crisis
After the rains
Excessive rains pose a serious challenge to whatever infrastructure is left in the shape of local disaster management
By Dr Noman Ahmed
As expected, the climate change syndrome is now out in the air. Beginning with torrential rains in the north, the monsoon has perhaps extended its stay in the terrains of Sindh.

issue
Education reforms 
It’s time!
It is the state’s responsibility to enable every individual to potentially draw the maximum from learning and training opportunities
By Humayun Akhtar Khan
In a way, a large number of our present day social and political problems are rooted in the inadequacies of our education system. Over the years, our state machinery has either been unable or unmoved to proactively upgrade the sector which ultimately supplies the country’s human resource base. And considering how our divergent public and private learning systems offer distinctly different curricula to the upper and lower classes, it is little surprise that even after six and a half decades literacy is one of the country’s biggest problems, with education accorded one of the lowest chunks from the already miniscule development budget.

Anti-corruption or
anti-colonialism?
There is a tendency to ignore instances of abuse of public power when laws and policies are designed to rob a people off their rightful ownership over public resources
By Ahsan Kamal
An aged man donning a white kurta is sitting in a makeshift tent, vowing to ‘fast unto death’ against the corrupt practices of the powerful few in a country where millions go hungry every day. Sounds familiar? No, I am not talking about Anna Hazare though many have used the label for Jahangir Akhtar, the 68 year old seasoned political activist who started his hunger strike in Islamabad on September 12.

crisis
Competitiveness count
Institutions need a lot to perform to improve their ranking in assessments report
By Hussain H Zaidi
In the latest edition of the World Economic Forum’s Global Competitiveness Report (2011-2012), Pakistan’s ranking has slightly improved to 118 (out of 142 countries) from 123 (out of 139 countries) in the previous year. This may be good news. However, it must be kept in mind that the ranking is still very low and that Pakistan’s position on the global competitiveness index (GCI) has gone significantly down since 2007-08 when it was 92nd.

Unfair share
Steps should be taken to ensure actual amount of hydel profits to Khyber Pakhtunkhwa
By Tahir Ali
The debate on the net hydel profit (NHP) arrears the Water and Power Development Authority (WAPDA) owes to Khyber Pakhtunkhwa has resurfaced with an all parties’ conference in Peshawar, unanimously calling upon the federal government to pay the NHP arrears of Rs258 billion as soon as possible.

performance
Manufacturing,
the neglected area
The bad shape of manufacturing sector in Pakistan has serious implications for economic growth, social well-being, and jobs
By Zubair Faisal Abbasi
There was a time when economists of neoclassical genre looked at industrialisation from the angle of trade policy rather than the other way round. It was argued that the process of trade would help discover comparative advantages in commodity production.

Politics of patronage
Criminal elements in Karachi must be dealt with an iron hand
By Salman Abid
Among various challenges being faced by democracy in Pakistan, one is violence, use of weapons and highhandedness of criminal and mafia elements within political parties.

 

crisis

After the rains

Excessive rains pose a serious challenge to whatever infrastructure is left in the shape of local disaster management

By Dr Noman Ahmed

As expected, the climate change syndrome is now out in the air. Beginning with torrential rains in the north, the monsoon has perhaps extended its stay in the terrains of Sindh.

Continuous downpours during August and September have unleashed havoc on the life and property of ordinary folks. While the ministers and their henchmen are busy in political wrangling and point scorings of sorts, hundreds of thousands of people are struggling to survive.

The most disappointing part is the gross incompetence of the disaster management authorities at the national and provincial level which remained conspicuous by their absence from fields. One has the right to question about the billions of rupees from local sources and donor funding which seem to have only brought perks and privileges to a handful of unscrupulous functionaries.

The compound effect of recurring rainfall and overspill of mega drains in Sindh has made the matters complex and difficult to handle. The tougher challenges of rehabilitation, re-construction, re-settlement and re-mobilisation cannot be delayed for long. It shall require single-minded application to chalk out immediate action projects that are acceptable to all stakeholders. And the features of sustainability and practicality of solutions shall always rank high among the deciding parameters.

As pointed out by experts, a comprehensive analysis of current rain and flooding saga must be carried out without delay. Longstanding and specific reasons behind the unpredictable spills from Left Bank Outfall Drain (LBOD), weather patterns leading to rain and flooding; causes for the hindrances in reaching out to marooned population are some of the key factors.

Some learning is stark apparent. Mobilisation of the government at the local level is out of sight. The absence of local government was sorely missed by men on the street. Unless correct lessons are not learnt repetitions of the same episodes shall continue.

The Sindh government was quick in making announcements of welfare measures which were hardly considered necessary at the point in time. There is a need to identify physical and geographical causes that led to the rain disasters.

While moving towards rehabilitation and re-construction, a precise and accurate estimate of damage to property and assets must be prepared. Given the absence of authenticity of claims, a dispute resolution mechanism must be instituted within this framework.

The damage and destruction assessment of district, provincial and national infrastructure should be done. A multi-layered planning framework must be put in place to deal with the corresponding levels of damages and losses at each tier of input.

Thus, plans at the provincial, district, tehsil/taluka and ward scales need to be made to provide scientific premise for absorbing the investments in the domain of rebuilding and re-construction. Ad-hoc and politically motivated decisions related to spot projects must be swapped with dependable plans and worthwhile projects. The undesirable approach of doling juicy contracts for petty gains must be avoided.

Floods also pinpoint the need for a mechanism of water management. The experiences show that the privileged always succeed at the cost of the poor and less fortunate — disasters being no exception. Raising of illegal embankments, causing breaches in standard protections and unauthorized drawing of water in spells of scarcity must be prevented.

Water management and surveillance of primary and secondary drains is an administrative and technical task which cannot be executed without political empowerment. The existing array of moribund institutions such as Irrigation and Public Health Engineering Departments may be reformed to handle the responsibility.

Unplanned attempts by successive regimes to distribute land in the flood-prone locations to political favourites have caused immense harm to the usual process of embankment protection.

Rampant encroachments and unauthorised occupation of flood basins has caused localised damages due to unprecedented changes in the flood path. Construction of local and national infrastructure with flood-insensitive designs has not only damaged the said infrastructure but also the adjoining areas.

Large scale deforestation at different terrains has caused overwhelming destruction. Only recently, a provincial chief minister had issued orders of clearing local forests to make way for crop lands. Such suicidal policies must be done away with, once and for all. Funds will pour in reasonable volume.

The fear remains that funds are spent in the absence of an effective plan. Nepotism and corruption are the usual predicaments. It is only logical that re-development works are undertaken in an integrated manner under sound planning to ensure long-term performance. Techniques of simulation and other scientific tools can make the planning process articulate and free of errors.

Rains will follow a repeat cycle in times to come. A logical approach to deal with them is to re-direct the water where territorial and technical possibilities of storage can be worked out.

Sindh is a vast landmass with 140,915 km territory. A substantial part of this land is barren. If a workable rain and flood diversion planning is expedited, a sizable volume of these swelling waters can be turned into a most useful resource for dry seasons and in dry strips.

But that will require political consensus of stable footings, transparency in decision-making and trustworthy technical competence to formulate alternatives. Consolidation and periodic repair of existing water infrastructure, planning and development of new flood canals and diversion works, preparation of need-based water threshold plan and utilisation of information tools for flood warning should be a priority. Dealing with the crisis as an isolated event will prove counterproductive and out of sync with the reality.

 

issue

Education reforms

It’s time!

It is the state’s responsibility to enable every individual to potentially draw the maximum from learning and training opportunities

By Humayun Akhtar Khan

In a way, a large number of our present day social and political problems are rooted in the inadequacies of our education system. Over the years, our state machinery has either been unable or unmoved to proactively upgrade the sector which ultimately supplies the country’s human resource base. And considering how our divergent public and private learning systems offer distinctly different curricula to the upper and lower classes, it is little surprise that even after six and a half decades literacy is one of the country’s biggest problems, with education accorded one of the lowest chunks from the already miniscule development budget.

Sporadic attempts to deal with the education dilemma have largely failed because they overlooked the origins of the cleavage that alienates the majority, reserving modern, English-medium education for the privileged few. By not stressing common curriculum in institutions across the country, those at the helm of affairs have accepted a situation that creates divisions at the source, denying the lower and lower-middle income groups any chance of providing their children with quality education and therefore a secure future.

The solution must, therefore, begin with identifying and formulating a widely accepted common curriculum for schools across the country, both private and public. We must begin training the youth of tomorrow right from the first day. We must ensure that they have access to modern syllabi; that they grow up genuinely understanding and appreciating their surroundings while realising their duties to the country.

While we go about modernising the common curriculum, relevant authorities must be directed to mould the system into one that encourages skill development and discourages old, unhealthy habits like rote learning that have typified our education system. Practices like rote learning inculcate a tendency to follow blindly without understanding concepts.

As subjects and syllabi are revised, so too must the examination system into one whose integrity is beyond question. When the system produces educated individuals who in turn become part of the system itself, an automatic correction can be hoped for. But in the interim period, it is up to the government to ensure integrity of the examination process, a key step towards ensuring success of the proposed overhaul. Integrity of the examination system can be safeguarded by including educationists from the public/private sector in Pakistan and abroad initially until enough human resource is trained locally. The system can be duly accredited by a foreign examination board.

Any education reforms that overlook the reality and demographics of those it is meant to impact is bound to fail. We need to be mindful that over a long period of education neglect, a system has evolved where children earn the family bread starting from their early years. While it is always advisable to move them immediately towards education and learning, it must also be appreciated that doing so risks depriving their families of essential subsistence. Therefore, the proposed modification must make room for children whose work is essential for their families to survive. Running dual shifts and accommodating distance learning must, therefore, be an integral part of education reforms.

Once a uniform curriculum has been approved, the next important step will be training of teachers. It is no small challenge. Again, while in the long term this problem will solve itself, the government will need to act proactively in the initial stages. Coordinated teachers’ training programmes will have to be undertaken to ensure that the quality of education being imparted is not compromised.

The next most prudent step will be evaluation of the schools themselves. A credible school evaluation system like OFSTED (Office for Standards in Education, UK) should be set-up to provide independent advice on matters of policy to the government and to publish an annual report on the quality of education provision in Pakistan. This evaluation body should carry out regular inspections of each school, public or private, resulting in an evaluation of the effectiveness of the school. Recommendations should be given for improvement in teaching, learning and management of schools. The evaluation should be carried out by well-known and credible professionals of the public/private sector and representatives of the parents.

Vocational education is another serious concern, perhaps even more important than the primary and secondary education system that must precede it. It determines the long term direction of the student, which builds on the decade or so of education that has been invested in him. Therefore, vocational and technical education should be encouraged so that education is linked to enhancement of skills.

One of the most important questions that confront education reform planners is the madrassa system. As Pakistan’s problems of extremism have multiplied post-9/11, the madrassas have come under unprecedented scrutiny, with demands for radical overhaul. Upon close inspection, while it is apparent that their curricula will have to be modernised, it is also a fact worth noting that unlike our traditional education sector, these institutions provide boarding, lodging, education and meals for their students and that too at very low costs. It thus becomes apparent why marginalised groups would prefer enrolling their children in madrassas as opposed to government schools in their present shape. Similar facilities should be strived for in public schools too.

Public libraries equipped with the modern research and reference tools, including internet facilities, must be encouraged. The Higher Education Commission should be ensured autonomy and encouraged to improve quality of universities by enhancing its budget. Private sector should be given incentives to invest in all levels of educational, vocational and teachers training institutions. An allocation of 8 percent GDP to education should be our ultimate target.

We must tackle these issues in ways that minimise negative fallout and encourage quality education for a majority of our children. By investing in the children and youth of today, we make an active investment in the Pakistan of tomorrow. All said and done, there are really very few practical ways of discouraging the brain drain and encouraging productive Pakistanis to help improve the nation’s outlook and national income. It must begin with providing every Pakistani, rich or poor, upper class or lower, with the same basic opportunity for education. It is the state’s responsibility to enable every individual to potentially draw the maximum from learning and training opportunities in preparation for joining the job market and becoming part of the productive process.

The writer is the Secretary General of Pakistan Muslim League and a former federal minister

 

Anti-corruption or
anti-colonialism?

There is a tendency to ignore instances of abuse of public power when laws and policies are designed to rob a people off their rightful ownership over public resources

By Ahsan Kamal

An aged man donning a white kurta is sitting in a makeshift tent, vowing to ‘fast unto death’ against the corrupt practices of the powerful few in a country where millions go hungry every day. Sounds familiar? No, I am not talking about Anna Hazare though many have used the label for Jahangir Akhtar, the 68 year old seasoned political activist who started his hunger strike in Islamabad on September 12.

The comparison with Anna dissolves when we look beyond the issue of tactics. The two men are poles apart in their diagnoses of the major societal ills, proposed solutions, and their relationship to the very idea of politics.

Team Anna identifies corruption (narrowly defined) as the main culprit and tries to rally support by claiming moral authority with a self-avowed antagonism towards politics (not simply towards politicians). Jahangir Akhtar and his followers see the disproportionately high military spending as the root of most of Pakistan’s ills and demand the creation of a welfare state by doing away with the national security state and the doctrine of existential enmity with India. Anna demands the creation of a Jan Lokpal (citizen’s ombudsman) with powers that extend above and beyond the tripartite system of the legislature, executive and judiciary.

Jahangir asks for a reduction in defense expenditures, increase in budget allocations for health and education, and accountability of politicians, bureaucrats, generals and judges through legislative action and electoral accountability. Anna assumes the appearance of a self-appointed messiah and a moral crusader against politics itself. Jahangir acts with dignity and respect towards the masses and their chosen representatives.

Many have called the Anna-Phenomenon ‘the tyranny of the people’, top-down paternalism, anti-democratic, and narrowly focused on a certain kind of corruption while ignoring other economic injustices. The role of corporate media and support by Hindu nationalist has also raised concerns. But I wish to comment on how this movement seeks to legitimize itself and identifies with its support base. On what grounds does it demand sweeping changes in the structure of government? India is after all a celebrated democracy. Why not work within the domain of politics?

The Anna-phenomenon is a populist movement, grounded in middle-class outrage over recent media-led emphasis on mega-corruption cases in India. Legitimacy is sought in a moral space, neatly separated from the domain of politics. The movement is hardly representative of Indian masses, but this does not deter Team Anna from claiming the right to speak for the people. Team Anna is eager to tell everyone that its leaders do not intend to participate in mainstream politics. Politicians and bureaucrats are seen as "the enemy of the people" — an abstract, faceless and homogenous entity.

With these claims a rationale appears: "We, the people" are moral and incorruptible; only we can reform the system on the basis of our moral authority; but our integrity remains intact only if we remain outside the domain of ‘dirty’ politics; for politics and politicians are synonymous with corruption. The rhetoric of anti-corruption then provides for "extra-political" executions.

The claim of moral authority has shallow foundations. The same middle-class is a participant and beneficiary of systemic corruption and will not shy away from rishwat and sifarish to further their interests. Some may object and forward a defense. The everyday corruption of "the people" is the question of day-to-day survival and must not be equated with the massive corruption by the (political) elites. I find myself sympathetic to this view, especially in cases of "corruption" by the oppressed and popular classes who are forced to use unofficial/"illegal" ways since all other official doors are shut in their faces. But there are two problems with such concessions.

First, perceptions can be deceiving. Transparency International reports that a majority in Pakistan identifies police and revenue departments as the most corrupt. Why don’t these surveys identify the same players who are the target of the collective moral outrage characteristic of the Anna-Phenomenon, in India and in Pakistan? The role of media must be questioned here.

Second, while we all talk about the ‘culture of corruption’ and how it affects everyone, we never consider our own actions as corrupt, ‘illegal’ or immoral. Our own acts are seen as exceptions and by definition isolated events. I am not pointing out this contradiction as a case of moral failure but rather a political one. The belief in this state of exception for ourselves, this denial, is only convincing when we can blame someone else. Absolving ourselves of any social and political responsibility, we find the politician, bureaucrats and state official as easy targets.

Furthermore, I do not agree with the narrow focus on corruption, especially the emphasis on its "illegal" nature. There is a tendency to ignore instances of abuse of public power when laws and policies are designed to rob a people off their rightful ownership over public resources, which are then transferred via ‘legal’ channels to the coffers of the economic, political and military elites. The only way to tackle this form of corruption is through the political process.

In our country, the roots of this systemic problem go back to the formation of the state institutions during the colonial period. Lack of political accountability has perpetuated these practices. Consider the granting of land to officers and soldiers of our armed forces. The colonial state feared an internal armed revolt and was forced to reward its soldiers to prevent that from happening. But the policy of land grants continues till this day. This (corrupt?) practice is even more lucrative now with urban land grants and the development of various ‘housing authorities’ controlled by the armed forces. These practices are justified in the name of national security, but reek of a rotting colonialism.

This year almost two thirds of our annual federal budget will go to defense expenditure and debt servicing. What is corruption if not the wholesale transfer of almost 65 percent of our expected national revenue to the military without any parliamentary oversight and accountability? When laws and policies of a country are designed to deprive people of their rightful ownership of public resources, then what use do we have of "legality" and legally defined corruption?

With intellectual sagacity and moral consistency, Jahangir Akhtar hits at the core of Pakistan’s many ills — the structural problem of corruption and misappropriation of public funds done in the name of a false doctrine of national security. Arundhati Roy noted that while Anna Hazare’s tactics might be Ghandian, his politics is not. Jahangir Akhtar on the other hand is a true (anti-colonial) revolutionary, waging a peaceful battle of life and death. Let us rally behind him, for this voice must not be silenced. Let us turn his battle into our struggle.

 

The author is a lecturer of history and politics at Quaid-i-Azam University, Islamabad

 

crisis

Competitiveness count

Institutions need a lot to perform to improve their ranking in assessments report

By Hussain H Zaidi

In the latest edition of the World Economic Forum’s Global Competitiveness Report (2011-2012), Pakistan’s ranking has slightly improved to 118 (out of 142 countries) from 123 (out of 139 countries) in the previous year. This may be good news. However, it must be kept in mind that the ranking is still very low and that Pakistan’s position on the global competitiveness index (GCI) has gone significantly down since 2007-08 when it was 92nd.

The GCI measures the micro and macro economic foundations of an economy’s competitiveness, which is defined as "the set of institutions, policies, and factors that determine the level of productivity of a country." Competitiveness is regarded as the key driver of growth.

The edifice of competitiveness rests on 12 pillars, namely institutions, infrastructure, macro economic stability, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, market size, business sophistication, and innovation.

Coming back to Pakistan, it needs to be seen how the country has fared on these twelve pillars of competitiveness during last half a decade. We start with the institutions.

A country’s institutions, for the purpose of our discussion, comprise the legal and administrative framework within which the economic players — individuals, businesses and the government — interact. The institutions may hinder or promote growth and investment, may reward or penalise efficiency and may or may not apportion costs and benefits fairly.

Pakistan’s ranking with respect to institutions on the GCI index has been rather low. In 2007-08, the ranking was 81, which deteriorated to 85 in 2008-09, 89 in 2009-10 and 112 in 2010-11. In 2011-12, the ranking has slightly improved to 107.

The most obvious problem associated with Pakistan’s institutional framework is the high economic cost of terrorism on which Pakistan is placed at 141 out of 142 countries included in the Global Competitiveness Report.

Other major problem areas are organised crime, lack of transparency in the public sector, inefficient dispute settlement mechanism and lack of adequate protection of property, including intellectual property, rights.

On infrastructure, Pakistan’s ranking has consistently gone down: 72 in 2007-08, 85 in 2008-09, 89 in 2009-10, 110 in 2010-11 and 115 in 2011-12. The major issue is the electricity shortage. The overall quality of infrastructure also leaves much to be desired. Of the three modes of transport, the quality of air transport is worst.

A stable macro-economic environment is vital to sustained growth and competitiveness. However, Pakistan has been in throes of macro-economic (ME) instability during the last few years, forcing it to seek IMF assistance. Not surprisingly, the country’s ranking on ME index has deteriorated from 101 in 2007-08 to 116 in 2008-09, 114 in 2009-10, 133 in 2010-11 and to 138 in 2011-12.

The major causes are high inflation and fiscal deficit, massive public debit, low level of savings and high interest rate spread. Access to basic health and education shores up the productivity of labour and makes it easier for workers to adapt themselves to advanced production processes.

Pakistan has had a low ranking on this indicator: 115 in 2007-08, 116 in 2008-09, 114 in 2009-10, 123 in 2010-11 and 121 in 2011-12. The relevant problem areas are low level of primary education enrolment, high infant mortality rate, low life expectancy and poor quality of primary education.

Investment in higher education and training, including on-job training, is important for an economy which wants to move up the value chain. In case of Pakistan, higher education and training has been a neglected area borne out by the country’s rather low-ranking on this indicator: 116 in 2007-08, 123 in 2008-09, 118 in 2009-10, 123 in 2010-11 and 122 in 2011-12.

The biggest impediment is low level of secondary and tertiary education enrollment followed by inadequate staff training, availability of research and training services, internet access in schools and quality of science education.

Goods market efficiency pertains to producing and selling the right product mix given the demand and supply conditions and ensuring that the most efficient firms thrive. This is another area in which the country has had a low ranking: 82 in 2007-08, 100 in 2008-09, 83 in 2009-10, 91 in 2010-11 and 93 in 2011-12. The major problem areas are trade barriers, particularly high import tariffs, import-GDP ratio, high costs of agricultural policy and number of procedures to start a business.

The next indicator is labour market efficiency. Workers need to be allocated to their most efficient use and the economy must attract talent rather than make for brain drain. On labour market efficiency, Pakistan’s score has been worse than that on goods market efficiency. The position was 113 in 2007-08, 121 in 2008-09, 124 in 2009-10, 131 in 2010-11 and 136 in 2011-12. Hence, over the years labour market has become more inefficient. The major issues are woman participation in labour force, redundancy costs and lack of worker mobility.

Savings and investment are key to economic growth. This underlines the importance of efficient and transparent financial institutions to channel national savings into their most productive use. Financial market sophistication is one indicator where Pakistan has comparatively fared well. The country was ranked 65th in 2007-08, 71st in 2008-09, 64th in 2009-10, 73rd in 2010-11 and 70th in 2011-12.

Access to loans and venture capital availability are the areas where the country’s position is quite high — 41st and 45th respectively. However, the overall availability and affordability of financial services need a lot of improvement.

Technological readiness, the next on the GCI index, means the agility with which existing technologies are adopted to raise productivity. Access to information and communication technologies (ICT) are the main planks of technological readiness. Not surprisingly, technological readiness is an obstacle to Pakistan’s competitiveness as evident from the country’s low ranking on this index: 89 in 2007-08, 100 in 2008-09, 104 in 2009-10, 109 in 2010-11 and 115 in 2011-12. The major problems are lack of technology transfer through FDI, the internet usage, and availability of latest technologies.

Of all the GCI pillars, Pakistan’s ranking is highest in market size, which includes not only the domestic market but also the foreign market. Market size is important because it enables the firms to realize the economies of scale and thus cut down production cost. The country was ranked 28th in 2007-08, 29th in 2008-09, 30th in 2009-10, 31st in 2010-11 and 30th in 2011-12. In terms of domestic and foreign market size, the country is ranked at 27 and 59 respectively. This underlines the need for increasing the export market size.

Business sophistication, the 11th indicator, comprehends the quality of a country’s overall business network and the standard of firm level strategies and operations. An important relevant concept is cluster development, which shores up efficiencies and makes for innovation.

Pakistan has occupied a middle position in terms of business sophistication: 79 in 2007-08, 87 in 2008-09, 81 in 2009-10, 79 in 2010-11 and 76 in 2011-12. Pakistan is fairly ahead (48th) in terms of cluster development. The two biggest problems on this indicator are the unwillingness of the top business management to delegate their authority at junior level and the local supplier quality. The former has a lot to do with the country’s culture of power.

Finally, we come to innovation, which is important because in the long run standard of living can be raised only by inventing and exploiting new techniques. Innovation requires above all sufficient investment in research and development (R&D).

On this GCI pillar also, Pakistan has occupied a middle position: 69 in 2007-08, 82 in 2008-09, 79 in 2009-10, and 75 in both 2010-11 and 2011-12. Interestingly, Pakistan has comparatively high place in terms of company spending on R&D (50th) and capacity for innovation (51st). However, the major problem areas are government’s procurement of advanced technological products, grant of utility patents and availability of scientists and engineers.

 

 

Unfair share

Steps should be taken to ensure actual amount of hydel profits to Khyber Pakhtunkhwa

By Tahir Ali

The debate on the net hydel profit (NHP) arrears the Water and Power Development Authority (WAPDA) owes to Khyber Pakhtunkhwa has resurfaced with an all parties’ conference in Peshawar, unanimously calling upon the federal government to pay the NHP arrears of Rs258 billion as soon as possible.

Held under the chairmanship of Chief Minister Amir Haider Khan Hoti and attended by all major political parties within or without the assemblies, the conference expressed concern over capping of NHP at Rs6 billion and resolved to back the KP government in its NHP endeavours.

Senator Haji Muhammad Adeel, former finance minister and member of KP national finance commission (NFC) team, laments that WAPDA has capped the annual NHP at Rs6bn against the dictates of AGN Qazi formula (QF), which was unanimously endorsed by NFC meeting in February 1988, approved by Council of Common Interests in January 1991 and validated by presidential NFC order No3 of 1991. The NFC had recommended increase of 10 percent on Rs6 billion for future years. He says as per KP’s calculation based on the QF, its annual NHP for 2010-11 stands at Rs40bn against Rs6bn.

"While Punjab is being paid Rs5bn for around 100MW of electricity produced at Ghazi Barotha power project, KP is given Rs6bn despite the fact that it produces around 4000MW and power tariff has been increased manifold since then," he says.

Besides the fact that Rs6bn was determined based on power tariffs of 1987 at the rate of Rs0.33 per unit, in dollar terms in 1991, Rs6bn equaled $200 million. Now it can fetch around $70 million with the current rate of return.

The Arbitration Tribunal (AT) headed by Justice Ajmal Mian had agreed to QF for calculating NHP for 1991-92 but did not apply the QF mechanism for the years onward and rather adhered to a mechanism of compound indexation of 10 percent per year in NHP, using Rs6.9bn as benchmark which was calculated on the basis of QF by WAPDA for 1991. While the provincial conference projected the arrears at Rs258bn,

Adeel says it is around Rs300bn now. "Apart from Rs75bn NHP arrears (the AT decreed it at Rs110bn but Rs35bn have been paid to the province till now), as per QF and AT award, WAPDA owes us over Rs55bn for 10 percent interest on the outstanding amount and Rs203bn for due but unpaid increased NHP amount post AT award and another Rs40 billion as this year’s NHP," he says.

Had that period and amount also been included, KP’s outstanding amount against WAPDA would have been much more than at present. It further claimed that according to the QF, the revenues should include all the revenues paid by the consumers, including surcharge and additional surcharges.

WAPDA, however, proposed Rs72bn against Rs83bn already paid, thus claiming Rs10.9bn as overpayment to KP and said that surcharges of Rs829bn and other revenues of Rs195bn could not be used for NHP determination. It also stubbornly rejected as unconstitutional the QF.

KP, realising that WAPDA is too weak financially or reluctant to provide the money, has focussed on the federal government being guarantor of the AT award and rightly so.

Para 3 and 4 of the Presidential NFC order No3 of 1991 states: The net profits from the bulk generation of power at the hydro-electric stations located in the provinces shall be paid by the concerned undertaking established or administered by the federal government (i.e. WAPDA) to the provinces and that the federal government shall guarantee payment of net profits to the provinces concerned by the above undertaking on a regular basis.

Based on the NFC award, AT award was binding on all parties. It had been signed by the then WAPDA chairman Tariq Hamid and secretary finance KP and endorsed by the federal secretary water and power from the federal government. But WAPDA challenged the award in a civil court. Sensing betrayed, KP also went to the Supreme Court against this move where the case is still pending.

When the present ANP-led coalition government was installed, it soon formed an all parties Jirga headed by CM Hoti that met Prime Minister Yousaf Raza Gilani in September 2008 and apprised him of their grievances on capped annual NHP and arrears.

The PM promised to solve the problems and formed a committee of experts to present its report within two months on the issues. Later in October 2009, the PM announced payment of Rs110 billion arrears on behalf of WAPDA in five annual installments to be given on July 1 each year with the promise to release first installment of Rs10 but it was paid only in December when the provincial NFC team threatened boycott of its proceedings.

The technical committee is yet to give its decision. KP finance ministry’s white paper says that while participating in the committee, KP shall not accept reopening of issues already decided/settled, that any settlement must conform to the parameters of AT and NFC awards, and that calculation of NHP shall be in accordance with QF.

Last year, the federal government paid Rs25bn simultaneously but it has released only Rs4.6bn till date and intends to release the amount in bits and pieces.

Aftab Ahmad Khan Sherpao, president of Pakistan Peoples Party (S) says the coalition at the centre and province should have no problem in increasing annual NHP, giving the province its arrears along with mark up for the entire period. "Our party would support the government in its bid to get NHP arrears and increase the NHP annual amount as a matter of provincial right. But in case they fail to do so, ANP should come out of the federal government," he says.

"Arbitration was unnecessary in the matter. NHP is the constitutional right that was accepted by AG N Qazi commission, established in 1987 by CCI and guaranteed by constitutional provisions and no government could have denied NHP to the province. However KP government must stick to the QF and never renege on provincial rights," he adds.

Sub-clause 2 of Article 157 of the Constitution clearly empowers the provinces to construct power projects, levy taxes on, and fix tariff, for electricity, construct distribution and transmission lines for distribution of power and the provinces should insist on provincial management rather than the central bodies like WAPDA, Nepra and Pepco, etc, but provinces have reneged on their rights.

 

performance

Manufacturing,
the neglected area

The bad shape of manufacturing sector in Pakistan has serious implications for economic growth, social well-being, and jobs

By Zubair Faisal Abbasi

There was a time when economists of neoclassical genre looked at industrialisation from the angle of trade policy rather than the other way round. It was argued that the process of trade would help discover comparative advantages in commodity production.

It was thought that it might induce competitive changes in techniques of production leading less-developed countries to move up the ladder of economic development. Following the process, the less-developed countries might become specialised and possibly industrialised from being predominantly agrarian.

The above-mentioned theory was thought to be the ‘natural process’ of economic development. Any policy-induced divergence through trade policy instruments such as export subsidies and regulation of the import and exportable were considered to be detrimental to trade and therefore for the whole economy. As a result, identifying priority sectors for industrial activity went out of favour in economic development policy, especially after the early 1980s. Many economies around the world were structurally adjusted to increase trade liberalisation and global integration in less developed countries with a few exceptions.

While the results in terms of robust growth in industrialization and manufacturing activity were either negative or mixed, this theorization has been questioned. Even in the case of Pakistan, many researchers argued that alongside the neoliberal reforms, industrial fortunes went into decline.

The country was not able to radically transform the structure of its economy from being agriculture to industrial which have had wide-ranging implications for its quality of growth. Most serious implication has been a serious neglect of advancements in science and technology as a key component of growth strategy.

Ultimately, it led to factor intensity i.e., increased use of factors of production like land, as major source of economic growth rather than innovations and productivity increases. The component of economic growth which comes from innovation with science and technology at its base has not really got currency in Pakistan.

There were a number of assumptions behind trade as engine for modernisation thesis. The most important was that the flow of information about sun-rise and sun-set businesses, labour retraining, and industrial up-gradation could be a costless and seamless process. The basic assumption being untrue, provided enough space to change perceptions around modernization of the real sectors of economy. It became evident from the development experiences of the late industrialisers such as Germany, Japan, East Asian economies and more recently China and India that trade policy must be looked at from the angle of industrialisation.

Therefore, economies need to be designed in a way that comparative and competitive advantages are built in manufacturing sector which diversify economy in new dimensions. It is also important to move productive capacity of the economy from low to high productivity activities.

Though constrained by changes in World Trade Organization, especially with extremely powerful agreements called TRIPS and TRIMS, the African countries are showing renewed commitment with industrial development to increasing manufacturing capability. This is a fact that the WTO law has put limits on many options of industrial and trade policy which were available to the now-developed countries at the similar levels of development.

According to a recent report of UNCTAD and UNIDO, ‘Economic Development in Africa – Fostering Industrial Development in Africa in the New Global Environment’, under the new global environment in which export subsidies, quotas and local content requirements are discouraged and banned, it is interesting to note that African governments are trying to re-vitalise efforts to structurally transform and diversify their economies.

Some examples may be as following: recently, South African government adopted the National Industrial Policy Framework. In addition, national development programmes of Egypt, Kenya, Namibia, Nigeria, and Uganda have industrialization as key component of growth strategies.

Apart from the New Partnership for Africa’s development adopted in 2001, at regional levels, the African heads of States in February 2008, adopted a Plan of Action for the Accelerated Industrial Development of Africa. These trends must be instructive for Pakistan as well, which is facing almost similar challenges of food and energy prices along with global recession owing to financial crisis.

Pakistan needs to understand that manufacturing sector which is a part of industrialisation process along with mining and construction, has strategic importance for high quality growth. The first factor for this importance is that technology and innovation which is established and experimented with in manufacturing and also transferred to other sectors through manufactured goods.

The second factor is that it creates demand for goods of other sectors such as agriculture and services. With manufacturing the banking and insurance as well as communication services get a push. With labour-absorbing capacity of the manufacturing sector, it creates employment as well as high value makes export growth possible.

On the contrary, trends in Pakistan show a different picture. While setting up of new production units or their expansion is important for jobs, growth and stable supplies, the fixed private investment or capital formation has been falling rapidly since 2006-07. In 2007-08, it decreased by less than one percent. In 2008-09, private investment declined by 7.3 percent.

The fiscal year 2009-10 witnessed a double digit fall of 13.7 percent. A former IMF official Meekal Aziz argues, ‘much of the data on small-scale manufacturing (SSM) are bogus. It is a fixed number put into the National Accounts each year. The decline in private investment is certainly worrying. With public sector investment also constrained, a fall in total investment has ominous implications for growth and jobs going forward’.

The economic managers of Pakistan need to focus on the bad shape of manufacturing sector in Pakistan which has serious implications for economic growth, social well-being, and jobs. The sector needs operationalisation of focused industrial, science and technology policy which encourages environment-friendly industrial development.

 

The writer is development policy specialist and consultant.

 

Politics of patronage

Criminal elements in Karachi must be dealt with an iron hand

By Salman Abid

Among various challenges being faced by democracy in Pakistan, one is violence, use of weapons and highhandedness of criminal and mafia elements within political parties.

Of the many actors responsible for unrest in Karachi, the highest responsibility can be fixed on political parties that have been directly found involved in patronising criminals instead of doing away with them. It has been pointed out repeatedly that political parties constituting the ruling alliance in Sindh are involved in almost every occurrence in Karachi.

The business community in Karachi is the ultimate victim, lodging complaints before the media that they are helpless against extortion from one political force or the other.

Director General Sindh Rangers has said that political parties are committing the crime of harbouring the criminal elements in their political offices. The same fact is endorsed by reports submitted before the supreme court of Pakistan. Some target killers have confessed that they enjoyed political protection of major political parties.

The question is why the political parties are not ready to admit their misdeeds? It is unfortunate that our political parties have two faces, one is democratic the other criminal.

It seems that political parties are misled by the belief that they can go on like that. Things have changed a lot and elements of fear in Karachi have been sidelined. Normally, large city of the world are thronged by the underworld, challenging the democratic politics. Same is the case in Karachi where the mafia has grown much taller and stronger then the political parties.

The mafias are found involved in target killings, land grabbing, kidnapping, drugs, illegal weapons, and extortion, etc. It can become a recurrent problem if remedial policies cease to exist.

Formerly, Karachi was ruled by a single party and it was a common thought that the political mandate, by virtue of a specialized planning, has been bestowed on that single ruling party for a long time to come. But these days, we see a number of political groups.

A bad thing is these emerging political groups rely on gun and terror based strategy. It is a tragic news item saying that 40 percent police employs inducted to the force by the ruling parties have been criminals.

Such groups among political parties have been functioning with the single purpose, and that is to be used by political parties as gangsters. The trend of terror is not limited to Karachi only, it is being exported to other cities as well.

It is not right to think that the situation of Karachi is impossible to redress. The main cause is lack of political commitment in the politics of Karachi.

Besides the MQM and the PPP, which have been accused of providing arms to their supporters, there is news that the Pakhtun community smuggles heavy weapons from KPK into Karachi.

If the MQM rightly claims to be the sole representatives of Karachi and Hyderabad and enjoys a heavy mandate, why does it not take full responsibility of unrest in the area.

The biggest challenge for the political elite and torch-bearers of peaceful co existence is whether political parties are willing to disband their criminal members. It is good to see that there is pressure on political parties from the superior judiciary and political intelligentsia.

A number of compromises slow this process. For example, the politics of ‘reconciliation’ is likely to succeed if the MQM gives the green signal to rejoin the cabinet at both national and provincial level, without suggesting a solution to Karachi’s problems.

Are the political parties moving towards the policy of creating and accepting these states within states? Political parties have not expelled people found involved in terrorist activities nor have they been handed over to the law enforcing agencies. It is interesting to note that all relevant political groups in Karachi flash the list of criminals belonging to the rival political groups and pose themselves as innocent.

If the political parties want to strengthen democracy and minimise the chances of a military dictatorship, they are required to at least do one thing — that is to disband mafia and terrorism from their policies.

It is the responsibility of all political parties to make a quick decision of not protecting criminal elements and hand them over to the police authorities. Isn’t it our duty to come out of emotional attachment and personal liking and disliking? The city must be cleared of gangsters without discrimination. This is the only thing to be done at the earliest with full force and sincerity.

 

The writer is a political analyst. He can be reached at [email protected]

 

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