 and the events preceding it through his poem Hizr karo meray tan se (known better by its first line, Ab shurooh qatl-e-aam ka mela) published in 1971, with graphic references to “the cries of my blood”, invasion of “my body” and slaughter. Later, his Hum ke Thehre ajnabi refers to his anguish at the separation and bitterness.”
Today, when there are other curbs on speaking out, Faiz’s poetry is found emblazoned on banners by activist groups like Citizens for Democracy speaking out for justice and the rule of law -- for example at their signature campaign urging justice and the rule of law (15,000 signatures in one day), and well-attended Reference for slain Minority Affairs Minister Shahbaz Bhatti. In Pakistan, Faiz’s exhortation to ‘bol’ (speak out) has never been more relevant.
More taxes or more taxed?
It’s time politicians, judges, and civil-military high-ups make their tax declarations public
By Huzaima Bukhari and Dr. Ikramul Haq
On March 15, 2011, the government resorted to the most undesirable practice of levying taxes through Presidential Ordinances -- though it is as per Constitution -- bypassing the true parliamentary process. Such regressive taxation -- leaving the rich unaffected and subjecting the poor to suffer more -- is a most worrisome aspect.
Measures announced to generate Rs53 billion during the remaining period of the current fiscal year amidst economic hardships faced by the people have been justifiably criticised by independent analysts. There is a consensus that these steps will further accelerate inflation and retard economic growth.
Levy of 15 percent surcharge under Income Tax Ordinance, 2001 increasing burden on existing taxpayers (those outside the tax net will remain unaffected!) and its impact on taxes withheld at import and supply stage is highly lamentable.
The burden of surcharge is not confined to individual taxpayers as wrongly claimed by official quarters. On goods and services and host of other transactions, in fact, rates of withholding taxes stand enhanced, overnight increasing cost of doing business and making commodities and services more expensive -- deteriorating overall business environments and quality of life for overwhelming majority of population.
In indirect tax regimes -- sales tax and federal excise -- changes have been made having negative effects for agricultural sector and export-orientated units. The approach of the Federal Board of Revenue (FBR) is to avoid taxing the rich, and instead ask withholding agents to collect taxes at source, which is easier, though potentially anti-business and anti-people.
Adam Smith in his classic work: An enquiry into the nature and causes of the wealth of nations 1776, observes, “Remedy inequality of riches as much as possible, by relieving the poor and burdening the rich”.
A successful tax system must reduce inequalities through a policy of redistribution of income and wealth. Higher rates of income taxes, capital transfer taxes and wealth taxes are some means adopted for achieving these ends. In Pakistan, there has been a gradual shift from equitable taxes to highly inequitable taxes.
Failure to remove inequalities through progressive taxes and shift to presumptive and easily collectable ones has destroyed all canons of taxation. This deviation has transferred the burden of taxes from the rich to the poor and the present government, though posing to be pro-poor, is bent upon making things even worse.
It is high time to make a paradigm shift in the prevalent tax policy. Our revenue potential is not less than Rs.4-5 trillion provided pro-growth, equitable and rational policies are devised with the consultation of stakeholders. We need to tax the rich, broaden tax base, overhaul tax machinery, rationalise tax rates, withdraw all exemptions and concessions available to the privileged sections of society and plug revenue leakages.
We cannot succeed in tapping optimum tax potential unless national tax policy parameters are redefined and massive structural reforms are made. The main ingredients of this policy can be (a) progressive direct taxation of income, wealth, and property transactions, (b) taxation of commodities (customs duty, excise levy, and sales tax) purchased largely by high-income groups, and (c) subsidies (negative taxation) on goods purchased by low-income groups.
Successive governments have never bothered to initiate any meaningful debate on formulation of a pro-growth ‘National Tax Policy’. On the contrary, they keep on introducing onerous tax policies that are pushing millions of people below the poverty line.
In the wake of massive destruction caused by floods, we presented in these columns many proposals for generating extra revenues without harming the economy. The government tried its best to introduce Value Added Tax (VAT) -- later renamed as Reformed General Sales Tax Act (RGST) -- but failed to get the Bill passed by National Assembly. It was pending in the Lower House, after being adopted by Senate -- when the government under tremendous pressure introduced tax measures using powers available to the President under Article 89 of the Constitution. It is high time that all the political parties sit together and evolve a consensus for pulling the country out of economic difficulties.
Efforts at the national level are needed to move quickly and decisively to reverse regressive taxation and bring the rich and mighty into tax net. Our political culture supports racketeering. Tragically, this social evil is doubly compounded as it necessitates greater and greater tax burden on law-abiders. The most crucial problem faced by the State is devising of effective measures to curb tax evasion to ensure distribution of the burden of taxes fairly and justly.
The duty to pay taxes is seen as a collective responsibility rather than a personal one. The ability-to-pay principle views tax policy issues in isolation to incidence of public expenditure. Many regard this principle as the most equitable and just method of taxation. It is emphasized primarily for its redistributive role. We in Pakistan have completely deviated from this principle, which is a constitutional obligation of the government under Article 3 of the Constitution.
The existing tax protects exploitative elements. The poor are paying exorbitant sales tax of 17 percent to 23 percent (in fact 40 percent on finished imported goods after adding customs duty, special excise duty, federal excise duty, sales tax after mandatory value addition and income tax at source) on essential commodities. But the mighty sections of society, such as absentee landlords, big industrialists, generals and bureaucrats are paying no wealth tax/income tax on their colossal assets/incomes. In a country where the rich make billions on a daily basis, tax-to-GDP ratio is pathetically low at 9percent.
Rent of agricultural land derived by absentee landlord should be taxed heavily forcing them to give up ownership. These lands should be given to the landless tillers who are exploited by the feudal class. The corporate rate should be brought down to 20 percent to promote industrialisation, but any director or other office holder (having more than 20 percent shares) drawing annual salary exceeding Rs5 million should be taxed at the rate of 50 percent.
Because of callousness of rulers, massive tax non-compliance is the rule of the day. Rulers do not pay taxes despite having enormous assets at home and abroad. Taxes should be for the welfare and benefit of the public at large and not for the luxuries of the rulers and State functionaries.
Tax policy should be used as a tool of distributive justice. The government should launch programmes, financed mainly through taxes, to solve the twin problems of unemployment and poverty. These welfare-oriented schemes may also include subsidized/free medical and educational facilities, low-cost housing, and drinking water facilities in rural areas (especially flood-ravaged ones), land improvement schemes, and employment guarantee programmes.
Once people see the tangible benefits of the taxes paid, there will be better response to tax compliance. Taxes cannot be collected through harsh measures and irrational policies. It is high time that politicians, judges, civil-military high-ups and public office holders make their tax declarations public.
We need to bring fundamental structural and operational changes in all spheres of governance. For achieving rapid industrial and economic growth, reforms are needed urgently. Once these goals are fulfilled revenue collection will automatically be taken care of.
writers, tax lawyers, are members of visiting Faculty of Lahore University
of Management Sciences (LUMS)
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